Exhibit 10.1

 

 

 

DEBTOR-IN-POSSESSION CREDIT AGREEMENT

Dated as of June 18, 2014

among

KID BRANDS, INC.,

as the Lead Borrower

For

The Borrowers Named Herein

The Guarantors Named Herein

SALUS CAPITAL PARTNERS, LLC

as Administrative Agent and Collateral Agent,

and

The Other Lenders Party Hereto

 

 

 

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Table of Contents

 

         Page  

Article I DEFINITIONS AND ACCOUNTING TERMS

     2   

1.01

  Defined Terms      2   

1.02

  Other Interpretive Provisions      50   

1.03

  Accounting Terms Generally      51   

1.04

  Rounding      51   

1.05

  Times of Day      51   

1.06

  Letter of Credit Amounts      51   

1.07

  Currency Equivalents Generally      51    Article II THE COMMITMENTS AND
CREDIT EXTENSIONS      52   

2.01

  Committed Loans; Reserves      52   

2.02

  Borrowings of Committed Loans      53   

2.03

  Letters of Credit      54   

2.04

  Reserved      61   

2.05

  Prepayments      61   

2.06

  Termination or Reduction of Commitments      63   

2.07

  Repayment of Loans      63   

2.08

  Interest      63   

2.09

  Fees      64   

2.10

  Computation of Interest and Fees      65   

2.11

  Evidence of Debt      65   

2.12

  Payments Generally; Agent’s Clawback      66   

2.13

  Sharing of Payments by Lenders      67   

2.14

  Settlement Amongst Lenders      68   

2.15

  Release      69   

2.16

  Waiver of any Priming Rights; Credit Bid      69    Article III TAXES, YIELD
PROTECTION AND ILLEGALITY; APPOINTMENT OF LEAD BORROWER      70   

3.01

  Taxes      70   

3.02

  Illegality      72   

3.03

  Inability to Determine Rates      72   

3.04

  Increased Costs; Reserves on LIBO Rate Loans      72   

3.05

  Reserved      74   

 

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Table of Contents

 

         Page  

3.06

  Mitigation Obligations; Replacement of Lenders      74   

3.07

  Survival      74   

3.08

  Designation of Lead Borrower as Borrowers’ Agent      74    Article IV
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS      75   

4.01

  Conditions of Initial Credit Extension      75   

4.02

  Conditions to all Credit Extensions      78    Article V REPRESENTATIONS AND
WARRANTIES      79   

5.01

  Existence, Qualification and Power      79   

5.02

  Authorization; No Contravention      80   

5.03

  Governmental Authorization; Other Consents      80   

5.04

  Binding Effect      80   

5.05

  Financial Statements; No Material Adverse Effect      80   

5.06

  Litigation      81   

5.07

  No Default      81   

5.08

  Ownership of Property; Liens      81   

5.09

  Environmental Compliance      82   

5.10

  Insurance      83   

5.11

  Taxes      83   

5.12

  ERISA Compliance      83   

5.13

  Subsidiaries; Equity Interests      84   

5.14

  Margin Regulations; Investment Company Act      84   

5.15

  Disclosure      85   

5.16

  Compliance with Laws      85   

5.17

  Intellectual Property; Licenses, Etc      85   

5.18

  Labor Matters      86   

5.19

  Security Documents      86   

5.20

  Reserved      87   

5.21

  Deposit Accounts      87   

5.22

  Brokers      87   

5.23

  Material Contracts      87   

5.24

  Casualty      87   

5.25

  Reserved      87   

 

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Table of Contents

 

