Exhibit 10.3

 

  

EXECUTION VERSION

 

 

 

SECOND LIEN TERM LOAN AGREEMENT

 

Dated as of March 28, 2013

 

among

 

SEQUENTIAL BRANDS GROUP, INC.,
as the Borrower

 

The Guarantors Named Herein

 

PATHLIGHT CAPITAL, LLC
as Administrative Agent and Collateral Agent
and

 

The Lenders Party Hereto

 

 

 

 

 

 

EXECUTION VERSION

 

TABLE OF CONTENTS

 

Section   Page       Article I DEFINITIONS AND ACCOUNTING TERMS 1       Section
1.01 Defined Terms. 1       Section 1.02 Other Interpretive Provisions. 33      
Section 1.03 Accounting Terms. 34       Section 1.04 Rounding. 34       Section
1.05 Times of Day. 34       Article II THE COMMITMENTS AND LOANS 35      
Section 2.01 Loans. 35       Section 2.02 Reserved. 35       Section 2.03
Prepayments. 35       Section 2.04 Repayment of Obligations. 36       Section
2.05 Interest. 36       Section 2.06 Fees. 36       Section 2.07 Computation of
Interest and Fees. 37       Section 2.08 Evidence of Debt. 38       Section 2.09
Payments Generally; Agent’s Clawback. 38       Section 2.10 Sharing of Payments
by Lenders. 39       Article III TAXES, YIELD PROTECTION AND ILLEGALITY 39      
Section 3.01 Taxes. 39       Section 3.02 Illegality. 43       Section 3.03
Inability to Determine Rates. 43       Section 3.04 Increased Costs; Reserves.
44       Section 3.05 Reserved. 45       Section 3.06 Mitigation Obligations. 45
      Section 3.07 Survival. 45       Article IV CONDITIONS PRECEDENT TO LOANS
46       Section 4.01 Conditions of Loan. 46       Article V REPRESENTATIONS AND
WARRANTIES 49       Section 5.01 Existence, Qualification and Power. 49      
Section 5.02 Authorization; No Contravention. 49       Section 5.03 Governmental
Authorization; Other Consents. 49

 

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Section 5.04 Binding Effect. 50       Section 5.05 Financial Statements; No
Material Adverse Effect. 50       Section 5.06 Litigation. 51       Section 5.07
No Default. 51       Section 5.08 Ownership of Property; Liens. 51       Section
5.09 Environmental Compliance. 52       Section 5.10 Insurance. 52       Section
5.11 Taxes. 52       Section 5.12 ERISA Compliance. 53       Section 5.13
Subsidiaries; Equity Interests. 54       Section 5.14 Margin Regulations;
Investment Company Act. 54       Section 5.15 Disclosure. 54       Section 5.16
Compliance with Laws. 55       Section 5.17 Intellectual Property; Licenses,
Etc. 55       Section 5.18 Reserved. 55       Section 5.19 Security Documents.
55       Section 5.20 Solvency. 56       Section 5.21 Deposit Accounts. 56      
Section 5.22 Brokers. 56       Section 5.23 Material Contracts. 56       Article
VI AFFIRMATIVE COVENANTS 56       Section 6.01 Financial Statements. 56      
Section 6.02 Certificates; Other Information. 58       Section 6.03 Notices. 59
      Section 6.04 Payment of Obligations. 61       Section 6.05 Preservation of
Existence, Etc. 61       Section 6.06 Maintenance of Properties; Intellectual
Property. 61       Section 6.07 Maintenance of Insurance. 61       Section 6.08
Compliance with Laws. 62       Section 6.09 Books and Records; Accountants. 62  
    Section 6.10 Inspection Rights; Appraisals of Intellectual Property. 63    
  Section 6.11 Additional Loan Parties. 63       Section 6.12 Cash Management.
64       Section 6.13 Information Regarding the Collateral. 65

 

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Section 6.14 Environmental Laws. 65       Section 6.15 Further Assurances. 66  
    Section 6.16 Material Contracts. 66       Section 6.17 Reserved. 66      
Section 6.18 Post-Closing Items. 66       Article VII NEGATIVE COVENANTS 67    
  Section 7.01 Liens. 67       Section 7.02 Investments. 67       Section 7.03
Indebtedness; Disqualified Stock; Equity Issuances. 67       Section 7.04
Fundamental Changes. 68       Section 7.05 Dispositions. 68       Section 7.06
Restricted Payments. 68       Section 7.07 Prepayments of Indebtedness. 69      
Section 7.08 Change in Nature of Business. 69       Section 7.09 Transactions
with Affiliates. 69       Section 7.10 Burdensome Agreements. 70       Section
7.11 Use of Proceeds. 70       Section 7.12 Amendment of Material Documents;
Material Licenses. 71       Section 7.13 Fiscal Year. 71       Section 7.14
Deposit Accounts. 71       Section 7.15 Financial Covenants. 71       Article
VIII EVENTS OF DEFAULT AND REMEDIES 71       Section 8.01 Events of Default. 71
      Section 8.02 Remedies Upon Event of Default. 75       Section 8.03
Application of Funds. 75       Article IX THE AGENT 77       Section 9.01
Appointment and Authority. 77       Section 9.02 Rights as a Lender. 77      
Section 9.03 Exculpatory Provisions. 77       Section 9.04 Reliance by Agent. 78
      Section 9.05 Delegation of Duties. 78       Section 9.06 Resignation of
Agent. 79       Section 9.07 Non-Reliance on Agent and Other Lenders. 79      
Section 9.08 Agent May File Proofs of Claim. 79

 

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Section 9.09 Collateral and Guaranty Matters. 80       Section 9.10 Notice of
Transfer. 81       Section 9.11 Reports and Financial Statements. 81      
Section 9.12 Agency for Perfection. 81       Section 9.13 Indemnification of
Agent. 82       Section 9.14 Relation among Lenders. 82       Article X
MISCELLANEOUS 82       Section 10.01 Amendments, Etc. 82       Section 10.02
Notices; Effectiveness; Electronic Communications. 84       Section 10.03 No
Waiver; Cumulative Remedies. 85       Section 10.04 Expenses; Indemnity; Damage
Waiver. 86       Section 10.05 Payments Set Aside. 87       Section 10.06
Successors and Assigns. 87       Section 10.07 Treatment of Certain Information;
Confidentiality. 91       Section 10.08 Right of Setoff. 91       Section 10.09
Interest Rate Limitation. 92       Section 10.10 Counterparts; Integration;
Effectiveness. 92       Section 10.11 Survival. 92       Section 10.12
Severability. 92       Section 10.13 Replacement of Lenders. 93       Section
10.14 Governing Law; Jurisdiction; Etc. 93       Section 10.15 Waiver of Jury
Trial. 94       Section 10.16 No Advisory or Fiduciary Responsibility. 95      
Section 10.17 USA PATRIOT Act Notice. 95       Section 10.18 Foreign Asset
Control Regulations. 96       Section 10.19 Time of the Essence. 96      
Section 10.20 Press Releases. 96       Section 10.21 Additional Waivers. 97    
  Section 10.22 No Strict Construction. 98       Section 10.23 Attachments. 98  
    Section 10.24 Electronic Execution of Assignments and Certain Other
Documents. 98       Section 10.25 First Lien Intercreditor Agreement. 98      
SIGNATURES S-99

 

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SCHEDULES

 

1.01   Excluded Subsidiaries 2.01   Commitments and Applicable Percentages 5.01
  Loan Parties Organizational Information 5.08(b)(1)   Owned Real Estate
5.08(b)(2)   Leased Real Estate 5.10   Insurance 5.13   Subsidiaries; Other
Equity Investments 5.17   Intellectual Property; Material Licenses 5.17A  
Material Intellectual Property Exceptions 5.21   Deposit Accounts 5.23  
Material Contracts 7.01   Existing Liens 7.02   Existing Investments 7.03  
Existing Indebtedness 10.02   Agent’s Office; Certain Addresses for Notices
10.06   Permitted Transferees

 

EXHIBITS

 

    Form of       A   Assignment and Assumption B   Compliance Certificate C  
Note D-1   Foreign Lender Exemption Certificate D-2   Foreign Lender U.S. Tax
Compliance Certificate D-3   Alternative Form Foreign Lender U.S. Tax Compliance
Certificate D-4   Foreign Partnership U.S. Tax Compliance Certificate E  
License Payment Report

 

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EXECUTION VERSION

 

SECOND LIEN TERM LOAN AGREEMENT

 

This SECOND LIEN TERM LOAN AGREEMENT (the “Agreement”) is entered into as of
March 28, 2013, among SEQUENTIAL BRANDS GROUP, INC., a Delaware corporation (the
“Borrower”), the Guarantors; each lender from time to time party hereto
(collectively, the “Lenders” and individually, a “Lender”); and PATHLIGHT
CAPITAL, LLC, as Administrative Agent and Collateral Agent.

 

The Borrower has requested that the Lenders provide a term loan facility, and
the Lenders have indicated their willingness to lend on the terms and conditions
set forth herein.

 

In consideration of the mutual covenants and agreements herein contained, the
parties hereto covenant and agree as follows:

 

Article I
DEFINITIONS AND ACCOUNTING TERMS

 

Section 1.01    Defined Terms. As used in this Agreement, the following terms
shall have the meanings set forth below:

 

“Accommodation Payment” as defined in Section 10.21(c).

 

“Acquisition” means, with respect to any Person (a) a purchase of a Controlling
interest in the Equity Interests of any other Person, (b) a purchase or other
acquisition of all or substantially all of the assets or properties of, another
Person or of any business unit of another Person, or (c) any merger or
consolidation of such Person with any other Person or other transaction or
series of transactions resulting in the acquisition of all or substantially all
of the assets, or a Controlling interest in the Equity Interests, of any Person,
in each case in any transaction or group of transactions which are part of a
common plan.

 

“Act” shall have the meaning provided in Section 10.17.

 

“Adjusted LIBOR Rate” means, with respect to any Loan for any Interest Period,
an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of
one percent (1%)) equal to the LIBOR Rate for such Interest Period multiplied by
the Statutory Reserve Rate. The Adjusted LIBOR Rate will be adjusted
automatically as of the effective date of any change in the Statutory Reserve
Rate.

 

“Affiliate” means, with respect to any Person, (i) another Person that directly,
or indirectly through one or more intermediaries, Controls or is Controlled by
or is under common Control with the Person specified, (ii) any director,
officer, managing member, partner, trustee, or beneficiary of that Person, (iii)
any other Person directly or indirectly holding 10% or more of any class of the
Equity Interests of that Person, and (iv) any other Person 10% or more of any
class of whose Equity Interests is held directly or indirectly by that Person.

 

“Agent” means Pathlight in its capacity as administrative agent and collateral
agent under any of the Loan Documents, or any successor thereto.

 

 

 

 

“Agent Parties” shall have the meaning specified in Section 10.02(c).

 

“Agent’s Office” means the Agent’s address and, as appropriate, account as set
forth on Schedule 10.02, or such other address or account as the Agent may from
time to time notify the Borrower and the Lenders.

 

“Aggregate Commitments” means the sum of the Commitments of all the Lenders. As
of the Closing Date, the Aggregate Commitments are $20,000,000.

 

“Agreement” means this Credit Agreement.

 

“Allocable Amount” has the meaning specified in Section 10.21(d).

 

“Alternative Rate” means, at any date of determination the sum of (i) the Base
Rate, plus (ii) eleven and three quarters percent (11.75%) per annum.

 

“Applicable Lenders” means the Required Lenders, all affected Lenders, or all
Lenders, as the context may require.

 

“Applicable Margin” means 12.75% per annum.

 

“Applicable Percentage” means, with respect to any Lender at any time, the
percentage (carried out to the ninth decimal place) obtained by dividing (x) the
outstanding principal balance of such Lender’s Loans by (y) the aggregate
outstanding principal balance of the Loans of all Lenders.

 

“Approved Fund” means any Fund that is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender (c) an entity or an Affiliate of an entity that
administers or manages a Lender, or (d) the same investment advisor or an
advisor under common control with such Lender, Affiliate or advisor, as
applicable.

 

“Assignee Group” means two or more Eligible Assignees that are Affiliates of one
another or two or more Approved Funds managed by the same investment advisor.

 

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is
required by Section 10.06(b)), and accepted by the Agent, in substantially the
form of Exhibit A or any other form approved by the Agent.

 

“Attributable Indebtedness” means, on any date, (a) in respect of any Capital
Lease Obligation of any Person, the capitalized amount thereof that would appear
on a balance sheet of such Person prepared as of such date in accordance with
GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized
amount of the remaining lease or similar payments under the relevant lease or
other applicable agreement or instrument that would appear on a balance sheet of
such Person prepared as of such date in accordance with GAAP if such lease,
agreement or instrument were accounted for as a capital lease.

 

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“Audited Financial Statements” means the audited Consolidated balance sheet of
the Borrower and its Subsidiaries for the Fiscal Year ended December 31, 2011,
and the related Consolidated statements of income or operations, Shareholders’
Equity and cash flows for such Fiscal Year of the Borrower and its Subsidiaries,
including the notes thereto.

 

“Bank of America” means Bank of America, N.A. and its successors.

 

“Base Rate” means for any day a fluctuating rate per annum equal to the higher
of (a) the rate of interest in effect for such day as publicly announced from
time to time by Bank of America as its “prime rate”; and (b) the Federal Funds
Rate for such day, plus 0.50%. The “prime rate” is a rate set by Bank of America
based upon various factors including Bank of America’s costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate. Any change in Bank of America’s prime rate or the Federal Funds Rate,
respectively, shall take effect at the opening of business on the day specified
in the public announcement of such change.

 

“Blocked Account” has the meaning provided in Section 6.12(a).

 

“Blocked Account Agreement” means with respect to an account established by a
Loan Party (other than Excluded Accounts), an agreement, in form and substance
reasonably satisfactory to the Agent, establishing control (as defined in the
UCC) of such account by the Agent or the First Lien Agent, as applicable, and
whereby the Blocked Account Bank agrees, upon the occurrence and during the
continuance of an Event of Default, to comply only with the instructions
originated by the Agent or First Lien Agent, as applicable, without the further
consent of any Loan Party.

 

“Blocked Account Bank” means each bank with whom Deposit Accounts are maintained
and with whom a Blocked Account Agreement has been, or is required to be,
executed in accordance with the terms hereof.

 

“Borrower” has the meaning specified in the introductory paragraph hereto.

 

“Brand Matter Acquisition” means the acquisition by the Borrower of all of the
equity interest of B®and Matter, LLC pursuant to the Brand Matter Acquisition
Agreement.

 

“Brand Matter Acquisition Agreement” means that certain Purchase Agreement dated
as of March 28, 2013, by and among the Borrower as Purchaser (as defined
therein) and ETPH Acquisition, LLC, a limited liability company organized under
the laws of Delaware, as Seller (as defined therein).

 

“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state where the Agent’s Office is located.

 

“Called Principal Amount” means the principal amount of the Loan (including, if
applicable, the amount of any capitalized interest) (a) that is to be prepaid by
the Borrower, or (b) has become or is deemed to be immediately due and payable
on the Termination Date.

 

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“Capital Expenditures” means, with respect to any Person for any period, (a) all
expenditures made (whether made in the form of cash or other property) or costs
incurred for the acquisition or improvement of fixed or capital assets of such
Person (excluding normal replacements and maintenance which are properly charged
to current operations), in each case that are (or should be) set forth as
capital expenditures in a Consolidated statement of cash flows of such Person
for such period, in each case prepared in accordance with GAAP, and (b) Capital
Lease Obligations incurred by a Person during such period.

 

“Capital Lease Obligations” means, with respect to any Person for any period,
the obligations of such Person to pay rent or other amounts under any lease of
(or other arrangement conveying the right to use) real or personal property, or
a combination thereof, which obligations are required to be classified and
accounted for as liabilities on a balance sheet of such Person under GAAP and
the amount of which obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. § 9601 et seq.

 

“CERCLIS” means the Comprehensive Environmental Response, Compensation, and
Liability Information System maintained by the United States Environmental
Protection Agency.

 

“CFC” means a Person that is a controlled foreign corporation under Section 957
of the Code.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation, implementation or application thereof by any
Governmental Authority or (c) the making or issuance of any request, rule,
guideline or directive (whether or not having the force of law) by any
Governmental Authority; provided that notwithstanding anything herein to the
contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and
all requests, rules, guidelines or directives thereunder or issued in connection
therewith and (y) all requests, rules, guidelines or directives promulgated by
the Bank for International Settlements, the Basel Committee on Banking
Supervision (or any successor or similar authority) or the United States or
foreign regulatory authorities, in each case pursuant to Basel III, shall in
each case be deemed to be a “Change in Law”, regardless of the date enacted,
adopted or issued.

 

“Change of Control” means an event or series of events by which:

 

(a)          any “person” or “group” (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, but excluding any employee
benefit plan of such person or its subsidiaries, and any person or entity acting
in its capacity as trustee, agent or other fiduciary or administrator of any
such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5
under the Securities Exchange Act of 1934, except that a person or group shall
be deemed to have “beneficial ownership” of all securities that such person or
group has the right to acquire, whether such right is exercisable immediately or
only after the passage of time (such right, an “option right”)), directly or
indirectly, of 45% or more of the Equity Interests of the Borrower entitled to
vote for members of the board of directors or equivalent governing body of the
Borrower 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); or

 

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(b)          during any period of 12 consecutive months, a majority of the
members of the board of directors or other equivalent governing body of the
Borrower cease to be composed of individuals (i) who were members of that board
or equivalent governing body on the first day of such period, (ii) whose
election or nomination to that board or equivalent governing body was approved
by individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clauses (i) and (ii)
above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body (excluding, in the case of
both clause (ii) and clause (iii), any individual whose initial nomination for,
or assumption of office as, a member of that board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the board of directors); or

 

(c)          any “change in control” or similar event as defined in any Material
Contract or any document governing Material Indebtedness of any Loan Party; or

 

(d)          the Borrower fails at any time to own, directly or indirectly, 100%
of the Equity Interests of each other Loan Party (other than the William Rast
Entities), free and clear of all Liens (other than the Liens in favor of the
Agent and Liens permitted pursuant to clause (o) of the definition of Permitted
Encumbrances), except where such failure is as a result of a transaction not
prohibited by the Loan Documents; or

 

(e)          (1) the Borrower fails at any time to own, directly or indirectly,
82% of the Equity Interests of William Rast Sourcing and William Rast Licensing;
or (2) the Borrower fails at any time to own, directly or indirectly, 100% of
the Class A Membership Interests of William Rast Sourcing and William Rast
Licensing in each case, free and clear of all Liens (other than the Liens in
favor of the Agent and Liens permitted pursuant to clause (o) of the definition
of Permitted Encumbrances), except where such failure is as a result of a
transaction not prohibited by the Loan Documents; or

 

(f)          the Borrower fails at any time to own, directly or indirectly, 60%
of the Equity Interests of DVS, free and clear of all Liens (other than the
Liens in favor of the Agent and Liens permitted pursuant to clause (o) of the
definition of Permitted Encumbrances), except where such failure is as a result
of a transaction not prohibited by the Loan Documents.

 

“Closing Date” means the first date all the conditions precedent in Section 4.01
are satisfied or waived in accordance with Section 10.01.

 

“Code” means the Internal Revenue Code of 1986, and the regulations promulgated
thereunder, as amended and in effect.

 

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“Collateral” means any and all “Collateral” as defined in any applicable
Security Document and all other property that is or is intended under the terms
of the Security Documents to be subject to Liens in favor of the Agent.

 

“Collection Account” has the meaning provided in Section 6.12(b).

 

“Commitment” means, as to each Lender, its obligation to make Loans to the
Borrower pursuant to Section 2.01 in an aggregate principal amount equal to the
amount set forth opposite such Lender’s name on Schedule 2.01.

 

“Compliance Certificate” means a certificate substantially in the form of
Exhibit B.

 

“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise Taxes or
branch profits Taxes.

 

“Consent” means actual consent given by a Lender from whom such consent is
sought; or the passage of seven (7) Business Days from receipt of written notice
to a Lender from the Agent of a proposed course of action to be followed by the
Agent without such Lender’s giving the Agent written notice of that Lender’s
objection to such course of action.

 

“Consolidated” means, when used to modify a financial term, test, statement, or
report of a Person, the application or preparation of such term, test, statement
or report (as applicable) based upon the consolidation, in accordance with GAAP,
of the financial condition or operating results of such Person and its
Subsidiaries.

 

“Consolidated EBITDA” means, at any date of determination, an amount equal to
Consolidated Net Income of the Borrower and its Subsidiaries on a Consolidated
basis for the applicable measurement period, plus (a) the following to the
extent deducted in calculating such Consolidated Net Income: (i) Consolidated
Interest Charges, (ii) the provision for Federal, state, local and foreign
income Taxes, (iii) depreciation and amortization expense and (iv) other
non-recurring expenses reducing such Consolidated Net Income which do not
represent a cash item in such period or any future period (in each case of or by
the Borrower and its Subsidiaries for such period), minus (b) the following to
the extent included in calculating such Consolidated Net Income: (i) Federal,
state, local and foreign income tax credits and (ii) all non-cash items
increasing Consolidated Net Income (in each case of or by the Borrower and its
Subsidiaries for such period), all as determined on a Consolidated basis in
accordance with GAAP.

 

“Consolidated Fixed Charge Coverage Ratio” means, at any date of determination,
the ratio of (a) (i) Consolidated EBITDA for such period minus (ii) Capital
Expenditures made during such period, minus (iii) the aggregate amount of
Federal, state, local and foreign income taxes paid in cash during such period
(but not less than zero) to (b) the sum of (i) Debt Service Charges plus (ii)
the aggregate amount of all Restricted Payments, in each case, of or by the
Borrower and its Subsidiaries for the applicable measurement period, all as
determined on a Consolidated basis in accordance with GAAP.

 

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“Consolidated Interest Charges” means, for the applicable measurement period,
the sum of (a) all interest, premium payments, debt discount, fees, charges and
related expenses in connection with borrowed money (including capitalized
interest) or in connection with the deferred purchase price of assets, in each
case to the extent treated as interest in accordance with GAAP, including,
without limitation, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers’ acceptance financing and net
costs under Swap Contracts, but excluding any non-cash or deferred interest
financing costs, and (b) the portion of rent expense with respect to such period
under Capital Lease Obligations that is treated as interest in accordance with
GAAP minus (c) interest income during such period (excluding any portion of
interest income representing accruals of amounts received in a previous period),
in each case of or by the Borrower and its Subsidiaries for the most recently
completed period, all as determined on a Consolidated basis in accordance with
GAAP.

 

“Consolidated Net Income” means, as of any date of determination, the net income
of the Borrower and its Subsidiaries for the applicable measurement period, all
as determined on a Consolidated basis in accordance with GAAP, provided,
however, that there shall be excluded (a) extraordinary gains and extraordinary
losses for such period, (b) the income (or loss) of any Subsidiary during such
period in which any other Person has a joint interest, except to the extent of
the amount of cash dividends or other distributions actually paid in cash to the
Borrower during such period, (c) the income (or loss) of any Subsidiary during
such period and accrued prior to the date it becomes a Subsidiary of the
Borrower or any of its Subsidiaries or is merged into or consolidated with the
Borrower or any of its Subsidiaries or that Person’s assets are acquired by the
Borrower or any of its Subsidiaries, and (d) the income of any direct or
indirect Subsidiary of the Borrower to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its Organization
Documents or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Subsidiary, except that the cash
proceeds received by any Loan Party from any licensing of any Intellectual
Property (including any licensing in any foreign jurisdiction) shall be included
in determining Consolidated Net Income and the Borrower’s equity in any net loss
of any such Subsidiary for such period shall be included in determining
Consolidated Net Income.

 

“Consolidated Positive Net Income” means, as of any date of determination, an
amount equal to Consolidated Net Income of the Borrower and its Subsidiaries on
a Consolidated basis for the applicable measurement period, plus the following
to the extent deducted in calculating such Consolidated Net Income: (a)
depreciation and amortization expense, (b) one-time non-cash charges, non-cash
compensation, non-cash Federal, state, local and foreign income taxes relating
to amortization of intangibles for tax purposes and non-cash interest, (c)
one-time costs relating to any Permitted Acquisition (of the type referred to in
clause (ii) of the definition thereof) or fees in connection with any Permitted
Indebtedness in an amount not to exceed $5,000,000 in any Fiscal Year of the
Borrower, and (d) wind-down costs related to the Heelys Acquisition and
discontinued operations for the twelve month period following the Closing Date
in an amount not to exceed $5,000,000 in the aggregate, all as determined on a
Consolidated basis in accordance with GAAP.

 

-7-

 

 

“Consolidated Total Indebtedness” means, as of any date of determination, for
the Borrower and its Subsidiaries on a Consolidated basis, without duplication,
the sum of (a) the outstanding principal amount of all obligations, whether
current or long-term, for borrowed money (including Obligations hereunder, but
excluding the convertible notes issued pursuant to the Securities Purchase
Agreement) and all obligations evidenced by bonds, debentures, notes, loan
agreements or other similar instruments, (b) all purchase money Indebtedness,
(c) all direct obligations arising under letters of credit (including standby
and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar
instruments, (d) all obligations in respect of the deferred purchase price of
property or services (other than trade accounts payable in the ordinary course
of business), (e) all Attributable Indebtedness, (f) without duplication, all
Guarantees with respect to outstanding Indebtedness of the types specified in
clauses (a) through (e) above of Persons other than the Borrower or any
Subsidiary, and (g) all Indebtedness of the types referred to in clauses (a)
through (f) above of any partnership or joint venture (other than a joint
venture that is itself a corporation or limited liability company) in which the
Borrower or a Subsidiary is a general partner or joint venturer, unless such
Indebtedness is expressly made non-recourse to the Borrower or such Subsidiary.

 

“Contractual Obligation” means, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.

 

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

 

“Copyright” has the meaning specified in the Security Agreement.

 

“Copyright Security Agreement” means the Grant of Security Interest in United
States Copyrights dated as of the Closing Date among certain Loan Parties and
the Agent.

 

“Credit Party” or “Credit Parties” means (a) individually, (i) each Lender and
its Affiliates, (ii) the Agent, (iii) each beneficiary of each indemnification
obligation undertaken by any Loan Party under any Loan Document, (iv) any other
Person to whom Obligations under this Agreement and other Loan Documents are
owing, and (v) the successors and assigns of each of the foregoing, and (b)
collectively, all of the foregoing.

 

“Credit Party Expenses” means (a) all reasonable out-of-pocket expenses incurred
by the Agent and its Affiliates in connection with this Agreement and the other
Loan Documents, including without limitation (i) the reasonable fees, charges
and disbursements of (A) counsel for the Agent, (B) outside consultants for the
Agent, (C) appraisers, and (D) commercial finance examiners, in connection with
(1) the preparation, negotiation, administration, management, execution and
delivery of this Agreement and the other Loan Documents or any amendments,
modifications or waivers of the provisions thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), (2) the
enforcement or protection of its rights in connection with this Agreement or the
Loan Documents or efforts to preserve, protect, collect, or enforce the
Collateral or in connection with any proceeding under any Debtor Relief Laws, or
(3) any workout, restructuring or negotiations in respect of any Obligations,
and (ii) all customary fees and charges (as adjusted from time to time) of the
Agent with respect to the disbursement of funds (or the receipt of funds) to or
for the account of the Borrower (whether by wire transfer or otherwise),
together with any out-of-pocket costs and expenses incurred in connection
therewith, and (b) all reasonable out-of-pocket expenses incurred by the Credit
Parties who are not the Agent or any Affiliate after the occurrence and during
the continuance of an Event of Default, provided that such Credit Parties as a
whole shall be entitled to reimbursement for no more than one counsel
representing all such Credit Parties (absent an actual conflict of interest in
which case such affected Credit Parties may engage and be reimbursed for one
additional counsel for the affected Credit Parties taken as a whole).

 

-8-

 

 

“Debt Service Charges” means for any applicable measurement period, the sum of
(a) Consolidated Interest Charges paid or required to be paid for such period,
plus (b) principal payments made or required to be made on account of
Indebtedness (excluding any Synthetic Lease Obligations but including, without
limitation, the principal component of all Obligations and of any Capital Lease
Obligations) for such period, in each case determined on a Consolidated basis in
accordance with GAAP.

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect.

 

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

 

“Default Rate” means, with respect to any Loan, an interest rate equal to the
interest rate otherwise applicable to such Loan plus two percent (2%) per annum.

 

“Deposit Account” means each checking, savings or other demand deposit account
maintained by any of the Loan Parties. All funds in each Deposit Account shall
be conclusively presumed to be Collateral and proceeds of Collateral and the
Agent and the Lenders shall have no duty to inquire as to the source of the
amounts on deposit in any Deposit Account.

 

“Disposition” or “Dispose” means the sale, transfer, license, sublicense, lease
or other disposition (including any sale and leaseback transaction), whether in
one transaction or in a series of transactions, of any property (including,
without limitation, any Equity Interests other than Equity Interests of the
Borrower) by any Person (or the granting of any option or other right to do any
of the foregoing), including any sale, assignment, transfer or other disposal,
with or without recourse, of any notes or accounts receivable or any rights and
claims associated therewith.

 

“Disqualified Stock” means any Equity Interest that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is ninety-one (91)
days after the date on which the Loans mature. The amount of Disqualified Stock
deemed to be outstanding at any time for purposes of this Agreement will be the
maximum amount that the Borrower and its Subsidiaries may become obligated to
pay upon maturity of, or pursuant to any mandatory redemption provisions of,
such Disqualified Stock or portion thereof, plus accrued dividends.

 

-9-

 

 

“Dollars” and “$” mean lawful money of the United States.

 

“DVS” means DVS Footwear International LLC, a Delaware limited liability
company.

 

“Early Termination Fee” has the meaning set forth in Section 2.06(a).

 

“Eligible Assignee” means (a) a Credit Party which is a Credit Party on the
Closing Date or becomes a Credit Party pursuant to any of clauses (b) through
(d) below, or any of its Affiliates; (b) a bank, insurance company, or company
engaged in the business of making commercial loans; (c) an Approved Fund; and
(d) any other Person (other than a natural Person) satisfying the requirements
of Section 10.06(b) hereof; provided that notwithstanding the foregoing,
“Eligible Assignee” shall not include a Loan Party or any of their respective
Affiliates or Subsidiaries.

 

“Environmental Laws” means any and all applicable Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, or governmental restrictions relating to pollution and the
protection of the environment or the release of any materials into the
environment, including those related to Hazardous Materials.

 

“Environmental Liability” means any liability, obligation, damage, loss, claim,
action, suit, judgment, order, fine, penalty, fee, expense, or cost, contingent
or otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Borrower, any other Loan
Party or any of their respective Subsidiaries directly or indirectly resulting
from or based upon (a) violation of any Environmental Law, (b) the generation,
use, handling, transportation, storage, treatment or disposal or presence of any
Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.

 

“Equity Interests” means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or non-voting, and whether or not such shares,
warrants, options, rights or other interests are outstanding on any date of
determination.

 

“ERISA” means the Employee Retirement Income Security Act of 1974.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with the Borrower within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).

 

-10-

 

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan;
(b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which such entity was a
“substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Pension Plan amendment as a termination under Section 4041 or
4041A of ERISA; (e) the institution by the PBGC of proceedings to terminate a
Pension Plan; (f) any event or condition which constitutes grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; (g) the determination that any Pension Plan is
considered an at-risk plan or a plan in endangered or critical status within the
meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of
ERISA; or (h) the imposition of any liability under Title IV of ERISA, other
than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
the Borrower or any ERISA Affiliate.

 

“Event of Default” has the meaning specified in Section 8.01. An Event of
Default shall be deemed to be continuing unless and until that Event of Default
has been duly waived as provided in Section 10.01 hereof.

 

“Excluded Account” has the meaning specified in Section 6.12.

 

“Excluded Subsidiary” means a Subsidiary of the Borrower that is organized for
the purpose of, and is engaged solely in the business of, owning Intellectual
Property to be acquired pursuant to a Permitted Acquisition, and which
Subsidiary complies with the following requirements: (i) such Subsidiary is
subject to customary restrictions to make such Subsidiary a special purpose,
bankruptcy remote entity, as determined by the Agent in its reasonable
discretion; (ii) such Subsidiary maintains Deposit Accounts and other bank
accounts which are separate from the Borrower and the other Loan Parties and
does not co-mingle any cash or cash equivalents of such Subsidiary with the
Borrower or any other Loan Party; (iii) no Loan Party issues or incurs any
Indebtedness or Guarantee in respect of, or grants any Lien on any of its assets
or properties to secure, any Indebtedness, liabilities or other obligations of
such Subsidiary, and (iv) no Loan Party has any obligation to maintain such
Subsidiary’s financial condition or cause such Subsidiary to achieve any level
of operating results.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
any Recipient or required to be withheld or deducted from a payment to a
Recipient, (a) Taxes imposed on or measured by net income (however denominated),
franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result
of such Recipient being organized under the laws of, or having its principal
office or, in the case of any Lender, its Lending Office located in, the
jurisdiction imposing such Tax (or any political subdivision thereof) or (ii)
that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal
withholding Taxes imposed on amounts payable to or for the account of such
Lender with respect to an applicable interest in a Loan pursuant to a law in
effect on the date on which (i) such Lender acquires such interest in the Loan
(other than pursuant to an assignment request by the Borrower under Section
10.13) or (ii) such Lender changes its Lending Office, except in each case to
the extent that, pursuant to Section 3.01(a)(ii) or (c), amounts with respect to
such Taxes were payable either to such Lender’s assignor immediately before such
Lender became a party hereto or to such Lender immediately before it changed its
Lending Office, (c) Taxes attributable to such Recipient’s failure to comply
with Section 3.01(e) and (d) any U.S. federal withholding Taxes imposed pursuant
to FATCA.

 

-11-

 

 

“Executive Order” has the meaning set forth in Section 10.18.

 

“Facility Guaranty” means the Guaranty made by the Guarantors in favor of the
Agent and the other Credit Parties, in form reasonably satisfactory to the
Agent.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof and any agreements entered into
pursuant to Section 1471(b)(1) of the Code.

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate (rounded
upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of
America on such day on such transactions as determined by the Agent.

 

“Fee Letter” means the letter agreement, dated as of the date hereof, between
the Borrower and the Agent.

 

“First Lien Agent” means Bank of America, in its capacity as administrative
agent and collateral agent for the lenders under the First Lien Credit
Agreement, together with any successor agent.

 

“First Lien Credit Agreement” means that certain Term Loan Agreement dated as of
March 28, 2013 among the Borrower, the guarantors party thereto, the lenders
party thereto, and the First Lien Agent, as the same may be amended, restated,
supplemented or otherwise modified, and any refinancings, refundings, renewals
or extensions thereof permitted hereunder.

“First Lien Facility” means the credit facilities made available pursuant to the
First Lien Credit Agreement.

 

“First Lien Intercreditor Agreement” means that certain Intercreditor Agreement,
dated as March 28, 2013, among the Agent and the First Lien Agent.

 

“First Lien Loan Documents” means any and all documents executed in connection
with the First Lien Facility.

 

“First Lien Obligations” means “Obligations” as such term is defined in the
First Lien Credit Agreement or equivalent term in connection with any Permitted
Refinancing thereof.

 

-12-

 

 

“Fiscal Month” means any fiscal month of any Fiscal Year, which month shall
generally end on the last day of each calendar month in accordance with the
fiscal accounting calendar of the Borrower.

 

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters
shall generally end on the last day of each March, June, September and December
of such Fiscal Year in accordance with the fiscal accounting calendar of the
Borrower.

 

“Fiscal Year” means any period of twelve consecutive months ending on December
31 of any calendar year.

 

“Foreign Asset Control Regulations” has the meaning set forth in Section 10.18.

 

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is resident for tax purposes.
For purposes of this definition, the United States, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

 

“FRB” means the Board of Governors of the Federal Reserve System of the United
States.

 

“Fund” means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.

 

“GAAP” means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

 

“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central Bank).

 

-13-

 

 

“Guarantee” means, as to any Person, (a) any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation payable or performable by
another Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect, (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation, (ii) to purchase or lease property,
securities or services for the purpose of assuring the obligee in respect of
such Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity or level of
income or cash flow of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any Lien on any assets of such Person securing any Indebtedness or other
obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person (or any right, contingent or otherwise, of
any holder of such Indebtedness to obtain any such Lien). The amount of any
Guarantee shall be deemed to be an amount equal to the stated or determinable
amount of the related primary obligation, or portion thereof, in respect of
which such Guarantee is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof. The term “Guarantee” as a
verb has a corresponding meaning.

 

“Guarantor” means (i) each domestic Subsidiary of the Borrower existing on the
Closing Date, other than the Subsidiaries set forth on Schedule 1.01 hereto, and
(ii) each other Subsidiary of the Borrower that shall be required to execute and
deliver a Facility Guaranty pursuant to Section 6.11.

 

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos-containing materials,
polychlorinated biphenyls, radon gas, and all other substances or wastes of any
nature regulated pursuant to any Environmental Law.

 

“Heelys Acquisition” means the acquisition by the Borrower of certain assets of
Heelys, Inc. pursuant to the Heelys Acquisition Agreement.

 

“Heelys Acquisition Agreement” means the Agreement and Plan of Merger, dated as
of December 7, 2012, among Heelys, Inc., a Delaware corporation, Sequential
Brands Group, Inc., a Delaware corporation, and Wheels Merger Sub Inc., a
Delaware corporation.

 

“Indebtedness” means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:

 

(a)          all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes, loan
agreements or other similar instruments;

 

(b)          the maximum amount of all direct or contingent obligations of such
Person arising under letters of credit (including standby and commercial),
bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

 

(c)          net obligations of such Person under any Swap Contract;

 

(d)          all obligations of such Person to pay the deferred purchase price
of property or services (other than trade accounts payable in the ordinary
course of business and, in each case, not past due for more than 60 days after
the date on which such trade account payable was created);

 

-14-

 

 

(e)          indebtedness (excluding prepaid interest thereon) secured by a Lien
on property owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements), whether or
not such indebtedness shall have been assumed by such Person or is limited in
recourse;

 

(f)          All Attributable Indebtedness of such Person;

 

(g)          all obligations of such Person to purchase, redeem, retire, defease
or otherwise make any payment in respect of any Equity Interest in such Person
or any other Person (including, without limitation, Disqualified Stock), or any
warrant, right or option to acquire such Equity Interest, valued, in the case of
a redeemable preferred interest, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends; and

 

(h)          all Guarantees of such Person in respect of any of the foregoing.

 

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person. The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date.

 

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by or on account of any obligation of any Loan
Party under any Loan Document and (b) to the extent not otherwise described in
(a), Other Taxes.

 

“Indemnitees” has the meaning specified in Section 10.04(b).

 

“Information” has the meaning specified in Section 10.07.

 

“Intellectual Property” has the meaning specified in the Security Agreement.

 

“Interest Payment Date” means the last day of each calendar month.

 

“Interest Period” means three months.

 

“Internal Control Event” means a material weakness in, or fraud that involves
management or other employees who have a significant role in, the Borrower’s
and/or its Subsidiaries’ internal controls over financial reporting, in each
case as described in the Securities Laws.