         Page  

5.26

  Personally Identifiable Information      87   

5.27

  Bankruptcy Matters      87    Article VI AFFIRMATIVE COVENANTS      88   

6.01

  Financial Statements      88   

6.02

  Certificates; Other Information      90   

6.03

  Notices      92   

6.04

  Payment of Obligations      94   

6.05

  Preservation of Existence, Etc      94   

6.06

  Maintenance of Properties      94   

6.07

  Maintenance of Insurance      94   

6.08

  Compliance with Laws      96   

6.09

  Books and Records; Accountants      96   

6.10

  Inspection Rights      97   

6.11

  Use of Proceeds      98   

6.12

  Additional Loan Parties      98   

6.13

  Cash Management      98   

6.14

  Information Regarding the Collateral      100   

6.15

  Physical Inventories      101   

6.16

  Environmental Laws      101   

6.17

  Further Assurances      102   

6.18

  Compliance with Terms of Leaseholds      103   

6.19

  Material Contracts      103   

6.20

  Approved Budget      103   

6.21

  Employee Benefit Plans      103   

6.22

  Designation as Senior Debt      103   

6.23

  Retention      103   

6.24

  Sale Pleadings; Notices to Agent      104   

6.25

  Intellectual Property Licenses      104   

6.26

  Bankruptcy Milestones      105   

6.27

  Financing Orders      105   

6.28

  Field Examination      105   

6.29

  Post-Closing      105   

 

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Table of Contents

 

         Page   Article VII NEGATIVE COVENANTS      105   

7.01

  Liens      106   

7.02

  Investments      106   

7.03

  Indebtedness; Disqualified Stock      106   

7.04

  Fundamental Changes      106   

7.05

  Dispositions      106   

7.06

  Restricted Payments      107   

7.07

  Prepayments of Indebtedness      107   

7.08

  Change in Nature of Business      107   

7.09

  Transactions with Affiliates      107   

7.10

  Burdensome Agreements      108   

7.11

  Use of Proceeds      108   

7.12

  Amendment of Material Documents      108   

7.13

  Fiscal Year      108   

7.14

  Deposit Accounts      109   

7.15

  Reserved      109   

7.16

  Payments of Earnout or Duty Amounts      109   

7.17

  Inactive Subsidiaries      109   

7.18

  Financial Covenant      109   

7.19

  Repayment of Indebtedness      109   

7.20

  Reclamation Claims      110   

7.21

  Chapter 11 Claims      110   

7.22

  Bankruptcy Actions      110   

7.23

  Professional Fee Escrow Account      110    Article VIII EVENTS OF DEFAULT AND
REMEDIES      110   

8.01

  Events of Default      110   

8.02

  Remedies Upon Event of Default      115   

8.03

  Application of Funds      116    Article IX THE AGENT      118   

9.01

  Appointment and Authority      118   

9.02

  Rights as a Lender      118   

9.03

  Exculpatory Provisions      118   

 

iv

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Table of Contents

 

         Page  

9.04

  Reliance by Agent      120   

9.05

  Delegation of Duties      120   

9.06

  Resignation of Agent      120   

9.07

  Non-Reliance on Agent and Other Lenders      121   

9.08

  Reserved      121   

9.09

  Agent May File Proofs of Claim      121   

9.10

  Collateral and Guaranty Matters      122   

9.11

  Notice of Transfer      122   

9.12

  Reports and Financial Statements      123   

9.13

  Agency for Perfection      123   

9.14

  Indemnification of Agent      124   

9.15

  Relation among Lenders      124   

9.16

  Defaulting Lenders      124    Article X MISCELLANEOUS      125   

10.01

  Amendments, Etc      125   

10.02

  Notices; Effectiveness; Electronic Communications      125   

10.03

  No Waiver; Cumulative Remedies      127   

10.04

  Expenses; Indemnity; Damage Waiver      127   

10.05

  Payments Set Aside      129   

10.06

  Successors and Assigns      130   

10.07

  Treatment of Certain Information; Confidentiality      133   

10.08

  Right of Setoff      134   

10.09

  Interest Rate Limitation      134   

10.10

  Counterparts; Integration; Effectiveness      135   

10.11

  Survival      135   

10.12

  Severability      135   

10.13

  Replacement of Lenders      136   

10.14

  Governing Law; Jurisdiction; Etc      136   

10.15

  Waiver of Jury Trial      138   

10.16

  No Advisory or Fiduciary Responsibility      138   

10.17

  USA PATRIOT Act Notice      138   

10.18

  Foreign Asset Control Regulations      139   

 

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Table of Contents

 

         Page  

10.19

  Time of the Essence      139   

10.20

  Press Releases; Cooperation      139   

10.21

  Additional Waivers      140   

10.22

  No Strict Construction      141   

10.23

  Attachments      141   

 

vi

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SCHEDULES

 