 

“Investment” means, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of Equity Interests of another Person, (b) a loan, advance or
capital contribution to, Guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or interest in, another Person, or (c) any
Acquisition, or (d) any other investment of money or capital in order to obtain
a profitable return. For purposes of covenant compliance, the amount of any
Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment.

 

-15-

 

 

“IRS” means the United States Internal Revenue Service.

 

“Laws” means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority.

 

“Lease” means any agreement, whether written or oral, no matter how styled or
structured, pursuant to which a Loan Party is the lessee of any real property
for any period of time.

 

“Lender” has the meaning specified in the introductory paragraph hereto.

 

“Lending Office” means, as to any Lender, the office or offices of such Lender
as a Lender may from time to time notify the Borrower and the Agent.

 

“LIBOR Rate” means the rate per annum equal to the British Bankers Association
LIBOR Rate or the successor thereto if the British Bankers Association is no
longer making a LIBOR rate available (“LIBOR”), as published by Reuters (or
other commercially available source providing quotations of LIBOR as designated
by the Agent from time to time) at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period, for Dollar
deposits (for delivery on the first day of such Interest Period) with a term
equivalent to such Interest Period. If such rate is not available at such time
for any reason, then the “LIBOR Rate” for such Interest Period shall be the rate
per annum determined by the Agent to be the rate at which deposits in Dollars
for delivery on the first day of such Interest Period in same day funds in the
approximate amount of the Loan and with a term equivalent to such Interest
Period would be offered by Bank of America’s London Branch to major banks in the
London interbank eurodollar market at their request at approximately 11:00 a.m.
(London time) two Business Days prior to the commencement of such Interest
Period.

 

“License Payment Report” shall be a report prepared by Borrower showing all
payments received by the Loan Parties with respect to any licenses or license
agreements, which shall be in the form attached hereto as Exhibit E.

 

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

 

“Loan” has the meaning specified in Section 2.01.

 

-16-

 

 

“Loan Account” has the meaning assigned to such term in Section 2.08.

 

“Loan Documents” means this Agreement, each Note, the Fee Letter, the Blocked
Account Agreements, the Security Documents, the Facility Guaranty, First Lien
Intercreditor Agreement and any other instrument or agreement now or hereafter
executed and delivered in connection herewith.

 

“Loan Parties” means, collectively, the Borrower and each Guarantor.

 

“Loan to Value Percentage” means 71.4 % reduced by 0.90% for every $1,000,000 of
principal paid after December 31, 2013 to either the First Lien Agent pursuant
to Section 2.03(c) and Section 2.04(a) of the First Lien Credit Agreement or to
the Agent pursuant to Section 2.04(a) of this Agreement.

 

“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect on, the operations, business, assets, properties or liabilities
(actual or contingent), condition (financial or otherwise) of the Borrower and
its subsidiaries, taken as a whole; (b) a material impairment of the rights and
remedies of the Agent under this Agreement or any other Loan Document, or of the
ability of the Borrower or any other Loan Party to perform its obligations under
any Loan Document to which it is a party; or (c) a material adverse effect upon
the legality, validity, binding effect or enforceability against the Borrower or
any other Loan Party of any Loan Document to which it is a party.

 

“Material Contract” means, with respect to any Person, each contract to which
such Person is a party material to the business, condition (financial or
otherwise), operations, performance, properties or prospects of such Person, and
shall include, without limitation, the Brand Matter Acquisition Agreement, the
Heelys Acquisition Agreement, and each Material License.

 

“Material Indebtedness” means Indebtedness (other than the Obligations) of the
Loan Parties in an aggregate principal amount exceeding $5,000,000. For purposes
of determining the amount of Material Indebtedness at any time, (a) the amount
of the obligations in respect of any Swap Contract at such time shall be
calculated at the Swap Termination Value thereof, (b) undrawn committed or
available amounts shall be included, and (c) all amounts owing to all creditors
under any combined or syndicated credit arrangement shall be included. Without
limiting the foregoing, all Indebtedness incurred under the First Lien Facility
shall be Material Indebtedness, regardless of the amount thereof.

 

“Material Intellectual Property” means those items of Intellectual Property
described on Part 1 of Schedule 5.17 hereto as updated from time to time after
consultation with the Agent to reflect foreign Intellectual Property (other than
Copyrights) acquired after the date hereof, and all other items of Intellectual
Property (other than Copyrights) established, registered or recorded in the
United States acquired after the date hereof and any Copyright which is subject
to and identified in a Material License.

 

“Material License” means a Primary Material License and a Secondary Material
License.

 

“Maturity Date” means March 28, 2018.

 

-17-

 

 

“Maximum Rate” has the meaning provided therefor in Section 10.09.

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

 

“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes
or is obligated to make contributions, or during the preceding five plan years,
has made or been obligated to make contributions.

 

“Multiple Employer Plan” means a Plan which has two or more contributing
sponsors (including the Borrower or any ERISA Affiliate) at least two of whom
are not under common control, as such a plan is described in Section 4064 of
ERISA.

 

“Net Proceeds” means, with respect to any Disposition by any Loan Party, the
excess, if any, of (i) the sum of cash and cash equivalents received in
connection with such transaction (including any cash or cash equivalents
received by way of deferred payment pursuant to, or by monetization of, a note
receivable or otherwise, but only as and when so received) over (ii) the sum of
(A) the principal amount of any Indebtedness that is secured by the applicable
asset by a Lien permitted hereunder which is senior to the Agent’s Lien on such
asset and that is required to be repaid (or to establish an escrow for the
future repayment thereof) in connection with such transaction (other than
Indebtedness under the Loan Documents), and (B) the reasonable and customary
out-of-pocket expenses incurred by such Loan Party in connection with such
transaction (including, without limitation, appraisals, and brokerage, legal,
title and recording or transfer tax expenses and commissions) paid by any Loan
Party to third parties (other than Affiliates)).

 

“Non-Consenting Lender” has the meaning provided therefor in Section 10.01.

 

“Note” means a promissory note made by the Borrower in favor of a Lender
evidencing Loans made by such Lender, substantially in the form of Exhibit D.

 

“NPL” means the National Priorities List under CERCLA.

 

“Obligations” means all advances to, and debts (including principal, interest,
fees, costs, and expenses), liabilities, obligations, covenants, indemnities,
and duties of, any Loan Party arising under any Loan Document or otherwise with
respect to any, whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising and including interest, fees, costs, expenses and indemnities
that accrue after the commencement by or against any Loan Party of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in such
proceeding, regardless of whether such interest, fees costs, expenses and
indemnities are allowed claims in such proceeding.

 

“Organization Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; (c) with respect to any
partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity, and (d) in each case, all shareholder or other
equity holder agreements, voting trusts and similar arrangements to which such
Person is a party or which is applicable to its Equity Interests and all other
arrangements relating to the Control or management of such Person.

 

-18-

 

 

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as
a result of a present or former connection between such Recipient and the
jurisdiction imposing such Tax (other than connections arising from such
Recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Loan Document, or sold or assigned an interest in any Loan or Loan Document).

 

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Loan Document, except any such Taxes that are Other
Connection Taxes imposed with respect to an assignment (other than an assignment
made pursuant to Section 3.06(b)).

 

“Participant” has the meaning specified in Section 10.06(d).

 

“Participation Register” has the meaning provided therefor in Section 10.06(d).

 

“Patent” has the meaning specified in the Security Agreement.

 

“Patent Security Agreement” means the Grant of Security Interests in United
States Patents dated as of the Closing Date among certain Loan Parties and the
Agent.

 

“Pathlight” means Pathlight Capital LLC and its successors.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“PCAOB” means the Public Company Accounting Oversight Board.

 

“Pension Act” means the Pension Protection Act of 2006.

 

“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum
required contributions (including any installment payment thereof) to Pension
Plans and set forth in, with respect to plan years ending prior to the effective
date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each
as in effect prior to the Pension Act and, thereafter, Section 412, 430, 431,
432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.

 

“Pension Plan” means any employee pension benefit plan (including a Multiple
Employer Plan or a Multiemployer Plan) that is maintained or is contributed to
by the Borrower and any ERISA Affiliate and is either covered by Title IV of
ERISA or is subject to the minimum funding standards under Section 412 of the
Code.

 

-19-

 

 

“Permitted Acquisition” means (i) an Acquisition consummated by an Excluded
Subsidiary, provided, that no cash, cash equivalents or any other assets of any
Loan Party or DVS are used to fund such Acquisition except for contribution of
Equity Interests of the Borrower and the cash proceeds of issuances of Equity
Interests of the Borrower or equity contributions to the Borrower, or (ii) any
other Acquisition for total consideration not in excess of $25,000,000
consummated by a Loan Party in which all of the following conditions are
satisfied:

 

(a)          No Default or Event of Default then exists or would arise from the
consummation of such Acquisition;

 

(b)          Such Acquisition shall have been approved by the Board of Directors
of the Person (or similar governing body if such Person is not a corporation)
which is the subject of such Acquisition and such Person shall not have
announced that it will oppose such Acquisition or shall not have commenced any
action which alleges that such Acquisition shall violate applicable Law;

 

(c)          The Borrower shall have furnished the Agent with ten (10) Business
Days’ prior written notice of such intended Acquisition and shall have furnished
the Agent with a current draft of the documentation in connection with such
Acquisition (and final copies thereof as and when executed), a summary of any
due diligence undertaken by the Loan Parties in connection with such
Acquisition, appropriate financial statements of the Person which is the subject
of such Acquisition, pro forma projected financial statements for the twelve
(12) month period following such Acquisition after giving effect to such
Acquisition (including balance sheets, cash flows and income statements by
quarter for the acquired Person, individually, and on a Consolidated basis with
all Loan Parties), and such other information as the Agent may reasonably
require, all of which shall be in form reasonably satisfactory to the Agent and
in a manner reasonably acceptable to the Agent;

 

(d)          The Loan Parties shall have complied with their obligations
pursuant to Section 6.17 of the First Lien Credit Agreement, and in the event
that the financing for the Permitted Acquisition is to be provided by the First
Lien Lenders, (x) the legal structure of the Acquisition shall be reasonably
acceptable to the Agent, and (y) an appraisal shall be required in connection
with the Acquisition and such appraisal shall be in form and substance
acceptable to the Agent;

 

(e)          After giving effect to the Acquisition, if the Acquisition is an
Acquisition of Equity Interests, the Borrower shall acquire and own, directly or
indirectly, a majority of the Equity Interests in the Person being acquired and
shall Control a majority of any voting interests or shall otherwise Control the
governance of the Person being acquired;

 

(f)          Any assets acquired shall consist principally of Intellectual
Property, and if the Acquisition involves a merger, consolidation or acquisition
of Equity Interests, the Person which is the subject of such Acquisition shall
be engaged in, the business of owning and licensing Intellectual Property;
provided that (x) unless otherwise agreed by the Agent, any Acquisition of
assets which includes inventory, equipment and other working capital assets in
addition to Intellectual Property or which involves the acquisition of Equity
Interests of a Person which also owns inventory, equipment and other working
capital assets in addition to Intellectual Property shall provide for the
wind-down and sale of such working capital assets within twelve (12) months
following the closing date of such acquisition and (y) Agent shall be reasonably
satisfied with the amount of any liabilities assumed or required to be paid by
any Loan Party in connection with any transaction described in clause (x) of
this proviso;

 

-20-

 

 

(g)          If the Person which is the subject of such Acquisition will be
maintained as a Subsidiary of a Loan Party (other than an Excluded Subsidiary),
or if the assets acquired in an Acquisition will be transferred to a Subsidiary
(other than an Excluded Subsidiary) which is not then a Loan Party, such
Subsidiary shall have complied with the provisions of Section 6.11 and Section
6.15 hereof;

 

(h)          The Borrower is in compliance with Section 7.15(b) on a pro-forma
basis after giving effect to such Acquisition; and

 

(i)          No cash, cash equivalents or any other assets of any Loan Party or
DVS are used to fund such Acquisition (other than and limited to the amount of
any cash proceeds received by the Borrower in connection with the sale of its
common Equity Interests or from a cash contribution to the common equity capital
of the Borrower made by the Borrower’s shareholders, in each case, solely to
finance such Acquisition), unless after the closing of (and after giving effect
to) the Acquisition, the cash and cash equivalents on the consolidated balance
sheet of the Loan Parties is the same as prior to such Acquisition.

 

“Permitted Disposition” means any of the following:

 

(a)          licenses and sublicenses of Intellectual Property of a Loan Party
or any of its Subsidiaries in the ordinary course of business, other than,
unless the Agent consents thereto, outbound licenses of any Material
Intellectual Property which would not result in a Material Adverse Effect on the
value of the Collateral constituting Intellectual Property;

 

(b)          Dispositions of Intellectual Property so long as: (i) no Default or
Event of Default exist or would occur as the result of such Disposition;
(ii) the Loan to Value Percentage at the time and after giving effect to the
Disposition is less than 50%; (iii) the Net Proceeds of such Disposition are at
least equal to the orderly liquidation value of such Intellectual Property based
upon the most recent appraisal of such Intellectual Property undertaken by the
Agent or received by the Agent from the First Lien Agent pursuant to Section
6.10(b) with respect thereto; and (iv) the Borrower makes any prepayments
required pursuant to Section 2.03(b) in connection therewith;

 

(c)          Dispositions of real property, inventory, equipment and other
assets (other than Intellectual Property) in the ordinary course of business
(including such Dispositions in connection with the wind-down of the Heelys
Acquisition) or property (other than Intellectual Property) that is
substantially worn, damaged, obsolete or, in the judgment of a Loan Party, no
longer useful or necessary in its business or that of any Subsidiary;

 

(d)          Disposition of inventory, equipment and other working capital
assets (other than Intellectual Property) and Real Estate acquired in a
Permitted Acquisition within twelve (12) months after the consummation of such
Permitted Acquisition;

 

-21-

 

 

(e)          Dispositions among the Loan Parties or by any Subsidiary to a Loan
Party; and

 

(f)          Dispositions by any Subsidiary which is not a Loan Party to another
Subsidiary that is not a Loan Party.

 

“Permitted Encumbrances” means:

 

(a)          Liens imposed by law for Taxes that are not yet due or are being
contested in compliance with Section 6.04;

 

(b)          Carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s
and other like Liens imposed by applicable Laws, arising in the ordinary course
of business and securing obligations that are not overdue by more than thirty
(30) days or are being contested in compliance with Section 6.04;

 

(c)          Pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations, other than any Lien imposed by ERISA;

 

(d)          Deposits to secure the performance of bids, trade contracts and
leases (other than Indebtedness), statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;

 

(e)          Liens in respect of judgments that would not constitute an Event of
Default hereunder;

 

(f)          Easements, covenants, conditions, restrictions, rights-of-way and
similar encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or materially
interfere with the ordinary conduct of business of a Loan Party and such other
minor title defects or survey matters that, taken as a whole, do not materially
interfere with the current use of the real property;

 

(g)          Liens existing on the Closing Date listed on Schedule 7.01 and
Liens to secure any Permitted Refinancings of the Indebtedness with respect
thereto;

 

(h)          Liens on fixed or capital assets or on Real Estate of any Loan
Party which secure Indebtedness permitted under clauses (c) and/or (d) of the
definition of Permitted Indebtedness so long as (i) such Liens and the
Indebtedness secured thereby are incurred prior to or within ninety (90) days
after such acquisition, (ii) the Indebtedness secured thereby does not exceed
the cost of acquisition of the applicable assets, and (iii) such Liens shall
attach only to the assets or Real Estate acquired, improved or refinanced with
such Indebtedness and shall not extend to any other property or assets of the
Loan Parties;

 

(i)          Liens in favor of the Agent;

 

(j)          Landlords’ and lessors’ statutory Liens in respect of rent not in
default;

 

-22-

 

 

(k)          Possessory Liens in favor of brokers and dealers arising in
connection with the acquisition or disposition of Investments owned as of the
Closing Date and other Permitted Investments, provided that such liens (a)
attach only to such Investments and (b) secure only obligations incurred in the
ordinary course and arising in connection with the acquisition or disposition of
such Investments and not any obligation in connection with margin financing;

 

(l)          Liens arising solely by virtue of any statutory or common law
provisions relating to banker’s Liens, Liens in favor of securities
intermediaries, rights of setoff or similar rights and remedies as to deposit
accounts or securities accounts or other funds maintained with depository
institutions or securities intermediaries;

 

(m)          Liens arising from precautionary UCC filings regarding “true”
operating leases or, to the extent permitted under the Loan Documents, the
consignment of goods to a Loan Party;

 

(n)          Liens on property (other than Intellectual Property) in existence
at the time such property is acquired pursuant to a Permitted Acquisition or on
such property of a Subsidiary of a Loan Party in existence at the time such
Subsidiary is acquired pursuant to a Permitted Acquisition; provided, that such
Liens are not incurred in connection with or in anticipation of such Permitted
Acquisition and do not attach to any other assets of any Loan Party or any
Subsidiary;

 

(o)          Liens on Collateral securing Indebtedness permitted pursuant to
clause (a) of the definition of Permitted Indebtedness; provided such Liens are
subject to the First Lien Intercreditor Agreement (or, in the case of any other
such credit facility or any Permitted Refinancing thereof permitted hereunder,
another intercreditor agreement containing terms that are at least as favorable
to the Credit Parties as those contained in the First Lien Intercreditor
Agreement) and the Indebtedness secured by such Liens is permitted to be
incurred pursuant to clause (a)(i) of the definition of “Permitted
Indebtedness”.

 

(p)          Liens on earnest money deposits made in connection with any
agreement in respect of a Permitted Acquisition or consisting of an agreement to
dispose of any property in a Permitted Disposition;

 

(q)          ground leases in respect of real property on which facilities owned
or leased by the Borrower or any of its Subsidiaries are located;

 

(r)          (i) licenses, sublicenses, leases or subleases granted by any Loan
Party to other Persons not materially interfering with the conduct of the
business of such Loan Party, (ii) any interest or title of a lessor, sublessor
or licensor under any Lease, (iii) restriction or encumbrance to which the
interest or title of such lessor or sublessor may be subject and (iv)
subordination of the interest of the lessee or sub-lessee under such Lease to
any restriction or encumbrance referred to in the preceding clause (iii); and

 

(s)          Liens in connection with any zoning, building, land use or similar
law or right reserved to or vested in any Governmental Authority to control or
regulate the use of any or dimensions of real property or the structure thereon.

 

-23-

 

 

“Permitted Indebtedness” means each of the following:

 

(a)          (i) Indebtedness in respect of the First Lien Credit Agreement, and
any Permitted Refinancing thereof; provided that (A) the aggregate outstanding
principal amount of any Indebtedness in respect of the First Lien Credit
Agreement or any Permitted Refinancing thereof shall not exceed the sum of (x)
the amount of Indebtedness provided to any Loan Party by the First Lien
Creditors to finance a Permitted Acquisition pursuant to and in accordance with
Section 6.17 of the First Lien Credit Agreement and (y) $45,000,000, in each
case, less all regularly scheduled or mandatory prepayments, as required
pursuant to the First Lien Credit Agreement as in effect on the date hereof in
the aggregate at any time and (B) any Indebtedness in respect of the First Lien
Credit Agreement or any Permitted Refinancing thereof shall not have an earlier
maturity date than the Maturity Date or a decreased weighted average life than
the First Lien Facility in effect on the date hereof and (ii) any other
Indebtedness outstanding on the date hereof and listed on Schedule 7.03 hereto
and, in the case of the foregoing clause (ii), any Permitted Refinancing
thereof;

 

(b)          Indebtedness of any Loan Party to any other Loan Party;

 

(c)          purchase money Indebtedness of any Loan Party to finance the
acquisition of any personal property consisting solely of fixed or capital
assets, including Capital Lease Obligations, and any Indebtedness assumed in
connection with the acquisition of any such assets (other than Intellectual
Property) or secured by a Lien on any such assets prior to the acquisition
thereof, and Permitted Refinancings thereof, provided, however, that the
aggregate principal amount of Indebtedness permitted by this clause (c) shall
not exceed $5,000,000 at any time outstanding and further provided that, if
requested by the Agent, the Loan Parties shall use commercially reasonable
efforts to cause the holders of any such Indebtedness incurred to finance the
acquisition of assets containing information relating to Intellectual Property,
licensing arrangements or financial information to enter into an intercreditor
agreement with the Agent on terms reasonably satisfactory to the Agent;

 

(d)          Indebtedness incurred for the construction or acquisition or
improvement of, or to finance or to refinance, any Real Estate owned by any Loan
Party (including therein any Indebtedness incurred in connection with
sale-leaseback transactions permitted hereunder and any Synthetic Lease
Obligations), provided that, if requested by the Agent, the Loan Parties shall
use commercially reasonable efforts to cause the holders of such Indebtedness
and the lessors under any sale-leaseback transaction to enter into an access
agreement with respect to any Real Estate in which the Loan Parties maintain
information relating to Intellectual Property, licensing arrangements or
financial information, on terms reasonably satisfactory to the Agent;

 

(e)          contingent liabilities under surety bonds or similar instruments
incurred in the ordinary course of business;

 

(f)          obligations (contingent or otherwise) of any Loan Party or any
Subsidiary thereof existing or arising under any Swap Contract, provided that
(i) such obligations are (or were) entered into by such Person in the ordinary
course of business for the purpose of directly mitigating risks associated with
fluctuations in interest rates or foreign exchange rates, and not for purposes
of speculation or taking a “market view” and (ii) such Swap Contract does not
contain any provision exonerating the non-defaulting party from its obligation
to make payments on outstanding transactions to the defaulting party;

 

-24-

 

 

 

 

(g)          Indebtedness of any Person that becomes a Subsidiary (other than an
Excluded Subsidiary) of a Loan Party in a Permitted Acquisition, which
Indebtedness is existing at the time such Person becomes a Subsidiary of a Loan
Party (other than Indebtedness incurred solely in contemplation of such Person’s
becoming a Subsidiary of a Loan Party);

 

(h)          the Obligations;

 

(i)          unsecured Indebtedness of the Borrower pursuant to the Securities
Purchase Agreement;

 

(j)          other unsecured Indebtedness in an aggregate principal amount not
to exceed $5,000,000 at any time outstanding;

 

(k)          Reserved;

 

(l)           Indebtedness consisting of unsecured guaranties by any Loan Party
of the Indebtedness and lease and other contractual obligations, in each case of
any other Loan Party, to the extent permitted under this Agreement;

 

(m)         Indebtedness arising from the honoring by any bank or other
financial institution of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business, so long as such
Indebtedness is extinguished within five Business Days of its incurrence;

 

(n)          Indebtedness owed to any Person providing property, casualty,
liability or other insurance to any Loan Party, 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 period in which such
Indebtedness is incurred and such Indebtedness is outstanding only for a period
not exceeding twelve months;

 

(o)          Indebtedness of any Loan Party which may be deemed to exist in
connection with agreements providing indemnification, purchase price adjustments
and other similar obligations in connection with the acquisition or disposition
of assets in accordance with this Agreement, so long as any such obligations are
those of the Person making the respective acquisition or sale, and are not
guaranteed by any other Person except as permitted by sub-clause (l) herein;

 

(p)          Indebtedness representing deferred compensation or similar
obligation to employees of Loan Parties incurred in the ordinary course of
business; and

 

(q)          Indebtedness of any Loan Party in respect of letters of credit,
bank guarantees, supporting obligations bankers’ acceptances, performance bonds,
surety bonds, statutory bonds, appeal bonds, warehouse receipts or similar
instruments issued or created in the ordinary course of business, including with
respect of workers compensation claims, health, disability or other employee
benefits or property, casualty or liability insurance or self-insurance or other
Indebtedness with respect to reimbursement-type obligations regarding workers
compensation claims; provided that any reimbursement obligations in respect
thereof are reimbursed within 30 days following the due date thereof.

 

-25-

 

 

“Permitted Investments” means each of the following:

 

(a)          readily marketable obligations issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than 360 days from the
date of acquisition thereof; provided that the full faith and credit of the
United States of America is pledged in support thereof;

 

(b)          commercial paper issued by any Person organized under the laws of
any state of the United States of America and rated at least “Prime-1” (or the
then equivalent grade) by Moody’s or at least “A-1” (or the then equivalent
grade) by S&P, in each case with maturities of not more than 180 days from the
date of acquisition thereof;

 

(c)          time deposits with, or insured certificates of deposit or bankers’
acceptances of, any commercial bank that (i) (A) is a Lender or (B) is organized
under the laws of the United States of America, any state thereof or the
District of Columbia or is the principal banking subsidiary of a bank holding
company organized under the laws of the United States of America, any state
thereof or the District of Columbia, and is a member of the Federal Reserve
System, (ii) issues (or the parent of which issues) commercial paper rated as
described in clause (b) of this definition and (iii) has combined capital and
surplus of at least $1,000,000,000, in each case with maturities of not more
than 180 days from the date of acquisition thereof;

 

(d)          Fully collateralized repurchase agreements with a term of not more
than thirty (30) days for securities described in clause (a) above (without
regard to the limitation on maturity contained in such clause) and entered into
with a financial institution satisfying the criteria described in clause (c)
above or with any primary dealer and having a market value at the time that such
repurchase agreement is entered into of not less than 100% of the repurchase
obligation of such counterparty entity with whom such repurchase agreement has
been entered into;

 

(e)          Investments, classified in accordance with GAAP as current assets
of the Loan Parties, in any money market fund, mutual fund, or other investment
companies that are registered under the Investment Company Act of 1940, as
amended, which are administered by financial institutions that have the highest
rating obtainable from either Moody’s or S&P, and which invest solely in one or
more of the types of securities described in clauses (a) through (d) above;

 

(f)          Investments existing on the Closing Date set forth on Schedule
7.02, but not any increase in the amount thereof or any other modification of
the terms thereof;

 

(g)          (i) Investments by any Loan Party and its Subsidiaries in their
respective Subsidiaries outstanding on the Closing Date, (ii) additional
Investments by any Loan Party and its Subsidiaries in Loan Parties (but not, for
the avoidance of doubt, in Excluded Subsidiaries other than (x) Investments made
with contributions of the Equity Interests of the Borrower and cash proceeds of
equity contributions to the Borrower made by the Borrower’s shareholders and (y)
non-monetary Investments consisting of the acquisition or formation and
ownership of the Equity Interests thereof to the extent permitted pursuant to
clause (m) hereof), and (iii) additional Investments by Subsidiaries of the Loan
Parties that are not Loan Parties in other Subsidiaries that are not Loan
Parties;

 

-26-

 

 

(h)          Investments consisting of extensions of credit in the nature of
accounts receivable or notes receivable arising from the grant of trade credit
in the ordinary course of business, and Investments received in satisfaction or
partial satisfaction thereof from financially troubled account debtors to the
extent reasonably necessary in order to prevent or limit loss;

 

(i)          Guarantees constituting Permitted Indebtedness;

 

(j)          so long as no Default or Event of Default has occurred and is
continuing or would result from such Investment, Investments by any Loan Party
in Swap Contracts permitted hereunder;

 

(k)         Investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;

 

(l)          Advances to officers, directors and employees of the Loan Parties
in the ordinary course of business in an amount not to exceed $250,000 to any
individual at any time or in an aggregate amount not to exceed $500,000 at any
time outstanding;

 

(m)         Investments constituting Permitted Acquisitions;

 

(n)          Loan Parties may own the equity interests of their respective
Subsidiaries created or acquired in accordance with this Agreement (so long as
all amounts invested in such Subsidiaries are independently justified under
another clause of this definition);

 

(o)          deposits made in the ordinary course of business to secure the
performance of leases or other obligations pursuant to Section 7.03;

 

(p)          purchases of assets in the ordinary course of business to the
extent not constituting a Permitted Acquisition;

 

(q)          Investments consisting of (x) transactions permitted under Section
7.03 and 7.05, (y) Restricted Payments permitted by Section 7.06 and (z)
repayments or other acquisitions of Indebtedness of any Loan Party not
prohibited by Section 7.07;

 

(r)          promissory notes and other non-cash consideration received in
connection with any asset sale permitted by Section 7.05; and

 

(s)          advances in the form of a prepayment of expense to vendors,
suppliers and trade creditors consistent with their past practices, so long as
such expenses were incurred in the ordinary course of business;

 

-27-

 

 

provided, however, that notwithstanding the foregoing, after the occurrence and
during the continuance of an Event of Default, no such Investments specified in
clauses (a) through (e) shall be permitted.

 

“Permitted Refinancing” means, with respect to any Person, any Indebtedness
issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund (collectively, to “Refinance”), the
Indebtedness being Refinanced (or previous refinancings thereof constituting a
Permitted Refinancing); provided, that (a) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing does not exceed the
principal amount (or accreted value, if applicable) of the Indebtedness so
Refinanced (plus unpaid accrued interest and premiums thereon and underwriting
discounts, defeasance costs, fees, commissions and expenses), (b) the weighted
average life to maturity of such Permitted Refinancing is greater than or equal
to the weighted average life to maturity of the Indebtedness being Refinanced,
(c) such Permitted Refinancing shall not require any scheduled principal
payments due prior to the Maturity Date in excess of or prior to the scheduled
principal payments due prior to such Maturity Date for the Indebtedness being
Refinanced, (d) if the Indebtedness being Refinanced is subordinated in right of
payment to the Obligations under this Agreement, such Permitted Refinancing
shall be subordinated in right of payment to such Obligations on terms at least
as favorable to the Credit Parties as those contained in the documentation
governing the Indebtedness being Refinanced, (e) no Permitted Refinancing shall
have direct or indirect obligors who were not also obligors of the Indebtedness
being Refinanced, or greater guarantees or security, than the Indebtedness being
Refinanced, (f) such Permitted Refinancing shall be otherwise on terms not
materially less favorable to the Credit Parties than those contained in the
documentation governing the Indebtedness being Refinanced, taken as a whole,
including, without limitation, with respect to financial and other covenants and
events of default, (g) the interest rate applicable to any such Permitted
Refinancing shall not exceed the then applicable market interest rate, (h) at
the time thereof, no Default or Event of Default shall have occurred and be
continuing and (i) in the case of a Refinance of any Indebtedness permitted
pursuant to clause (a) of the definition of Permitted Indebtedness, the agent
and lenders party thereto agree in writing to be bound by the First Lien
Intercreditor Agreement.

 

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, limited partnership,
Governmental Authority or other entity.

 

“Plan” means any employee benefit plan within the meaning of Section 3(3) of
ERISA (including a Pension Plan), maintained for employees of the Borrower or
any ERISA Affiliate or any such Plan to which the Borrower or any ERISA
Affiliate is required to contribute on behalf of any of its employees.

 

“Primary Material License” means the license agreements described on Part 2 of
Schedule 5.17 hereto, and any other license agreement, the revenues from which,
hereafter constitute ten percent (10%) or more of annual revenues of the
Borrower and its Subsidiaries derived from any individual brand.

 

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“Real Estate” means all Leases and all land, together with the buildings,
structures, parking areas, and other improvements thereon, now or hereafter
owned by any Loan Party, including all easements, rights-of-way, and similar
rights relating thereto.

 

“Realizable Orderly Liquidation Value” means the sum of (w) one hundred percent
(100%) of the orderly liquidation of the Intellectual Property of the Loan
Parties (other than William Rast or any other Person that any Loan Party is not
entitled to receive 100% of the economic benefit from); (x) eighty two percent
(82%) of the orderly liquidation value of the Intellectual Property of William
Rast; (y) sixty percent (60%) of the orderly liquidation value of the
Intellectual Property of DVS; and (z) for the Intellectual Property of a Person
that a Loan Party is not entitled to receive 100% of the economic benefit, the
percentage of the orderly liquidation value of the Intellectual Property equal
to the percentage of the economic benefit that such Loan Party is entitled to
receive from such Person, in each case based upon the most recent appraisal of
such Intellectual Property undertaken by the Agent or received by the Agent from
the First Lien Agent pursuant to Section 6.10(b) with respect thereto.

 

“Recipient” means the Agent or any Lender.

 

“Register” has the meaning specified in Section 10.06(c).

 

“Registered Public Accounting Firm” has the meaning specified by the Securities
Laws and shall be independent of the Borrower and its Subsidiaries as prescribed
by the Securities Laws.

 

“Related Parties” means, with respect to any Person, such Person’s Affiliates
and the partners, directors, officers, employees, agents, trustees,
administrators, managers, advisors and representatives of such Person and of
such Person’s Affiliates.

 

“Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

 

“Reports” has the meaning provided in Section 9.11.

 

“Required Lenders” means, as of any date of determination, Lenders holding in
the aggregate more than 50% of the aggregate outstanding principal amount of all
Loans.

 

“Responsible Officer” means the chief executive officer, president, chief
financial officer, treasurer or assistant treasurer of a Loan Party or any of
the other individuals designated in writing to the Agent by an existing
Responsible Officer of a Loan Party as an authorized signatory of any
certificate or other document to be delivered hereunder. Any document delivered
hereunder that is signed by a Responsible Officer of a Loan Party shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such Loan Party and such
Responsible Officer shall be conclusively presumed to have acted on behalf of
such Loan Party.

 

“Restated Financial Statements” means (x) an amendment to the Borrower’s annual
report on Form 10-K for the Fiscal Year ended December 31, 2011 to modify the
treatment of certain items contained therein and (y) an amendment to the
Borrower’s quarterly report on Form 10-Q for each of the Fiscal Quarters ended
March 31, 2012, June 30, 2012 and September 30, 2012 to modify the treatment of
certain items contained therein, in each case as previously described to the
Agent.

 

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“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock or other Equity
Interest of any Person or any of its Subsidiaries, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, defeasance,
acquisition, cancellation or termination of any such capital stock or other
Equity Interest, or on account of any return of capital to such Person’s
stockholders, partners or members (or the equivalent of any thereof), or any
option, warrant or other right to acquire any such dividend or other
distribution or payment. Without limiting the foregoing, “Restricted Payments”
with respect to any Person shall also include all payments made by such Person
with any proceeds of a dissolution or liquidation of such Person.

 

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc. and any successor thereto.

 

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

 

“SEC” means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.

 

“Secondary Material License” means the license agreements described on Part 3 of
Schedule 5.17 hereto, and any other license agreement, the revenues from which
hereafter constitute two percent (2%) of annual revenue of the Borrower and its
Subsidiaries.

 

 

“Securities Laws” means the Securities Act of 1933, the Securities Exchange Act
of 1934, Sarbanes-Oxley, and the applicable accounting and auditing principles,
rules, standards and practices promulgated, approved or incorporated by the SEC
or the PCAOB.

 

“Securities Purchase Agreement” means that certain Securities Purchase Agreement
dated February 2, 2012 between the Borrower and TCP WR Acquisition, LLC,
pursuant to which the Borrower has issued convertible notes in the original
principal amount of $14,500,000;

 

“Security Agreement” means the Security Agreement dated as of the Closing Date
among the Loan Parties and the Agent.

 

“Security Documents” means the Security Agreement, the Copyright Security
Agreement, the Patent Security Agreement, the Trademark Security Agreement, the
Blocked Account Agreements and each other security agreement or other instrument
or document executed and delivered to the Agent pursuant to this Agreement or
any other Loan Document granting a Lien to secure any of the Obligations.

 

“Senior Obligations” means the sum of (i) the then outstanding amount of the
Obligations plus (ii) the then outstanding amount of the First Lien Obligations.

 

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“Shareholders’ Equity” means, as of any date of determination, consolidated
shareholders’ equity of the Borrower and its Subsidiaries as of that date
determined in accordance with GAAP.

 

“Solvent” and “Solvency” means, with respect to any Person on a particular date,
that on such date (a) at fair valuation, all of the properties and assets of
such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair saleable value of the
properties and assets of such Person is not less than the amount that would be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, and (d) such Person is not engaged in a business or a transaction, and
is not about to engage in a business or transaction, for which such Person’s
properties and assets would constitute unreasonably small capital after giving
due consideration to the prevailing practices in the industry in which such
Person is engaged. The amount of all guarantees at any time shall be computed as
the amount that, in light of all the facts and circumstances existing at the
time, can reasonably be expected to become an actual or matured liability.

 

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the FRB to which the Agent is subject with respect to the
Adjusted LIBOR Rate, for eurocurrency funding (currently referred to as
“Eurocurrency Liabilities” in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D. Loans
shall be deemed to constitute eurocurrency funding and to be subject to such
reserve requirements without benefit of or credit for proration, exemptions or
offsets that may be available from time to time to any Lender under such
Regulation D or any comparable regulation. The Statutory Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in any
reserve percentage.

 

“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
Equity Interests having ordinary voting power for the election of directors or
other governing body are at the time beneficially owned, or the management of
which is otherwise controlled, directly, or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise specified, all
references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a
Subsidiary or Subsidiaries of a Loan Party, but shall exclude Excluded
Subsidiaries.

 

“Swap Contract” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a “Master Agreement”), including
any such obligations or liabilities under any Master Agreement.

 

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“Swap Termination Value” means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include a Lender or any Affiliate of a
Lender).

 

“Synthetic Lease Obligation” means the monetary obligation of a Person under (a)
a so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property (including sale and leaseback
transactions), in each case, creating obligations that do not appear on the
balance sheet of such Person but which, upon the application of any Debtor
Relief Laws to such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment).

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.

 

“Termination Date” means the earliest to occur of (i) the Maturity Date, (ii)
the date on which the maturity of the Obligations is accelerated (or deemed
accelerated) in accordance with Article VIII or (iii) the date on which the
Borrower prepays the Loans in full and terminates this Agreement in accordance
with Section 2.03(a) hereof.

 

“Trademark” has the meaning specified in the Security Agreement.

 

“Trademark Security Agreement” means the Grant of Security Interest in United
States Trademarks dated as of the Closing Date among certain Loan Parties and
the Agent.

 

“Trading with the Enemy Act” has the meaning set forth in Section 10.18.

 

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in
effect from time to time in the State of New York; provided, however, that if a
term is defined in Article 9 of the Uniform Commercial Code differently than in
another Article thereof, the term shall have the meaning set forth in Article 9;
provided further that, if by reason of mandatory provisions of law, perfection,
or the effect of perfection or non-perfection, of a security interest in any
Collateral or the availability of any remedy hereunder is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, “Uniform Commercial Code” means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection or availability of
such remedy, as the case may be.

 

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“United States” and “U.S.” mean the United States of America.

 

“U.S. Person” means any Person that is a “United States Person” as defined in
Section 7701(a)(30) of the Code.

 

“U.S. Tax Compliance Certificate” has the meaning specified in Section
3.01(e)(ii)(B)(III).

 

“Warrant” means that certain Class B Common Stock Purchase Warrant issued by the
Borrower to the Agent pursuant to and in accordance with the terms of the
Warrant Purchase Agreement.

 

“Warrant Purchase Agreement” means that certain Warrant Purchase Agreement dated
as of the date hereof by and between the Borrower and Agent for the purchase of
the Warrant.

 

“William Rast Entities” means William Rast Licensing and William Rast Sourcing
and their respective Subsidiaries, as applicable.

 

“William Rast Licensing” means William Rast Licensing, LLC, a California limited
liability company.

 

“William Rast Sourcing” means William Rast Sourcing, LLC, a California limited
liability company.

 

Section 1.02         Other Interpretive Provisions. With reference to this
Agreement and each other Loan Document, unless otherwise specified herein or in
such other Loan Document:

 

(a)          The definitions of terms herein shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words “include,” “includes” and “including” shall be deemed to be followed
by the phrase “without limitation.” The word “will” shall be construed to have
the same meaning and effect as the word “shall.” Unless the context requires
otherwise, (i) any definition of or reference to any agreement, instrument or
other document (including any Organization Document) shall be construed as
referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein or in any other Loan
Document), (ii) any reference herein to any Person shall be construed to include
such Person’s successors and assigns, (iii) the words “herein,” “hereof” and
“hereunder,” and words of similar import when used in any Loan Document, shall
be construed to refer to such Loan Document in its entirety and not to any
particular provision thereof, (iv) all references in a Loan Document to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, the Loan Document in
which such references appear, (v) any reference to any law shall include all
rules, regulations and orders thereunder and all statutory and regulatory
provisions consolidating, amending, replacing or interpreting such law and any
reference to any law or regulation shall, unless otherwise specified, refer to
such law or regulation as amended, modified or supplemented from time to time,
and (vi) 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, including cash, securities, accounts and contract rights.

 

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(b)          In the computation of periods of time from a specified date to a
later specified date, the word “from” means “from and including;” the words “to”
and “until” each mean “to but excluding;” and the word “through” means “to and
including.”

 

(c)          Section headings herein and in the other Loan Documents are
included for convenience of reference only and shall not affect the
interpretation of this Agreement or any other Loan Document.

 

(d)          Any reference herein or in any other Loan Document to the
satisfaction, repayment, or payment in full of the Obligations shall mean the
repayment in Dollars in full in cash or immediately available funds (or, in the
case of contingent reimbursement obligations providing cash collateralization)
of all of the Obligations (including the payment of any termination amount then
applicable other than unasserted contingent indemnification Obligations.

 

Section 1.03         Accounting Terms.

 

(a)          Generally. All accounting terms not specifically or completely
defined herein shall be construed in conformity with, and all financial data
(including financial ratios and other financial calculations) required to be
submitted pursuant to this Agreement shall be prepared in conformity with, GAAP
applied on a consistent basis, as in effect from time to time, applied in a
manner consistent with that used in preparing the Audited Financial Statements,
except as otherwise specifically prescribed herein.

 

(b)          Changes in GAAP. If at any time any change in GAAP would affect the
computation of any financial ratio or requirement set forth in any Loan
Document, and either the Borrower or the Required Lenders shall so request, the
Agent, the Lenders and the Borrower shall negotiate in good faith to amend such
ratio or requirement to preserve the original intent thereof in light of such
change in GAAP (subject to the approval of the Required Lenders); provided that,
until so amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) the Borrower shall
provide to the Agent and the Lenders financial statements and other documents
required under this Agreement or as reasonably requested hereunder setting forth
a reconciliation between calculations of such ratio or requirement made before
and after giving effect to such change in GAAP.

 

Section 1.04         Rounding. Any financial ratios required to be maintained by
the Loan Parties pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed herein and
rounding the result up or down to the nearest number (with a rounding-up if
there is no nearest number).

 

Section 1.05         Times of Day. Unless otherwise specified, all references
herein to times of day shall be references to Eastern time (daylight or
standard, as applicable).

 

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Article II
THE COMMITMENTS AND LOANS

 

Section 2.01         Loans. Subject to the terms and conditions set forth
herein, each Lender severally agrees to make loans (each such loan, a “Loan”) to
the Borrower on the Closing Date in an aggregate principal amount equal to such
Lender’s Commitment in immediately available funds in accordance with
instructions provided by the Borrower. The aggregate amount of the Loans shall
not exceed the Aggregate Commitments. The Commitment of each Lender shall expire
upon the funding by such Lenders of the Loan equal to such Lender’s Commitment.

 

Section 2.02         Reserved.

 

Section 2.03         Prepayments.

 

(a)          The Borrower may, upon irrevocable notice from the Borrower to the
Agent, at any time or from time to time voluntarily prepay Loans in whole or in
part without premium or penalty except as provided in Section 2.06(a) hereof;
provided that (i) such notice must be received by the Agent not later than 11:00
a.m. three Business Days prior to any date of prepayment of any Loans; (ii) any
prepayment of Loans shall be in a principal amount of $2,000,000 or a whole
multiple of $500,000 in excess thereof; or, if less, the entire principal amount
thereof then outstanding or such lesser amount as is acceptable to the Agent.
Each such notice shall specify the date and amount of such prepayment and the
Loans to be prepaid. The Agent will promptly notify each Lender of its receipt
of each such notice, and of the amount of such Lender’s Applicable Percentage of
such prepayment. If such notice is given by the Borrower, the Borrower shall
make such prepayment and the payment amount specified in such notice shall be
due and payable on the date specified therein, except that, to the extent
delivered in connection with a full or partial refinancing of the Obligations,
such notice shall not be irrevocable until such refinancing is closed and
funded. Each such prepayment shall be applied to the Loans of the Lenders in
accordance with their respective Applicable Percentages.

 

(b)          In connection with any Disposition of any Intellectual Property of
the Borrower or its Subsidiaries, the Borrower shall prepay the Loans in an
amount equal to the difference between (i) 100% of the orderly liquidation value
of such Intellectual Property as determined by the most recent appraisal of such
Intellectual Property undertaken by the Agent or received from the First Lien
Agent pursuant to Section 6.10(b) with respect thereto minus (ii) the lesser of
(x) fifty (50%) of the orderly liquidation value of such Intellectual Property
as determined by the most recent appraisal of such Intellectual Property
undertaken by the Agent or received by the Agent form the First Lien Agent
pursuant to Section 6.10(b) with respect thereto; or (y) the amount paid to the
First Lien Agent in connection with such Disposition pursuant to Section 2.03(b)
of the First Lien Credit Agreement.

 

(c)          In connection with any Disposition of any assets of the Borrower or
its Subsidiaries (other than Intellectual Property and assets constituting
Inventory or accounts receivable disposed of in connection with a wind-down of
acquired assets (including in connection with the Heelys Acquisition)), the
Borrower shall prepay the Loans in an amount equal to the difference between (i)
100% of the Net Proceeds from the Disposition of such assets minus (ii) the
amount paid to the First Lien Agent in connection with such Disposition pursuant
to Section 2.03(b) of the First Lien Credit Agreement.

 

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(d)          Subject to the First Lien Intercreditor Agreement, the Borrower
shall prepay the Loans to the extent required pursuant to the provisions of
Section 6.12 hereof.

 

(e)          In the event the First Lien Agent waives (i) any prepayments
required pursuant to Section 2.03 of the First Lien Credit Agreement or (ii) any
repayment required pursuant to Section 2.04 of the First Lien Credit Agreement
then the Borrower shall prepay the Loans in the amount of such payment waived by
the First Lien Agent.

 

(f)          Prepayments made pursuant to this Section 2.03 shall be applied to
the remaining scheduled installments of principal due in respect of the Loans in
inverse order of maturity.

 

Section 2.04         Repayment of Obligations.

 

(a)          In addition to the mandatory prepayment provisions set forth in
Section 2.03 above, the Borrower shall repay the Loans in an amount equal to
$500,000 on March 31, June 30, September 30 and December 31 of each year,
commencing June 30, 2013.

 

(b)          The Borrower shall repay to the Agent, for the account of the
Lenders, on the Termination Date the aggregate principal amount of Loans
outstanding on such date. Once repaid or prepaid, Loans may not be reborrowed.

 

Section 2.05         Interest.

 

(a)          Subject to the provisions of Section 2.05(b) below, each Loan shall
bear interest on the outstanding principal amount thereof at a rate per annum
equal to the Adjusted LIBOR Rate plus the Applicable Margin.

 

(b)          If any Event of Default exists, all outstanding Obligations shall
thereafter bear interest at a fluctuating interest rate per annum at all times
equal to the Default Rate and thereafter such Obligations shall bear interest at
the Default Rate to the fullest extent permitted by Law. Accrued and unpaid
interest on past due amounts (including interest on past due interest) shall be
due and payable upon demand.

 

(c)          Except as provided in Section 2.05(b), interest on each Loan shall
be due and payable in arrears on each Interest Payment Date applicable thereto
and at such other times as may be specified herein. Interest hereunder shall be
due and payable in accordance with the terms hereof before and after judgment,
and before and after the commencement of any proceeding under any Debtor Relief
Law.

 

Section 2.06         Fees.

 

(a)          Early Termination Fee. In the event that (i) the Termination Date
occurs, for any reason, prior to March 28, 2017, or (ii) the Borrower makes any
voluntary prepayment of the Loan prior to March 28, 2017 (other than (x) in
connection with a refinancing of the Loans in which Pathlight participates or
(y) for purposes of ensuring compliance with Section 7.15(b) or curing any
Default or Event of Default thereunder (but solely up to the amount necessary to
ensure such compliance or cure such Default or Event of Default)), the Borrower
shall pay to the Agent, for the ratable benefit of the Lenders, a premium (the
“Early Termination Fee”) equal to the following amounts:

 

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Prepayment Date   Early Termination Fee       From and after the Closing Date
through the date immediately preceding the 1st  anniversary of the Closing Date
  4.00% of the Called Principal Amount       From and after the 1st anniversary
of the Closing Date through the date immediately preceding the 2nd anniversary
of the Closing Date   3.00% of the Called Principal Amount       From and after
the 2nd anniversary of the Closing Date through the date immediately preceding
the 3rd  anniversary of the Closing Date   2.00% of the Called Principal Amount
      From and after the 3rd anniversary of the Closing Date through the date
immediately preceding the 4th anniversary of the Closing Date   1.00% of the
Called Principal Amount

 

All parties to this Agreement agree and acknowledge that the Lenders will have
suffered damages on account of the early termination of this Agreement and that,
in view of the difficulty in ascertaining the amount of such damages, the Early
Termination Fee constitutes reasonable compensation and liquidated damages to
compensate the Lenders on account thereof.

 

(b)          Agent’s Fee. The Borrower shall pay to the Agent for its own
account an annual administrative agent’s fee in the amount of $60,000 per annum
(the “Agent’s Fee”), which Agent’s Fee shall be paid on the Closing Date and on
each anniversary of the Closing Date. The Agent’s Fee shall be fully earned when
paid and shall not be refundable for any reason whatsoever.

 

(c)          Other Fees. The Borrower shall pay to the Agent for its own account
fees in the amounts and at the times specified in the Fee Letter. Such fees
shall be fully earned when paid and shall not be refundable for any reason
whatsoever.

 

Section 2.07         Computation of Interest and Fees. All computations of
interest for the Alternate Rate Loans when the Base Rate is determined by Bank
of America’s “prime rate” shall be made on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed. All other computations of
fees and interest shall be made on the basis of a 360-day year and actual days
elapsed. Interest shall accrue on each Loan for the day on which the Loan is
made, and shall not accrue on a Loan, or any portion thereof, for the day on
which the Loan or such portion is paid. Each determination by the Agent of an
interest rate or fee hereunder shall be conclusive and binding for all purposes,
absent manifest error.

 

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Section 2.08         Evidence of Debt.

 

(a)          The Loans made by each Lender shall be evidenced by one or more
accounts or records maintained by the Agent (the “Loan Account”) in the ordinary
course of business. In addition, each Lender may record in such Lender’s
internal records, an appropriate notation evidencing the date and amount of each
Loan from such Lender, each payment and prepayment of principal of any such
Loan, and each payment of interest, fees and other amounts due in connection
with the Obligations due to such Lender. The accounts or records maintained by
the Agent and each Lender shall be conclusive absent manifest error of the
amount of the Loans made by the Lenders to the Borrower and the interest and
payments thereon. Any failure to so record or any error in doing so shall not,
however, limit or otherwise affect the obligation of the Borrower hereunder to
pay any amount owing with respect to the Obligations. In the event of any
conflict between the accounts and records maintained by any Lender and the
accounts and records of the Agent in respect of such matters, the accounts and
records of the Agent shall control in the absence of manifest error. Upon the
request of any Lender made through the Agent, the Borrower shall execute and
deliver to such Lender (through the Agent) a Note, which shall evidence such
Lender’s Loans in addition to such accounts or records. Each Lender may attach
schedules to its Note and endorse thereon the date, amount and maturity of its
Loans and payments with respect thereto. Upon receipt of an affidavit of a
Lender as to the loss, theft, destruction or mutilation of such Lender’s Note
and upon cancellation of such Note, the Borrower will issue, in lieu thereof, a
replacement Note in favor of such Lender, in the same principal amount thereof
and otherwise of like tenor.

 

Section 2.09         Payments Generally; Agent’s Clawback.

 

(a)          General. All payments to be made by the Borrower shall be made
without condition or deduction for any counterclaim, defense, recoupment or
setoff. Except as otherwise expressly provided herein, all payments by the
Borrower hereunder shall be made to the Agent, for the account of the respective
Lenders to which such payment is owed, at the Agent’s Office in Dollars and in
immediately available funds not later than 2:00 p.m. on the date specified
herein. The Agent will promptly distribute to each Lender its Applicable
Percentage (or other applicable share as provided herein) of such payment in
like funds as received by wire transfer to such Lender’s Lending Office. All
payments received by the Agent after 2:00 p.m. shall, at the option of the
Agent, be deemed received on the next succeeding Business Day and any applicable
interest or fee shall continue to accrue. If any payment to be made by the
Borrower shall come due on a day other than a Business Day, payment shall be
made on the next following Business Day, and such extension of time shall be
reflected in computing interest or fees, as the case may be.

 

(b)          Payments by Borrower; Presumptions by Agent. Unless the Agent shall
have received notice from the Borrower prior to the time at which any payment is
due to the Agent for the account of any of the Lenders hereunder that the
Borrower will not make such payment, the Agent may assume that the Borrower has
made such payment on such date in accordance herewith and may, in reliance upon
such assumption, distribute to the Lenders the amount due. In such event, if the
Borrower has not in fact made such payment, then each of the Lenders severally
agrees to repay to the Agent forthwith on demand the amount so distributed to
such Lender, in immediately available funds with interest thereon, for each day
from and including the date such amount is distributed to it to but excluding
the date of payment to the Agent, at the greater of the Federal Funds Rate and a
rate determined by the Agent in accordance with banking industry rules on
interbank compensation.

 

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(c)          Funding Source. Nothing herein shall be deemed to obligate any
Lender to obtain the funds for any Loan in any particular place or manner or to
constitute a representation by any Lender that it has obtained or will obtain
the funds for any Loan in any particular place or manner.

 

Section 2.10         Sharing of Payments by Lenders. If any Lender shall, by
exercising any right of setoff or counterclaim or otherwise, obtain payment in
respect of any principal of, interest on, or other amounts with respect to, any
of the Loans resulting in such Lender’s receiving payment of a proportion of the
aggregate amount of such Loans greater than its pro rata share thereof as
provided herein (including as in contravention of the priorities of payment set
forth in Section 8.03), then the Lender receiving such greater proportion shall
(a) notify the Agent of such fact, and (b) purchase (for cash at face value)
participations in the Loans of the other Lenders, or make such other adjustments
as shall be equitable, so that the benefit of all such payments shall be shared
by the Lenders ratably and in the priorities set forth in Section 8.03, provided
that:

 

(i)          if any such participations or subparticipations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations or subparticipations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest; and

 

(ii)         the provisions of this Section shall not be construed to apply to
(x) any payment made by the Loan Parties pursuant to and in accordance with the
express terms of this Agreement or (y) any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Loans to any assignee or participant.

 

Each Loan Party consents to the foregoing and agrees, to the extent it may
effectively do so under Law, that any Lender acquiring a participation pursuant
to the foregoing arrangements may exercise against such Loan Party rights of
setoff and counterclaim with respect to such participation as fully as if such
Lender were a direct creditor of such Loan Party in the amount of such
participation.

 

Article III
TAXES, YIELD PROTECTION AND ILLEGALITY

 

Section 3.01         Taxes.

 

(a)          Payments Free of Taxes; Obligation to Withhold; Payments on Account
of Taxes.

 

(i)          Any and all payments by or on account of any obligation of any Loan
Party under any Loan Document shall be made without deduction or withholding for
any Taxes, except as required by applicable Laws. If any applicable Laws (as
determined in the good faith discretion of the Agent) require the deduction or
withholding of any Tax from any such payment by the Agent or a Loan Party, then
the Agent or such Loan Party shall be entitled to make such deduction or
withholding, upon the basis of the information and documentation to be delivered
pursuant to subsection (e) below.

 

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(ii)         If any Loan Party or the Agent shall be required by any applicable
Laws other than the Code to withhold or deduct any Taxes from any payment, then
(A) such Loan Party or the Agent, as required by such Laws, shall withhold or
make such deductions as are determined by it to be required based upon the
information and documentation it has received pursuant to subsection (e) below,
(B) such Loan Party or the Agent, to the extent required by such Laws, shall
timely pay the full amount withheld or deducted to the relevant Governmental
Authority in accordance with such Laws, and (C) to the extent that the
withholding or deduction is made on account of Indemnified Taxes, the sum
payable by the applicable Loan Party shall be increased as necessary so that
after any required withholding or the making of all required deductions
(including deductions applicable to additional sums payable under this Section
3.01) the applicable Recipient receives an amount equal to the sum it would have
received had no such withholding or deduction been made.

 

(b)          Payment of Other Taxes by the Borrower. Without limiting the
provisions of subsection (a) above, the Borrower shall timely pay to the
relevant Governmental Authority in accordance with applicable Law, or at the
option of the Agent timely reimburse it for the payment of, any Other Taxes.

 

(c)          Tax Indemnifications.

 

(i)          The Loan Parties shall, and each Loan Party does hereby, jointly
and severally indemnify each Recipient, and shall make payment in respect
thereof within 10 days after demand therefor, for the full amount of any
Indemnified Taxes (including Indemnified Taxes imposed or asserted on or
attributable to amounts payable under this Section 3.01) payable or paid by such
Recipient or required to be withheld or deducted from a payment to such
Recipient, and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability delivered to the
Borrower by a Lender (with a copy to the Agent), or by the Agent on its own
behalf or on behalf of a Lender, shall be conclusive absent manifest error.

 

(ii)         Each Lender shall, and does hereby, severally indemnify, and shall
make payment in respect thereof within 10 days after demand therefor, (x) the
Agent against any Indemnified Taxes attributable to such Lender (but only to the
extent that any Loan Party has not already indemnified the Agent for such
Indemnified Taxes and without limiting the obligation of the Loan Parties to do
so), (y) the Agent and the Loan Parties, as applicable, against any Taxes
attributable to such Lender’s failure to comply with the provisions of Section
10.06(d) relating to the maintenance of a Participant Register and (z) the Agent
and the Loan Parties, as applicable, against any Excluded Taxes attributable to
such Lender, in each case, that are payable or paid by the Agent or a Loan Party
in connection with any Loan Document, and any reasonable expenses arising
therefrom or with respect thereto, whether or not such Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability delivered to any
Lender by the Agent shall be conclusive absent manifest error. Each Lender
hereby authorizes the Agent to set off and apply any and all amounts at any time
owing to such Lender under this Agreement or any other Loan Document against any
amount due to the Agent under this clause (ii).

 

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(d)          Evidence of Payments. Upon request by the Borrower or the Agent, as
the case may be, after any payment of Taxes by the Borrower or by the Agent to a
Governmental Authority as provided in this Section 3.01, the Borrower shall
deliver to the Agent or the Agent shall deliver to the Borrower, as the case may
be, the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of any return required by Laws to
report such payment or other evidence of such payment reasonably satisfactory to
the Borrower or the Agent, as the case may be.

 

(e)          Status of Lenders; Tax Documentation.

 

(i)          Any Lender that is entitled to an exemption from or reduction of
withholding Tax with respect to payments made under any Loan Document shall
deliver to the Borrower and the Agent, at the time or times reasonably requested
by the Borrower or the Agent, such properly completed and executed documentation
reasonably requested by the Borrower or the Agent as will permit such payments
to be made without withholding or at a reduced rate of withholding. In addition,
any Lender, if reasonably requested by the Borrower or the Agent, shall deliver
such other documentation prescribed by applicable Law or reasonably requested by
the Borrower or the Agent as will enable the Borrower or the Agent to determine
whether or not such Lender is subject to backup withholding or information
reporting requirements. Notwithstanding anything to the contrary in the
preceding two sentences, the completion, execution and submission of such
documentation (other than such documentation set forth in Section
3.01(e)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the
Lender’s reasonable judgment such completion, execution or submission would
subject such Lender to any material unreimbursed cost or expense or would
materially prejudice the legal or commercial position of such Lender.

 

(ii)         Without limiting the generality of the foregoing, in the event that
the Borrower is a U.S. Person,

 

(A)         any Lender that is a U.S. Person shall deliver to the Borrower and
the Agent on or prior to the date on which such Lender becomes a Lender under
this Agreement (and from time to time thereafter upon the reasonable request of
the Borrower or the Agent), executed originals of IRS Form W-9 certifying that
such Lender is exempt from U.S. federal backup withholding tax;

 

(B)         any Foreign Lender shall, to the extent it is legally entitled to do
so, deliver to the Borrower and the Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Agent), whichever of the following is
applicable:

 

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(I)         in the case of a Foreign Lender claiming the benefits of an income
tax treaty to which the United States is a party (x) with respect to payments of
interest under any Loan Document, executed originals of IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “interest” article of such tax treaty and (y) with respect to
any other applicable payments under any Loan Document, IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “business profits” or “other income” article of such tax treaty;

 

(II)        executed originals of IRS Form W-8ECI;

 

(III)       in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under Section 881(c) of the Code, (x) a
certificate substantially in the form of Exhibit D-1 to the effect that such
Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the
Code, a “10 percent shareholder” of the Borrower within the meaning of Section
881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in
Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y)
executed originals of IRS Form W-8BEN; or

 

(IV)        to the extent a Foreign Lender is not the beneficial owner, executed
originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a
U.S. Tax Compliance Certificate substantially in the form of Exhibit D-2 or
Exhibit D-3, IRS Form W-9, and/or other certification documents from each
beneficial owner, as applicable; provided that if the Foreign Lender is a
partnership and one or more direct or indirect partners of such Foreign Lender
are claiming the portfolio interest exemption, such Foreign Lender may provide a
U.S. Tax Compliance Certificate substantially in the form of Exhibit D-4 on
behalf of each such direct and indirect partner;

 

(C)         any Foreign Lender shall, to the extent it is legally entitled to do
so, deliver to the Borrower and the Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Agent), executed originals of any
other form prescribed by applicable Law as a basis for claiming exemption from
or a reduction in U.S. federal withholding Tax, duly completed, together with
such supplementary documentation as may be prescribed by applicable Law to
permit the Borrower or the Agent to determine the withholding or deduction
required to be made; and

 

(D)         if a payment made to a Lender under any Loan Document would be
subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to
fail to comply with the applicable reporting requirements of FATCA (including
those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such
Lender shall deliver to the Borrower and the Agent at the time or times
prescribed by law and at such time or times reasonably requested by the Borrower
or the Agent such documentation prescribed by applicable Law (including as
prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional
documentation reasonably requested by the Borrower or the Agent as may be
necessary for the Borrower and the Agent to comply with their obligations under
FATCA and to determine that such Lender has complied with such Lender’s
obligations under FATCA or to determine the amount to deduct and withhold from
such payment. Solely for purposes of this clause (D), “FATCA” shall include any
amendments made to FATCA after the date of this Agreement.

 

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(iii)        Each Lender agrees that if any form or certification it previously
delivered pursuant to this Section 3.01 expires or becomes obsolete or
inaccurate in any respect, it shall update such form or certification or
promptly notify the Borrower and the Agent in writing of its legal inability to
do so.

 

(f)          Treatment of Certain Refunds. Unless required by applicable Laws,
at no time shall the Agent have any obligation to file for or otherwise pursue
on behalf of a Lender, or have any obligation to pay to any Lender, any refund
of Taxes withheld or deducted from funds paid for the account of such Lender. If
any Recipient determines, in its sole discretion exercised in good faith, that
it has received a refund of any Taxes as to which it has been indemnified by any
Loan Party or with respect to which any Loan Party has paid additional amounts
pursuant to this Section 3.01, it shall pay to the Loan Party an amount equal to
such refund (but only to the extent of indemnity payments made, or additional
amounts paid, by a Loan Party under this Section 3.01 with respect to the Taxes
giving rise to such refund), net of all out-of-pocket expenses (including Taxes)
incurred by such Recipient, and without interest (other than any interest paid
by the relevant Governmental Authority with respect to such refund), provided
that the Loan Party, upon the request of the Recipient, agrees to repay the
amount paid over to the Loan Party (plus any penalties, interest or other
charges imposed by the relevant Governmental Authority) to the Recipient in the
event the Recipient is required to repay such refund to such Governmental
Authority. Notwithstanding anything to the contrary in this subsection, in no
event will the applicable Recipient be required to pay any amount to the Loan
Party pursuant to this subsection the payment of which would place the Recipient
in a less favorable net after-Tax position than such Recipient would have been
in if the Tax subject to indemnification and giving rise to such refund had not
been deducted, withheld or otherwise imposed and the indemnification payments or
additional amounts with respect to such Tax had never been paid. This subsection
shall not be construed to require any Recipient to make available its tax
returns (or any other information relating to its taxes that it deems
confidential) to any Loan Party or any other Person.

 

(g)          Survival. Each party’s obligations under this Section 3.01 shall
survive the resignation or replacement of the Agent or any assignment of rights
by, or the replacement of, a Lender, and the repayment, satisfaction or
discharge of all of the Obligations.

 

Section 3.02         Illegality. If any Lender determines that any Law has made
it unlawful, or that any Governmental Authority has asserted that it is
unlawful, for any Lender or its applicable Lending Office to determine or charge
interest based on the LIBOR Rate, or any Governmental Authority has imposed
material restrictions on the authority of such Lender to purchase or sell, or to
take deposits of, Dollars in the London interbank market, then, on notice
thereof by such Lender to the Borrower through the Agent, any obligation of such
Lender to determine interest based on the LIBOR Rate shall be suspended until
such Lender notifies the Agent and the Borrower that the circumstances giving
rise to such determination no longer exist. Immediately upon receipt of such
notice, interest on the Loan shall accrue and be payable at the Alternative
Rate.

 

Section 3.03         Inability to Determine Rates. If the Required Lenders
determine that for any reason adequate and reasonable means do not exist for
determining the LIBOR Rate for the Interest Period or the LIBOR Rate for the
Interest Period does not adequately and fairly reflect the cost to such Lenders
of funding such Loan, the Agent will promptly so notify the Borrower and each
Lender. Upon receipt of such notice, interest on the Loans shall accrue and be
payable at the Alternate Rate.

 

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Section 3.04         Increased Costs; Reserves.

 

(a)          Increased Costs Generally. If any Change in Law shall:

 

(i)          impose, modify or deem applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of,
deposits with or for the account of, or credit extended or participated in by,
any Lender (except any reserve requirement reflected in the LIBOR Rate);

 

(ii)         subject any Recipient to any Taxes (other than (A) Indemnified
Taxes, (B) Taxes described in clauses (b) through (d) of the definition of
Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal,
letters of credit, commitments, or other obligations, or its deposits, reserves,
other liabilities or capital attributable thereto; or

 

(iii)        impose on any Lender or the London interbank market any other
condition, cost or expense (other than Taxes) affecting this Agreement;

 

and the result of any of the foregoing shall be to increase the cost to such
Lender of making, converting to, continuing or maintaining any Loan, or to
reduce the amount of any sum received or receivable by such Lender hereunder
(whether of principal, interest or any other amount) then, upon request of such
Lender, together with documentation reasonably supporting such request, the Loan
Parties will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.

 

(b)          Capital Requirements. If any Lender determines that any Change in
Law affecting such Lender or any Lending Office of such Lender or such Lender’s
holding company, if any, regarding capital requirements has or would have the
effect of reducing the rate of return on such Lender’s capital or on the capital
or liquidity of such Lender’s holding company, if any, as a consequence of this
Agreement, or the Loans made by such Lender, to a level below that which such
Lender or such Lender’s holding company could have achieved but for such Change
in Law (taking into consideration such Lender’s policies and the policies of
such Lender’s holding company with respect to capital adequacy), then upon
request from time to time from such Lender together with documentation
reasonably supporting such request, the Loan Parties will pay to such Lender
such additional amount or amounts as will compensate such Lender or such
Lender’s holding company for any such reduction suffered.

 

(c)          Certificates for Reimbursement. A certificate of a Lender setting
forth the amount or amounts necessary to compensate such Lender or its holding
company, as the case may be, as specified in subsection (a) or (b) of this
Section and delivered to the Borrower shall be conclusive absent manifest error.
The Loan Parties shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof.

 

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(d)          Delay in Requests. Failure or delay on the part of any Lender to
demand compensation pursuant to the foregoing provisions of this Section shall
not constitute a waiver of such Lender’s right to demand such compensation,
provided that the Loan Parties shall not be required to compensate a Lender
pursuant to the foregoing provisions of this Section for any increased costs
incurred or reductions suffered more than nine months prior to the date that
such Lender notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s intention to claim
compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the nine-month period
referred to above shall be extended to include the period of retroactive effect
thereof).

 

(e)          Reserved.

 

(f)          Notwithstanding anything to the contrary contained in this Section
3.04, no Lender shall demand compensation for any increased costs pursuant to
this Section 3.04 if it shall not be the general policy or practice of such
Lender to demand such compensation in similar circumstances and unless such
demand is generally consistent with such Lender’s treatment of comparable
borrowers of such Lender in the United States with similarly affected loans.

 

Section 3.05         Reserved.

 

Section 3.06         Mitigation Obligations.

 

(a)          Designation of a Different Lending Office. If any Lender requests
compensation under Section 3.04 or the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to
Section 3.02, then such Lender shall use reasonable efforts to designate a
different Lending Office for funding or booking its Loans hereunder or to assign
its rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designation or assignment
(i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04,
as the case may be, in the future, or eliminate the need for the notice pursuant
to Section 3.02, as applicable, and (ii) in each case, would not subject such
Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable
costs and expenses incurred by any Lender in connection with any such
designation or assignment.

 

(b)          Replacement of Lenders. If any Lender requests compensation under
Section 3.04, or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 3.01 and, in each case, such Lender has declined or is unable to
designate a different Lending Office in accordance with Section 3.06(a), the
Borrower may replace such Lender in accordance with Section 10.13.

 

Section 3.07         Survival. All of the Borrower’s obligations under this
Article III shall survive repayment of all Obligations hereunder and resignation
of the Agent.

 

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Article IV
CONDITIONS PRECEDENT TO LOANS

 

Section 4.01         Conditions of Loan. The obligation of each Lender to make
its Loan hereunder is subject to satisfaction of the following conditions
precedent:

 

(a)          The Agent’s receipt of the following, each of which shall be
originals, telecopies or other electronic image scan transmission (e.g., “pdf”
or “tif” via e-mail) (followed promptly by originals) unless otherwise
specified, each dated the Closing Date (or, in the case of certificates of
governmental officials, a recent date before the Closing Date) and each in form
and substance satisfactory to the Agent:

 

(i)          counterparts of this Agreement each properly executed by a
Responsible Officer of the signing Loan Party and the Lenders sufficient in
number for distribution to the Agent, each Lender and the Borrower;

 

(ii)         a Note executed by the Borrower in favor of each Lender requesting
a Note;

 

(iii)        such certificates of resolutions or other action, incumbency
certificates and/or other certificates of Responsible Officers of each Loan
Party as the Agent may require evidencing (A) the authority of each Loan Party
to enter into this Agreement and the other Loan Documents to which such Loan
Party is a party or is to become a party and (B) the identity, authority and
capacity of each Responsible Officer thereof authorized to act as a Responsible
Officer in connection with this Agreement and the other Loan Documents to which
such Loan Party is a party or is to become a party;

 

(iv)        copies of each Loan Party’s Organization Documents and such other
documents and certifications as the Agent may reasonably require to evidence
that each Loan Party is duly organized or formed, and that each Loan Party is
validly existing, in good standing in its jurisdiction of organization or
formation;

 

(v)         an opinion of White & Case LLP, counsel to the Loan Parties,
addressed to the Agent and each Lender, as to such customary matters concerning
the Loan Parties and the Loan Documents as the Agent may reasonably request;

 

(vi)        a certificate of a Responsible Officer of the Borrower certifying
(A) that the conditions specified in this Article IV have been satisfied, (B)
that there has been no event or circumstance since the date of the Audited
Financial Statements that has had or could be reasonably expected to have,
either individually or in the aggregate, a Material Adverse Effect, (C) to the
Solvency of the Loan Parties as of the Closing Date after giving effect to the
transactions contemplated hereby, and (D) either that (1) no consents, licenses
or approvals are required in connection with the execution, delivery and
performance by such Loan Party and the validity against such Loan Party of the
Loan Documents to which it is a party, or (2) that all such consents, licenses
and approvals have been obtained and are in full force and effect;

 

(vii)       [Reserved.];

 

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(viii)      the Security Documents and evidence that the certificates evidencing
any stock being pledged thereunder have been delivered to the First Lien Agent,
together with undated stock powers executed in blank, each duly executed by the
applicable Loan Parties;

 

(ix)         a License Payment Report as of March 22, 2013;

 

(x)          all other Loan Documents, each duly executed by the applicable Loan
Parties;

 

(xi)         the Warrant Purchase Agreement and the Warrant, each duly executed
by the Borrower;

 

(xii)        The First Lien Intercreditor Agreement duly executed by all parties
thereto and acknowledged by each Loan Party;

 

(xiii)       (A)         an appraisal (based on net liquidation value) by a
third party appraiser acceptable to the Agent of all Material Intellectual
Property of the Loan Parties, the results of which are satisfactory to the
Agent, and (B) a written report regarding the results of a commercial finance
examination of the Loan Parties, which shall be satisfactory to the Agent;

 

(xiv)      results of searches or other evidence reasonably satisfactory to the
Agent (in each case dated as of a date reasonably satisfactory to the Agent)
indicating the absence of Liens on the assets of the Loan Parties, except for
Permitted Encumbrances and Liens for which termination statements satisfactory
to the Agent are being tendered concurrently with such extension of credit or
other arrangements satisfactory to the Agent for the delivery of such
termination statements have been made; and

 

(xv)       all documents and instruments, including Uniform Commercial Code
financing statements and filings with the United States Patent and Trademark
Office and the United States Copyright Office, required by law or reasonably
requested by the Agent to be filed, registered or recorded to create or perfect
the first priority Liens intended to be created under the Loan Documents and all
such documents and instruments shall have been so filed, registered or recorded
to the satisfaction of the Agent.

 

(b)          The Agent and the Lenders shall have received and be satisfied with
the substance of (i) (x) audited annual financial statements of the Borrower and
its Subsidiaries for the Fiscal Year ended December 31, 2011, (y) audited annual
financial statements of the Borrower and its Subsidiaries for the Fiscal Year
ended December 31, 2012 (or, if audited financial statements are not available,
unaudited drafts thereof), and (z) interim financial statements of the Borrower
and its Subsidiaries dated the end of the most recent Fiscal Quarter ended at
least forty-five (45) days prior to the Closing Date for which such financial
statements are available, and (ii) projections and such other information
(financial or otherwise) reasonably requested by the Agent.

 

(c)          All fees required to be paid to the Agent on or before the Closing
Date shall have been paid in full, and all fees required to be paid to the
Lenders on or before the Closing Date shall have been paid in full.

 

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(d)          The Borrower shall have paid all fees, charges and disbursements of
counsel to the Agent to the extent invoiced at least one (1) Business Day prior
to the Closing Date.

 

(e)          The Agent and the Lenders shall have received all documentation and
other information required by regulatory authorities under applicable “know your
customer” and anti-money laundering rules and regulations, including without
limitation the USA PATRIOT Act.

 

(f)          The Agent shall have received a certified copy of the Brand Matter
Acquisition Agreement, duly executed by the parties thereto (together with all
exhibits and schedules thereto), which shall be in full force and effect.

 

(g)          Prior to or contemporaneously with the initial funding of the
Loans, the Borrower shall consummate the Brand Matter Acquisition in accordance
with the terms and conditions set forth in the Brand Matter Acquisition
Agreement; provided that, without the prior consent of the Agent, no provision
of the Brand Matter Acquisition Agreement shall have been amended, supplemented
or otherwise modified, and no provision thereof shall have been waived by the
Borrower in a manner that is material and adverse to the interests of the
Lenders (as reasonably determined by the Agent).

 

(h)          The representations and warranties of each Loan Party contained in
Article V or in any other Loan Document, or which are contained in any document
furnished at any time under or in connection herewith or therewith, shall be
true and correct in all material respects on and as of the Closing Date, except
to the extent that such representations and warranties specifically refer to an
earlier date, in which case they shall be true and correct as of such earlier
date, and in the case of any representation and warranty qualified by
materiality, they shall be true and correct in all respects.

 

(i)          There shall not be pending any action, suit, investigation or
proceeding pending or, to the knowledge of the Borrower, threatened in writing
in any court or before any arbitrator or Governmental Authority in which there
is a reasonable possibility of a decision which would reasonably be expected to
have a Material Adverse Effect.

 

(j)          after giving effect to the Brand Matter Acquisition, the funding of
the First Lien Facility and the funding of the Loan, hereunder, the Borrower
shall have cash on its balance sheet in an amount at least equal to $15,000,000
and shall provide evidence reasonably satisfactory to the Agent reflecting such
cash balance.

 

(k)          The Agent shall have received evidence reasonably satisfactory to
it that in connection with the Brand Matter Acquisition that the holder of
Equity Interest in Brand Matter shall have converted at least $12,000,000 of
such Equity Interest into Equity Interest of the Borrower.

 

(l)          The First Lien Credit Agreement shall have closed and the lenders
under the First Lien Facility shall have funded $45,000,000. The Agent shall
have received a certified copy of the First Lien Credit Agreement and First Lien
Loan Documents.

 

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(m)          The Agent shall have received evidence satisfactory to it that all
of the outstanding convertible notes of the Borrower in the aggregate principal
amount of $14,500,000 shall have been converted into Equity Interests of the
Borrower.

 

Article V
REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties to enter into this Agreement and to make Loans
hereunder, each Loan Party represents and warrants to the Agent and the other
Credit Parties that:

 

Section 5.01         Existence, Qualification and Power. Each Loan Party and
each of their Subsidiaries (a) is a corporation, limited liability company,
partnership or limited partnership, duly incorporated, organized or formed,
validly existing and, where applicable, in good standing under the Laws of the
jurisdiction of its incorporation, organization or formation, (b) has all
requisite power and authority and all requisite governmental licenses, permits,
authorizations, consents and approvals to (i) own or lease its assets and carry
on its business and (ii) execute, deliver and perform its obligations under the
Loan Documents to which it is a party, and (c) is duly qualified and is licensed
and, where applicable, in good standing under the Laws of each jurisdiction
where its ownership, lease or operation of properties or the conduct of its
business requires such qualification or license; except in clauses (a) and (b)
to the extent not relating to the Loan Parties or to DVS and in clause (c), to
the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect. Schedule 5.01 annexed hereto sets forth, as of the
Closing Date, each Loan Party’s name as it appears in official filings in its
state of incorporation or organization, its state of incorporation or
organization, organization type, organization number, if any, issued by its
state of incorporation or organization, and its federal employer identification
number.