1.01    Borrowers 1.02    Guarantors 1.03    Existing Letters of Credit 2.01   
Commitments and Applicable Percentages 4.01(l)    Pre-Petition Amounts 5.01   
Loan Parties Organizational Information 5.08(b)(1)    Owned Real Estate
5.08(b)(2)    Leased Real Estate 5.09    Environmental Matters 5.10    Insurance
5.13    Subsidiaries; Other Equity Investments 5.17    Intellectual Property
Matters 5.18    Labor Matters 5.21    Deposit Accounts 5.24    Material
Contracts 6.02    Financial and Collateral Reporting 6.25    Intellectual
Property Licenses 7.01    Existing Liens 7.02    Existing Investments 7.03   
Existing Indebtedness 7.09    Affiliate Transactions 10.02    Agent’s Office;
Certain Addresses for Notices

EXHIBITS

 

   Form of A    Committed Loan Notice B-1    Tranche A Note B-2    Tranche A-1
Note C    Compliance Certificate D    Assignment and Assumption E    Borrowing
Base Certificate F    DDA Notification G    Gross Sales Report H    Cash
Management Order I    Interim Financing Order J    Summary of Approved Budget

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DEBTOR-IN-POSSESSION CREDIT AGREEMENT

This DEBTOR-IN-POSSESSION CREDIT AGREEMENT (“Agreement”) is entered into as of
June 18, 2014, among Kid Brands, Inc., a New Jersey corporation (the “Lead
Borrower”), the Persons named on Schedule 1.01 hereto (collectively with the
Lead Borrower, the “Borrowers”), the Persons named on Schedule 1.02 hereto
(collectively, the “Guarantors”), each lender from time to time party hereto
(collectively, the “Lenders” and individually, a “Lender”), and SALUS CAPITAL
PARTNERS, LLC, as Administrative Agent and Collateral Agent (the “Agent”).

On June 18, 2014 (the “Petition Date”), the Lead Borrower and the other Loan
Parties commenced cases under Chapter 11 of the Bankruptcy Code, 11 U.S.C. 101
et seq. (the “Bankruptcy Code”), case numbers 14-22582, 14-22583, 14-22585,
14-22587, 14-22589, 14-22590 and 14-22591 (collectively, the “Chapter 11 Case”)
by filing voluntary petitions for relief under Chapter 11 with the United States
Bankruptcy Court for the District of New Jersey (the “Bankruptcy Court”). The
Lead Borrower and the other Loan Parties continue to operate their businesses
and manage their properties as debtors and debtors in possession pursuant to
Sections 1107(a) and 1108 of the Bankruptcy Code.

The Borrowers have requested, and the Agent and the Lenders have agreed, upon
the terms and conditions set forth in this Agreement to make available to the
Borrowers a senior secured revolving credit facility, pursuant to sections
364(c)(1), 364(c)(2), 364(c)(3), and 364(d) of the Bankruptcy Code, in an
aggregate amount not to exceed $49,000,000, the proceeds of which will be used
solely in order to (a) repay Indebtedness and other obligations owed under, or
in connection with, the Pre-Petition Credit Agreement, (b) finance the
acquisition of working capital assets of the Borrowers, including the purchase
of inventory and equipment, in each case in the ordinary course of business,
(c) Cash Collateralize the Outstanding Amount of L/C Obligations with respect to
Letters of Credit, and (d) for general corporate purposes of the Loan Parties,
including post-petition operating expenses set forth in the Approved Budget and
other expenses arising in the Chapter 11 Case as may be approved by the
Bankruptcy Court and the Agent.

The Lenders have agreed to provide a revolving loan to the Borrowers pursuant to
sections 364(c)(1), 364(c)(2), 364(c)(3), and 364(d) of the Bankruptcy Code on
terms and conditions of this Agreement and in the Interim Financing Order (or
the Final Financing Order when applicable) so long as (a) such postpetition
credit obligations are secured by a first priority and senior security interest
in and lien upon substantially all of the assets of the Loan Parties, whether
now existing or hereafter acquired and (b) all Obligations of the Loan Parties
to the Agent and Lenders hereunder and under the other Loan Documents shall be
full recourse to each of the Loan Parties, in each instance as more fully set
forth in the Loan Documents and in the Interim Financing Order (or the Final
Financing Order when applicable).

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

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

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

“ACH” means automated clearing house transfers.