 

Section 5.02         Authorization; No Contravention. The execution, delivery
and performance by each Loan Party of each Loan Document to which such Person is
or is to be a party, has been duly authorized by all necessary corporate or
other organizational action, and does not and will not (a) contravene the terms
of any of such Person’s Organization Documents; (b) conflict with or result in
any breach, termination, or contravention of, or constitute a default under, or
require any payment to be made under (i) any Material Contract or any Material
Indebtedness to which such Person is a party or affecting such Person or the
properties of such Person or any of its Subsidiaries or (ii) any order,
injunction, writ or decree of any Governmental Authority or any arbitral award
to which such Person or its property is subject; (c) result in or require the
creation of any Lien upon any asset of any Loan Party (other than Liens in favor
of the Agent under the Security Documents); or (d) violate any applicable Law,
except in the case of clauses (b)(ii) and (d), to the extent that such conflict
or violation would not reasonably be expected to result in a Material Adverse
Effect.

 

Section 5.03         Governmental Authorization; Other Consents. No approval,
consent, exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority or any other Person is necessary or required in
connection with the execution, delivery or performance by, or enforcement
against, any Loan Party of this Agreement or any other Loan Document, except for
(a) the perfection or maintenance of the Liens created under the Security
Documents (including the first priority nature thereof) or (b) such as have been
obtained or made and are in full force and effect.

 

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Section 5.04         Binding Effect. This Agreement has been, and each other
Loan Document, when delivered, will have been, duly executed and delivered by
each Loan Party that is party thereto. This Agreement constitutes, and each
other Loan Document when so delivered will constitute, a legal, valid and
binding obligation of such Loan Party, enforceable against each Loan Party that
is party thereto in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law, and (ii)
the need for filings and registrations necessary to perfect the Liens on the
Collateral granted by the Loan Parties in favor of the Credit Parties.

 

Section 5.05         Financial Statements; No Material Adverse Effect.

 

(a)          Except with respect to items to be reflected in the Restated
Financial Statements, the Audited Financial Statements (i) were prepared in
accordance with GAAP consistently applied throughout the period covered thereby,
except as otherwise expressly noted therein; (ii) fairly present the financial
condition of the Borrower and its Subsidiaries as of the date thereof and their
results of operations for the period covered thereby in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein; and (iii) show all Material Indebtedness and other
liabilities, direct or contingent, of the Borrower and its Subsidiaries as of
the date thereof, including liabilities for taxes, material commitments and
Indebtedness.

 

(b)          Except with respect to items to be reflected in the Restated
Financial Statements, the unaudited Consolidated balance sheet of the Borrower
and its Subsidiaries dated September 30, 2012, and the related Consolidated
statements of income or operations, Shareholders’ Equity and cash flows for the
Fiscal Quarter ended on that date (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein, and (ii) fairly present the financial condition of the
Borrower and its Subsidiaries as of the date thereof and their results of
operations for the period covered thereby, subject, in the case of clauses (i)
and (ii), to the absence of footnotes and to normal year-end audit adjustments.

 

(c)          Since the date of the Audited Financial Statements, there has been
no event or circumstance, either individually or in the aggregate, that has had
or could reasonably be expected to have a Material Adverse Effect.

 

(d)          Except with respect to items to be reflected in the Restated
Financial Statements, to the best knowledge of the Borrower, no Internal Control
Event exists or has occurred since the date of the Audited Financial Statements
that has resulted in or could reasonably be expected to result in a misstatement
in any material respect, (i) in any financial information delivered or to be
delivered to the Agent or the Lenders, (ii) of covenant compliance calculations
provided hereunder or (iv) of the assets, liabilities, financial condition or
results of operations of the Borrower and its Subsidiaries on a Consolidated
basis.

 

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(e)          The Consolidated forecasted balance sheet and statements of income
and cash flows of the Borrower and its Subsidiaries delivered pursuant to
Section 6.01(c) were prepared in good faith on the basis of the assumptions
stated therein, which assumptions were reasonable in light of the conditions
existing at the time of delivery of such forecasts, and represented, at the time
of delivery, the Loan Parties’ best estimate of its future financial
performance, it being recognized by the Lenders that projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by the projections may differ from the projected results
included in such projections.

 

(f)          The License Payment Report delivered to the Agent pursuant to
Section 4.01(a)(ix) was true and correct and fairly and accurately presented all
of the payments received by any Loan Party with respect to any licenses or
license agreements for the period covered thereby.

 

Section 5.06         Litigation. There are no actions, suits, proceedings,
claims or disputes pending or, to the knowledge of the Loan Parties after due
and diligent investigation, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, by or against any Loan Party
or any of its Subsidiaries or against any of its properties or revenues that (a)
purport to affect or pertain to this Agreement or any other Loan Document, or
any of the transactions contemplated hereby, or (b) either individually or in
the aggregate, if determined adversely, could reasonably be expected to have a
Material Adverse Effect.

 

Section 5.07         No Default. No Loan Party or any Subsidiary is in default
under or with respect to, any Material Contract or any Material Indebtedness. As
of the Closing Date, no Default or Event of Default has occurred and is
continuing or would result from the consummation of the transactions
contemplated by this Agreement or any other Loan Document.

 

Section 5.08         Ownership of Property; Liens.

 

(a)          Each of the Loan Parties has good marketable title in fee simple to
or valid leasehold interests or use rights in, all Real Estate necessary in the
ordinary conduct of its business, except for (i) Permitted Encumbrances, and
(ii) such defects in, or failures to have, title as could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect. Each
of the Loan Parties and each of their Subsidiaries has good and marketable title
to, or valid licenses to use, all personal property and assets material to the
ordinary conduct of its business except for such defects in, or failures to
have, title as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

(b)          Schedule 5.08(b)(1) sets forth the address (including street
address, county and state) of all Real Estate (excluding Leases, easements,
rights of way and similar rights) that is owned by the Loan Parties, together
with a list of the holders of any mortgage or other Lien thereon as of the
Closing Date. Schedule 5.08(b)(2) sets forth the address (including street
address, county and state) of all material Leases of the Loan Parties, together
with the name of each lessor and its contact information with respect to each
such Lease as of the Closing Date. Each of such Leases is in full force and
effect and the Loan Parties are not in default of any material term thereof.

 

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Section 5.09         Environmental Compliance.

 

(a)          No Loan Party (i) has failed to comply with any Environmental Law
or to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has become subject to any
Environmental Liability, (iii) has received notice of any claim with respect to
any Environmental Liability or (iv) knows of any basis for any Environmental
Liability, except, in each case (i) to (iv), as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)          Except as could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, (i) none of the properties
currently owned or operated by any Loan Party is listed or, to the knowledge of
the Loan Parties proposed for listing, on the NPL or on the CERCLIS; (ii) to the
knowledge of the Loan Parties, there are no underground or above-ground storage
tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which
Hazardous Materials are being treated, stored or disposed on any property
currently owned or operated by any Loan Party; (iii) there is no asbestos or
asbestos-containing material on any property currently owned or operated by any
Loan Party; and (iv) Hazardous Materials have not been released, discharged or
disposed of on any property currently owned or operated by any Loan Party in
violation of any Environmental Law.

 

(c)          No Loan Party is undertaking, either individually or together with
other potentially responsible parties, any investigation or assessment or
remedial or response action relating to any actual or threatened release,
discharge or disposal of Hazardous Materials at any site, location or operation,
either voluntarily or pursuant to the order of any Governmental Authority or the
requirements of any Environmental Law, except, in each case, as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and to the knowledge of the Loan Parties, all Hazardous
Materials generated, used, treated, handled or stored at, or transported to or
from, any property currently owned or operated by any Loan Party have been
disposed of in a manner not reasonably expected to have a Material Adverse
Effect.

 

Section 5.10         Insurance. The properties of the Loan Parties are insured
with financially sound and reputable insurance companies which are not
Affiliates of the Loan Parties, in such, with such deductibles and covering such
risks (including, without limitation, workmen’s compensation, public liability,
business interruption, property damage and directors and officers liability
insurance) as are customarily carried by companies engaged in similar businesses
and owning similar properties in localities where the Loan Parties operates.
Schedule 5.10 sets forth a description of all insurance maintained by or on
behalf of the Loan Parties as of the Closing Date. As of the Closing Date, each
insurance policy listed on Schedule 5.10 is in full force and effect and all
premiums in respect thereof that are due and payable have been paid.

 

Section 5.11         Taxes. The Loan Parties and each of their Subsidiaries (a)
have filed all United States federal, state and other material tax returns and
reports required to be filed, and (b) have paid all United States federal, state
and other material taxes, assessments, fees and other governmental charges
levied or imposed upon them or their properties, income or assets otherwise due
and payable, except those (i) which are being contested in good faith by
appropriate proceedings being diligently conducted, for which adequate reserves
have been provided in accordance with GAAP or (ii) as could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
There is no proposed tax assessment against any Loan Party that would, if made,
have a Material Adverse Effect. No Loan Party or any Subsidiary thereof is a
party to any tax sharing agreement.

 

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Section 5.12         ERISA Compliance.

 

(a)          Each Pension Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other U.S. federal or state
laws, except where any failure could not reasonably be expected to have a
Material Adverse Effect. Each Pension Plan that is intended to be a qualified
plan under Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service to the effect that the form of such
Plan is qualified under Section 401(a) of the Code and the trust related thereto
has been determined by the Internal Revenue Service to be exempt from federal
income tax under Section 501(a) of the Code, or an application for such a letter
is currently being processed by the Internal Revenue Service. To the knowledge
of the Borrower, nothing has occurred that would prevent or cause the loss of
such tax-qualified status.

 

(b)          There are no pending or, to the knowledge of the Borrower,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan that could reasonably be expected to have a Material
Adverse Effect. There has been no non-exempt prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan that has resulted
or could reasonably be expected to result in a Material Adverse Effect.

 

(c)          (i) No ERISA Event has occurred, and neither the Borrower nor any
ERISA Affiliate is aware of any fact, event or circumstance that could
reasonably be expected to constitute or result in an ERISA Event with respect to
any Pension Plan; (ii) the Borrower and each ERISA Affiliate has met all
applicable requirements under the Pension Funding Rules in respect of each
Pension Plan, and no waiver of the minimum funding standards under the Pension
Funding Rules has been applied for or obtained; (iii) neither the Borrower nor
any ERISA Affiliate has incurred any liability to the PBGC other than for the
payment of premiums, and there are no premium payments which have become due
that are unpaid; (iv) neither the Borrower nor any ERISA Affiliate has engaged
in a transaction that could be subject to Section 4069 or Section 4212(c) of
ERISA; and (v) no Pension Plan has been terminated by the plan administrator
thereof nor by the PBGC, and no event or circumstance has occurred or exists
that could reasonably be expected to cause the PBGC to institute proceedings
under Title IV of ERISA to terminate any Pension Plan, except, in each of
clauses (i) through (v), as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

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Section 5.13         Subsidiaries; Equity Interests. As of the Closing Date, the
Loan Parties have no Subsidiaries other than those specifically disclosed in
Part (a) of Schedule 5.13, which Schedule sets forth the legal name,
jurisdiction of incorporation or formation and authorized Equity Interests of
each such Subsidiary. All of the outstanding Equity Interests in such
Subsidiaries have been validly issued, are fully paid and non-assessable and are
owned by a Loan Party in the amounts specified on Part (a) of Schedule 5.13 free
and clear of all Liens except for those Liens created under the Security
Documents, Liens permitted by clause (o) of the definition of Permitted
Encumbrances and Permitted Encumbrances having priority over the Lien of the
Credit Parties under applicable Laws. Except as set forth in Schedule 5.13,
there are no outstanding rights to purchase any Equity Interests in any
Subsidiary. As of the Closing Date, the Loan Parties have no equity investments
in any other corporation or entity other than those specifically disclosed in
Part (b) of Schedule 5.13. All of the outstanding Equity Interests in the Loan
Parties have been validly issued, and are fully paid and non-assessable and are
owned in the amounts specified on Part (c) of Schedule 5.13 free and clear of
all Liens except for those Liens created under the Security Documents and
Permitted Encumbrances having priority over the Liens of the Credit Parties
under applicable Laws. The copies of the Organization Documents of each Loan
Party and each amendment thereto provided pursuant to Section 4.01 are true and
correct copies of each such document, each of which is valid and in full force
and effect.

 

Section 5.14         Margin Regulations; Investment Company Act.

 

(a)          No Loan Party is engaged or will be engaged, principally or as one
of its important activities, in the business of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the FRB), or extending
credit for the purpose of purchasing or carrying margin stock. None of the
proceeds of the Loans shall be used directly or indirectly for the purpose of
purchasing or carrying any margin stock, for the purpose of reducing or retiring
any Indebtedness that was originally incurred to purchase or carry any margin
stock or for any other purpose that might cause any of the Loans to be
considered a “purpose credit” within the meaning of Regulations T, U, or X
issued by the FRB.

 

(b)          None of the Loan Parties, any Person Controlling any Loan Party, or
any Subsidiary is or is required to be registered as an “investment company”
under the Investment Company Act of 1940.

 

Section 5.15         Disclosure. Each Loan Party and each of their Subsidiaries
has disclosed to the Agent and the Lenders all agreements, instruments and
corporate or other restrictions to which it is subject, and all other matters
known to it, that, in each case, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. As of the Closing
Date, no report, financial statement, certificate or other information relating
to the Borrower or any of its Subsidiaries (other than any information of a
general economic or industry specific nature and third party consultants
reports) furnished by or on behalf of any Loan Party to the Agent or any Lender
in connection with the transactions contemplated hereby and the negotiation of
this Agreement or delivered hereunder or under any other Loan Document (in each
case, as modified or supplemented by other information so furnished prior to the
execution hereof or thereof) when taken as a whole contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, after giving effect to any supplements thereto, not materially misleading;
provided that, with respect to projected financial information, the Loan Parties
represent only that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time.

 

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Section 5.16         Compliance with Laws. Each of the Loan Parties and each of
their Subsidiaries is in compliance in all material respects with the
requirements of all Laws and all orders, writs, injunctions and decrees
applicable to it or to its properties, except in such instances in which (a)
such requirement of Law or order, writ, injunction or decree is being contested
in good faith by appropriate proceedings diligently conducted or (b) the failure
to comply therewith, either individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.

 

Section 5.17         Intellectual Property; Licenses, Etc. The Loan Parties and
each of their Subsidiaries own, or are licensed to use, all Material
Intellectual Property, and the use thereof by the Loan Parties or their
Subsidiaries does not infringe upon the rights of any other Person. Except as
set forth in Schedule 5.17A, all items of Material Intellectual Property as of
the Closing Date are: (a) subsisting and have not been adjudged invalid or
unenforceable, in whole or part; and (b) to the knowledge of the Loan Parties,
valid, in full force and effect and not in known conflict with the rights of any
Person. The Loan Parties have made all filings and recordations necessary in the
exercise of reasonable and prudent business judgment to protect their interests
in the Material Intellectual Property in the United States Patent and Trademark
Office, and the United States Copyright Office, as appropriate, including, the
performance of all acts and the payment of all required fees and taxes to
maintain each and every item of Material Intellectual Property in full force and
effect. As of the Closing Date, no litigation is pending or, to the knowledge of
any Loan Party, threatened which contains allegations respecting the validity,
enforceability, infringement or ownership of any of the Material Intellectual
Property. No Loan Party (x) is in breach of or default under the provisions of
any of the Material Licenses, nor is there any event, fact, condition or
circumstance which, with notice or passage of time or both, would constitute or
result in a conflict, breach, default or event of default under, any of the
foregoing which reasonably could be expected to result in, either individually
or in the aggregate, a Material Adverse Effect or (y) is a party to any
amendment, side letter, joint-venture or any other instrument or agreement
relating to any Material Intellectual Property or Material License that has not
been previously disclosed and provided to the Agent.

 

Section 5.18         Reserved.

 

Section 5.19         Security Documents.

 

(a)          The Security Agreement creates in favor of the Agent, for the
benefit of the Credit Parties, a valid and enforceable security interest in the
Collateral (as defined in the Security Agreement) the enforceability of which is
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors’ rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law. The UCC financing statements and other filings delivered by the Loan
Parties on the Closing Date are in appropriate form for filing in the applicable
offices. Upon such filings and/or the obtaining of “control” (as such term is
defined in the UCC) to the extent required by the Loan Documents (and, in the
case of Intellectual Property that is issued by, or registered or applied for
in, the United States Copyright Office and constituting Collateral, the filing
and recordation of the Copyright Security Agreement with the United States
Copyright Office, the Agent will have a perfected Lien on, and security interest
in, to and under all right, title and interest of the grantors thereunder in all
Collateral that may be perfected in the United States by filing, recording or
registering a financing statement or analogous document (including without
limitation the proceeds of such Collateral subject to the limitations relating
to such proceeds in the UCC) (it being understood that subsequent recordings in
the United States Copyright Office may be necessary to perfect a Lien on
registered Copyrights acquired by the Loan Parties after the date hereof).

 

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Section 5.20         Solvency.

 

After giving effect to the transactions contemplated by this Agreement, the Loan
Parties, on a Consolidated basis, are Solvent. No transfer of property has been
or will be made by any Loan Party and no obligation has been or will be 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 any Loan Party.

 

Section 5.21         Deposit Accounts.

 

(a)          Annexed hereto as Schedule 5.21 is a list of all Deposit Accounts
maintained by the Loan Parties as of the Closing Date, which Schedule includes,
with respect to each Deposit Account (i) the name and address of the depository;
(ii) the account number(s) maintained with such depository; (iii) a contact
person at such depository, and (iv) the identification of each Blocked Account
Bank.

 

Section 5.22         Brokers. No broker or finder brought about the obtaining,
making or closing of the Loans or transactions contemplated by the Loan
Documents, and no Loan Party or Affiliate thereof has any obligation to any
Person in respect of any finder’s or brokerage fees in connection therewith.

 

Section 5.23         Material Contracts. Schedule 5.23 sets forth all Material
Contracts (other than Material Licenses set forth on Schedule 5.17) to which any
Loan Party is a party or is bound as of the Closing Date. The Loan Parties have
delivered true, correct and complete copies of such Material Contracts to the
Agent on or before the Closing Date. The Loan Parties are not in breach or in
default in any material respect of or under any Material Contract and have not
received any notice of default under, or of the intention of any other party
thereto to terminate, any Material Contract.

 

Article VI
AFFIRMATIVE COVENANTS

 

So long as any Loan or other Obligation hereunder shall remain unpaid or
unsatisfied (other than contingent indemnification claims for which a claim has
not been asserted), the Loan Parties shall, and shall cause their Subsidiaries
to:

 

Section 6.01         Financial Statements. Deliver to the Agent, in form and
detail satisfactory to the Agent:

 

(a)          as soon as available, but in any event within 90 days after the end
of each Fiscal Year of the Borrower (commencing with the fiscal year ended
December 31, 2012), a Consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such Fiscal Year, and the related consolidated
statements of income or operations, Shareholders’ Equity and cash flows for such
Fiscal Year, setting forth in each case in comparative form the figures for the
previous Fiscal Year, all in reasonable detail and prepared in accordance with
GAAP, audited and accompanied by a report and unqualified opinion of a
Registered Public Accounting Firm of nationally recognized standing reasonably
acceptable to the Agent, which report and opinion shall be prepared in
accordance with generally accepted auditing standards and shall not be subject
to any “going concern” or like qualification or exception or any qualification
or exception as to the scope of such audit;

 

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(b)          as soon as available, but in any event within 45 days after the end
of each Fiscal Quarters of each Fiscal Year of the Borrower (commencing with the
Fiscal Quarter ended March 31, 2013), a Consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such Fiscal Quarter, and the
related consolidated statements of income or operations, Shareholders’ Equity
and cash flows for such Fiscal Quarter and for the portion of the Borrower’s
Fiscal Year then ended, setting forth in each case in comparative form the
figures for (A) such period set forth in the projections delivered pursuant to
Section 6.01(d) hereof, (B) the corresponding Fiscal Quarter of the previous
Fiscal Year and (C) the corresponding portion of the previous Fiscal Year, all
in reasonable detail, certified by a Responsible Officer of the Borrower as
fairly presenting the financial condition, results of operations, Shareholders’
Equity and cash flows of the Borrower and its Subsidiaries as of the end of such
Fiscal Quarter in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes;

 

(c)          solely to the extent prepared by the Borrower in the ordinary
course of business, then as soon as available, a consolidated balance sheet of
the Borrower and its Subsidiaries as at the end of each Fiscal Month of each
Fiscal Year of the Borrower, and the related consolidated statements of income
or operations, Shareholders’ Equity and cash flows for such Fiscal Month,
certified by a Responsible Officer of the Borrower as fairly presenting the
financial condition, results of operations, Shareholders’ Equity and cash flows
of the Borrower and its Subsidiaries as of the end of such Fiscal Month in
accordance with GAAP, subject only to normal year-end audit adjustments and the
absence of footnotes;

 

(d)          as soon as available, but in any event at least 30 days before the
end of each Fiscal Year of the Borrower, forecasts prepared by management of the
Borrower, representing the Borrower’s best good faith estimate of future
financial performance and based on assumptions believed by the Borrower to be
fair and reasonable in light of current market conditions and consistent with
historical practices and otherwise in form and based upon assumptions reasonably
satisfactory to the Agent, of the consolidated balance sheets and statements of
income or operations and cash flows of the Borrower and its Subsidiaries on a
quarterly (or, solely to the extent prepared by the Borrower in the ordinary
course of business, monthly) basis for the immediately following Fiscal Year
(including the Fiscal Year in which the Maturity Date occurs), and as soon as
available, any significant revisions to such forecast with respect to such
Fiscal Year; and

 

(e)          as soon as available, but in any event within 5 business days after
the end of each Fiscal Month of the Borrower, a License Payment Report as at the
end of such Fiscal Month.

 

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Section 6.02         Certificates; Other Information. Deliver to the Agent, in
form and detail satisfactory to the Agent:

 

(a)          concurrently with the delivery of the financial statements referred
to in Section 6.01(a), a certificate of its Registered Public Accounting Firm
certifying such financial statements and stating that in making the examination
necessary for their certification of such financial statements, such Registered
Public Accounting Firm has not obtained any knowledge of the existence of any
Default or Event of Default under Section 7.15 hereof or, if any such Default or
Event of Default shall exist, stating the nature and status of such event;

 

(b)          concurrently with the delivery of the financial statements referred
to in Sections 6.01(a) and (b) (commencing with the delivery of the financial
statements for the Fiscal Year ended December 31, 2012), (i) a duly completed
Compliance Certificate signed by a Responsible Officer of the Borrower, and in
the event of any change in generally accepted accounting principles used in the
preparation of such financial statements, the Borrower shall also provide a
statement of reconciliation conforming such financial statements to GAAP and
(ii) a copy of management’s discussion and analysis with respect to such
financial statements;

 

(c)          concurrently with the delivery of the financial statements referred
to in Sections 6.01(a) and (b), financial statements with respect to any
Excluded Subsidiaries of the Loan Parties;

 

(d)          promptly upon receipt, copies of any detailed audit reports,
management letters or recommendations submitted to the board of directors (or
the audit committee of the board of directors) of the Borrower by its Registered
Public Accounting Firm in connection with the accounts or books of the Loan
Parties, or any audit of any of them, including, without limitation, specifying
any Internal Control Event;

 

(e)          promptly after the same are available, copies of each annual
report, proxy or financial statement or other report or communication sent to
the stockholders of the Borrower, and copies of all annual, regular, periodic
and special reports and registration statements which the Borrower may file or
be required to file with the SEC under Section 13 or 15(d) of the Securities
Exchange Act of 1934 or with any national securities exchange;

 

(f)          as soon as available, but in any event within 15 days after the end
of each Fiscal Quarters of each Fiscal Year of the Borrower (commencing with the
Fiscal Quarter ended March 31, 2013), an updated report of the royalty revenue
summary by brand and related licensing detail with respect to the all Material
Licenses of the Loan Parties and any Subsidiary;

 

(g)          as soon as available, but in any event within 15 days after the end
of each Fiscal Year of the Borrower, a report summarizing the insurance coverage
(specifying type, amount and carrier) in effect for the Loan Parties and
containing such additional information as the Agent, or any Lender through the
Agent, may reasonably specify;

 

(h)          promptly after the Agent’s request therefor, copies of all Material
Contracts and documents evidencing Material Indebtedness;

 

(i)          promptly, and in any event within five Business Days after receipt
thereof by the Borrower, copies of each notice or other correspondence received
from any Governmental Authority (including, without limitation, the SEC (or
comparable agency in any applicable non-U.S. jurisdiction)) concerning any
proceeding with, or investigation or possible investigation or other inquiry by
such Governmental Authority regarding financial or other operational results of
any Loan Party or any other matter which, if adversely determined, could
reasonably expected to have a Material Adverse Effect;

 

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(j)          promptly, any material amendments, modifications or waivers with
respect to any Material Contract or Material License;

 

(k)          promptly, any Primary Material License entered into by a Loan Party
or its Subsidiary;

 

(l)          promptly, any material notices or information received by any Loan
Party from the First Lien Agent or any lender under the First Lien Credit
Agreement; and

 

(m)          promptly, such additional information regarding the business
affairs, financial condition or operations of any Loan Party, or compliance with
the terms of the Loan Documents, as the Agent or any Lender may from time to
time reasonably request.

 

Documents required to be delivered pursuant to Section 6.01(a) or (b), or
Section 6.02 (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date (i) on which the
Borrower posts such documents, or provides a link thereto on the Borrower’s
website on the Internet at the website address listed on Schedule 10.02; or (ii)
on which such documents are posted on the Borrower’s behalf on an Internet or
intranet website, if any, to which each Lender and the Agent have access
(whether a commercial, third-party website or whether sponsored by the Agent);
provided that: (i) the Borrower shall deliver paper copies of such documents to
the Agent or any Lender that requests the Borrower to deliver such paper copies
until a written request to cease delivering paper copies is given by the Agent
or such Lender and (ii) the Borrower shall notify the Agent (by telecopier or
electronic mail) of the posting of any such documents and provide to the Agent
by electronic mail electronic versions (i.e., soft copies) of such documents.
The Agent shall have no obligation to request the delivery or to maintain copies
of the documents referred to above, and in any event shall have no
responsibility to monitor compliance by the Loan Parties with any such request
for delivery, and each Lender shall be solely responsible for requesting
delivery to it or maintaining its copies of such documents.

 

Section 6.03         Notices. Promptly notify the Agent:

 

(a)          of the occurrence of any Default or Event of Default under this
Agreement or under the First Lien Credit Agreement;

 

(b)          of any matter that has resulted or could reasonably be expected to
result in a Material Adverse Effect,

 

(c)          of any breach or non-performance of, or any default under, a
Material Contract or with respect to Material Indebtedness of any Loan Party
that has resulted or could reasonably be expected to result in a Material
Adverse Effect;

 

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(d)          of any dispute, litigation, investigation, proceeding or suspension
between any Loan Party and any Governmental Authority, or the commencement of,
or any material development in, any litigation or proceeding affecting any Loan,
including pursuant to any applicable Environmental Laws, in each case that has
resulted or could reasonably be expected to result in a Material Adverse Effect;

 

(e)          of the occurrence of any ERISA Event that has resulted or could
reasonably be expected to result in a Material Adverse Effect;

 

(f)          of any material change in accounting policies or financial
reporting practices by any Loan Party;

 

(g)          of any change in the Borrower’s senior executive officers;

 

(h)          of the discharge by the Borrower of its present Registered Public
Accounting Firm or any withdrawal or resignation by such Registered Public
Accounting Firm;

 

(i)          Reserved;

 

(j)          of the filing of any Lien for unpaid Taxes against any Loan Party
that has resulted or could reasonably be expected to result in a Material
Adverse Effect;

 

(k)          of the Borrower’s obtaining knowledge that any application or
registration relating to any Material Intellectual Property (whether now or
hereafter existing) may become abandoned or dedicated, or of any adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court) regarding
Borrower’s ownership of any Material Intellectual Property; and

 

(l)          of the failure to renew, or the cancelation of, any Material
License.

 

Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and stating what action the Borrower has taken and proposes
to take with respect thereto.

 

Documents required to be delivered pursuant to this Section 6.03 (to the extent
any such documents are included in materials otherwise filed with the SEC) may
be delivered electronically and if so delivered, shall be deemed to have been
delivered on the date (i) on which the Borrower posts such documents, or
provides a link thereto on the Borrower’s website on the Internet at the website
address listed on Schedule 10.02; or (ii) on which such documents are posted on
the Borrower’s behalf on an Internet or intranet website, if any, to which each
Lender and the Agent have access (whether a commercial, third-party website or
whether sponsored by the Agent); provided that the Borrower shall notify the
Agent (by telecopier or electronic mail) of the posting of any such documents
and provide to the Agent by electronic mail electronic versions (i.e., soft
copies) of such documents.

 

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Section 6.04         Payment of Obligations. Pay and discharge as the same shall
become due and payable, all its obligations and liabilities, including (a) all
tax liabilities, assessments and governmental charges or levies upon it or its
properties or assets, (b) all lawful claims (including, without limitation,
claims of landlords, warehousemen, customs brokers, freight forwarders,
consolidators, and carriers) which, if unpaid, would by Law become a Lien upon
its property (other than Permitted Encumbrances); and (c) all Material
Indebtedness, as and when due and payable, but subject to any subordination
provisions contained in any instrument or agreement evidencing such
Indebtedness, except, in each case, where (i)(A) the validity or amount thereof
is being contested in good faith by appropriate proceedings, and (B) such Loan
Party has set aside on its books adequate reserves with respect thereto in
accordance with GAAP, or (ii) the failure to make payment pending such contest
could not reasonably be expected to result in a Material Adverse Effect.

 

Section 6.05         Preservation of Existence, Etc. (a) Preserve, renew and
maintain in full force and effect its legal existence and good standing under
the Laws of the jurisdiction of its organization or formation except in a
transaction permitted by Section 7.04 or 7.05; and (b) take all reasonable
action to maintain all rights, privileges, permits, licenses and franchises
necessary or desirable in the normal conduct of its business, except to the
extent that failure to do so could not reasonably be expected to have a Material
Adverse Effect. Notwithstanding the foregoing, no provision herein or in any
other Loan Document shall be deemed to restrict the dissolution of William Rast
Europe Holdings, LLC and such dissolution is expressly permitted.

 

Section 6.06         Maintenance of Properties; Intellectual Property.

 

(a)          (i) Maintain, preserve and protect all of its material properties
and equipment necessary in the operation of its business in good working order
and condition, ordinary wear and tear, casualty and condemnation excepted; and
(ii) make all necessary repairs thereto and renewals and replacements thereof
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect.

 

(b)          (i) Maintain all Material Intellectual Property in order that such
Material Intellectual Property will be (A) subsisting and not adjudged invalid
or unenforceable, in whole or part and (B) valid, in full force and effect and
not in known conflict with the rights of any Person; (ii) make all filings and
recordations necessary in the exercise of reasonable and prudent business
judgment to protect such Loan Party’s interest in the Material Intellectual
Property in the United States Patent and Trademark Office and the United States
Copyright Office; (iii) perform all acts and pay all required fees and taxes to
maintain each and every item of the Material Intellectual Property in full force
and effect; and (iv) enforce all material provisions relating to quality
assurance of products and services set forth in any Primary Material License.
For clarity, if any Loan Party determines, in its reasonable judgment, that any
item of Intellectual Property which does not constitute Material Intellectual
Property is no longer used or useful or of material value, such Loan Party may
abandon, cancel or cease to protect such non-Material Intellectual Property.

 

Section 6.07         Maintenance of Insurance.

 

(a)          Maintain with financially sound and reputable insurance companies
reasonably acceptable to the Agent and not Affiliates of the Loan Parties,
insurance with respect to its properties and business against loss or damage of
the kinds customarily insured against by Persons engaged in the same or similar
business and operating in the same or similar locations or as is required by
Law, of such types and in such amounts as are customarily carried under similar
circumstances by such other Persons and as are reasonably acceptable to the
Agent.

 

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(b)          Cause each such policy referred to in clause (a) above (i) to be
endorsed to name the Agent as an additional insured or a loss payee, as
applicable, in a form reasonably satisfactory to the Agent, and (ii) to provide
that it shall not be canceled, modified or not renewed (x) by reason of
nonpayment of premium except upon not less than ten (10) days’ prior written
notice thereof by the insurer to the Agent (giving the Agent the right to cure
defaults in the payment of premiums) or (y) for any other reason except upon not
less than thirty (30) days’ prior written notice thereof by the insurer to the
Agent.

 

(c)          Deliver to the Agent, prior to the cancellation, modification or
non-renewal of any such policy of insurance, a copy of a renewal or replacement
policy (or other evidence of renewal of a policy previously delivered to the
Agent, including an insurance binder) together with evidence satisfactory to the
Agent of payment of the premium therefor.

 

(d)          None of the Credit Parties, or their agents or employees shall be
liable for any loss or damage insured by the insurance policies required to be
maintained under this Section 6.07. Each Loan Party shall look solely to its
insurance companies or any other parties other than the Credit Parties for the
recovery of such loss or damage and such insurance companies shall have no
rights of subrogation against any Credit Party or its agents or employees. If,
however, the insurance policies do not provide waiver of subrogation rights
against such parties, as required above, then the Loan Parties hereby agree, to
the extent permitted by law, to waive their right of recovery, if any, against
the Credit Parties and their agents and employees. The designation of any form,
type or amount of insurance coverage by any Credit Party under this Section 6.07
shall in no event be deemed a representation, warranty or advice by such Credit
Party that such insurance is adequate for the purposes of the business of the
Loan Parties or the protection of their properties.

 

Section 6.08         Compliance with Laws. Comply in all material respects with
the requirements of all Laws and all orders, writs, injunctions and decrees
applicable to it or to its business or property, except in such instances in
which (a) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted and with
respect to which adequate reserves have been set aside and maintained by the
Loan Parties in accordance with GAAP; (b) such contest effectively suspends
enforcement of the contested Laws, and (c) the failure to comply therewith could
not reasonably be expected to have a Material Adverse Effect.

 

Section 6.09         Books and Records; Accountants.

 

(a)          Maintain proper books of record and account, in which full, true
and correct entries in conformity with GAAP consistently applied shall be made
of all financial transactions and matters involving the assets and business of
the Loan Parties.

 

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(b)          At all times retain Grant Thornton LLP or any other Registered
Public Accounting Firm of nationally recognized standing, or another Registered
Public Accounting Firm which is reasonably satisfactory to the Agent, and,
subject to the limitation set forth in Section 6.10 below, instruct such
Registered Public Accounting Firm to cooperate with, and be available to, the
Agent or its representatives to discuss the Loan Parties’ financial performance,
financial condition, operating results, controls, and such other matters, within
the scope of the retention of such Registered Public Accounting Firm, as may be
raised by the Agent.

 

Section 6.10         Inspection Rights; Appraisals of Intellectual Property.

 

(a)          Permit representatives and independent contractors, including
consultants, of the Agent to visit and inspect, under guidance of officers of
the Borrower, any of its or its Subsidiaries properties, to examine their
corporate, financial and operating records, and make copies thereof or abstracts
therefrom, and to discuss their affairs, finances and accounts with their
officers, and Registered Public Accounting Firm, all at the expense of the Loan
Parties and at such reasonable times during normal business hours and as often
as may be reasonably desired (but absent the existence of a Default or Event of
Default, the Borrower shall not be required to pay for more than three such
visits and inspections in any calendar year) upon reasonable advance notice to
the Borrower; provided, however, that when a Default or an Event of Default
exists the Agent (or any of its representatives or independent contractors) may
do any of the foregoing at the expense of the Loan Parties as often as it deems
appropriate and at any time during normal business hours and without advance
notice.

 

(b)          Upon the request of the Agent after reasonable prior notice, permit
the Agent or professionals (including appraisers) retained by the Agent to
conduct (x) up to two (2) appraisals of the trade names and brands and other
Intellectual Property of the Loan Parties and DVS in each calendar year at the
Loan Parties’ expense and (y) up to one (1) additional appraisal of the trade
names and brands and other Intellectual Property of the Loan Parties and DVS in
each calendar year at the Lenders’ expense. Notwithstanding the foregoing, the
Agent may cause additional appraisals to be undertaken if a Default or an Event
of Default shall have occurred and be continuing, at the expense of the Loan
Parties. The Agent agrees that as long as no Default or Event of Default has
occurred and is continuing and as long as  the First Lien Agent has conducted an
appraisal of the trade names and brands and other Intellectual Property  during
any calendar year and such appraisers and the form and substance of such
appraisal are, in each case, reasonably satisfactory to the Agent (which
appraisal has been delivered to the Agent by the First Lien Agent), then the
Agent shall only conduct one additional appraisal at the Loan Parties expense in
such calendar year; (the Loan Parties shall authorize and direct the First Lien
Agent to deliver such appraisals to the Agent to do so).

 

Section 6.11         Additional Loan Parties. Notify the Agent at the time that
any Person becomes a Subsidiary, and promptly thereafter (and in any event
within fifteen (15) days or such longer period as may be agreed to by the Agent
in its reasonable discretion), cause any such Person (a) which is not a CFC or
an Excluded Subsidiary to (i) become a Loan Party by executing and delivering to
the Agent a Joinder to this Agreement or a Joinder to the Facility Guaranty or
such other documents as the Agent shall deem appropriate for such purpose, (ii)
grant a Lien to the Agent on such Person’s Intellectual Property and other
assets of the same type that constitute Collateral (other than for the avoidance
of doubt, Real Estate) to secure the Obligations, and (iii) deliver to the Agent
documents of the types referred to in clauses (iii) and (iv) of Section 4.01(a)
and opinions of counsel to such Person (which shall cover, among other things,
the legality, validity, binding effect and enforceability of the documentation
referred to in clause (a)), and (b) if any Equity Interests or Indebtedness of
such Person (other than an Excluded Subsidiary) are owned by or on behalf of any
Loan Party, to pledge such Equity Interests and promissory notes evidencing such
Indebtedness (except that, if such Subsidiary is a CFC); the Equity Interests of
such Subsidiary to be pledged shall be limited to 65% of the outstanding voting
Equity Interests of such Subsidiary and 100% of the non-voting Equity Interests
of such Subsidiary, in each case in form, content and scope reasonably
satisfactory to the Agent. In no event shall compliance with this Section 6.11
waive or be deemed a waiver or Consent to any transaction giving rise to the
need to comply with this Section 6.11 if such transaction was not otherwise
expressly permitted by this Agreement or constitute or be deemed to constitute,
with respect to any Subsidiary, an approval of such Person as a Borrower.

 

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Section 6.12         Cash Management.