“Acceptable Document of Title” means, with respect to any Inventory, a tangible,
negotiable bill of lading or other Document (as defined in the UCC) that (a) is
issued by a common carrier which is not an Affiliate of the Approved Foreign
Vendor or any Loan Party which is in actual possession of such Inventory, (b) is
issued to the order of a Loan Party or, if so requested by the Agent, during the
continuance of an Event of Default to the order of the Agent, (c) names the
Agent as a notice party and bears a conspicuous notation on its face of the
Agent’s security interest therein, (d) is not subject to any Lien (other than in
favor of the Agent and other Permitted Liens), and (e) is on terms otherwise
reasonably acceptable to the Agent.

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

“Account” means “accounts” as defined in the UCC, and also means a right to
payment of a monetary obligation, whether or not earned by performance, (a) for
property that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of, (b) for services rendered or to be rendered, (c) for a
policy of insurance issued or to be issued, (d) for a secondary obligation
incurred or to be incurred, (e) for energy provided or to be provided, (f) for
the use or hire of a vessel under a charter or other contract, (g) arising out
of the use of a credit or charge card or information contained on or for use
with the card, or (h) as winnings in a lottery or other game of chance operated
or sponsored by a state, governmental unit of a state, or person licensed or
authorized to operate the game by a state or governmental unit of a state. The
term “Account” includes health-care-insurance receivables.

“Acquired Debt” means mortgage Indebtedness or Indebtedness with respect to
Capital Leases of a Person existing at the time such Person became a Subsidiary
or assumed by any Loan Party pursuant to a Permitted Acquisition (and not
created or incurred in connection with or in anticipation of such Permitted
Acquisition).

“Acquisition” means, with respect to any Person, (a) an investment in, or 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.

“Acquisition Agreement” means that certain Asset Purchase Agreement dated as of
April 1, 2008 among LaJobi, as buyer, LaJobi Industries, as seller, and Lawrence
and Joseph Bivona, as shareholders, pursuant to which LaJobi purchased
substantially all of the assets of the LaJobi Industries upon the terms and
conditions set forth therein.

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

 

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“Adjusted LIBO Rate” means an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of one percent) equal to (i) the LIBO Rate
multiplied by (ii) the Statutory Reserve Rate. The Adjusted LIBO Rate will be
adjusted automatically as of the effective date of any change in the Statutory
Reserve Rate.

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Agent.

“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 twenty percent (20%) or
more of any class of the Equity Interests of that Person, and (iv) any other
Person twenty percent (20%) or more of any class of whose Equity Interests is
held directly or indirectly by that Person.

“Agent” means Salus in its capacity as Administrative Agent and Collateral Agent
under any of the Loan Documents, or any successor thereto in such capacities.

“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 Lead Borrower and the Lenders.

“Aggregate Commitments” means the sum of the Aggregate Tranche A Commitments and
the Aggregate Tranche A-1 Commitments of all of the Lenders. As of the Closing
Date, the Aggregate Commitments are $49,000,000.

“Aggregate Tranche A Commitments” means the sum of the Tranche A Commitment(s)
of all the Tranche A Lenders. As of the Closing Date, the Aggregate Tranche A
Commitments are $27,000,000.

“Aggregate Tranche A-1 Commitments” means the sum of the Tranche A-1
Commitment(s) of all of the Tranche A-1 Lenders. As of the Closing Date, the
Aggregate Tranche A-1 Commitments are $22,000,000.

“Agreement” means this Credit Agreement, as the same may be amended, restated,
supplemented, or modified from time to time.

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

“Allowed Professional Fees” means incurred and allowed unpaid professional fees
and expenses of the Case Professionals, to the extent such fees and expenses are
incurred and allowed and payable pursuant to an order of the Bankruptcy Court
(which order has not been reversed, vacated, or stayed).

 

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

“Applicable Margin” means (i) with respect to Tranche A Loans, 10% per annum and
(ii) with respect to Tranche A-1 Loans, 15% per annum.

“Applicable Percentage” means, in each case as the context requires, (a) with
respect to each Credit Extension under the Tranche A Commitments, the Tranche A
Applicable Percentage, (b) with respect to each Credit Extension under the
Tranche A-1 Commitments, the Tranche A-1 Applicable Percentage and (c) with
respect to all Lenders at any time, the percentage of the sum of the Aggregate
Commitments represented by the sum of such Lender’s Commitment at such time. If
the Tranche A Commitments or the Tranche A-1 Commitments have been terminated
pursuant to Section 2.06 or Section 8.02 or if the Aggregate Commitments have
expired, then the Applicable Percentage of each Lender shall be determined based
on the Applicable Percentage of such Lender most recently in effect, giving
effect to any subsequent assignments. The initial Applicable Percentage of each
Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the
Assignment and Assumption pursuant to which such Lender becomes a party hereto,
as applicable.