 

(a)          On or prior to the day which is ninety (90) days following the
Closing Date (or such longer period as may be agreed to by the Agent in its
reasonable discretion), cause all Deposit Accounts that are concentration and
controlled disbursement accounts of the Loan Parties to be maintained with Bank
of America pursuant to such documentation as the Agent may reasonably request,
including, without limitation, a Blocked Account Agreement satisfactory in form
and substance to the Agent with respect to each such Deposit Account
(collectively, the “Blocked Accounts”); provided that the Borrower shall be
permitted to maintain for the nine (9) month period immediately following the
Closing Date, up to $1,500,000 in the aggregate in any disbursement account(s)
which are not held by Bank of America (such account(s), the “Excluded
Accounts”); it being understood that (x) no later than December 26, 2013, a
Blocked Account Control agreement shall be required in respect to the Excluded
Accounts (including, for the avoidance of doubt, those Deposit Accounts
described in clause (z) of this proviso), (y) prior to December 26, 2013, no
Blocked Account Control Agreement or other control agreement shall be required
in respect of the Excluded Accounts, provided that the aggregate amount on
deposit in the Excluded Accounts at any time does not exceed $1,500,000, and (z)
on and after December 26, 2013 the amount in all Deposit Accounts located
outside of the United States shall not exceed $500,000 in the aggregate.

 

(b)          After the occurrence and during the continuance of an Event of
Default, cause the ACH or wire transfer to the collection account maintained by
the First Lien Agent at Bank of America (the “Collection Account”), no less
frequently than daily, all cash receipts and collections received by each Loan
Party from all sources, whether or not constituting Collateral, including,
without limitation, the then entire ledger balance of each Blocked Account or
any other Deposit Account of the Loan Parties (in each case, net of any minimum
balance, not to exceed $2,500.00 per account, as may be required to be kept in
the subject Blocked Account or other Deposit Account by the applicable Blocked
Account Bank or depository).

 

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(c)          The Collection Account shall at all times be under the sole
dominion and control of the First Lien Agent. The Loan Parties hereby
acknowledge and agree that (i) the Loan Parties have no right of withdrawal from
the Collection Account, (ii) the funds on deposit in the Collection Account
shall at all times be collateral security for all of the Obligations and (iii)
during the continuance of an Event of Default, the funds on deposit in the
Collection Account shall be applied to the repayment of the Obligations as
provided in this Agreement subject to the First Lien Intercreditor Agreement. In
the event that, notwithstanding the provisions of this Section 6.12, any Loan
Party receives or otherwise has dominion and control of any such cash receipts
or collections, such receipts and collections shall be held in trust by such
Loan Party for the Agent, shall not be commingled with any of such Loan Party’s
other funds or deposited in any account of such Loan Party and shall, not later
than the Business Day after receipt thereof, be deposited into the Collection
Account or dealt with in such other fashion as such Loan Party may be instructed
by the Agent.

 

(d)          Upon the request of the Agent, cause bank statements and/or other
reports to be delivered to the Agent not less often than monthly, accurately
setting forth all amounts deposited in each Blocked Account to ensure the proper
transfer of funds as set forth above.

 

Section 6.13         Information Regarding the Collateral.

 

Furnish to the Agent at least thirty (30) days prior written notice of any
change in: (i) any Loan Party’s; (ii) the location of any Loan Party’s chief
executive office, its principal place of business or any office in which it
maintains books or records relating to Collateral owned by it; (iii) any Loan
Party’s organizational structure or jurisdiction of incorporation or formation;
or (iv) any Loan Party’s Federal Taxpayer Identification Number or
organizational identification number assigned to it by its state of
organization. The Loan Parties shall not effect or permit any change referred to
in the preceding sentence unless all filings have been made or are made
substantially concurrently therewith under the UCC or otherwise that are
required in order for the Agent to continue at all times following such change
to have a valid, legal and perfected first priority security interest in all the
Collateral for its own benefit and the benefit of the other Credit Parties.

 

Section 6.14         Environmental Laws.

 

(a)          Except in each case, where the failure to do so would not,
individually or in the aggregate reasonably be expected to result in a Material
Adverse Effect, (a) conduct its operations and keep and maintain its Real Estate
in material compliance with all Environmental Laws; (b) obtain and renew all
material environmental permits necessary for its operations and properties; and
(c) implement any and all investigation, remediation, removal and response
actions that are appropriate or necessary to maintain the value and
marketability of the Real Estate or to otherwise comply with Environmental Laws
pertaining to the presence, generation, treatment, storage, use, disposal,
transportation or release of any Hazardous Materials on, at, in, under, above,
to, from or about any of its Real Estate, provided, however, that neither a Loan
Party nor any of its Subsidiaries shall be required to undertake any such
cleanup, removal, remedial or other action to the extent that its obligation to
do so is being contested in good faith and by proper proceedings and adequate
reserves have been set aside and are being maintained by the Loan Parties with
respect to such circumstances in accordance with GAAP.

 

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Section 6.15         Further Assurances.

 

(a)          Execute any and all further documents, financing statements,
agreements and instruments, and take all such further actions (including the
filing and recording of financing statements and other documents), that may be
required under any Law, or which the Agent may reasonably request, to effectuate
the transactions contemplated by the Loan Documents or to grant, preserve,
protect or perfect the Liens created or intended to be created by the Security
Documents or the validity or priority of any such Lien, all at the expense of
the Loan Parties (subject to the rights of the Loan Parties to dispose of the
Collateral to the extent permitted herein). The Loan Parties also agree to
provide to the Agent, from time to time upon request, evidence satisfactory to
the Agent as to the perfection and priority of the Liens created or intended to
be created by the Security Documents.

 

(b)          If any material assets of the type included in the Collateral as of
the Closing Date (excluding for the avoidance of doubt, any Real Estate) are
acquired by any Loan Party after the Closing Date (other than assets
constituting Collateral under the Security Documents that become subject to the
perfected first-priority Lien under the Security Documents upon acquisition
thereof and other than, for the avoidance of doubt, any Equity Interests of any
Excluded Subsidiary), notify the Agent thereof, and the Loan Parties will cause
such assets to be subjected to a Lien securing the Obligations and will take
such actions as shall be necessary or shall be requested by any Agent to grant
and perfect such Liens, including actions described in paragraph (a) of this
Section 6.15, all at the expense of the Loan Parties. In no event shall
compliance with this Section 6.15(b) waive or be deemed a waiver or Consent to
any transaction giving rise to the need to comply with this Section 6.15(b) if
such transaction was not otherwise expressly permitted by this Agreement.

 

Section 6.16         Material Contracts. (a) Perform and observe all the terms
and provisions of each Primary Material License and each other Material Contract
(other than Secondary Material Licenses) to be performed or observed by it, (b)
maintain each such Primary Material License and each other Material Contract
(other than Secondary Material Licenses) in full force and effect except to the
extent such Primary Material License or other Material Contract (other than
Secondary Material Licenses) is no longer used or useful in the conduct of the
business of the Loan Parties in the ordinary course of business, consistent with
past practices, (c) enforce each such Primary Material License and each other
Material Contract (other than Secondary Material Licenses) in accordance with
its terms, and (d) cause each of its Subsidiaries to do the foregoing, except,
in any case, where the failure to do so, either individually or in the
aggregate, could not be reasonably likely to have a Material Adverse Effect.

 

Section 6.17         Reserved.

 

Section 6.18         Post-Closing Items.

 

(a)          (i) Within ninety (90) days of the Closing Date (or such longer
period as may be agreed by the Agent in its reasonable discretion), the Loan
Parties shall cause to be obtained the Blocked Account Agreements required
pursuant to Section 6.12 hereof, and (ii) no later than December 26, 2013, the
Loan Parties shall cause to be obtained the Blocked Account Agreements for the
Excluded Accounts.

 

(b)          The Borrower shall use commercially reasonable efforts to enter
into a long term lease in respect of its corporate headquarters on or prior to
the date that is one hundred and twenty (120) days following the Closing Date;
it being understood and agreed that the failure to enter into such lease on or
prior to such date shall not constitute a Default or Event of Default hereunder,
under the other Loan Documents or the First Lien Credit Agreement.

 

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(c)          Within five (5) business days of the Closing Date (or such longer
period as may be agreed by the Agent in its reasonable discretion), the Loan
Parties shall deliver to the Agent an opinion from local Nevada counsel and an
opinion from local Texas counsel, in each case, as to such customary matters
concerning the Loan Parties and the Loan Documents as the Agent may reasonably
request.

 

(d)          Within thirty (30) business days of the Closing Date (or such
longer period as may be agreed by the Agent in its reasonable discretion), the
Loan Parties shall cause to be delivered all endorsements to the insurance
policies in favor of the Agent as are required under the Loan Documents.

 

(e)          Within five (5) business days of the Closing Date (or such longer
period as may be agreed by the Agent in its reasonable discretion), the Loan
Parties shall cause to be delivered customary evidence reasonably satisfactory
to the Agent that all insurance required to be maintained pursuant to the Loan
Documents are in effect.

 

Article VII

NEGATIVE COVENANTS

 

So long as any Loan or other Obligation hereunder shall remain unpaid or
unsatisfied (other than contingent indemnification claims for which a claim has
not been asserted), no Loan Party shall nor shall it permit any of its
Subsidiaries to:

 

Section 7.01         Liens. Create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired or sign or file or suffer to exist under the UCC or any similar Law or
statute of any jurisdiction a financing statement that names any Loan Party as
debtor; sign or suffer to exist any security agreement authorizing any Person
thereunder to file such financing statement; sell any of its property or assets
subject to an understanding or agreement (contingent or otherwise) to repurchase
such property or assets with recourse to it; or assign or otherwise transfer any
accounts or other rights to receive income, other than, as to all of the above,
Permitted Encumbrances.

 

Section 7.02         Investments. Make any Investments, except Permitted
Investments. Neither Agent nor any Lender shall condition any consent to an
Acquisition which is not a Permitted Acquisition and for which the Lender has
declined to provide financing for such Acquisition.

 

Section 7.03         Indebtedness; Disqualified Stock; Equity Issuances.

 

(a)          Create, incur, assume, guarantee, suffer to exist or otherwise
become or remain liable with respect to, any Indebtedness, except Permitted
Indebtedness;

 

(b)          Issue Disqualified Stock;

 

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(c)          Issue and sell any other Equity Interests unless (i) such Equity
Interests shall be issued solely by the Borrower and not by a Subsidiary of a
Loan Party, (ii) such Equity Interests provide that all dividends and other
Restricted Payments in respect thereof shall be made solely in additional shares
of such Equity Interests, in lieu of cash, (iii) such Equity Interests shall not
be subject to redemption other than redemption at the option of the Loan Party
issuing such Equity Interests and in accordance with the limitations contained
in this Agreement, and (iv) all Restricted Payments in respect of such Equity
Interests are expressly subordinated to the Obligations; or

 

(d)          Permit any Excluded Subsidiary to create, incur, assume, guarantee,
suffer to exist or otherwise become or remain liable with respect to any
Indebtedness, except Indebtedness of an Excluded Subsidiary with respect to the
purchase price for any Permitted Acquisition if the Lenders have determined not
to provide such Indebtedness or have failed to respond to exercise their right
of first refusal with respect to providing such Indebtedness as set forth in
Section 6.17.

 

Section 7.04         Fundamental Changes. Merge, dissolve, liquidate,
consolidate with or into another Person, (or agree to do any of the foregoing),
except that, so long as no Default or Event of Default shall have occurred and
be continuing prior to or immediately after giving effect to any action
described below or would result therefrom:

 

(a)          any Subsidiary (other than an Excluded Subsidiary) which is not a
Loan Party may merge with (i) a Loan Party, provided that the Loan Party shall
be the continuing or surviving Person, or (ii) any one or more other
Subsidiaries which are not Loan Parties, provided that when any wholly-owned
Subsidiary is merging with another Subsidiary, the wholly-owned Subsidiary shall
be the continuing or surviving Person;

 

(b)          any Excluded Subsidiary may merge with any other Excluded
Subsidiary;

 

(c)          any Subsidiary which is a Loan Party may merge into any Subsidiary
which is a Loan Party or into the Borrower, provided that in any merger
involving the Borrower, the Borrower shall be the continuing or surviving
Person; and

 

(d)          in connection with a Permitted Acquisition, any Subsidiary (other
than an Excluded Subsidiary) of a Loan Party may merge with or into or
consolidate with any other Person or permit any other Person to merge with or
into or consolidate with it; provided that (i) the Person surviving such merger
shall be a wholly-owned Subsidiary of a Loan Party and such Person shall become
a Loan Party in accordance with the provisions of Section 6.11 hereof, and (ii)
in the case of any such merger to which any Loan Party is a party, such Loan
Party is the surviving Person.

 

Section 7.05         Dispositions. Make any Disposition, except Permitted
Dispositions.

 

Section 7.06         Restricted Payments. Declare or make, directly or
indirectly, any Restricted Payment, or incur any obligation (contingent or
otherwise) to do so, except:

 

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(a)          each Subsidiary of a Loan Party may make Restricted Payments to any
Loan Party or to another Subsidiary of the Borrower which is the immediate
parent of the Subsidiary making such Restricted Payment;

 

(b)          the Loan Parties and each Subsidiary may declare and make dividend
payments or other distributions payable solely in the common stock or other
common Equity Interests of such Person;

 

(c)          Reserved.

 

(d)          any non-wholly-owned Subsidiary of the Borrower (other than
William Rast) may make Restricted Payments (which may be in cash) to its
shareholders, members or partners generally, so long as the Borrower or its
respective Subsidiary which owns the Equity Interest in the Subsidiary making
such Restricted Payment receives at least its proportionate share thereof (based
upon its relative holding of the Equity Interest in the Subsidiary making such
Restricted Payment and taking into account the relative preferences, if any, of
the various classes of Equity Interests of such Subsidiary);

 

(e)          the Borrower may acquire Equity Interests in connection with the
exercise of stock options, warrants or other convertible or exchangeable
securities to the extent such Equity Interests represent a portion of the
exercise price of those stock options, warrants or other convertible or
exchangeable securities by way of cashless exercise; and

 

(f)          the Borrower may pay management fees to Tengram in the ordinary
course of business and consistent with past practices and in accordance with
Section 7.09(g).

 

Section 7.07         Prepayments of Indebtedness. Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in any
manner any Indebtedness for borrowed money, or make any payment in violation of
any subordination terms, except (a) (i) regularly scheduled or mandatory
repayments, repurchases, redemptions or defeasances of Permitted Indebtedness
(other than the First Lien Facility and Indebtedness of the Borrower under the
Securities Purchase Agreement), (ii) regularly scheduled payments and mandatory
prepayments under the First Lien Facility in accordance with the terms of the
First Lien Credit Agreement and, so long as no Default or Event of Default then
exists, prepayments and other repurchases, redemptions or defeasances of the
First Lien Facility, and (iii) the conversion to Equity Interests (but not the
payment) of Indebtedness under the Securities Purchase Agreement, and (b)
Permitted Refinancings of any such Indebtedness.

 

Section 7.08         Change in Nature of Business. Engage in any line of
business substantially different from the business conducted by the Loan Parties
on the Closing Date or any business substantially related or incidental thereto.

 

Section 7.09         Transactions with Affiliates. Enter into, renew, extend or
be a party to any transaction of any kind with any Affiliate of any Loan Party,
whether or not in the ordinary course of business, other than on fair and
reasonable terms substantially as favorable to the Loan Parties or such
Subsidiary as would be obtainable by the Loan Parties or such Subsidiary at the
time in a comparable arm’s length transaction with a Person other than an
Affiliate, provided that the foregoing restriction shall not apply to:

 

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(a)          a transaction between or among the Loan Parties;

 

(b)          dividends may be paid to the extent provided in Section 7.06;

 

(c)          loans may be made and other transactions may be entered into by the
Borrower and its Subsidiaries to the extent permitted by Sections 7.02, 7.03 and
7.04;

 

(d)          customary fees, indemnities and reimbursements may be paid to
non-officer directors of the Borrower and its Subsidiaries;

 

(e)          the Borrower and its Subsidiaries may enter into, and may make
payments under, employment agreements, employee benefits plans, stock option
plans, indemnification provisions and other similar compensatory arrangements
with officers, employees and directors of the Borrower and its Subsidiaries in
the ordinary course of business;

 

(f)          Subsidiaries of the Borrower may pay management fees, licensing
fees and similar fees to the Borrower or to any wholly-owned domestic Subsidiary
of the Borrower that is a Guarantor; and

 

(g)          Provided no Default or Event of Default exist or would arise as a
result of the making of such payment, the Borrower may pay management fees to
Tengram Capital Management, L.P. (“Tengram”) in the ordinary course of business
and consistent with prior practices in an amount not to exceed in any Fiscal
Year the lesser of (x) $1,000,000; or (y) the amount of such management fees set
forth in the Management Services Agreement entered into by the Borrower and
Tengram as in effect as of the Closing Date.

 

Section 7.10         Burdensome Agreements. Enter into or permit to exist any
Contractual Obligation (other than this Agreement or any other Loan Document)
that (a) limits the ability (i) of any Subsidiary (other than an Excluded
Subsidiary) to make Restricted Payments or other distributions to any Loan Party
or to otherwise transfer property to or invest in a Loan Party, (ii) of any
Subsidiary (other than an Excluded Subsidiary) to Guarantee the Obligations,
(iii) of any Subsidiary (other than an Excluded Subsidiary) to make or repay
loans to a Loan Party, or (iv) of the Loan Parties to create, incur, assume or
suffer to exist Liens on property of such Person in favor of the Agent;
provided, however, that this clause (iv) shall not prohibit any negative pledge
incurred or provided in favor of any holder of Indebtedness permitted under
clauses (c), or (d) of the definition of Permitted Indebtedness solely to the
extent any such negative pledge relates to the property financed by or the
subject of such Indebtedness; or (b) requires the grant of a Lien to secure an
obligation of such Person if a Lien is granted to secure another obligation of
such Person.

 

Section 7.11         Use of Proceeds. Use the proceeds of any Credit Extension,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, (a) to purchase or carry margin stock (within the meaning of
Regulation U of the FRB) or to extend credit to others for the purpose of
purchasing or carrying margin stock or to refund Indebtedness originally
incurred for such purpose, or (b) for any purposes other than (i) the payment of
the purchase price and transaction costs in connection with the Brand Matter
Acquisition, (ii) to finance Capital Expenditures of the Loan Parties, and (iii)
for general corporate purposes, in each case to the extent expressly permitted
under Law and the Loan Documents.

 

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Section 7.12         Amendment of Material Documents; Material Licenses.

 

(a)          Amend, modify or waive any of a Loan Party’s rights under (i) its
Organization Documents in a manner materially adverse to the Credit Parties,
(ii) the First Lien Credit Agreement or any other documentation relating to the
First Lien Facility that would shorten the maturity thereof or otherwise, when
taken as a whole, be materially adverse to the Credit Parties or in a manner
that would violate the First Lien Intercreditor Agreement, or (iii) any Primary
Material License which would have an adverse impact on the Lenders (as
reasonably determined by the Agent), without the prior express written consent
of the Agent.

 

(b)          Enter into any new Material Licenses unless such licenses require
each such licensee thereunder to pay any fees and other consideration thereunder
into a Blocked Account.

 

Section 7.13         Fiscal Year.

 

Change the Fiscal Year of any Loan Party, or the accounting policies or
reporting practices of the Loan Parties, except as required by GAAP.

 

Section 7.14         Deposit Accounts.

 

Open new Deposit Accounts (other than the Excluded Account) unless the Loan
Parties shall have delivered to the Agent appropriate Blocked Account Agreements
as required pursuant to Section 6.12 and otherwise satisfactory to the Agent.

 

Section 7.15         Financial Covenants.

 

(a)          Positive Net Income. Permit Consolidated Positive Net Income, as
calculated on a quarterly basis commencing with the Fiscal Quarter of the
Borrower ending June 30, 2013 to be equal to or less than $0.

 

(b)          Loan to Value. On or after December 31, 2013, permit the Senior
Obligations, at any time to be greater than the Loan to Value Percentage of the
Realizable Orderly Liquidation Value of registered trademarks of the Loan
Parties, as determined pursuant to the most recent appraisal with respect to
such registered trademarks conducted by or on behalf of the Agent or delivered
to the Agent by the First Lien Agent pursuant to Section 6.10(b).

 

(c)          Cash Balance. Permit the aggregate cash on deposit in the Loan
Parties’ Blocked Accounts at any time (i) during the period of the Closing Date
through and including December 31, 2013 to be less than $3,524,597; or (ii) on
or after January 1, 2014 to be less than $3,000,000.

 

Article VIII

EVENTS OF DEFAULT AND REMEDIES

 

Section 8.01         Events of Default. Any of the following shall constitute an
Event of Default:

 

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(a)          Non-Payment. The Borrower or any other Loan Party fails to pay (i)
when and as required to be paid, any amount of principal of any Loan, or (ii)
within three (3) Business Days of any due date therefor, interest on any Loan,
any fee due hereunder, or any other amount payable hereunder or under any other
Loan Document; or

 

(b)          Specific Covenants. Any Loan Party fails to perform or observe any
term, covenant or agreement contained in any of (i) Sections 6.03(a), 6.05(a),
6.06(b)(i)(A), 6.17, 6.18 or Article VII, or (ii) Sections 6.01, 6.02, 6.03
(other than 6.03(a)), 6.06(b)(i)(B) and (ii)-(iv), 6.07, 6.10 or 6.12 and such
failure continues for 10 days, or (iii) Sections 6.11 or 6.13 and such failure
continues for 15 days; or

 

(c)          Other Defaults. Any Loan Party fails to perform or observe any
other covenant or agreement (not specified in subsection (a) or (b) above)
contained in any Loan Document on its part to be performed or observed and such
failure continues for 30 days; or

 

(d)          Representations and Warranties. Any representation, warranty,
certification or statement of fact made or deemed made by or on behalf of any
Loan Party herein, in any other Loan Document, or in any document delivered in
connection herewith or therewith shall be incorrect or misleading in any
material respect when made or deemed made; or

 

(e)          Cross-Default. Any Loan Party (A) fails to make any payment when
due (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise) in respect of any Material Indebtedness, or (B) fails to observe
or perform any other agreement or condition relating to any such Material
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event occurs, the effect of which default or
other event is to cause, or to permit the holder or holders of such Material
Indebtedness or the beneficiary or beneficiaries of any Guarantee thereof (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to be demanded or to become due or to be repurchased, prepaid,
defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made, prior to its stated
maturity or such Guarantee to become payable or cash collateral in respect
thereof to be demanded; or

 

(f)          Insolvency Proceedings, Etc. Any Loan Party institutes or consents
to the institution of any proceeding under any Debtor Relief Law, or makes an
assignment for the benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer for it or for all or any material part of its
property; or a proceeding shall be commenced or a petition filed, without the
application or consent of such Person, seeking or requesting the appointment of
any receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer is appointed and the appointment continues undischarged,
undismissed or unstayed for 45 calendar days or an order or decree approving or
ordering any of the foregoing shall be entered; or any proceeding under any
Debtor Relief Law relating to any such Person or to all or any material part of
its property is instituted without the consent of such Person and continues
undismissed or unstayed for 45 calendar days, or an order for relief is entered
in any such proceeding; or

 

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(g)          Inability to Pay Debts; Attachment. (i) Any Loan Party becomes
unable or admits in writing its inability or fails generally to pay its debts as
they become due in the ordinary course of business, or (ii) any writ or warrant
of attachment or execution or similar process is issued or levied against all or
any material part of the property of any such Person and is not released,
vacated or fully bonded within 30 days after its issuance or levy; or

 

(h)          Judgments. There is entered against any Loan Party (i) one or more
judgments or orders for the payment of money in an aggregate amount (as to all
such judgments and orders) exceeding $5,000,000 (to the extent not covered by
independent third-party insurance as to which the insurer is rated at least “A”
by A.M. Best Company, has been notified of the potential claim and does not
dispute coverage), or (ii) any one or more non-monetary judgments that have, or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect and, in either case, (A) enforcement proceedings are
commenced by any creditor upon such judgment or order, or (B) there is a period
of 10 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, is not in effect; or

 

(i)          ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or
Multiemployer Plan which has resulted or could reasonably be expected to result
in liability of any Loan Party under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $5,000,000 or
which would reasonably likely result in a Material Adverse Effect, or (ii) a
Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of
any applicable grace period, any installment payment with respect to its
withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in
an aggregate amount in excess of $5,000,000 or which would reasonably likely
result in a Material Adverse Effect; or

 

(j)          Invalidity of Loan Documents. (i) Any material provision of any
Loan Document, at any time after its execution and delivery and for any reason,
ceases to be in full force and effect; or any Loan Party or any other Person
contests in any manner the validity or enforceability of any material provision
of any Loan Document; or any Loan Party denies that it has any or further
liability or obligation under any material provision of any Loan Document, or
purports to revoke, terminate or rescind any material provision of any Loan
Document or seeks to avoid, limit or otherwise adversely affect any Lien
purported to be created under any Security Document; or (ii) any Lien purported
to be created under any Security Document shall cease to be, or shall be
asserted by any Loan Party or any other Person not to be, a valid and perfected
Lien on any Material Intellectual Property, Material License or any other
material portion of the Collateral, with the priority required by the applicable
Security Document, except to the extent that any lack of perfection or
enforceability results from any act or omission of the Agent (so long as such
act or omission does not result from the breach or non-compliance by a Loan
Party with the terms of any Loan Document); or

 

(k)          Change of Control. There occurs any Change of Control; or

 

(l)          Cessation of Business. Except as otherwise expressly permitted
hereunder, the Loan Parties, taken as a whole, shall take any action to suspend
the operation of their business in the ordinary course or liquidate all or a
material portion of their assets or business; or

 

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(m)          Breach of Contractual Obligation. Any default or event of default
occurs under a Primary Material License which gives rise to a right of a party
to such Primary Material License to cease payment to, or excuses payment to, the
Borrower thereunder, or the termination of any Primary Material License unless
either (i) the Borrower reasonably demonstrates to the Agent, based on good
faith and reasonable forecasts, that the Borrower will remain in pro forma
compliance with the provisions of Section 7.15 for a period of twelve months
after the occurrence of such default or termination, or (ii) the Borrower is
disputing such default in good faith based on reasonable grounds (as determined
by the Agent in its reasonable discretion), or (iii) the Borrower enters into a
substitute Primary Material License and the Borrower reasonably demonstrates to
the Agent, based on good faith and reasonable forecasts, that, after giving
effect to such substitute Primary Material License, the Borrower will remain in
pro forma compliance with the provisions of Section 7.15 for a period of twelve
months after the occurrence of such default or termination; or

 

(n)          Indictment. Any director or senior officer of any Loan Party is (i)
criminally indicted or convicted of a felony for fraud or dishonesty in
connection with the Loan Parties’ business, unless such director or senior
officer promptly resigns or is removed or replaced or (ii) charged by a
Governmental Authority under any Law that would reasonably be expected to lead
to forfeiture of any material portion of Collateral; or

 

(o)          Insolvency of Licensee. Any proceeding described in clause (f)
above, whether voluntary or involuntary, shall commence with respect any
licensee under a Primary Material License and shall continue for a period of 45
days, unless (i) the applicable licensee shall “assume” the applicable Primary
Material License under applicable bankruptcy law, or (ii) either (A) the
Borrower otherwise reasonably demonstrates to the Agent, based on good faith and
reasonable forecasts, that the Borrower will remain in pro forma compliance with
the provisions of Section 7.15 for a period of twelve months after the
commencement of such proceeding or (B) the Borrower enters into a substitute
Primary Material License and the Borrower reasonably demonstrates to the Agent,
based on good faith and reasonable forecasts, that, after giving effect to such
substitute Primary Material License, the Borrower will remain in pro forma
compliance with the provisions of Section 7.15 for a period of twelve months
after the occurrence of such default or termination; or

 

(p)          Subordination. (i) The subordination provisions of the documents
evidencing or governing any subordinated indebtedness (the “Subordinated
Provisions”) shall, in whole or in part, terminate, cease to be effective or
cease to be legally valid, binding and enforceable against any holder of the
subordinated indebtedness; or (ii) any Borrower or any other Loan Party shall,
directly or indirectly, disavow or contest in any manner (A) the effectiveness,
validity or enforceability of any of the Subordination Provisions, (B) that the
Subordination Provisions exist for the benefit of the Credit Parties, or (C)
that all payments of principal of or premium and interest on the subordinated
indebtedness, or realized from the liquidation of any property of any Loan
Party, shall be subject to any of the Subordination Provisions.

 

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Section 8.02         Remedies Upon Event of Default. If any Event of Default
occurs and is continuing, the Agent may, or, at the request of the Required
Lenders shall, take any or all of the following actions:

 

(a)          declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other Obligations to be immediately
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Loan Parties; and

 

(b)          whether or not the maturity of the Obligations shall have been
accelerated pursuant hereto, proceed to protect, enforce and exercise all rights
and remedies of the Credit Parties under this Agreement, any of the other Loan
Documents or Law, including, but not limited to, by suit in equity, action at
law or other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Agreement and the other Loan Documents
or any instrument pursuant to which the Obligations are evidenced, and, if such
amount shall have become due, by declaration or otherwise, proceed to enforce
the payment thereof or any other legal or equitable right of the Credit Parties;

 

provided, however, that upon the occurrence of any Default or Event of Default
with respect to any Loan Party under Section 8.01(f), the unpaid principal
amount of all outstanding Loans, all interest accrued thereon and all other
Obligations shall automatically become due and payable without further act of
the Agent or any Lender.

 

No remedy herein is intended to be exclusive of any other remedy and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or any other provision of Law.

 

Section 8.03         Application of Funds. After the exercise of remedies
provided for in Section 8.02 (or after the Obligations have automatically become
immediately due and payable as set forth in the proviso to Section 8.02), any
amounts received on account of the Obligations shall be applied by the Agent in
the following order subject to the terms of the First Lien Intercreditor
Agreement:

 

First, to payment of that portion of the Obligations constituting fees,
indemnities, Credit Party Expenses and other amounts (including fees, charges
and disbursements of counsel to the Agent and amounts payable under Article III)
payable to the Agent;

 

Second, to payment of that portion of the Obligations constituting indemnities
(including indemnities due under Section 10.04 hereof), Credit Party Expenses,
and other amounts (other than principal, interest and fees) payable to the
Lenders (including Credit Party Expenses to the respective Lenders and amounts
payable under Article III), ratably among them in proportion to the amounts
described in this clause Second payable to them;

 

Third, to payment of that portion of the Obligations constituting accrued and
unpaid interest on the Loans, and fees (excluding any Early Termination Fee then
owing), ratably among the Lenders in proportion to the respective amounts
described in this clause Third payable to them;

 

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Fourth, to payment of that portion of the Obligations constituting unpaid
principal of the Loans, ratably among the Lenders in proportion to the
respective amounts described in this clause Fourth held by them;

 

Fifth, to payment of all other Obligations (including without limitation the
cash collateralization of unliquidated indemnification obligations and the
payment of any Early Termination Fee then owing), ratably among the Credit
Parties in proportion to the respective amounts described in this clause Fifth
held by them; and

 

Last, the balance, if any, after all of the Obligations have been indefeasibly
paid in full, to the Loan Parties or as otherwise required by Law.

 

Section 8.04         Right to Cure. .

 

(a)          Notwithstanding anything to the contrary contained in Section 8.01,
in the event of any Event of Default under the financial covenant set forth in
Section 7.15(b) and until the expiration of the fifteenth (15th) calendar day
thereafter (such date, the “Cure Expiration Date”), the Borrower may, so long as
no Default or Event of Default then exists (other than an Event of Default under
the financial covenant set forth in Section 7.15(b)), (x) designate any portion
of the Net Proceeds of any issuance of common Equity Interests of the Borrower
or any cash proceeds from an equity contribution to the Borrower’s common equity
made by the Borrower’s shareholders, or (y) any cash on hand of the Borrower, so
long as, as a prepayment of the Loans in an amount equal to the amount by which
the outstanding amount of the Obligations exceed the limitation set forth in
Section 7.15(b), as determined pursuant to the most recent appraisal conducted
by or on behalf of the Agent pursuant to Section 6.10(b); provided that, the
Borrower may not use cash described in clause (y) above for any prepayment
pursuant to this Section 8.04, unless after giving effect to the prepayment
under this Section 8.04, the Borrower has cash on its balance sheet at least
equal to $10,000,000.

 

(b)          If, after giving effect to the foregoing prepayment of the Loans,
the Borrower shall then be in compliance with the requirements of Section
7.15(b), the Borrower shall be deemed to have satisfied the requirements of
Section 7.15(b) as of the relevant date of determination with the same effect as
though there had been no failure to comply therewith at such date, and the
applicable existing breach or default of Section 7.15(b) shall be deemed cured
for this purpose of the Agreement.

 

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Article IX

THE AGENT

 

Section 9.01         Appointment and Authority.

 

(a)          Each of the Lenders (in its capacity as a Lender) hereby
irrevocably appoints Bank of America to act on its behalf as the administrative
agent and collateral agent hereunder and under the other Loan Documents and
authorizes the Agent to take such actions on its behalf and to exercise such
powers as are delegated to the Agent by the terms hereof or thereof (including,
without limitation, acquiring, holding and enforcing any and all Liens on
Collateral granted by any of the Loan Parties to secure any of the Obligations),
together with such actions and powers as are reasonably incidental thereto. The
provisions of this Article are solely for the benefit of the Agent and the other
Credit Parties, and no Loan Party or any Subsidiary thereof shall have rights as
a third party beneficiary of any of such provisions. It is understood and agreed
that the use of the term “agent” herein or in any other Loan Documents (or any
other similar term) with reference to the 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 as a matter of market
custom, and is intended to create or reflect only an administrative relationship
between contracting parties.

 

Section 9.02         Rights as a Lender. The Person serving as the Agent
hereunder shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though it were not the Agent and
the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or
unless the context otherwise requires, include the Person serving as the Agent
hereunder in its individual capacity. Such Person and its Affiliates may accept
deposits from, lend money to, act as the financial advisor or in any other
advisory capacity for and generally engage in any kind of business with the Loan
Parties or any Subsidiary or other Affiliate thereof as if such Person were not
the Agent hereunder and without any duty to account therefor to the Lenders.

 

Section 9.03         Exculpatory Provisions. The Agent shall not have any duties
or obligations except those expressly set forth herein and in the other Loan
Documents. Without limiting the generality of the foregoing, the Agent:

 

(a)          shall not be subject to any fiduciary or other implied duties,
regardless of whether a Default or Event of Default has occurred and is
continuing;

 

(b)          shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby or by the other Loan Documents that the Agent is
required to exercise as directed in writing by the Applicable Lenders, provided
that the Agent shall not be required to take any action that, in its opinion or
the opinion of its counsel, may expose the Agent to liability or that is
contrary to any Loan Document or Law, including for the avoidance of doubt any
action that may be in violation of the automatic stay under any Debtor Relief
Law; and

 

(c)          shall not, except as expressly set forth herein and in the other
Loan Documents, have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to the Loan Parties or any of its
Affiliates that is communicated to or obtained by the Person serving as the
Agent or any of its Affiliates in any capacity.

 

The Agent shall not be liable for any action taken or not taken by it (i) with
the Consent or at the request of the Applicable Lenders (as the Agent shall
believe in good faith shall be necessary under the circumstances as provided in
Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or
willful misconduct as determined by a final and non-appealable judgment of a
court of competent jurisdiction.

 

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The Agent shall not be deemed to have knowledge of any Default or Event of
Default unless and until notice describing such Default or Event of Default is
given to the Agent by the Loan Parties or a Lender. In the event that the Agent
obtains such actual knowledge or receives such a notice, the Agent shall give
prompt notice thereof to each of the other Credit Parties. Upon the occurrence
of a Default or an Event of Default, the Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Applicable Lenders. Unless and until the Agent shall have received such
direction, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to any such Default or Event of
Default as it shall deem advisable in the best interest of the Credit Parties.
In no event shall the Agent be required to comply with any such directions to
the extent that the Agent believes that its compliance with such directions
would be unlawful.

 

The Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with
this Agreement or any other Loan Document, (ii) the contents of any certificate,
report or other document delivered hereunder or thereunder or in connection
herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein
or the occurrence of any Default or Event of Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document or the creation,
perfection or priority of any Lien purported to be created by the Security
Documents, (v) the value or the sufficiency of any Collateral, or (vi) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Agent.

 

Section 9.04         Reliance by Agent. The Agent shall be entitled to rely
upon, and shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing
(including, but not limited to, any electronic message, Internet or intranet
website posting or other distribution) believed by it to be genuine and to have
been signed, sent or otherwise authenticated by the proper Person. The Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to have been made by the proper Person, and shall not incur any liability
for relying thereon. The Agent may consult with legal counsel (who may be
counsel for any Loan Party), independent accountants and other experts selected
by it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts.

 

Section 9.05         Delegation of Duties. The Agent may perform any and all of
its duties and exercise its rights and powers hereunder or under any other Loan
Document by or through any one or more sub-agents appointed by the Agent. The
Agent and any such sub-agent may perform any and all of its duties and exercise
its rights and powers by or through their respective Related Parties. The
exculpatory provisions of this Article shall apply to any such sub-agent and to
the Related Parties of the Agent and any such sub-agent. The Agent shall not be
responsible for the negligence or misconduct of any sub-agents except to the
extent that a court of competent jurisdiction determines in a final and
non-appealable judgment that the Agent acted with gross negligence or willful
misconduct in the selection of such sub-agents.

 

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Section 9.06         Resignation of Agent. The Agent may at any time give
written notice of its resignation to the Lenders and the Borrower. Upon receipt
of any such notice of resignation, the Required Lenders shall have the right, in
consultation with the Borrower, to appoint a successor, which shall be a bank
with an office in the United States, or an Affiliate of any such bank with an
office in the United States. If no such successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Agent gives notice of its resignation, then the retiring
Agent may on behalf of the Lenders appoint a successor Agent meeting the
qualifications set forth above; provided that if the Agent shall notify the
Borrower and the Lenders that no qualifying Person has accepted such
appointment, then such resignation shall nonetheless become effective in
accordance with such notice and (1) the retiring Agent shall be discharged from
its duties and obligations hereunder and under the other Loan Documents (except
that in the case of any Collateral held by the Agent on behalf of the Lenders
under any of the Loan Documents, the retiring Agent shall continue to hold such
collateral security until such time as a successor Agent is appointed) and
(2) all payments, communications and determinations provided to be made by, to
or through the Agent shall instead be made by or to each Lender directly, until
such time as the Required Lenders appoint a successor Agent as provided for
above in this Section. Upon the acceptance of a successor’s appointment as Agent
hereunder, such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring (or retired) Agent, and
the retiring Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents (if not already discharged therefrom
as provided above in this Section). The fees payable by the Borrower to a
successor Agent shall be the same as those payable to its predecessor unless
otherwise agreed between the Borrower and such successor. After the retiring
Agent’s resignation hereunder and under the other Loan Documents, the provisions
of this Article and Section 10.04 shall continue in effect for the benefit of
such retiring Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while the
retiring Agent was acting as Agent hereunder.

 

Section 9.07         Non-Reliance on Agent and Other Lenders. Each Lender
acknowledges that it has, independently and without reliance upon the Agent or
any other Lender or any of their Related Parties and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender or
any of their Related Parties and based on such documents and information as it
shall from time to time deem appropriate, continue to make its own decisions in
taking or not taking action under or based upon this Agreement, any other Loan
Document or any related agreement or any document furnished hereunder or
thereunder. Except as provided in Section 9.11, the Agent shall not have any
duty or responsibility to provide any Credit Party with any other credit or
other information concerning the affairs, financial condition or business of any
Loan Party that may come into the possession of the Agent.

 

Section 9.08         Agent May File Proofs of Claim. In case of the pendency of
any proceeding under any Debtor Relief Law or any other judicial proceeding
relative to any Loan Party, the Agent (irrespective of whether the principal of
the Loans shall then be due and payable as herein expressed or by declaration or
otherwise and irrespective of whether the Agent shall have made any demand on
the Loan Parties) shall be entitled and empowered, by intervention in such
proceeding or otherwise

 

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(a)          to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Loans and all other Obligations that
are owing and unpaid and to file such other documents as may be necessary or
advisable in order to have the claims of the Lenders, the Agent and the other
Credit Parties (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders, the Agent, such Credit Parties and
their respective agents and counsel and all other amounts due the Lenders, the
Agent and such Credit Parties under Sections 2.06 and 10.04) allowed in such
judicial proceeding; and

 

(b)          to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Agent and to pay to the Agent any
amount due for the reasonable compensation, expenses, disbursements and advances
of the Agent and its agents and counsel, and any other amounts due the Agent
under Sections 2.06 and 10.04.

 

Nothing contained herein shall be deemed to authorize the Agent to authorize or
consent to or accept or adopt on behalf of any Credit Party any plan of
reorganization, arrangement, adjustment or composition affecting the Obligations
or the rights of any Credit Party or to authorize the Agent to vote in respect
of the claim of any Credit Party in any such proceeding.

 

Section 9.09         Collateral and Guaranty Matters. The Credit Parties
irrevocably authorize the Agent, at its option and in its discretion,

 

(a)          to release any Lien on any property granted to or held by the Agent
under any Loan Document (i) upon payment in full of all Obligations (other than
contingent indemnification obligations for which no claim has been asserted),
(ii) that is sold or to be sold as part of or in connection with any sale
permitted hereunder or under any other Loan Document, or (iii) if approved,
authorized or ratified in writing by the Applicable Lenders in accordance with
Section 10.01;

 

(b)          to subordinate any Lien on any property granted to or held by the
Agent under any Loan Document to the holder of any Lien on such property that is
permitted by clause (h) of the definition of Permitted Encumbrances; and

 

(c)          to release any Guarantor from its obligations under the Facility
Guaranty if such Person ceases to be a Subsidiary as a result of a transaction
permitted hereunder.

 

Upon request by the Agent at any time, the Applicable Lenders will confirm in
writing the Agent’s authority to release or subordinate its interest in
particular types or items of property, or to release any Guarantor from its
obligations under the Facility Guaranty pursuant to this Section 9.09. In each
case as specified in this Section 9.09, the Agent will, at the Loan Parties’
expense, execute and deliver to the applicable Loan Party such documents as such
Loan Party may reasonably request to evidence the release of such item of
Collateral from the assignment and security interest granted under the Security
Documents or to subordinate its interest in such item, or to release such
Guarantor from its obligations under the Facility Guaranty, in each case in
accordance with the terms of the Loan Documents and this Section 9.09.

 

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Section 9.10         Notice of Transfer. The Agent may deem and treat a Lender
party to this Agreement as the owner of such Lender’s portion of the Obligations
for all purposes, unless and until, and except to the extent, an Assignment and
Acceptance shall have become effective as set forth in Section 10.06.

 

Section 9.11         Reports and Financial Statements. By signing this
Agreement, each Lender:

 

(a)          Reserved;

 

(b)          is deemed to have requested that the Agent furnish, and the Agent
agrees to furnish, such Lender, promptly after they become available, copies of
all financial statements required to be delivered by the Borrower hereunder;

 

(c)          is deemed to have requested that the Agent furnish, and the Agent
agrees to furnish, such Lender, promptly after they become available, copies of
all appraisals of the Collateral received by the Agent (collectively, the
“Reports”);

 

(d)          expressly agrees and acknowledges that the Agent makes no
representation or warranty as to the accuracy of the financial statements or
Reports, and shall not be liable for any information contained in any financial
statement or Report;

 

(e)          expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that the Agent or any other party
performing any audit or examination will inspect only specific information
regarding the Loan Parties and will rely significantly upon the Loan Parties’
books and records, as well as on representations of the Loan Parties’ personnel;

 

(f)          agrees to keep all financial statements and Reports confidential in
accordance with the provisions of Section 10.07 hereof; and

 

(g)          without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold the Agent and any
such other Lender preparing a Report harmless from any action the indemnifying
Lender may take or conclusion the indemnifying Lender may reach or draw from any
Report in connection with any Credit Extensions that the indemnifying Lender has
made or may make to the Borrower, or the indemnifying Lender’s participation in,
or the indemnifying Lender’s purchase of, the Loans; and (ii) to pay and
protect, and indemnify, defend, and hold the Agent and any such other Lender
preparing a Report harmless from and against, the claims, actions, proceedings,
damages, costs, expenses, and other amounts (including attorney costs) incurred
by the 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.

 

Section 9.12         Agency for Perfection. Each Credit Party hereby appoints
each other Credit Party as agent for the purpose of perfecting Liens for the
benefit of the Credit Parties, in assets which, in accordance with Article 9 of
the UCC or any other Law of the United States can be perfected only by
possession or control. Should any Credit Party (other than the Agent) obtain
possession or control of any such Collateral, such Credit Party shall notify the
Agent thereof, and, promptly upon the Agent’s request therefor shall deliver
such Collateral to the Agent or otherwise deal with such Collateral in
accordance with the Agent’s instructions.

 

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Section 9.13         Indemnification of Agent. Without limiting the obligations
of Loan Parties hereunder, to the extent that the Loan Parties for any reason
fails to indefeasibly pay any amount required under Section 10.04 to be paid by
them to the Agent (or any sub-agent thereof), the Lenders shall indemnify the
Agent, any sub-agent thereof and any Related Party, as the case may be ratably
according to their Applicable Percentages, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Agent, any sub-agent thereof
and their Related Parties in any way relating to or arising out of this
Agreement or any other Loan Document or any action taken or omitted to be taken
by the Agent, any sub-agent thereof and their Related Parties in connection
therewith; provided, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent’s, any sub-agent’s and
their Related Parties’ gross negligence or willful misconduct as determined by a
final and nonappealable judgment of a court of competent jurisdiction.

 

Section 9.14         Relation among Lenders. The Lenders are not partners or
co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Agent) authorized to act
for, any other Lender.

 

Article X

MISCELLANEOUS

 

Section 10.01      Amendments, Etc.

 

(a)          No amendment or waiver of any provision of this Agreement or any
other Loan Document, and no Consent to any departure by any Loan Party
therefrom, shall be effective unless in writing signed by the Agent, with the
Consent of the Required Lenders, and the Borrower or the applicable Loan Party,
as the case may be, and each such waiver or Consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
however, that no such amendment, waiver or consent shall:

 

(i)          as to any Lender, postpone any date fixed by this Agreement or any
other Loan Document for any scheduled payment (including the Maturity Date) or
mandatory prepayment of principal, interest, fees or other amounts due hereunder
or under any of the other Loan Documents without the written Consent of such
Lender,

 

(ii)         as to any Lender, reduce the principal of, or the rate of interest
specified herein on, any Loan held by such Lender, or (subject to clause (ii) of
the second proviso to this Section 10.01) any fees or other amounts payable
hereunder or under any other Loan Document to or for the account of such Lender,
without the written Consent of such Lender; provided, however, that only the
Consent of the Required Lenders shall be necessary to amend the definition of
“Default Rate” or to waive any obligation of the Borrower to pay interest at the
Default Rate;

 

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(iii)        as to any Lender, change Section 2.10 or Section 8.03 in a manner
that would alter the pro rata sharing of payments required thereby without the
written Consent of such Lender;

 

(iv)        change any provision of this Section or the definition of “Required
Lenders”, or any other provision hereof specifying the number or percentage of
Lenders required to amend, waive or otherwise modify any rights hereunder or
make any determination or grant any consent hereunder, without the written
Consent of each Lender;

 

(v)         except as expressly permitted hereunder or under any other Loan
Document, release, or limit the liability of, any Loan Party without the written
Consent of each Lender;

 

(vi)        except for Permitted Dispositions or as provided in Section 9.09,
release all or substantially all of the Collateral from the Liens of the
Security Documents without the written Consent of each Lender; and

 

(vii)       except as expressly permitted herein or in any other Loan Document,
subordinate the Obligations hereunder or the Liens granted hereunder or under
the other Loan Documents, to any other Indebtedness or Lien, as the case may be
without the written Consent of each Lender;

 

and, provided further, that (i) no amendment, waiver or Consent shall, unless in
writing and signed by the Agent in addition to the Lenders required above,
affect the rights or duties of any Agent under this Agreement or any other Loan
Document; and (ii) the Fee Letter may be amended, or rights or privileges
thereunder waived, in a writing executed only by the parties thereto.

 

(b)          Notwithstanding anything to the contrary in this Agreement or any
other Loan Document any Loan Document may be amended and waived with the consent
of the Agent at the request of the Borrower without the need to obtain the
consent of any other Lender if such amendment or waiver is delivered in order
(i) to comply with local Law or advice of local counsel, (ii) to cure
ambiguities or defects or (iii) to cause any Loan Document to be consistent with
this Agreement and the other Loan Documents.

 

(c)          If any Lender does not Consent (a “Non-Consenting Lender”) to a
proposed amendment, waiver, consent or release with respect to any Loan Document
that requires the Consent of each Lender and that has been approved by the
Required Lenders, the Borrower may repalce such Non-Consenting Lender in
accordance with Section 10.13; provided that such amendment, waiver, consent or
release can be effected as a result of the assignment contemplated by such
Section (together with all other such assignments required by the Borrower to be
made pursuant to this paragraph).

 

(d)          Notwithstanding any provision herein to the contrary, this
Agreement may be amended with the written consent of the Required Lenders, the
Agent and the Borrower (i) to add one or more additional term loan facilities to
this Agreement, and to permit the extensions of credit and all related
obligations and liabilities arising in connection therewith from time to time
outstanding to share ratably (or on a basis subordinated to the existing
facilities hereunder) in the benefits of this Agreement and the other Loan
Documents with the obligations and liabilities from time to time outstanding in
respect of the existing facilities hereunder, and (ii) in connection with the
foregoing, to permit, as deemed appropriate by the Agent and approved by the
Lenders, the Lenders providing such additional credit facilities to participate
in any required vote or action required to be approved by the Required Lenders
or by any other number, percentage or class of Lenders hereunder.

 

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Section 10.02      Notices; Effectiveness; Electronic Communications.

 

(a)          Notices Generally. Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in subsection (b) below), all notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopier as
follows, and all notices and other communications expressly permitted hereunder
to be given by telephone shall be made to the applicable telephone number, as
follows:

 

(i)          if to the Loan Parties or the Agent, to the address, telecopier
number, electronic mail address or telephone number specified for such Person on
Schedule 10.02; and

 

(ii)         if to any other Lender, to the address, telecopier number,
electronic mail address or telephone number specified in writing to the Borrower
and the Agent.

 

Notices and other communications sent by hand or overnight courier service, or
mailed by certified or registered mail, shall be deemed to have been given when
received; notices and other communications sent 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). Notices and other
communications delivered through electronic communications to the extent
provided in subsection (b) below, shall be effective as provided in such
subsection (b).

 

(b)          Electronic Communications. Notices and other communications to the
Lender hereunder may be delivered or furnished by electronic communication
(including e-mail and Internet or intranet websites) pursuant to procedures
approved by the Agent. The Agent or the Borrower may, in its discretion, agree
to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it, provided that approval of
such procedures may be limited to particular notices or communications.

 

Unless the Agent otherwise prescribes, (i) notices and other communications sent
to an e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the
intended recipient at its e-mail address as described in the foregoing clause
(i) of notification that such notice or communication is available and
identifying the website address therefor; provided that, for both clauses (i)
and (ii), if such notice, email or other communication is not sent during the
normal business hours of the recipient, such notice, email or communication
shall be deemed to have been sent at the opening of business on the next
business day for the recipient.

 

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(c)          Change of Address, Etc. Each of the Loan Parties and the Agent may
change its address, telecopier or telephone number for notices and other
communications hereunder by notice to the other parties hereto. Each other
Lender may change its address, telecopier or telephone number for notices and
other communications hereunder by notice to the Borrower and the Agent. In
addition, each Lender agrees to notify the Agent from time to time to ensure
that the Agent has on record (i) an effective address, contact name, telephone
number, telecopier number and electronic mail address to which notices and other
communications may be sent and (ii) accurate wire instructions for such Lender.

 

(d)          Reliance by Agent and Lenders. The Agent and the Lenders shall be
entitled to rely and act upon any notices purportedly given by or on behalf of
the Loan Parties even if (i) such notices were not made in a manner specified
herein, were incomplete or were not preceded or followed by any other form of
notice specified herein, or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof. The Loan Parties shall
indemnify the Agent, each Lender and the Related Parties of each of them from
all losses, costs, expenses and liabilities resulting from the reliance by such
Person on each notice purportedly given by or on behalf of the Loan Parties. All
telephonic notices to and other telephonic communications with the Agent may be
recorded by the Agent, and each of the parties hereto hereby consents to such
recording.

 

Section 10.03   No Waiver; Cumulative Remedies. No failure by any Credit Party
to exercise, and no delay by any such Person in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder or
under any other Loan Document preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges provided herein and in the other Loan Documents
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by Law. Without limiting the generality of the foregoing, the making of
the Loans shall not be construed as a waiver of any Default or Event of Default,
regardless of whether any Credit Party may have had notice or knowledge of such
Default or Event of Default at the time.

 

Notwithstanding anything to the contrary contained herein or in any other Loan
Document, the authority to enforce rights and remedies hereunder and under the
other Loan Documents against the Loan Parties or any of them shall be vested
exclusively in, and all actions and proceedings at Law in connection with such
enforcement shall be instituted and maintained exclusively by, the Agent in
accordance with Section 8.02 for the benefit of all the Lenders; provided,
however, that the foregoing shall not prohibit (a) the Agent from exercising on
its own behalf the rights and remedies that inure to its benefit (solely in its
capacity as Agent) hereunder and under the other Loan Documents, or (b) any
Lender from exercising setoff rights in accordance with Section 10.08 (subject
to the terms of Section 2.10); and provided, further, that if at any time there
is no Person acting as Agent hereunder and under the other Loan Documents, then
(i) the Required Lenders shall have the rights otherwise ascribed to the Agent
pursuant to Section 8.02 and (ii) in addition to the matters set forth in clause
(b) of the preceding proviso and subject to Section 2.10, any Lender may, with
the consent of the Required Lenders, enforce any rights and remedies available
to it and as authorized by the Required Lenders.

 

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Section 10.04    Expenses; Indemnity; Damage Waiver.

 

(a)          Costs and Expenses. The Borrower shall pay all Credit Party
Expenses.

 

(b)          Indemnification by the Loan Parties. The Loan Parties shall
indemnify the Agent (and any sub-agent thereof), each other Credit Party, and
each Related Party of any of the foregoing Persons (each such Person being
called an “Indemnitee”) against, and hold each Indemnitee harmless (on an after
tax basis) from, any and all losses, claims, causes of action, damages,
liabilities, settlement payments, costs, and related expenses (including the
reasonable fees, charges and disbursements of any one counsel for the
Indemnitees (and in the event of an actual conflict of interest, one additional
counsel for such affected parties) and one additional counsel in each other
applicable jurisdiction), incurred by any Indemnitee or asserted against any
Indemnitee by any third party or by any Borrower or any other Loan Party arising
out of, in connection with, or as a result of (i) the execution or delivery of
this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the performance by the parties hereto of their
respective obligations hereunder or thereunder, the consummation of the
transactions contemplated hereby or thereby, or the administration of this
Agreement and the other Loan Documents, (ii) any Loan or the use or proposed use
of the proceeds therefrom, (iii) any actual or alleged presence or release of
Hazardous Materials on or from any property owned or operated by any Loan Party,
or any Environmental Liability related in any way to any Loan Party, (iv) any
claims of, or amounts paid by any Credit Party to, a Blocked Account Bank or
other Person which has entered into a control agreement with any Credit Party
hereunder, or (v) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory, whether brought by a third party or by any Borrower or any
other Loan Party or any of the Loan Parties’ directors, shareholders or
creditors, and regardless of whether any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses (x) are
determined by a court of competent jurisdiction by final and non-appealable
judgment to have resulted from the bad faith, gross negligence or willful
misconduct of, or material breach of the obligations under this Agreement of,
such Indemnitee, or (y) are due to disputes between and among Indemnitees (other
than disputes involving any act or omission of the Borrower or any of its
Affiliates (other than the claims of the Agent)). Without limiting the
provisions of Section 3.01(c), this Section 10.04(b) shall not apply with
respect to Taxes other than any Taxes that represent losses, claims, damages,
etc. arising from any non-Tax claim.

 

(c)          Waiver of Consequential Damages, Etc. To the fullest extent
permitted by Law, the Loan Parties shall not assert, and hereby waive, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement, any other
Loan Document or any agreement or instrument contemplated hereby, the
transactions contemplated hereby or thereby, the Loans or the use of the
proceeds thereof.

 

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(d)          Payments. All amounts due under this Section shall be payable on
demand therefor.

 

(e)          Limitation of Liability. No Indemnitee shall be liable for any
damages arising from the use by unintended recipients of any information or
other materials distributed to such unintended recipients by such Indemnitee
through telecommunications, electronic or other information transmission systems
in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby other than for direct or actual
damages resulting from the gross negligence or willful misconduct of such
Indemnitee as determined by a final and nonappealable judgment of a court of
competent jurisdiction.

 

(f)          Survival. The agreements in this Section shall survive the
resignation of the Agent, the assignment of the Loans by any Lender, the
replacement of any Lender and the repayment, satisfaction or discharge of all
the other Obligations.

 

Section 10.05 Payments Set Aside. To the extent that any payment by or on behalf
of the Loan Parties is made to any Credit Party, or any Credit Party exercises
its right of setoff, and such payment or the proceeds of such setoff or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by such
Credit Party in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any proceeding under any Debtor Relief Law or
otherwise, then (a) to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such setoff had
not occurred, and (b) each Lender severally agrees to pay to the Agent upon
demand its Applicable Percentage (without duplication) of any amount so
recovered from or repaid by the Agent, plus interest thereon from the date of
such demand to the date such payment is made at a rate per annum equal to the
Federal Funds Rate from time to time in effect. The obligations of the Lenders
under clause (b) of the preceding sentence shall survive the payment in full of
the Obligations and the termination of this Agreement.

 

Section 10.06 Successors and Assigns.

 

(a)          Successors and Assigns Generally. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that no Loan Party
may assign or otherwise transfer any of its rights or obligations hereunder or
under any other Loan Document without the prior written Consent of the Agent and
each Lender and no Lender may assign or otherwise transfer any of its rights or
obligations hereunder except (i) to an Eligible Assignee in accordance with the
provisions of Section 10.06(b), (ii) by way of participation in accordance with
the provisions of subsection Section 10.06(d), or (iii) by way of pledge or
assignment of a security interest subject to the restrictions of Section
10.06(f) (and any other attempted assignment or transfer by any party hereto
shall be null and void). Nothing in this Agreement, expressed or implied, shall
be construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants to the extent
provided in subsection (d) of this Section and, to the extent expressly
contemplated hereby, the Related Parties of each of the Credit Parties) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

 

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(b)          Assignments by Lenders. Any Lender may at any time assign to one or
more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of the Loans at the time owing to
it); provided that any such assignment shall be subject to the following
conditions:

 

(i)          Minimum Amounts.

 

(A)         in the case of an assignment of the entire remaining amount of the
assigning Lender’s Loans at the time owing to it or in the case of an assignment
to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a
Lender, no minimum amount need be assigned; and

 

(B)         in any case not described in subsection (b)(i)(A) of this Section,
the principal outstanding balance of the Loans of the assigning Lender subject
to each such assignment, determined as of the date the Assignment and Assumption
with respect to such assignment is delivered to the Agent or, if “Trade Date” is
specified in the Assignment and Assumption, as of the Trade Date, shall not be
less than $1,000,000 unless each of the Agent and, so long as no Default or
Event of Default has occurred and is continuing, the Borrower otherwise consents
(each such consent not to be unreasonably withheld or delayed); provided,
however, that concurrent assignments to members of an Assignee Group and
concurrent assignments from members of an Assignee Group to a single Eligible
Assignee (or to an Eligible Assignee and members of its Assignee Group) will be
treated as a single assignment for purposes of determining whether such minimum
amount has been met;

 

(ii)         Proportionate Amounts. 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 with respect to the Loans assigned;

 

(iii)        Required Consents. No consent shall be required for any assignment
except to the extent required by subsection (b)(i)(A) of this Section and, in
addition:

 

(A)         the consent of the Borrower (such consent not to be unreasonably
withheld or delayed) shall be required unless (1) a Default or Event of Default
has occurred and is continuing at the time of such assignment or (2) such
assignment is to a Lender, an Affiliate of a Lender, or an Approved Fund with
respect to such Lender or to a Person on the list of prohibited assignees
attached hereto as Schedule 10.06, and shall be deemed to have been given unless
the Borrower has responded within five (5) Business Days of request therefor;
and

 

(B)         the consent of the Agent (such consent not to be unreasonably
withheld or delayed) shall be required for assignments if such assignment is to
a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund
with respect to such Lender; and

 

(iv)        Assignment and Assumption. The parties to each assignment shall
execute and deliver to the Agent an Assignment and Assumption, together with a
processing and recordation fee of $3,500, provided, however, that the Agent may,
in its sole discretion, elect to waive such processing and recordation fee in
the case of any assignment.

 

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(v)         No Assignment to Certain Persons. No such assignment shall be made
(A) to the Loan Parties or any of the Loan Parties’ Subsidiaries or (B) to a
natural Person.

 

Subject to acceptance and recording thereof by the Agent pursuant to subsection
(c) of this Section, from and after the effective date specified in each
Assignment and Assumption, the Eligible Assignee thereunder shall be a party to
this Agreement and, to the extent of the interest assigned by such Assignment
and Assumption, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall continue
to be entitled to the benefits of Section 3.01, Section 3.04, Section 3.05, and
Section 10.04 with respect to facts and circumstances occurring prior to the
effective date of such assignment. Upon request, the Borrower (at its expense)
shall execute and deliver a Note to the assignee Lender. Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this subsection shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in
accordance with Section 10.06(d).

 

(c)          Register. The Agent, acting solely for this purpose as an agent of
the Borrower, shall maintain at the Agent’s Office a copy of each Assignment and
Assumption delivered to it (or the equivalent thereof in electronic form) and a
register for the recordation of the names and addresses of the Lenders and
principal amounts (and stated interest) of the Loans owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The entries in
the Register shall be conclusive, absent manifest error, and the Loan Parties,
the Agent and the Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes of
this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower and any Lender at any reasonable time
and from time to time upon reasonable prior notice.

 

(d)          Participations. (i) Any Lender may at any time, without the consent
of, or notice to, the Loan Parties or the Agent, sell participations to any
Person (other than a natural person or the Loan Parties or any of the Loan
Parties’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion
of such Lender’s rights and/or obligations under this Agreement (including all
or a portion of the Loans owing to it); provided that (i) such Lender’s
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Loan Parties, the Agent, the Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement. Any Participant shall
agree in writing to comply with all confidentiality obligations set forth in
Section 10.07 as if such Participant was a Lender hereunder.

 

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(ii)         Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, waiver or other modification described in clauses (i) through
(iii) of the first proviso to Section 10.01 that affects such Participant.
Subject to subsection (e) of this Section, the Loan Parties agree that each
Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05
(subject to the requirements and limitations therein, including the requirements
under Section 3.01(e) (it being understood that the documentation required under
Section 3.01(e) shall be delivered to the participating Lender) to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to Section 10.06(b). To the extent permitted by Law, each Participant
also shall be entitled to the benefits of Section 10.08 as though it were a
Lender, provided such Participant agrees to be subject to Section 2.10 as though
it were a Lender.

 

(iii)        Each Lender that sells a participation shall, acting solely for
this purpose as an agent of the Borrower, maintain a register on which it enters
the name and address of each Participant and the principal amounts (and stated
interest) of each Participant’s interest in the Loans or other obligations under
the Loan Documents (the “Participant Register”); provided that no Lender shall
have any obligation to disclose all or any portion of the Participant Register
(including the identity of any Participant or any information relating to a
Participant’s interest in any Loans or its other obligations under any Loan
Document) to any Person except to the extent that such disclosure is necessary
to establish that such Loan or other obligation is in registered form under
Section 5f.103-1(c) of the United States Treasury Regulations. The entries in
the Participant Register shall be conclusive absent manifest error, and such
Lender shall treat each Person whose name is recorded in the Participant
Register as the owner of such participation for all purposes of this Agreement
notwithstanding any notice to the contrary. For the avoidance of doubt, the
Agent (in its capacity as Agent) shall have no responsibility for maintaining a
Participant Register.

 

(e)          Limitations upon Participant Rights. A Participant shall not be
entitled to receive any greater payment under Section 3.01 or 3.04 than the
applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to
such Participant is made with the Borrower’s prior written consent. A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 3.01 unless the Borrower is notified of the
participation sold to such Participant and such Participant agrees, for the
benefit of the Loan Parties, to comply with Section 3.01(e) as though it were a
Lender.

 

(f)          Certain Pledges. Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided that no such pledge or assignment shall release such Lender from
any of its obligations hereunder or substitute any such pledgee or assignee for
such Lender as a party hereto.

 

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Section 10.07  Treatment of Certain Information; Confidentiality. Each of the
Credit Parties agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its Affiliates,
Approved Funds, and to its and its Affiliates’ and Approved Funds’ respective
partners, directors, officers, employees, agents, funding sources, attorneys,
advisors and representatives (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority purporting to have jurisdiction
over it (including any self-regulatory authority), (c) to the extent required by
Laws or regulations or by any subpoena or similar legal process, (d) to any
other party hereto, (e) in connection with the exercise of any remedies
hereunder or under any other Loan Document or any action or proceeding relating
to this Agreement or any other Loan Document or the enforcement of rights
hereunder or thereunder, (f) subject to an agreement (including any electronic
agreement contained in any Platform) containing provisions substantially the
same as those of this Section, to (i) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or its
advisors) to any Swap Contract relating to any Loan Party and its obligations,
(g) with the consent of the Borrower or (h) to the extent such Information (i)
becomes publicly available other than as a result of a breach of this Section or
(ii) becomes available to any Credit Party or any of their respective Affiliates
on a non-confidential basis from a source other than the Loan Parties.

 

For purposes of this Section, “Information” means all information received from
the Loan Parties or any Subsidiary thereof relating to the Loan Parties or any
Subsidiary thereof or their respective businesses, other than any such
information that is available to any Credit Party on a non-confidential basis
prior to disclosure by the Loan Parties or any Subsidiary thereof. Any Person
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

 

Each of the Credit Parties acknowledges that (a) the Information may include
material non-public information concerning the Loan Parties or a Subsidiary, as
the case may be, (b) it has developed compliance procedures regarding the use of
material non-public information and (c) it will handle such material non-public
information in accordance with Law, including Federal and state securities Laws.

 

Section 10.08  Right of Setoff. If an Event of Default shall have occurred and
be continuing or if any Lender shall have been served with a trustee process or
similar attachment relating to property of a Loan Party, each Lender and each of
their respective Affiliates is hereby authorized at any time and from time to
time, after obtaining the prior written consent of the Agent or the Required
Lenders, to the fullest extent permitted by Law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final, in
whatever currency) or other property at any time held and other obligations (in
whatever currency) at any time owing by such Lender or any such Affiliate to or
for the credit or the account of the Borrower or any other Loan Party against
any and all of the Obligations now or hereafter existing under this Agreement or
any other Loan Document to such Lender, regardless of the adequacy of the
Collateral, and irrespective of whether or not such Lender shall have made any
demand under this Agreement or any other Loan Document and although such
obligations of the Borrower or such Loan Party may be contingent or unmatured or
are owed to a branch or office of such Lender different from the branch or
office holding such deposit or obligated on such indebtedness. The rights of
each Lender and its Affiliates under this Section are in addition to other
rights and remedies (including other rights of setoff) that such Lender or its
Affiliates may have. Each Lender agrees to notify the Borrower and the Agent
promptly after any such setoff and application, provided that the failure to
give such notice shall not affect the validity of such setoff and application.

 

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Section 10.09  Interest Rate Limitation. Notwithstanding anything to the
contrary contained in any Loan Document, the interest paid or agreed to be paid
under the Loan Documents shall not exceed the maximum rate of non-usurious
interest permitted by Law (the “Maximum Rate”). If the Agent or any Lender shall
receive interest in an amount that exceeds the Maximum Rate, the excess interest
shall be applied to the principal of the Loans and other Obligations or, if it
exceeds such unpaid principal, refunded to the Borrower. In determining whether
the interest contracted for, charged, or received by the Agent or a Lender
exceeds the Maximum Rate, such Person may, to the extent permitted by Law, (a)
characterize any payment that is not principal as an expense, fee, or premium
rather than interest, (b) exclude voluntary prepayments and the effects thereof,
and (c) amortize, prorate, allocate, and spread in equal or unequal parts the
total amount of interest throughout the contemplated term of the Obligations
hereunder.

 

Section 10.10  Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and the other
Loan Documents constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Agent and when the Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto. Delivery of an executed counterpart of a signature
page of this Agreement by telecopy, pdf or other electronic transmission shall
be as effective as delivery of a manually executed counterpart of this
Agreement.

 

Section 10.11 Survival. All representations and warranties made hereunder and in
any other Loan Document or other document delivered pursuant hereto or thereto
or in connection herewith or therewith shall survive the execution and delivery
hereof and thereof. Such representations and warranties have been or will be
relied upon by the Credit Parties, regardless of any investigation made by any
Credit Party or on their behalf and notwithstanding that any Credit Party may
have had notice or knowledge of any Default or Event of Default, and shall
continue in full force and effect as long as the Loans or any other Obligation
hereunder shall remain unpaid or unsatisfied. Further, the provisions of
Sections 3.01, 3.04, 3.05 and 10.04 and Article IX shall survive and remain in
full force and effect regardless of the repayment of the Obligations or the
termination of this Agreement or any provision hereof.

 

Section 10.12  Severability. If any provision of this Agreement or the other
Loan Documents is held to be illegal, invalid or unenforceable, (a) the
legality, validity and enforceability of the remaining provisions of this
Agreement and the other Loan Documents shall not be affected or impaired thereby
and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

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Section 10.13  Replacement of Lenders. If any Lender requests compensation under
Section 3.04, or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 3.01, or if any Lender is a Non-Consenting Lender, then the Borrower
may, with the consent of the Agent and at Borrower’s sole expense and effort,
upon notice to such Lender and the Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in, and consents required by, Section 10.06), all of its interests,
rights (other than its existing rights to payments pursuant to Section 3.01 and
3.04) and obligations under this Agreement and the related Loan Documents to an
assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment), provided that:

 

(a)          the Borrower shall have paid to the Agent the assignment fee
specified in Section 10.06(b);

 

(b)          such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder and under the other Loan Documents
from the assignee (to the extent of such outstanding principal and accrued
interest and fees) or the Borrower (in the case of all other amounts);

 

(c)          in the case of any such assignment resulting from a claim for
compensation under Section 3.04 or payments required to be made pursuant to
Section 3.01, such assignment will result in a reduction in such compensation or
payments thereafter;

 

(d)          such assignment does not conflict with Laws; and

 

(e)          in the case of an assignment resulting from a Lender becoming a
Non-Consenting Lender, the applicable assignee shall have consented to the
applicable amendment, waiver or consent.

 

A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment and delegation
cease to apply.

 

Section 10.14  Governing Law; Jurisdiction; Etc.

 

(a)          GOVERNING LAW. This Agreement and the other Loan Documents and any
claims, controversy, dispute or cause of action (whether in contract or tort or
otherwise) based upon, arising out of or relating to this Agreement or any other
Loan Document (except, as to any other Loan Document, as expressly set forth
therein) and the transactions contemplated hereby and thereby shall be governed
by, and construed in accordance with, the law of the State of NEW yORK.

 

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(b)          SUBMISSION TO JURISDICTION. EACH LOAN PARTY IRREVOCABLY AND
UNCONDITIONALLY agrees that it will not commence any action, litigation or
proceeding of any kind or description, whether in law or equity, whether in
contract or in tort or otherwise, against the Agent, any Lender or any Related
Party of the foregoing in any way relating to this Agreement or any other Loan
Document or the transactions relating hereto or thereto, in any forum other than
THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED
STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE
COURT FROM ANY THEREOF, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY
LAW, IN SUCH FEDERAL COURT. EACH OF THE LOAN PARTIES HERETO AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION, LITIGATION 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 IN ANY OTHER LOAN DOCUMENT
SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY 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.

 

(c)          WAIVER OF VENUE. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED
TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE LOAN PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

 

(d)          SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW.

 

Section 10.15  Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

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Section 10.16  No Advisory or Fiduciary Responsibility. In connection with all
aspects of each transaction contemplated hereby, the Loan Parties each
acknowledge and agree that: (i) the credit facility provided for hereunder and
any related arranging or other services in connection therewith (including in
connection with any amendment, waiver or other modification hereof or of any
other Loan Document) are an arm’s-length commercial transaction between the Loan
Parties, on the one hand, and the Credit Parties, on the other hand, and each of
the Loan Parties is capable of evaluating and understanding and understands and
accepts the terms, risks and conditions of the transactions contemplated hereby
and by the other Loan Documents (including any amendment, waiver or other
modification hereof or thereof); (ii) in connection with the process leading to
such transaction, each Credit Party is and has been acting solely as a principal
and is not the financial advisor, agent or fiduciary, for the Loan Parties or
any of their respective Affiliates, stockholders, creditors or employees or any
other Person; (iii) none of the Credit Parties has assumed or will assume an
advisory, agency or fiduciary responsibility in favor of the Loan Parties with
respect to any of the transactions contemplated hereby or the process leading
thereto, including with respect to any amendment, waiver or other modification
hereof or of any other Loan Document (irrespective of whether any of the Credit
Parties has advised or is currently advising any Loan Party or any of its
Affiliates on other matters) and none of the Credit Parties has any obligation
to any Loan Party or any of its Affiliates with respect to the transactions
contemplated hereby except those obligations expressly set forth herein and in
the other Loan Documents; (iv) the Credit Parties and their respective
Affiliates may be engaged in a broad range of transactions that involve
interests that differ from those of the Loan Parties and their respective
Affiliates, and none of the Credit Parties has any obligation to disclose any of
such interests by virtue of any advisory, agency or fiduciary relationship; and
(v) the Credit Parties have not provided and will not provide any legal,
accounting, regulatory or tax advice with respect to any of the transactions
contemplated hereby (including any amendment, waiver or other modification
hereof or of any other Loan Document) and each of the Loan Parties has consulted
its own legal, accounting, regulatory and tax advisors to the extent it has
deemed appropriate. Each of the Loan Parties hereby waives and releases, to the
fullest extent permitted by law, any claims that it may have against each of the
Credit Parties with respect to any breach or alleged breach of agency or
fiduciary duty.

 

Section 10.17  USA PATRIOT Act Notice. Each Lender that is subject to the Act
(as hereinafter defined) and the Agent (for itself and not on behalf of any
Lender) hereby notifies the Loan Parties that pursuant to the requirements of
the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”), it is required to obtain, verify and record information that
identifies each Loan Party, which information includes the name and address of
each Loan Party and other information that will allow such Lender or the Agent,
as applicable, to identify each Loan Party in accordance with the Act. Each Loan
Party is in compliance, in all material respects, with the Patriot Act. No part
of the proceeds of the Loans will be used by the Loan Parties, 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. The Loan Parties shall,
promptly following a request by the Agent or any Lender, provide all
documentation and other information that the Agent or such Lender requests in
order to comply with its ongoing obligations under applicable “know your
customer” and anti-money laundering rules and regulations, including the Act.

 

-95-

 

 

Section 10.18  Foreign Asset Control Regulations. Neither of the advance of the
Loans nor the use of the proceeds of any thereof will violate the Trading With
the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading With the Enemy
Act”) or any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the “Foreign
Assets Control Regulations”) or any enabling legislation or executive order
relating thereto (which for the avoidance of doubt shall include, but shall not
be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property
and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b)
the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore,
none of the Loan Parties or their Affiliates (a) is or will become a “blocked
person” as described in the Executive Order, the Trading With the Enemy Act or
the Foreign Assets Control Regulations or (b) engages or will engage in any
dealings or transactions, or be otherwise associated, with any such “blocked
person” or in any manner violative of any such order.

 

Section 10.19  Time of the Essence. Time is of the essence of the Loan
Documents.

 

Section 10.20  Press Releases.

 

(a)          Each Credit Party executing this Agreement agrees that neither it
nor its Affiliates will in the future issue any press releases or other public
disclosure using the name of the Agent or its Affiliates or referring to this
Agreement or the other Loan Documents without at least two (2) Business Days’
prior notice to the Agent and without the prior written consent of the Agent
unless (and only to the extent that) such Credit Party or Affiliate is required
to do so under Law and then, in any event, such Credit Party or Affiliate will
consult with the Agent before issuing such press release or other public
disclosure.

 

(b)          Each Loan Party consents to the publication by the Agent or any
Lender of advertising material relating to the financing transactions
contemplated by this Agreement using any Loan Party’s name, product photographs,
logo or trademark. The Agent or such Lender shall provide a draft reasonably in
advance of any advertising material to the Borrower prior to the publication
thereof. The Agent reserves the right to provide to industry trade organizations
information necessary and customary for inclusion in league table measurements.

 

-96-

 

 

Section 10.21 Additional Waivers.

 

(a)          The Obligations are the joint and several obligation of each Loan
Party. To the fullest extent permitted by Law, the obligations of each Loan
Party shall not be affected by (i) the failure of any Credit Party to assert any
claim or demand or to enforce or exercise any right or remedy against any other
Loan Party under the provisions of this Agreement, any other Loan Document or
otherwise, (ii) any rescission, waiver, amendment or modification of, or any
release from any of the terms or provisions of, this Agreement or any other Loan
Document, (iii) the failure to perfect any security interest in, or the release
of, any of the Collateral or other security held by or on behalf of the Agent or
any other Credit Party, or (iv) any default, failure or delay, willful or
otherwise, in the performance of any of the Obligations, or by any other act or
omission that may or might in any manner or to any extent vary the risk of any
Loan Party or that would otherwise operate as a discharge of any Loan Party as a
matter of law or equity (other than the indefeasible payment in full in cash of
all the Obligations). The obligations of each Loan Party shall not be subject to
any reduction, limitation, impairment or termination for any reason (other than
the indefeasible payment in full in cash of the Obligations), including any
claim of waiver, release, surrender, alteration or compromise of any of the
Obligations, and shall not be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of any of the Obligations or otherwise.

 

(b)          To the fullest extent permitted by Law, each Loan Party waives any
defense based on or arising out of any defense of any other Loan Party or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause of the liability of any other Loan Party, other than
the indefeasible payment in full in cash of all the Obligations. The Agent and
the other Credit Parties may, at their election, foreclose on any security held
by one or more of them by one or more judicial or non-judicial sales, accept an
assignment of any such security in lieu of foreclosure, compromise or adjust any
part of the Obligations, make any other accommodation with any other Loan Party,
or exercise any other right or remedy available to them against any other Loan
Party, without affecting or impairing in any way the liability of any Loan Party
hereunder except to the extent that all of the Obligations have been
indefeasibly paid in full in cash. Each Loan Party waives any defense arising
out of any such election even though such election operates, pursuant to Law, to
impair or to extinguish any right of reimbursement or subrogation or other right
or remedy of such Loan Party against any other Loan Party.

 

(c)          Upon payment by any Loan Party of any Obligations, all rights of
such Loan Party against any other Loan Party arising as a result thereof by way
of right of subrogation, contribution, reimbursement, indemnity or otherwise
shall in all respects be subordinate and junior in right of payment to the prior
indefeasible payment in full in cash of all of the Obligations. In addition, any
indebtedness of any Loan Party now or hereafter held by any other Loan Party is
hereby subordinated in right of payment to the prior indefeasible payment in
full of the Obligations and no Loan Party will demand, sue for or otherwise
attempt to collect any such indebtedness. If any amount shall erroneously be
paid to any Loan Party on account of (i) such subrogation, contribution,
reimbursement, indemnity or similar right or (ii) any such indebtedness of any
Loan Party, such amount shall be held in trust for the benefit of the Credit
Parties and shall forthwith be paid to the Agent to be credited against the
payment of the Obligations, whether matured or unmatured, in accordance with the
terms of this Agreement and the other Loan Documents. Subject to the foregoing,
to the extent that any Loan Party shall, under this Agreement as a joint and
several obligor, repay any of the Obligations constituting Loans made to the
Borrower hereunder or other Obligations incurred directly and primarily by the
Borrower (an “Accommodation Payment”), then the Loan Party making such
Accommodation Payment shall be entitled to contribution and indemnification
from, and be reimbursed by, each of the other Loan Parties in an amount, for
each of such other Loan Parties, equal to a fraction of such Accommodation
Payment, the numerator of which fraction is such other Loan Party’s Allocable
Amount and the denominator of which is the sum of the Allocable Amounts of all
of the Loan Parties. As of any date of determination, the “Allocable Amount” of
each Loan Party shall be equal to the maximum amount of liability for
Accommodation Payments which could be asserted against such Loan Party hereunder
without (a) rendering such Loan Party “insolvent” within the meaning of Section
101 (32) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer
Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”),
(b) leaving such Loan Party with unreasonably small capital or assets, within
the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or
Section 5 of the UFCA, or (c) leaving such Loan Party unable to pay its debts as
they become due within the meaning of Section 548 of the Bankruptcy Code or
Section 4 of the UFTA, or Section 5 of the UFCA.

 

-97-

 

 

Section 10.22  No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.

 

Section 10.23  Attachments. The exhibits, schedules and annexes attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for the purposes stated herein, except that in the event of any
conflict between any of the provisions of such exhibits and the provisions of
this Agreement, the provisions of this Agreement shall prevail.

 

Section 10.24  Electronic Execution of Assignments and Certain Other Documents.
The words “execute,” “execution,” “signed,” “signature,” and words of like
import in any Assignment and Assumption or in any amendment or other
modification hereof (including waivers and consents) shall be deemed to include
electronic signatures, the electronic matching of assignment terms and contract
formations on electronic platforms approved by the Agent, or the keeping of
records in electronic form, each of which shall be of the same legal effect,
validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state laws based on the Uniform Electronic
Transactions Act.

 

Section 10.25  First Lien Intercreditor Agreement. Notwithstanding anything
herein to the contrary, the security interest granted to the Agent, for the
benefit of the Credit Parties, pursuant to the Security Documents and the
exercise of any right or remedy by the Agent hereunder and thereunder are
subject to the provisions of the First Lien Intercreditor Agreement. In the
event of any conflict between the terms of the First Lien Intercreditor
Agreement and this Agreement, the terms of the First Lien Intercreditor
Agreement shall govern and control. Except as specified herein, nothing
contained in the First Lien Intercreditor Agreement shall be deemed to modify
any of the provisions of this Agreement, which, as among the Loan Parties and
the Agent, shall remain in full force and effect.

 

-98-

 

 

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

 

  BORROWER:       SEQUENTIAL BRANDS GROUP, INC.       By: /s/ Gary Klein   Name:
Gary Klein   Title: Chief Financial Officer       GUARANTORS:       VERSATILE
ENTERTAINMENT, INC.       By: /s/ Gary Klein   Name: Gary Klein   Title: Chief
Financial Officer       BELLA ROSE, LLC       By: /s/ Gary Klein   Name: Gary
Klein   Title: Chief Financial Officer       WILLIAM RAST SOURCING, LLC      
By: /s/ Gary Klein   Name: Gary Klein   Title: Chief Financial Officer      
WILLIAM RAST LICENSING, LLC       By: /s/ Gary Klein   Name: Gary Klein   Title:
Chief Financial Officer       WILLIAM RAST RETAIL, LLC       BY: WILLIAM RAST
SOURCING, LLC,   as the Manager       By: /s/ Gary Klein   Name: Gary Klein  
Title: Chief Financial Officer

 

-99-

 

 

  WILLIAM RAST EUROPE
HOLDINGS, LLC       BY: WILLIAM RAST SOURCING, LLC, as the Manager       By: /s/
Gary Klein   Name: Gary Klein   Title: Chief Financial Officer       HEELY’S,
INC.       By: /s/ Gary Klein   Name: Gary Klein   Title: Chief Financial
Officer       HEELING MANAGEMENT CORP.       By: /s/ Gary Klein   Name: Gary
Klein   Title: Chief Financial Officer       HEELING HOLDING CORPORATION      
By: /s/ Gary Klein   Name: Gary Klein   Title: Chief Financial Officer      
HEELING SPORTS LIMITED       BY: HEELING MANAGEMENT CORP., as the General
Partner       By: /s/ Gary Klein   Name: Gary Klein   Title: Chief Financial
Officer       BY: HEELING HOLDING
CORPORATION, as the Limited Partner       By: /s/ Gary Klein   Name: Gary Klein
  Title: Chief Financial Officer

 

-100-

 

 

  B®AND MATTER, LLC       By: /s/ Gary Klein   Name: Gary Klein   Title: Chief
Financial Officer

 

-101-

 

 

  PATHLIGHT CAPITAL, LLC, as Agent
and as a Lender       By: /s/ Katie Hendricks   Name: Katie Hendricks   Title:
Vice President

 

-102-

 

 

Schedule 1.01

Non-Guarantor Subsidiaries

 

DVS Footwear International, LLC

 

 

 

 

Schedule 2.01

Commitments and Applicable Percentages

 

Lender  Commitment   Percentage  Pathlight Capital, LLC  $20,000,000    100%

 

 

 

 

Schedule 5.01

Loan Parties Organizational Information

 

Loan Party   State of
Incorporation or
Organization   Organization
Type   Organization
Number (if any)   Federal
Employer
Identification
Number Sequential Brands Group, Inc.   Delaware   corporation   0951343  
86-0449546                   Heelys, Inc.   Delaware   corporation   4184991  
75-2880496                   Heeling Management Corp.   Texas   corporation  
158394700   75-2880478                   Heeling Holding Corporation   Nevada  
corporation   NVC14317-2000   74-2959557                   Heeling Sports
Limited   Texas   limited partnership   13521510   75-288079                  
Versatile Entertainment, Inc.   California   corporation   C2340499   95-4807108
                  Bella Rose, LLC   California   limited liability company  
200513810052   87-0745811                   B®and Matter, LLC   Delaware  
limited liability company   4510759   26-2121258                   William Rast
Retail, LLC   California   limited liability company   200923810230   27-0919939
                  William Rast Licensing, LLC   California   limited liability
company   200624310013   20-5504304                   William Rast Sourcing, LLC
  California   limited liability company   200624310012   20-5504372            
      William Rast Europe Holdings, LLC   Delaware   limited liability company  
4664150   26-4443094

 

 

 

 

Schedule 5.08(b)(1)

Owned Real Estate

 

None.

 

 

 

 

Schedule 5.08(b)(2)

Leased Real Estate

 

Loan Party   Address of Leased Real
Property   County   Name of Lessor and Contact
Information               Sequential Brands Group, Inc.  

17383 W. Sunset Boulevard,

Pacific Palisades, CA 90272

  Los Angeles  

ECI Sunset, LLC

c/o Embarcadero Capital Partners, LLC

1301 Shoreway Road, Suite 250

Belmont, CA 94002

Attention: John Hamilton

                 

1065 Avenue of the Americas

Suite 1705

New York, NY 10018

  New York   N/A1               B®and Matter, LLC  

1450 Broadway

Suite 802

New York, NY 10018

  New York  

1450 Broadway, LLC

c/o Winoker Realty as agent

462 Seventh Ave

New York, NY 10018

Tel: (212) 519-2000

              Heeling Sports Limited  

3200 Belmeade Drive

Suite 100

Carrollton, TX 75006

  Dallas  

Cabot III – TX1M07

c/o Cabot Properties, Inc.

One Beacon Street, 17th Floor

Boston, MA 02108

Attn: Asset Management

 

 

1 This is the company’s new corporate headquarters. Company has right to use but
no obligations under a formal lease through December 31, 2013.

 

 

 

 

Schedule 5.10

 

Insurance

 

[Attached]

 

 

 

 

[ex10-3pg01.jpg]

 

 

 

 

[ex10-3pg02.jpg]

 

 

 

 

[ex10-3pg03.jpg]

 

 

 

 

[ex10-3pg04.jpg]

 

 

 

 

[ex10-3pg05.jpg]

 

 

 

 

[ex10-3pg06.jpg]

 

 

 

 

[ex10-3pg07.jpg]

 

 

 

 

[ex10-3pg08.jpg]

 

 

 

 

[ex10-3pg09.jpg]

 

 

 

 

[ex10-3pg10.jpg]

 

 

 

 

[ex10-3pg11.jpg]

 

 

 

 

[ex10-3pg12.jpg]

 

 

 

 

[ex10-3pg13.jpg]

 

 

 

 

[ex10-3pg14.jpg]

 

 

 

 

Schedule 5.13

Subsidiaries; Other Equity Investments

 

(a)Legal name, jurisdiction of incorporation or formation and authorized Equity
Interests of each Subsidiary of each Loan Party.

 

Subsidiary   Owner   Jurisdiction of
Incorporation
or Formation of
Subsidiary   Type of
Equity
Interest   Authorized
no. of
shares   Amount of
Equity
Interest
Owned by
Loan Party  

Outstanding
Options/Warrants/

Rights of
Conversion/Purchase

                          DVS Footwear International, LLC   Sequential Brands
Group, Inc.   Delaware   membership interest   N/A   60% of membership interest
  None                           DVS Footwear International, LLC   Elan Polo
International, Inc.   Delaware   membership interest   N/A   40% of membership
interest   None                           B®and Matter, LLC   Sequential Brands
Group, Inc.   Delaware   membership interest   N/A   100% of membership interest
  None                           Versatile Entertainment, Inc.   Sequential
Brands Group, Inc.   California   common stock   90 shares of common stock   90
shares of common stock   None                           Heelys, Inc.  
Sequential Brands Group, Inc.   Delaware   capital stock   1,000 shares of
common stock   100 shares of common stock (100%)   None                        
  Heeling Management Corp.   Heelys, Inc.   Texas   common stock   1,000 shares
of common stock   100 shares of common stock (100%)   None                      
    Heeling Holding Corporation   Heelys, Inc.   Nevada   common stock   1,000
shares of common stock   100 shares of common stock (100%)   None              
            Heeling Sports Limited   Heeling Management Corp. (General Partner)
  Texas   partnership interest   N/A   1% general partnership interest   None

 

 

 

 

Heeling Sports Limited   Heeling Holding Corporation (Limited Partner)   Texas  
partnership interest   N/A   99% limited partnership interest   None            
              Heeling Sports EMEA SPRL   Heelys, Inc.   Belgium   common stock  
61,855 shares of common stock   61,211 shares of common stock (99%)   None      
                    Heeling Sports EMEA SPRL   Heeling Sports Limited   Belgium
  common stock   61,855 shares of common stock   634 shares of common stock (1%)
  None                           Heeling Sports Japan K.K.   Heelys, Inc.  
Japan   common stock   15,000 shares  of common stock   14,850 shares of common
stock (99%)   None                           Heeling Sports Japan K.K.   Heeling
Sports Limited   Japan   common stock   15,000 shares  of common stock   150
shares of common stock (1%)   None                           Bella Rose, LLC  
Sequential Brands Group, Inc.   California   membership interest   N/A   100% of
membership interest   None                           William Rast Sourcing, LLC
  Bella Rose, LLC   California   membership interest   N/A   82% of membership
interest   None                           William Rast Sourcing, LLC   Tennman
WR-T, Inc.   California   membership interest   N/A   18% of membership interest
  None                           William Rast Licensing, LLC   Bella Rose, LLC  
California   membership interest   N/A   82% of membership interest   None      
                    William Rast Licensing, LLC   Tennman WR-T, Inc.  
California   membership interest   N/A   18% of membership interest   None

 

 

 

 

William Rast Retail, LLC   William Rast Sourcing, LLC   California   membership
interest   N/A   100% of membership interest   None                          
William Rast Europe Holdings, LLC   William Rast Sourcing, LLC   Delaware  
membership interest   N/A   100% of membership interest   None                  
        William Rast Europe, B.V.   William Rast Europe Holdings, LLC  
Netherlands   membership interest   N/A   100% of membership interest   None

 

(b)All equity investments in any other corporation or entity by each Loan Party,
and amounts, if any.

 

Loan Party  Corporation/Entity  Amount of Equity Interest held by Loan Party 
Sequential Brands Group, Inc.  DVS Footwear International, LLC   60% Heelys,
Inc.  Heeling Sports EMEA SPRL   99% Heeling Sports Limited  Heeling Sports EMEA
SPRL   1% Heelys, Inc.  Heeling Sports Japan K.K.   99% Heeling Sports Limited 
Heeling Sports Japan K.K.   1%

 

 

 

 

(c)All outstanding Equity Interests in the Loan Parties.

 

Loan Party  Owner of Equity Interest  Amount of Equity
Interest Owned   Outstanding
Options/Warrants/
Rights of
Conversion/Purchase Sequential Brands Group, Inc.  TCP WR Acquisition LLC 
 34.07%2  Total outstanding options: 397,000    Other Minority Shareholders 
 65.93%3 

Total outstanding warrants: 2,563,922

B®and Matter, LLC  Sequential Brands Group, Inc.   100%  None Versatile
Entertainment, Inc.  Sequential Brands Group, Inc.   100%  None Heelys, Inc. 
Sequential Brands Group, Inc.   100%  None Heeling Management Corp.  Heelys,
Inc.   100%  None Heeling Holding Corporation  Heelys, Inc.   100%  None Heeling
Sports Limited  Heeling Management Corp.   1%  None Heeling Sports Limited 
Heeling Holding Corporation   99%  None Bella Rose, LLC  Sequential Brands
Group, Inc.   100%  None William Rast Sourcing, LLC  Bella Rose, LLC   82%  None
William Rast Sourcing, LLC  Tennman WR-T, Inc.   18%  None William Rast
Licensing, LLC  Bella Rose, LLC   82%  None William Rast Licensing, LLC  Tennman
WR-T, Inc.   18%  None William Rast Retail, LLC  William Rast Sourcing, LLC 
 100%  None William Rast Europe Holdings, LLC  William Rast Sourcing, LLC 
 100%  None

 

 

2TCP WR Acquisition, LLC holds the largest percentage of outstanding shares of
Sequential Brands Group, Inc.

 

3Sequential Brands Group, Inc. is a publicly owned company with numerous
individual minority shareholders holding the 64.88% in the aggregate.

 

 

 

 

Schedule 5.17

Material Intellectual Property; Material Licenses

 

Part 1. Material Intellectual Property

 

Trademarks

No.   Word Mark   App. No.   Reg. No.   App. Date   Reg. Date   Owner          
                1.   ELLEN TRACY   74326572   1780391   10/28/1992   7/6/1993  
B®and Matter, LLC                           2.   CARIBBEAN JOE   76275113  
2845458   6/21/2001   5/25/2004   B®and Matter, LLC                           3.
  HAVANA JACK’S CAFE   76374007   2845660   2/21/2002   5/25/2004   B®and
Matter, LLC                           4.   JAMAICA BAY   76542053   3154498  
8/22/2003   10/10/2006   B®and Matter, LLC                           5.  
JAMAICA BAY   76542054   3088001   8/22/2003   5/2/2006   B®and Matter, LLC    
                      6.   [tex10-3pg16a.jpg]   76560155   3096056   10/29/2003
  5/23/2006   B®and Matter, LLC                           7.  
[tex10-3pg16b.jpg]   76560168   3096057   10/29/2003   5/23/2006   B®and Matter,
LLC                           8.   [tex10-3pg16b.jpg]   76560169   3083238  
10/29/2003   4/18/2006   B®and Matter, LLC                           9.  
[tex10-3pg16b.jpg]   76560172   3199184   10/29/2003   1/16/2007   B®and Matter,
LLC                           10.   [tex10-3pg16b.jpg]   76560173   3032684  
10/29/2003   12/20/2005   B®and Matter, LLC

 

 

 

 

No.   Word Mark   App. No.   Reg. No.   App. Date   Reg. Date   Owner 11.  
[tex10-3pg16b.jpg]   76560174   3032685   10/29/2003   12/20/2005   B®and
Matter, LLC                           12.   CARIBBEAN JOE ISLAND SUPPLY CO.  
77325599   4035248   11/9/2007   10/4/2011   B®and Matter, LLC                  
        13.   CARIBBEAN JOE ISLAND SUPPLY CO.   77325613   3673744   11/9/2007  
8/25/2009   B®and Matter, LLC                           14.   CARIBBEAN JOE
ISLAND SUPPLY CO.   77325639   3931350   11/9/2007   3/15/2011   B®and Matter,
LLC                           15.   CARIBBEAN JOE ISLAND SUPPLY CO.   77325918  
3673746   11/9/2007   8/25/2009   B®and Matter, LLC                          
16.   CARIBBEAN JOE ISLAND SUPPLY CO.   77326040   3928857   11/9/2007  
3/8/2011   B®and Matter, LLC                           17.   CARIBBEAN JOE
ISLAND SUPPLY CO.   77326051   3673747   11/9/2007   8/25/2009   B®and Matter,
LLC                           18.   CARIBBEAN JOE ISLAND SUPPLY CO.   77330194  
3917393   11/15/2007   2/8/2011   B®and Matter, LLC                          
19.   CARIBBEAN JOE ISLAND SUPPLY CO.   77330907   3677211   11/15/2007  
9/1/2009   B®and Matter, LLC                           20.   CARIBBEAN JOE
ISLAND SUPPLY CO.   77331268   4016218   11/16/2007   8/23/2011   B®and Matter,
LLC                           21.   ELLEN TRACY   78169120   3112534   9/30/2006
  7/4/2006   B®and Matter, LLC                           22.   HAVANA JACK’S
CAFÉ   78336590   3450763   12/4/2003   6/17/2008   B®and Matter, LLC          
                23.   CARIBBEAN JOE   78336621   3399348   12/4/2003   3/18/2008
  B®and Matter, LLC                           24.   LA CABANA   78336779  
3670940   12/5/3002   8/18/2009   B®and Matter, LLC                          
25.   IN FOCUS   78574553   3173187   2/24/2005   11/21/2006   B®and Matter, LLC

 

 

 

 

No.   Word Mark   App. No.   Reg. No.   App. Date   Reg. Date   Owner 26.  
TRACY ELLEN TRACY   78859553   3232933   4/12/2006   4/24/2007   B®and Matter,
LLC                           27.   ELLEN TRACY   78975375   2863810   9/30/2002
  7/13/2004   B®and Matter, LLC                           28.   CARIBBEAN JOE  
85037813   4283343   5/13/2010   1/29/2013   B®and Matter, LLC                  
        29.   CARIBBEAN PALMS   77311149   3604958   10/23/2007   4/14/2009  
B®and Matter, LLC                           30.   CARIBBEAN JOE   85094039  
4218374   7/27/2010   10/2/2012   B®and Matter, LLC                          
31.   HAVANA JACK’S CAFÉ   78977243   3143638   12/04/2003   9/12/2006   B®and
Matter, LLC                           32.   FASHIONOLOGY   77427704   3712792  
03/20/2008   11/17/2009   B®and Matter, LLC                           33.  
FASHIONOLOGY   77427702   3664532   03/20/2008   08/04/2009   B®and Matter, LLC
                          34.   FASHIONOLOGY LA   77259206   3667232  
08/20/2007   08/11/2009   B®and Matter, LLC                           35.  
FASHIONOLOGY LA   77259168   3667231   08/20/2007   08/11/2009   B®and Matter,
LLC                           36.   UHF   75308249   2189162   6/13/1997  
9/15/1998   Heeling Sports Limited                           37.   SOAP  
75308338   2361034   6/13/1997   6/27/2000   Heeling Sports Limited            
              38.   UHF   75319874   2202708   7/7/1997   11/10/1998   Heeling
Sports Limited                           39.   SOAP   75320503   2190714  
7/7/1997   9/22/1998   Heeling Sports Limited                           40.   O
  75328507   2484098   7/22/1997   9/4/2001   Heeling Sports Limited            
              41.   HEELING   75692101   2840485   4/27/1999   5/11/2004  
Heeling Sports Limited                           42.   HEELING   75692102  
2871922   4/27/1999   8/10/2004   Heeling Sports Limited                        
  43.   HEELYS   76063673   2720347   6/2/2000   6/3/2003   Heeling Sports
Limited                           44.   H HEELYS   76167878   2693898  
11/17/2000   3/4/2003   Heeling Sports Limited

 

 

 

 

No.   Word Mark   App. No.   Reg. No.   App. Date   Reg. Date   Owner 45.   H  
76167879   2684399   11/17/2000   2/4/2003   Heeling Sports Limited            
              46.   HEELYS   76168009   2698390   11/17/2000   3/18/2003  
Heeling Sports Limited                           47.   POWER UP   77262568  
3510858   8/23/2007   10/7/2008   Heeling Sports Limited                        
  48.   [tex10-3pg19.jpg]   77264239   3578567   8/24/2007   2/24/2009   Heeling
Sports Limited                           49.   H HEELYS WORLDWIDE   77723261  
3805558   4/27/2009   6/22/2010   Heeling Sports Limited                        
  50.   H HEELYS WORLDWIDE   77723340   3712007   4/27/2009   11/17/2009  
Heeling Sports Limited                           51.   HEELYS HX2   77948674  
4147099   3/2/2010   5/22/2012   Heeling Sports Limited                        
  52.   H X2   77949235   3959241   3/3/2010   5/10/2011   Heeling Sports
Limited                           53.   NANO   77954102   3952197   3/9/2010  
4/26/2011   Heeling Sports Limited                           54.   N NANO  
77954122   3949036   3/9/2010   4/19/2011   Heeling Sports Limited              
            55.   N   77954217   3949037   3/9/2010   4/19/2011   Heeling Sports
Limited                           56.   HEELYS   78901166   3679845   6/5/2006  
9/8/2009   Heeling Sports Limited                           57.   H   78901172  
3339689   6/5/2006   11/20/2007   Heeling Sports Limited                        
  58.   FREEDOM IS A WHEEL IN YOUR SOLE   78909664   3294016   6/15/2006  
9/18/2007   Heeling Sports Limited                           59.   EXPECT MORE
FROM YOUR SHOES   78946822   3302516   8/7/2006   10/2/2007   Heeling Sports
Limited

 

 

 

 

No.   Word Mark   App. No.   Reg. No.   App. Date   Reg. Date   Owner 60.  
[tex10-3pg20.jpg]   85044684   4099703   5/21/2010   2/14/2012   Heeling Sports
Limited                           61.   SOLE-LINK   85089293   4001254  
7/21/2010   7/26/2011   Heeling Sports Limited                           62.   H
  85090090   3904490   7/21/2010   1/11/2011   Heeling Sports Limited          
                63.   SIDEWALKSPORTS   85539961   4310384   2/10/2012  
3/26/2013   Heeling Sports Limited                           64.   PODIUM
DISTRIBUTION   76355622   2692616   1/7/2002   3/4/2003   Sequential Brands
Group, Inc.                           65.   SKATE MORE   76599501   3007150  
6/28/2004   10/18/2005   Sequential Brands Group, Inc.                          
66.   SKATE MORE   76599553   3303103   6/28/2004   10/2/2007   Sequential
Brands Group, Inc.                           67.   PROGRESS   77439109   3516366
  4/3/2008   10/14/2008   Sequential Brands Group, Inc.                        
  68.   ORIGINAL INTENT   77975110   3395645   9/22/2006   3/11/2008  
Sequential Brands Group, Inc.                           69.   CE CORE EXCLUSIVE
  78785172   3331854   1/4/2006   11/6/2007   Sequential Brands Group, Inc.    
                      70.   IN THE SKATEBOARD TRADITION   78870561   3204046  
4/26/2006   1/30/2007   Sequential Brands Group, Inc.                          
71.   STEP INTO SUMMER   78944039   3288195   8/3/2006   9/4/2007   Sequential
Brands Group, Inc.                           72.   STEP INTO SUMMER   78944271  
3288197   8/3/2006   9/4/2007   Sequential Brands Group, Inc.                  
        73.   PEOPLE*S LIBERATION *   77978058   3743326   7/11/2008   1/26/2010
  Versatile Entertainment, Inc.                           74.   PEOPLE'S
LIBERATION   78428261   3083655   6/1/2004   4/18/2006   Versatile
Entertainment, Inc.

 

 

 

 

No.   Word Mark   App. No.   Reg. No.   App. Date   Reg. Date   Owner 75.  
[tex10-3pg21a.jpg]   78786921   3348250   1/6/2006   12/4/2007   Versatile
Entertainment, Inc.                           76.   [tex10-3pg21b.jpg]  
78786924   3651173   1/6/2006   7/7/2009   Versatile Entertainment, Inc.        
                  77.   WILLIAM RAST   78790276   3304303   1/12/2006  
10/2/2007   William Rast Licensing, LLC                           78.   WILLIAM
RAST   78977897   3248653   5/31/2005   5/29/2007   William Rast Licensing, LLC
                          79.   WILLIAM RAST   77310357   3994216   10/22/2007  
7/12/2011   William Rast Licensing, LLC                           80.  
[tex10-3pg21c.jpg]   77388266   3998462   2/4/2008   7/19/2011   William Rast
Licensing, LLC                           81.   DVS   75026996   2,441,179  
12/4/1995   4/3/2001   DVS Footwear International, LLC                          
82.   DVS   76560792   2,915,817   11/20/2003   1/4/2005   DVS Footwear
International, LLC                           83.   Miscellaneous Design (Swirl &
Oval Design)   76560793   2,926,240   11/20/2003   9/14/2004   DVS Footwear
International, LLC                           84.   Miscellaneous Design (Swirl &
Oval Design)   75200119   2,352,196   11/19/1996   5/23/2000   DVS Footwear
International, LLC                           85.   Linda Allard Ellen Tracy   NA
 

TMA600998

(Canada)

  NA   NA   Brand Matter, LLC                           86.   Company Ellen
Tracy   NA  

TMA601091

(Canada)

  NA   NA   Brand Matter, LLC

 

 

 

 

Patents

 

No.   Patent   App. No.   Reg. No.   App. Date   Reg. Date   Owner 1.   FOOTWEAR
FOR GRINDING   08/799,062   5,970,631   02/10/1997   10/26/1999   Heeling Sports
Limited                           2.   FOOTWEAR APPARATUS WITH GRINDING PLATE
AND METHOD OF MAKING SAME   08/890,595   6,006,451   07/09/1997   12/28/1999  
Heeling Sports Limited                           3.   FOOTWEAR GRINDING
APPARATUS WITH FLANKING BEARING SURFACES   09/132,827   6,041,525   08/12/1998  
03/28/2000   Heeling Sports Limited                           4.   METHOD FOR
MAKING FOOTWEAR GRINDING APPARATUS   09/277,583   6,115,946   03/26/1999  
09/12/2000   Heeling Sports Limited                           5.   LONGITUDINAL
GRIND PLATE   09/333,612   6,158,150   06/15/1999   12/12/2000   Heeling Sports
Limited                           6.   GRINDING FOOTWEAR APPARATUS WITH STORAGE
COMPARTMENT   09/335,306   6,195,920   06/17/1999   03/06/2001   Heeling Sports
Limited                           7.   GRINDING FOOTWEAR APPARATUS INCLUDING
PLATE WITH BRAKING SURFACES   09/364,756   6,151,806   07/30/1999   11/28/2000  
Heeling Sports Limited                           8.   GRINDING APPARATUS WITH
FLEXIBLE PLATE   09/442,019   6,195,918   11/17/1999   03/06/2001   Heeling
Sports Limited                           9.   GRIND PLATE WITH REMOVABLE INSERTS
  09/494,137   6,247,251   01/28/2000   06/19/2001   Heeling Sports Limited    
                      10.   HIGH PERFORMANCE LIGHTWEIGHT GRIND SHOE APPARATUS  
09/494,138   6,357,145   01/28/2000   03/19/2002   Heeling Sports Limited      
                    11.   HEELING APPARATUS AND METHOD   09/540,125   6,450,509
  03/31/2000   09/17/2002   Heeling Sports Limited                           12.
  HIGH FLEX GRINDING SHOE   09/737,134   6,467,198     12/13/2000   10/22/2002  
Heeling Sports Limited                           13.   HEELING APPARATUS AND
METHOD   09/930,318   6,406,038   08/14/2001   06/18/2002   Heeling Sports
Limited                           14.   HEELING APPARATUS AND METHOD  
10/071,931   6,739,602   02/07/2002   05/25/2004   Heeling Sports Limited      
                    15.   HEELING APPARATUS AND METHOD   10/076,954   6,746,026
  02/15/2002   06/08/2004   Heeling Sports Limited                           16.
  MULTI-WHEEL HEELING APPARATUS   10/357,765   6,698,769   02/03/2003  
03/02/2004   Heeling Sports Limited

 

 

 

 

No.   Patent   App. No.   Reg. No.   App. Date   Reg. Date   Owner 17.   SHOCK
ABSORPTION SYSTEM FOR A SOLE   10/357,776   6,848,201   02/03/2003   02/01/2005
  Heeling Sports Limited                           18.   GRIND RAIL APPARATUS  
10/357,998   7,032,330   02/03/2003   04/25/2006   Heeling Sports Limited      
                    19.   EXTERNAL WHEELED HEELING APPARATUS AND METHOD  
10/369,063   7,063,336   02/18/2003   06/20/2006   Heeling Sports Limited      
                    20.   HEELING APPARATUS AND METHOD   10/863,090   6,979,003
  06/07/2004   12/27/2005   Heeling Sports Limited                           21.
  MOTORIZED TRANSPORTATION APPARATUS AND METHOD   11/198,673   7,610,972  
08/04/2005   11/03/2009   Heeling Sports Limited                           22.  
HEELING APPARATUS AND METHOD   11/317,977   7,165,773   12/22/2005   01/23/2007
  Heeling Sports Limited                           23.   EXTERNAL WHEELED
HEELING APPARATUS AND METHOD   11/471,365   7,165,774   06/19/2006   01/23/2007
  Heeling Sports Limited                           24.   HEELING APPARATUS AND
METHOD   11/656,595   7,621,540   01/22/2007   11/24/2009   Heeling Sports
Limited                           25.   HEELING APPARATUS WHEEL ASSEMBLY  
12/592,440       11/23/2009       Heeling Sports Limited                        
  26.   WHEELED PLATFORM APPARATUS AND METHOD FOR USE WITH   12/878,805      
09/09/2010       Heeling Sports Limited                           27.   GRINDING
PLATE FOR SHOES   29/073,474   D401,739   07/09/1997   12/01/1998   Heeling
Sports Limited                           28.   SHOE SOLE   29/073,546   D412,778
  07/09/1997   08/17/1999   Heeling Sports Limited                           29.
  TREAD FOR A SHOE SOLE   29/073,557   D414,021   07/09/1997   09/21/1999  
Heeling Sports Limited                           30.   COMBINATION GRINDING SHOE
SOLE AND PLATE   29/074,248   D404,550   07/09/1997   01/26/1999   Heeling
Sports Limited                           31.   SHOE MIDSOLE   29/083,441  
D413,193   02/06/1998   08/31/1999   Heeling Sports Limited                    
      32.   SHOE UPPER   29/083,517   D420,789   02/06/1998   02/22/2000  
Heeling Sports Limited                           33.   COMBINED MIDSOLE AND
GRINDING SHOE OUTSOLE   29/083,519   D412,779   02/06/1998   08/17/1999  
Heeling Sports Limited

 

 

 

 

No.   Patent   App. No.   Reg. No.   App. Date   Reg. Date   Owner 34.   SHOE
UPPER   29/083,525   D408,123   02/06/1998   04/20/1999   Heeling Sports Limited
                          35.   SHOE UPPER   29/087,479   D414,320   05/04/1998
  09/28/1999   Heeling Sports Limited                           36.   GRIND
PLATE   29/091,233   D426,374   07/27/1998   06/13/2000   Heeling Sports Limited
                          37.   GRIND PLATE   29/115,127   D426,948   12/07/1999
  06/27/2000   Heeling Sports Limited                           38.   LOW
PROFILE GRIND PLATE   29/117,396   D440,386   01/21/2000   04/17/2001   Heeling
Sports Limited                           39.   SHOE SOLE   29/289,728   D595,941
  07/28/2007   07/14/2009   Heeling Sports Limited                           40.
  HEELING APPARATUS   61/679,445       08/03/2012       Heeling Sports Limited  
                        41.   HEELING APPARATUS   13/666,660       11/1/2012    
  Heeling Sports Limited                           42.   ITEM OF FOOTWEAR  
29/436,145       12/1/2012       Heeling Sports Limited

 

U.S. Federal Trademarks – Intent to Use

 

No.   Mark   App. No.   App Date   Owner 1.   [tex10-3pg24.jpg]   77388268  
02/04/08   William Rast Licensing, LLC                   2.   [tex10-3pg24.jpg]
  77388270   02/04/08   William Rast Licensing, LLC

 

 

 

 

No.   Mark   App. No.   App Date   Owner 3.   COMPANY ELLEN TRACY   77679016  
02/26/09   B®and Matter, LLC                   4.   HAVANA JACK’S CAFÉ  
77704468   04/01/09   B®and Matter, LLC                   5.   ELLEN TRACY  
77704538   04/01/09   B®and Matter, LLC                   6.  
[tex10-3pg25a.jpg]   77959996   03/16/10   B®and Matter, LLC                  
7.   LIL JOE   85037886   05/13/10   B®and Matter, LLC                   8.  
HAVANA JACK’S CAFÉ   85039040   05/14/10   B®and Matter, LLC                  
9.   [tex10-3pg25b.jpg]   85094070   07/27/10   B®and Matter, LLC              
    10.   WILLIAM RAST   85768599   10/31/12   William Rast Licensing, LLC      
            11.   WILLIAM RAST   85768602   10/31/12   William Rast Licensing,
LLC                   12.   WILLIAM RAST   85768606   10/31/12   William Rast
Licensing, LLC

 

 

 

 

 

Part 2. Primary Material Licenses

 

1.License Agreement, dated as of September 6, 2012, between Sequential Brands
Group, Inc., as licensor and Sunrise Brands, as licensee.

 

2.License Agreement, dated as of June 29, 2012, between DVS Footwear
International, LLC and Elan Polo International, Inc.

 

3.License Agreement, dated as of July 13, 2012, between DVS Footwear
International, LLC and RSA & Associates Inc.

 

4.JCPenney/William Rast Licensing Agreement, dated as of November 17, 2011,
among William Rast Licensing, LLC, as licensor, William Rast Sourcing, LLC, as
licensee, and J. C. Penney Corporation, Inc., as sub-licensee.

 

5.Binding Term Sheet, dated as of December 9, 2009, between William Rast
Licensing, LLC, as licensor, and Viva Optique, Inc., as licensee.

 

6.Heelys License Agreement – Multi-country Exclusive License, dated as of
December 20, 2012, between Sequential Brands Group, Inc., as licensor, and BBC
International LLC, as licensee.

 

7.License Agreement, dated as of January 1, 2004, between B®and Matter, LLC (as
transferee of all rights in and to the Trademarks of L.C. Licensing, Inc.) and
G-III Apparel Group, Ltd. (as transferee of the rights as a licensee of Winlit
Group, Ltd.), as amended by that certain letter agreement, dated as of June 7,
2006, as further amended by that certain Second Amendment of License Agreement,
dated as of July 26, 2007, as further amended by that certain Amendment, dated
as of November 1, 2009, and as further amended by that certain August 2, 2010.

 

8.Agreement, dated as of December 22, 2008, between B®and Matter, LLC, as
licensor, and Charles Komar & Sons, Inc., as licensee, as amended by that
certain Amendment, dated as of December 7, 2009, and as further amended by that
certain letter agreement, dated as of June 14, 2011

 

9.License Agreement, dated as of December 7, 2009, between B®and Matter, LLC, as
licensor, and Charles Komar & Sons, Inc., as licensee, as amended by that
certain letter agreement, dated as of August 3, 2011, and as further amended by
that certain letter agreement, dated as of August 28, 2012.

 

10.Pacific Alliance – Ellen Tracy Women’s Sportswear and Active Agreement, dated
as of May 16, 2011, between B®and Matter, LLC, as licensor, and Pacific Alliance
USA Inc., as licensee, as amended by that certain Amendment, dated as of October
1, 2012.

 

11.Ellen Tracy License Agreement – Europe, dated as of December 5, 2011, between
B®and Matter, LLC, as licensor, and LF Europe Limited, as licensee.

 

 

 

 

12.License Agreement, dated as of July 13, 2006, between B®and Matter, LLC (as
transferre of all rights in and to the Trademarks of L.C. Licensing, Inc.), as
licensor, and Modern Shoe Company LLC, as licensee, as amended by that certain
Amendment No. 1 to License Agreement, dated as of October 20, 2009, as further
amended by that certain Amendment No. 2 to License Agreement, dated as of May
10, 2010, as further amended by that certain letter agreement, dated as of June
6, 2012, and as further amended by that certain letter agreement, dated as of
July 31, 2012.

 

13.License Agreement, dated as of June 10, 2011, between B®and Matter, LLC, as
licensor, and Bernette Textile Co., as licensee, as amended by that certain
letter agreement, dated as of March 29, 2012.

 

14.License Agreement, dated as of May 5, 2008, between B®and Matter, LLC, as
licensor, and DDK Apparel Inc., as licensee, as amended by that certain e-mail
amendment, dated as of January 19, 2010, as further amended by that certain
letter agreement, dated as of July 20, 2012.

 

15.License Agreement, dated as of October 15, 2002, as amended, between B®and
Matter, LLC (as transferee of all rights in and to the Trademarks of Alarmex
Holdings, LLC), as licensor, and Mainstream Swimsuits, Inc., as licensee, as
amended by that certain letter agreement, dated as of January 1, 2005, as
further amended by that certain Second Amendment, dated as of January 1, 2008,
as further amended by that certain Third Amendment, dated as of September 10,
2009, as further amended by that certain Fourth Amendment, dated as of January
1, 2011, and as further amended by that certain letter agreement, dated as of
October 10, 2012.

 

16.License Agreement, dated as of April 5, 2011, between B®and Matter, LLC, as
licensor, and Regent-Sutton LLC and affiliated Moret companies, as licensee.

 

Part 3. Secondary Material Licenses

 

1.License Agreement, dated as of October 16, 2012, between William Rast
Sourcing, LLC, as licensor, and FDJ French Dressing, Inc., as licensee.

 

2.License Agreement, dated as of September 15, 2009, between B®and Matter, LLC
and Leg Apparel, LLC, as amended by that certain letter agreement, dated as of
October 10, 2010, as further amended by that certain letter agreement, dated as
of August 4, 2011, as further amended by that certain letter agreement, dated as
of September 21, 2011, and as further amended by that certain letter agreement,
dated as of June 22, 2012

 

3.License Agreement, dated as of March 12, 2009, between B®and Matter, LLC and
Palm Beach Beauté, LLC.

4.License Agreement, dated as of December 9, 2009, between Brand Matter, LLC and
C&O Apparel, Inc.

 

 

 

 

Schedule 5.17(a)

Material Intellectual Property Exceptions

 

1)Potential opposition by ASICS America Corporation (“Asics”) against the “Dub
Design” Trademark (the “Opposed Trademark”) set forth below owned by William
Rast Licensing, LLC. Asics alleges that the Apposed Trademark is similar to
Asics’ “3 stripes” design trademark and could cause confusion.

 

Trademark   App. No.   Reg. No.   App. Date.   Reg. Date   Owner
[tex10-3pg28.jpg]   77388266   3998462   2/4/2008   7/19/2011   William Rast
Licensing, LLC

 

 

 

 

Schedule 5.21
Deposit Accounts

 

Loan Party   Legal Name of
Depositary   Address of Depositary   Account
number   Contact person at
depositary Sequential Brands Group, Inc.   Israel Discount Bank   511 Fifth
Avenue

New York, NY 10017   03-6887-6   James Morton

(212) 551-8723                   Versatile Entertainment, Inc.   Bank of the
West   P.O. Box 2830

Omaha, NE 68103-2830   026-470922   (800) 488-2265                   Versatile
Entertainment, Inc.   Bank of the West   P.O. Box 2830

Omaha, NE 68103-2830   648-034304   (800) 488-2265                   Versatile
Entertainment, Inc.   Bank of the West   P.O. Box 2830

Omaha, NE 68103-2830   027-942300   (800) 488-2265                   Versatile
Entertainment, Inc.   Bank of the West   P.O. Box 2830

Omaha, NE 68103-2830   648-034288   (800) 488-2265                   Versatile
Entertainment, Inc.   Israel Discount Bank   511 Fifth Avenue

New York, NY 10017   03-6888-4   James Morton

(212) 551-8723                   B®and Matter, LLC   Israel Discount Bank   511
Fifth Avenue

New York, NY 10017   03-4789-9   James Morton

(212) 551-8723                   Heelys, Inc.   Bank of Texas   5956 Sherry
Lane, Suite 600

Dallas, TX 75225   8093025187

  Erin Davis

(212) 987-8826

edavis@bankoftexas.com                   Heeling Sports Limited   Bank of Texas
  5956 Sherry Lane, Suite 600

Dallas, TX 75225   8093204223

  Erin Davis

(212) 987-8826

edavis@bankoftexas.com

 

 

 

 

William Rast Licensing LLC   Bank of the West   P.O. Box 2830

Omaha, NE 68103-2830   010-876797   (800) 488-2265                   William
Rast Sourcing LLC   Bank of the West   P.O. Box 2830

Omaha, NE 68103-2830   648-034270   (800) 488-2265                   William
Rast Sourcing LLC   Bank of the West   P.O. Box 2830

Omaha, NE 68103-2830   648-039352   (800) 488-2265                   William
Rast Europe Holdings LLC   Bank of the West   P.O. Box 2830

Omaha, NE 68103-2830   648-043560   (800) 488-2265                   William
Rast Retail, LLC   Bank of the West   P.O. Box 2830

Omaha, NE 68103-2830   648-043958   (800) 488-2265                   William
Rast Retail, LLC   Bank of the West   P.O. Box 2830

Omaha, NE 68103-2830   648-043966   (800) 488-2265                   William
Rast Retail, LLC   Bank of the West   P.O. Box 2830

Omaha, NE 68103-2830   648-043974   (800) 488-2265                   William
Rast Retail, LLC   Bank of the West   P.O. Box 2830

Omaha, NE 68103-2830   648-043990   (800) 488-2265

 

 

 

 

Schedule 5.23
Material Contracts

 

1.Agreement and Plan of Merger dated as of December 7, 2012 among Heelys, Inc.,
a Delaware corporation, Sequential Brands Group, Inc., a Delaware corporation
and Wheels Merger Sub Inc., a Delaware corporation.

 

2.Purchase Agreement dated as of March 28, 2013 by and among Sequential Brands
Group, Inc., a corporation incorporated under the laws of Delaware and ETPH
Acquisition, LLC, a limited liability company organized under the laws of
Delaware.

 

3.Royalty Agreement, dated as of October 2011, by and among Tennman WR-T, Inc.,
a Delaware corporation, William Rast Sourcing, LLC, a California limited
liability company and William Rast Licensing, LLC, a California limited
liability company.

 

4.Employment Agreement, dated as of November 19, 2012, by and between Sequential
Brands Group, Inc. and Yehuda Shmidman.

 

5.Employment Agreement, to be entered into, by and between Sequential Brands
Group, Inc. and Gary Klein.

 

6.Management Services Agreement, to be entered into, by and between Sequential
Brands Group, Inc. and Tengram Capital Management, L.P.

 

 

 

 

Schedule 7.01

Existing Liens

 

Jurisdiction  Type  Secured Party  Filing Number  Filing Date  Description of
Collateral 1.       Versatile Entertainment, Inc.           California, SOS 
UCC  Dell Financial Services L.P.  Original: 07-7107675646
Continuation: 12-73008558  Original: 03/26/2007

Continuation: 02/13/2012  Computer equipment and peripherals pursuant to that
certain revolving credit Account #6879450212001360111, dated March 15, 2007.

2.       William Rast Sourcing, LLC

        California, SOS  UCC  Rosenthal & Rosenthal, Inc.  Original:
10-7247131228
Amendment: 12-72999297  Original: 10/04/2010

Amendment: 02/06/2012

Amendment:

3/22/2013  (i) All accounts receivable provided for in that certain Factoring
Agreement , dated as of September 29, 2010, by and between William Rast
Sourcing, LLC and Rosenthal & Rosenthal, Inc., arising on or prior to February
1, 2012 which are either (x) no longer outstanding as of February 1, 2012 or (y)
evidenced by invoices #0457182 or 0457183 in the total face amount of $4,015.21,
(ii) any goods which by sale resulted in such accounts receivable; and (iii) the
proceeds of any such accounts receivable or goods.

 

 

 

 

Schedule 7.02
Existing Investments

 

1.Sequential Brands Group, Inc. owns 60% of the membership interest in DVS
Footwear International, LLC.

 

 

 

 

Schedule 7.03

Existing Indebtedness

 

None.

 

 

 

 

Schedule 10.02
Agent’s Office; Certain Addresses for Notices

 

  Agent   Pathlight Capital, LLC   One Post Office Square, Suite 3765   Boston,
Massachusetts 02109   Attention: Katie Hendricks   Telephone: (617) 830-7052  
E-mail: khendricks@pathlightcapital.com

 

  with a copy to:       Choate, Hall & Stewart LLP   Two International Place  
Boston, Massachusetts 02110   Attention: Kevin J. Simard, Esq.   Telephone:
(617) 248-4086   Facsimile: (617) 248-4000   E-mail: ksimard@choate.com  

 

  Loan Parties   Sequential Brands Group, Inc.       1065 Avenue of Americas,
Suite 1705   New York, NY 10018         Attention: Mr. Charlie Bang        
Telephone: (646) 395-4930   Facsimile: (646) 395-4901   E-Mail:
cbang@brand-matter.com   Website: www.sequentialbrandsgroup.com

 

 

 

 

Schedule 10.06

Permitted Transferees

 

1.Gordon Brothers Group LLC and any of its affiliates.

 

 

 

 

EXHIBIT A

 

FORM OF ASSIGNMENT AND ASSUMPTION

 

This Assignment and Assumption (this “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between
[the][each]1 Assignor identified in item 1 below ([the][each, an] “Assignor”)
and [the][each]2 Assignee identified in item 2 below ([the][each, an]
“Assignee”). [It is understood and agreed that the rights and obligations of
[the Assignors][the Assignees]3 hereunder are several and not joint.]4
Capitalized terms used but not defined herein shall have the meanings given to
them in the Term Loan Agreement identified below (the “Credit Agreement”),
receipt of a copy of which is hereby acknowledged by [the][each] Assignee. The
Standard Terms and Conditions set forth in Annex 1 attached hereto (the
“Standard Terms and Conditions”) are hereby agreed to and incorporated herein by
reference and made a part of this Assignment and Assumption as if set forth
herein in full.

 

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and
assigns to [the Assignee][the respective Assignees], and [the][each] Assignee
hereby irrevocably purchases and assumes from [the Assignor][the respective
Assignors], subject to and in accordance with the Standard Terms and Conditions
and the Credit Agreement, as of the Effective Date inserted by the Agent as
contemplated below, (i) all of [the Assignor’s][the respective Assignors’]
rights and obligations in [its capacity as a Lender][their respective capacities
as Lenders] under the Credit Agreement and the other Loan Documents or
instruments delivered pursuant thereto to the extent related to the amount and
percentage interest identified below of all of such outstanding rights and
obligations of [the Assignor][the respective Assignors] under the Loans and (ii)
to the extent permitted to be assigned under applicable Law, all claims, suits,
causes of action and any other right of [the Assignor (in its capacity as a
Lender)][the respective Assignors (in their respective capacities as Lenders)]
against any Person, whether known or unknown, arising under or in connection
with the Credit Agreement, any other Loan Documents or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including, but not limited to, contract claims, tort claims, malpractice claims,
statutory claims and all other claims at law or in equity related to the rights
and obligations sold and assigned pursuant to clause (i) above (the rights and
obligations sold and assigned by [the][any] Assignor to [the][any] Assignee
pursuant to clauses (i) and (ii) above being referred to herein collectively as
[the][an] “Assigned Interest”). Each such sale and assignment is without
recourse to [the][any] Assignor and, except as expressly provided in this
Assignment and Assumption, without representation or warranty by [the][any]
Assignor.

 

1. Assignor[s]:                             2. Assignee[s]:                    

 

 

1 For bracketed language here and elsewhere in this form relating to the
Assignor(s), if the assignment is from a single Assignor, choose the first
bracketed language. If the assignment is from multiple Assignors, choose the
second bracketed language.

2 For bracketed language here and elsewhere in this form relating to the
Assignee(s), if the assignment is to a single Assignee, choose the first
bracketed language. If the assignment is to multiple Assignees, choose the
second bracketed language.

3 Select as appropriate.

4 Include bracketed language if there are either multiple Assignors or multiple
Assignees.

 

 

 

 

[for each Assignee, indicate if [Affiliate][Approved Fund] of [identify Lender]]

3.Borrower:           Sequential Brands Group, Inc.

 

4.Agent: Pathlight Capital, LLC, as the Agent under the Credit Agreement.

 

5.Credit Agreement:           Term Loan Agreement, dated as of March 28, 2013
(as amended, amended and restated, restated, supplemented or otherwise modified
and in effect from time to time), by and among (i) Sequential Brands Group,
Inc., a Delaware corporation (the “Borrower”), (ii) the Guarantors from time to
time party thereto, (iii) the Lenders from time to time party thereto, and (iv)
Pathlight Capital, LLC, as administrative agent and collateral agent.

 

6.Assigned Interest[s]:

 

Assignor[s]5 

Assignee[s]6   Aggregate
Amount of
Loans
for all Lenders7   Amount of
Loans
Assigned8   Percentage
Assigned of
Loans9        $_________   $______    _________%         $_________   $______  
 _________%

 

[7.Trade Date:           __________________]10

 

Effective Date: __________________, 201_ [TO BE INSERTED BY AGENT AND WHICH
SHALL BE THE EFFECTIVE DATE OF DELIVERY OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]

 

 

5 List each Assignor, as appropriate.

6 List each Assignee, as appropriate.

7 Amounts in this column and in the column immediately to the right to be
adjusted by the counterparties to take into account any payments or prepayments
of Loans made between the Trade Date and the Effective Date.

8 Subject to minimum amount requirements pursuant to Section 10.06(b)(i) of the
Credit Agreement and subject to proportionate amount requirements pursuant to
Section 10.06(b)(ii) of the Credit Agreement.

9 Set forth, to at least 9 decimals, as a percentage of the Loans of all
Lenders.

10 To be completed if the Assignor and the Assignee intend that the minimum
assignment amount is to be determined as of the Trade Date.

 

 

 

 

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

    ASSIGNOR[S]11     [NAME OF ASSIGNOR]             By:       Name:      
Title:               ASSIGNEE[S]12     [NAME OF ASSIGNEE]             By:      
Name:       Title:  

 

[Consented to and]13 Accepted:               PATHLIGHT CAPITAL, LLC,       as
Agent                 By:         Name:         Title:                  
[Consented to:]14               SEQUENTIAL BRANDS GROUP, INC., as Borrower      
        By:         Name:         Title:        

 

 

11 Add additional signature blocks as needed.

12 Add additional signature blocks as needed.

13 To the extent that the Agent’s consent is required under Sections
10.06(b)(i)(B) or 10.06(b)(iii)(B) of the Credit Agreement.

14 To the extent that the Borrower’s consent is required under Sections
10.06(b)(i)(B) and/or 10.06(b)(iii)(A) of the Credit Agreement.

 

 

 

 

ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

 

Reference is made to the Term Loan Agreement, dated as of March 28, 2013 (as
amended, amended and restated, restated, supplemented or otherwise modified and
in effect from time to time, the “Credit Agreement”), by and among (i)
Sequential Brands Group, Inc., a Delaware corporation (the “Borrower”), (ii) the
Guarantors party thereto from time to time, (iii) the Lenders party thereto from
time to time, and (iv) Pathlight Capital, LLC, as administrative agent and
collateral agent (in such capacities, the “Agent”) for its own benefit and the
benefit of the other Credit Parties referred to therein. All capitalized terms
used herein and not otherwise defined shall have the same meaning herein as in
the Credit Agreement.

 

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

 

1.         Representations and Warranties.

 

1.1.      Assignor. [The][Each] Assignor (a) represents and warrants that (i) it
is the legal and beneficial owner of [the][[the relevant] Assigned Interest,
(ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or
other adverse claim and (iii) it has full power and authority, and has taken all
action necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby; and (b) assumes no
responsibility with respect to (i) any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Loan Document,
(ii) the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any collateral thereunder, (iii) the financial
condition of the Loan Parties or any other Person obligated in respect of any
Loan Document or (iv) the performance or observance by the Loan Parties or any
other Person of any of their respective obligations under any Loan Document.

 

1.2.      Assignee. [The][Each] Assignee (a) represents and warrants that (i) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) it
meets all the requirements to be an Eligible Assignee under the Credit Agreement
(subject to such consents, if any, as may be required under Section 10.06(b) of
the Credit Agreement), (iii) from and after the Effective Date, it shall be
bound by the provisions of the Credit Agreement as a Lender thereunder and, to
the extent of [the][the relevant] Assigned Interest, shall have the obligations
of a Lender thereunder, (iv) it is sophisticated with respect to decisions to
acquire assets of the type represented by [the][such] Assigned Interest and
either it, or the Person exercising discretion in making its decision to acquire
[the][such] Assigned Interest, is experienced in acquiring assets of such type,
(v) it has received a copy of the Credit Agreement, and has received or has been
accorded the opportunity to receive copies of the most recent financial
statements delivered pursuant to Section 6.01 thereof, as applicable, and such
other documents and information as it deems appropriate to make its own credit
analysis and decision to enter into this Assignment and Assumption and to
purchase [the][such] Assigned Interest, (vi) it has, independently and without
reliance upon the Agent, [the][any] Assignor or any other Lender and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Assignment and Assumption and to
purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender,
attached hereto is any documentation required to be delivered by it pursuant to
the terms of the Credit Agreement, duly completed and executed by [the][such]
Assignee; and (b) agrees that (i) it will, independently and without reliance
upon the Agent, [the][any] Assignor 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 the Loan
Documents, and (ii) 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.

 

 

 

 

2.          Payments. From and after the Effective Date, the Agent shall make
all payments in respect of [the][each] Assigned Interest (including payments of
principal, interest, fees and other amounts) to [the][the relevant] Assignor for
amounts which have accrued up to but excluding the Effective Date and to
[the][the relevant] Assignee for amounts which have accrued from and after the
Effective Date.

 

3.          General Provisions. This Assignment and Assumption shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns. This Assignment and Assumption may be executed in any
number of counterparts, which together shall constitute one instrument. Delivery
of an executed counterpart of a signature page of this Assignment and Assumption
by telecopy or other electronic image scan transmission (e.g., “pdf” or “tif”
via e-mail) shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of New York.

 

4.          Fees. Unless waived by the Agent in accordance with Section
10.06(b)(iv) of the Credit Agreement, this Assignment and Assumption shall be
delivered to the Agent with a processing and recordation fee of $3,500.

 

 

 

 

Exhibit b

 

FORM OF COMPLIANCE CERTIFICATE

 

Date of Certificate: ______________

 

To:Pathlight Capital, LLC, as Agent

 

Ladies and Gentlemen:

 

Reference is made to the Term Loan Agreement, dated as of March 28, 2013 (as
amended, amended and restated, restated, supplemented or otherwise modified and
in effect from time to time, the “Credit Agreement”) by, among others, (i)
Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the
“Borrower”), (ii) the Guarantors from time to time party thereto, (iii) the
Lenders from time to time party thereto, and (iv) Pathlight Capital, LLC, as
administrative agent and collateral agent (in such capacities, the “Agent”) for
its own benefit and the benefit of the other Credit Parties referred to therein.
All capitalized terms used herein and not otherwise defined shall have the same
meaning herein as in the Credit Agreement.

 

The undersigned, solely in his capacity as a duly authorized and acting
Responsible Officer of the Borrower, hereby certifies on behalf of the Borrower
and each of the other Loan Parties as of the date hereof the following:

 

(1)         No Defaults or Events of Default. To his knowledge, since __________
(the date of the last Compliance Certificate delivered pursuant to Section 6.02
of the Credit Agreement, or, in the case of the first Compliance Certificate
delivered after the Closing Date, the Closing Date), and except as set forth in
Appendix I, no Default or Event of Default has occurred.

 

(2)         Financial Calculations. 

(a)          Attached hereto as Appendix IIA are reasonably detailed
calculations necessary to determine the Positive Net Income for the period
ending _____________.

(b)          Attached hereto as Appendix IIB are reasonably detailed
calculations necessary to determine the Loan to Value Ratio as of the date
hereof.

(c)          Attached hereto as Appendix IIC are reasonably detailed
calculations necessary to determine the cash balance as of the date hereof.

 

 

 

 

(3)         Financial Statements.

 

[Use following paragraph (a) for Fiscal Year-end financial statements]

 

(a)          Attached hereto as Appendix III are the audited Consolidated
balance sheet of the Borrower and its Subsidiaries, as required by Section
6.01(a) of the Credit Agreement for the Fiscal Year ended ____________, and the
related consolidated statements of income or operations, Shareholders’ Equity
and cash flows for such Fiscal Year, setting forth in each case in comparative
form the figures for the previous Fiscal Year, all in reasonable detail,
prepared in accordance with GAAP and accompanied by such materials as are
required to be delivered pursuant to Section 6.01(a) of the Credit Agreement
(all of the foregoing, collectively, the “Annual Financial Statements”).

 

[Use following paragraph (b) for Fiscal Quarter-end financial statements]

 

(b)          Attached hereto as Appendix III are the Consolidated balance sheet
of the Borrower and its Subsidiaries, as required by Section 6.01(b) of the
Credit Agreement for the Fiscal Quarter ended ___________, and the related
consolidated statements of income or operations, Shareholders’ Equity and cash
flows for such Fiscal Quarter and for the portion of the Borrower’s Fiscal Year
then ended, setting forth in each case in comparative form the figures for (A)
such period set forth in the projections delivered pursuant to Section 6.01(d)
of the Credit Agreement, (B) the corresponding Fiscal Quarter of the previous
Fiscal Year and (C) the corresponding portion of the previous Fiscal Year, all
in reasonable detail and accompanied by such materials as are required to be
delivered pursuant to Section 6.01(b) of the Credit Agreement (all of the
foregoing, collectively, the “Quarterly Financial Statements”). The Quarterly
Financial Statements were prepared in accordance with GAAP and present fairly
the financial condition, results of operations, Shareholders’ Equity and cash
flows of the Borrower and its Subsidiaries, as of the end of such Fiscal
Quarter, subject only to normal year-end audit adjustments and the absence of
footnotes.

 

[Use following paragraph (c) for Fiscal Month-end financial statements, if
required. Delete if no Fiscal Month-end financial statements are prepared.1]

 

 

1 Solely to the extent prepared by the Borrower in the ordinary course of
business.

 

 

 

 

(c)          Attached hereto as Appendix III are the Consolidated balance sheet
of the Borrower and its Subsidiaries, to the extent required by Section 6.01(c)
of the Credit Agreement for the Fiscal Month ended ___________, and the related
consolidated statements of income or operations, Shareholders’ Equity and cash
flows for such Fiscal Month, all in reasonable detail and accompanied by such
materials as are required to be delivered pursuant to Section 6.01(c) of the
Credit Agreement (all of the foregoing, collectively, the “Monthly Financial
Statements”). The Monthly Financial Statements were prepared in accordance with
GAAP and present fairly the financial condition, results of operations,
Shareholders’ Equity and cash flows of the Borrower and its Subsidiaries, as of
the end of such Fiscal Month, subject only to normal year-end audit adjustments
and the absence of footnotes.

 

(4)         No Material Accounting Changes, Etc. Except as set forth in Appendix
IV, there has been no change in generally accepted accounting principles used in
the preparation of the [Annual Financial Statements][Quarterly Financial
Statements] [Monthly Financial Statements] furnished to the Agent for the
[Fiscal Year/ Fiscal Quarter/ Fiscal Month] ended ___________. If any such
change has occurred, a statement of reconciliation conforming such financial
statements to GAAP is attached hereto in Appendix IV.

 

(5)         Management Discussion. Attached hereto as Appendix V is a discussion
and analysis prepared by management of the Borrower with respect to the [Annual
Financial Statements] [Quarterly Financial Statements] [Monthly Financial
Statements] delivered herewith.

 

(6)         New Intellectual Property. Except as set forth in Appendix VI,
neither the Borrower nor any Subsidiary has acquired any new Material
Intellectual Property since the date of the last Compliance Certificate
delivered nor has any Intellectual Property become Material Intellectual
Property since the date of the last Compliance Certificate delivered.

 

(7)         New Material Licenses. Except as set forth in Appendix VII, neither
the Borrower nor any Subsidiary has acquired or entered into any new license
agreement that would constitute a Material License since the date of the last
Compliance Certificate delivered nor has any license become a Material License
since the date of the last Compliance Certificate delivered.

 

[signature page follows]

 

 

 

 

IN WITNESS WHEREOF, a duly authorized and acting Responsible Officer of the
Borrower, on behalf of the Borrower and each of the other Loan Parties, has duly
executed this Compliance Certificate as of __________________, 201_.

 

  BORROWER:         SEQUENTIAL BRANDS GROUP, INC.         By:     Name:      
Title:  

 

Signature Page to Compliance Certificate

 

 

 

 

APPENDIX I

 

Except as set forth below, no Default or Event of Default has occurred.

 

Appendix I to Compliance Certificate

 

 

 

 

Appendix IIA

 

Positive Net Income

 

1.Consolidated Positive Net Income:

 

(a) Consolidated Net Income: __________________         Plus the following, to
extent deducted in calculating     Consolidated Net Income for such measurement
period:         (c) depreciation and amortization expense: __________________  
    (d) one-time non-cash charges, non-cash compensation, non-cash Federal,
state, local and foreign income taxes relating to amortization of intangibles
for tax purposes and non-cash interest: __________________       (e) one-time
costs relating to any Permitted Acquisition (of the type referred to in clause
(ii) of the definition thereof) or fees in connection with any Permitted
Indebtedness in an amount  not to exceed $5,000,000 in any Fiscal Year of the
Borrower: __________________       (f) wind-down costs related to the acquired
Heelys Acquisition and discontinued operations for the twelve month period
following the Closing Date in an amount not to exceed $5,000,000 in the
aggregate: __________________       (g) Sum of lines 1(a) through 1(f):
__________________

 

Covenant:

 

The Loan Parties shall not permit Consolidated Positive Net Income, as
calculated on a quarterly basis to be equal to or less than $0.

 

In compliance?               ________ yes             __________ no

 

Appendix IIA to Compliance Certificate

 

 

 

 

Appendix IIB

 

Calculation of Loan to Value

 

1. Outstanding amount of the Senior Obligations as of the period ending
[__________________]: [__________________]       2. Realizable Orderly
Liquidation Value of the registered trademarks of the Loan Parties as of the
date hereof: [__________________]       3. Loan to Value Percentage as of the
previous Compliance Certificate: [__________________]2       4. Total principal
paid in the period ending [__________] to the First Lien Agent pursuant to
Section 2.03(c) and Section 2.04(a) of the First Lien Credit Agreement or to the
Agent pursuant to Section 2.04(a) of the Second Lien Term Loan Agreement:
[__________________]       5. Loan to Value Percentage reduction (0.90%
multiplied by (4): [__________________]       6. Loan to Value Percentage as of
the date hereof ((3) minus (5)): [__________________]       7. Loan to Value
Percentage from (6) times Realizable Orderly Liquidation Value of the registered
trademarks of the Loan Parties: [__________________]

 

Covenant:

 

On or after December 31, 2013, the Loan Parties shall not permit the Senior
Obligations, at any time to be greater than the Loan to Value Percentage of the
Realizable Orderly Liquidation Value of registered trademarks of the Loan
Parties, as determined pursuant to the most recent appraisal with respect to
such registered trademarks conducted by or on behalf of the Agent or delivered
to the Agent by the First Lien Agent pursuant to Section 6.10(b).

 

In compliance?                 ______ yes               ________ no

 

__________________

 

2           The Loan to Value Percentage for the Compliance Certificate
delivered for the period ending December 31, 2013 shall be 71.4%.

 

Appendix IIA to Compliance Certificate

 

 

 

 

Appendix IIC

 

Calculation of Cash Balance

 

1. Aggregate cash on deposit in the Block Accounts during period
ending  _________________: ________________________       2. Aggregate cash on
deposit in the Block Accounts as of  _________________: ________________________

 

Covenant:

 

The Loan Parties shall not permit the aggregate cash on deposit in the Loan
Parties’ Blocked Accounts at any time (i) during the period of the Closing Date
through and including December 31, 2013 to be less than $3,524,597; or (ii) on
or after January 1, 2014 to be less than $3,000,000.

 

In compliance?            ______ yes           ________ no

 

Appendix IIC to Compliance Certificate

 

 

 

 

APPENDIX III

 

(Financial Statements)

 

[see attached]

 

Appendix III to Compliance Certificate

 

 

 

 

APPENDIX IV

 

(GAAP)

 

[see attached]

 

Appendix IV to Compliance Certificate

 

 

 

 

APPENDIX V

 

(MD&A)

 

[see attached]

 

Appendix V to Compliance Certificate

 

 

 

 

APPENDIX VI

 

(Material Intellectual Property)

 

[see attached]

 

Appendix VI to Compliance Certificate

 

 

 

 

APPENDIX VII

 

(Material License)

  

[see attached]

  

 

 

 

Exhibit C

 

Form of Note

  

  NOTE  

 

$________________   ____________, 201_

 

FOR VALUE RECEIVED, the undersigned (the “Borrower”), promises to pay to the
order of _________________________________ (hereinafter, with any subsequent
holders, the “Lender”), c/o Pathlight Capital, LLC, One Post Office Square,
Suite 3765, Boston, Massachusetts 02109, the principal sum of
_____________________________ DOLLARS ($_____________), or, if less, the
aggregate unpaid principal balance of Loans made by the Lender to or for the
account of the Borrower pursuant to the Term Loan Agreement dated as of March
__, 2013 (as amended, amended and restated, restated, supplemented or otherwise
modified and in effect from time to time, the “Credit Agreement”) by and among
(i) the Borrower, (ii) the Guarantors from time to time party thereto, (iii) the
lenders from time to time party thereto (individually, a “Lender” and,
collectively, the “Lenders”), and (iv) Pathlight Capital, LLC, as administrative
agent and collateral agent (in such capacities, the “Agent”) for its own benefit
and the benefit of the other Credit Parties referred to therein, with interest
at the rate and payable in the manner stated therein.

 

This is a “Note” to which reference is made in the Credit Agreement and is
subject to all terms and provisions thereof. The principal of, and interest on,
this Note shall be payable at the times, in the manner, and in the amounts as
provided in the Credit Agreement and shall be subject to prepayment and
acceleration as provided therein. Capitalized terms used herein and not defined
herein shall have the meanings assigned to such terms in the Credit Agreement.

 

The Agent’s books and records concerning the Loans, the accrual of interest
thereon, and the repayment of such Loans, shall be conclusive evidence of the
indebtedness to the Lender hereunder, absent manifest error.

 

No delay or omission by the Agent or the Lender in exercising or enforcing any
of the Agent’s or such Lender’s powers, rights, privileges, remedies, or
discretions hereunder shall operate as a waiver thereof on that occasion nor on
any other occasion. No waiver of any Event of Default shall operate as a waiver
of any other Event of Default, nor as a continuing waiver of any such Event of
Default.

 

The Borrower, and each endorser and guarantor of this Note, waives presentment,
demand, notice, and protest, and also waives any delay on the part of the holder
hereof. The Borrower assents to any extension or other indulgence (including,
without limitation, the release or substitution of Collateral) permitted by the
Agent and/or the Lender with respect to this Note and/or any Collateral or any
extension or other indulgence with respect to any other liability or any
collateral given to secure any other liability of the Borrower or any other
Person obligated on account of this Note.

 

This Note shall be binding upon the Borrower, and each endorser and guarantor
hereof, and upon their respective successors, assigns and representatives, and
shall inure to the benefit of the Lender and its successors, endorsees, and
assigns.

 

 

 

 

The liabilities of the Borrower, and of any endorser or guarantor of this Note,
are joint and several, provided, however, the release by the Agent or the Lender
of any one or more such Persons shall not release any other Person obligated on
account of this Note. Each reference in this Note to the Borrower, any endorser,
and any guarantor, is to such Person individually and also to all such Persons
jointly.

 

THIS NOTE AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN
CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS
NOTE AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

THE Borrower IRREVOCABLY AND UNCONDITIONALLY AGREES THAT IT WILL NOT COMMENCE
ANY ACTION, LITIGATION OR PROCEEDING OF ANY KIND OR DESCRIPTION, WHETHER IN LAW
OR EQUITY, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, AGAINST THE AGENT, ANY
LENDER OR ANY RELATED PARTY OF THE FOREGOING IN ANY WAY RELATING TO THIS NOTE OR
ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN ANY
FORUM OTHER THAN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK,
AND ANY APPELLATE COURT FROM ANY THEREOF, AND THE BORROWER AND THE LENDER, BY
ITS ACCEPTANCE HEREOF, HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE
JURISDICTION OF SUCH COURTS AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION, LITIGATION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK
STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
THE BORROWER HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION, LITIGATION
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
NOTE OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY
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.

 

THE Borrower IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR
ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO ABOVE. THE BORROWER HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

 

THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN the MANNER PROVIDED FOR NOTICES IN SECTION 10.02 OF the
CREDIT AGREEMENT. NOTHING IN THIS NOTE WILL AFFECT THE RIGHT OF ANY PARTY TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

 

 

 

 

The Borrower makes the following waiver knowingly, voluntarily, and
intentionally, and understands that the Agent and the Lender, in the
establishment and maintenance of their respective relationship with the Borrower
contemplated by this Note, are each relying thereon. THE BORROWER, AND THE
LENDER, BY ITS ACCEPTANCE HEREOF, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS NOTE OR ANY
OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH OF THE BORROWER AND THE
LENDER, BY ITS ACCEPTANCE HEREOF, (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE
CREDIT AGREEMENT AND THIS NOTE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS HEREIN.

 

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed as of
the date set forth above.

 

  SEQUENTIAL BRANDS GROUP, INC.       By:     Name:   Title:

 

 

 

 

EXHIBIT D-1

 

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is made to that certain First Lien Term Loan Agreement, dated as of
March 28, 2013 (as amended, amended and restated, restated, supplemented or
otherwise modified and in effect from time to time, the “Credit Agreement”) by,
among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the
borrower (the “Borrower”), (ii) the Guarantors from time to time party thereto,
(iii) the Lenders from time to time party thereto, and (iv) Pathlight Capital,
LLC, as administrative agent and collateral agent (in such capacities, the
“Agent”) for its own benefit and the benefit of the other Credit Parties
referred to therein. All capitalized terms used herein and not otherwise defined
shall have the same meaning herein as in the Credit Agreement.

 

Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of
which it is providing this certificate, (ii) it is not a bank within the meaning
of Section 881(c)(3)(A) of the Code, (iii) it is not a 10 percent shareholder of
the Borrower within the meaning of Section 881(c)(3)(B) of the Code and (iv) it
is not a controlled foreign corporation related to the Borrower as described in
Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished the Agent and the Borrower with a certificate of
its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate,
the undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform the Borrower and the Agent,
and (2) the undersigned shall have at all times furnished the Borrower and the
Agent with a properly completed and currently effective certificate in either
the calendar year in which each payment is to be made to the undersigned, or in
either of the two calendar years preceding such payments.

 

[NAME OF LENDER]     By:       Name:         Title:       Date: ________ __,
201[  ]

 

 

 

 

EXHIBIT D-2

 

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is made to that certain First Lien Term Loan Agreement, dated as of
March 28, 2013 (as amended, amended and restated, restated, supplemented or
otherwise modified and in effect from time to time, the “Credit Agreement”) by,
among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the
borrower (the “Borrower”), (ii) the Guarantors from time to time party thereto,
(iii) the Lenders from time to time party thereto, and (iv) Pathlight Capital,
LLC, as administrative agent and collateral agent (in such capacities, the
“Agent”) for its own benefit and the benefit of the other Credit Parties
referred to therein. All capitalized terms used herein and not otherwise defined
shall have the same meaning herein as in the Credit Agreement.

 

Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate, (ii)
it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii)
it is not a 10 percent shareholder of the Borrower within the meaning of Section
881(c)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation
related to the Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished its participating Lender with a certificate of its
non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender in writing, and
(2) the undersigned shall have at all times furnished such Lender with a
properly completed and currently effective certificate in either the calendar
year in which each payment is to be made to the undersigned, or in either of the
two calendar years preceding such payments.

 

[NAME OF PARTICIPANT]     By:       Name:         Title:       Date: ________
__, 201[  ]

 

 

 

 

EXHIBIT D-3

 

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is made to that certain First Lien Term Loan Agreement, dated as of
March 28, 2013 (as amended, amended and restated, restated, supplemented or
otherwise modified and in effect from time to time, the “Credit Agreement”) by,
among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the
borrower (the “Borrower”), (ii) the Guarantors from time to time party thereto,
(iii) the Lenders from time to time party thereto, and (iv) Pathlight Capital,
LLC, as administrative agent and collateral agent (in such capacities, the
“Agent”) for its own benefit and the benefit of the other Credit Parties
referred to therein. All capitalized terms used herein and not otherwise defined
shall have the same meaning herein as in the Credit Agreement.

 

Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
participation in respect of which it is providing this certificate, (ii) its
direct or indirect partners/members are the sole beneficial owners of such
participation, (iii) with respect such participation, neither the undersigned
nor any of its direct or indirect partners/members is a bank extending credit
pursuant to a loan agreement entered into in the ordinary course of its trade or
business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of
its direct or indirect partners/members is a 10 percent shareholder of the
Borrower within the meaning of Section 881(c)(3)(B) of the Code and (v) none of
its direct or indirect partners/members is a controlled foreign corporation
related to the Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by one of the following forms from each of its partners/members that
is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an
IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such
partner’s/member’s beneficial owners that is claiming the portfolio interest
exemption. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Lender and (2) the undersigned shall have at all times furnished
such Lender with a properly completed and currently effective certificate in
either the calendar year in which each payment is to be made to the undersigned,
or in either of the two calendar years preceding such payments.

 

[NAME OF PARTICIPANT]     By:       Name:         Title:       Date: ________
__, 201[  ]

 

 

 

 

EXHIBIT D-4

 

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

 

Reference is made to that certain First Lien Term Loan Agreement, dated as of
March 28, 2013 (as amended, amended and restated, restated, supplemented or
otherwise modified and in effect from time to time, the “Credit Agreement”) by,
among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the
borrower (the “Borrower”), (ii) the Guarantors from time to time party thereto,
(iii) the Lenders from time to time party thereto, and (iv) Pathlight Capital,
LLC, as administrative agent and collateral agent (in such capacities, the
“Agent”) for its own benefit and the benefit of the other Credit Parties
referred to therein. All capitalized terms used herein and not otherwise defined
shall have the same meaning herein as in the Credit Agreement.

 

Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the Loan(s)
(as well as any Note(s) evidencing such Loan(s)) in respect of which it is
providing this certificate, (ii) its direct or indirect partners/members are the
sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such
Loan(s)), (iii) with respect to the extension of credit pursuant to the Credit
Agreement or any other Loan Document, neither the undersigned nor any of its
direct or indirect partners/members is a bank extending credit pursuant to a
loan agreement entered into in the ordinary course of its trade or business
within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct
or indirect partners/members is a 10 percent shareholder of the Borrower within
the meaning of Section 881(c)(3)(B) of the Code and (v) none of its direct or
indirect partners/members is a controlled foreign corporation related to the
Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished the Agent and the Borrower with IRS Form W-8IMY
accompanied by one of the following forms from each of its partners/members that
is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an
IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such
partner’s/member’s beneficial owners that is claiming the portfolio interest
exemption. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform the Borrower and the Agent, and (2) the undersigned shall have at all
times furnished the Borrower and the Agent with a properly completed and
currently effective certificate in either the calendar year in which each
payment is to be made to the undersigned, or in either of the two calendar years
preceding such payments.

 

[NAME OF LENDER]     By:       Name:         Title:       Date: ________ __,
201[  ]