“Appraisal Percentage” means one hundred percent (100%).

“Appraised Value” means, (a) with respect to Eligible Inventory, the appraised
orderly liquidation value, net of costs and expenses to be incurred in
connection with any such liquidation, which value is expressed as a percentage
of Cost of Eligible Inventory as set forth in the inventory stock ledger of the
Lead Borrower, which value shall be determined from time to time by the most
recent appraisal undertaken by an independent appraiser engaged by the Agent and
(b) with respect to Eligible Intellectual Property, the fair market value of
Eligible Intellectual Property as set forth in the most recent appraisal of
Eligible Intellectual Property as determined from time to time by an independent
appraiser engaged by the Agent.

“Appropriate Lender” means a Tranche A Lender or a Tranche A-1 Lender, as
applicable.

“Approved Budget” means the debtor in possession thirteen (13) week budget
prepared by the Lead Borrower and furnished to the Agent on or before the
Closing Date and thereafter weekly in accordance with this Agreement, as the
same may be updated, modified and/or supplemented thereafter from time to time
as provided in Section 6.01(d) which budget shall include a weekly cash budget,
including information on a line item basis as to (x) projected cash receipts,
(y) projected disbursements (including ordinary course operating expenses,
bankruptcy related expenses (including professional fees and expenses), capital
expenditures, asset sales and fees and expenses of the Agent (including counsel
therefor) and any other fees and expenses relating to the Loan Documents), and
(z) a calculation of Availability.

“Approved Budget Variance Report” shall mean a weekly report provided by the
Lead Borrower to the Agent in accordance with Section 6.01(d): (i) showing by
line item actual receipts for both inventory and revenues, actual disbursement
amounts, cash on hand, actual professional fees (other than counsel for the
Agent) and Availability as of the last day of the Cumulative Four Week Period
and the Cumulative Period, noting therein all variances, on a line-item basis,
from amounts set forth for such period in the Approved Budget, and shall include
explanations for all material variances, and (ii) certified by a Responsible
Officer of the Lead Borrower. The calculation of any variance for purposes of
determining the Borrowers’ compliance with Section 7.18 shall be set forth on
the Approved Budget Variance Report.

 

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“Approved Foreign Vendor” means a Foreign Vendor which (a) is located in any
country acceptable to the Agent in its reasonable discretion (and China,
Indonesia, Taiwan, Thailand and Vietnam are deemed acceptable), (b) has received
timely payment or performance of all obligations owed to it by the Loan Parties,
(c) has not asserted any reclamation, repossession, diversion, stoppage in
transit, Lien or title retention rights in respect of such Inventory, and (d),
if so reasonably requested by the Agent, has entered into and is in full
compliance with the terms of a Foreign Vendor Agreement.

“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 under common control
with such Lender, Affiliate or advisor, as applicable.

“Approved Liquidator” means a nationally recognized liquidator of recognized
standing approved by the Agent in its Permitted Discretion.

“Asset Sale” means the sale of all or substantially all of the Borrowers’ assets
pursuant to an asset purchase agreement approved by the Bankruptcy Court in the
Asset Sale Order pursuant to Bankruptcy Code section 363.

“Asset Sale Effective Date” means the date on which the Asset Sale is
consummated after all conditions to the closing of the Asset Sale have been
satisfied or waived by Agent.

“Asset Sale Hearing” means the hearing before the Bankruptcy Court to consider
approval of the Asset Sale.

“Asset Sale Motion” means a motion filed in the Bankruptcy Case seeking entry of
the Asset Sale Procedures Order and the Asset Sale Order by the Bankruptcy
Court.

“Asset Sale Order” means an order of the Bankruptcy Court, in form and substance
satisfactory to Agent, approving the Asset Sale and distribution of proceeds to
the Agent.

“Asset Sale Procedures Order” means an order of the Bankruptcy Court
(a) approving the procedures for the Asset Sale, (b) approving the form of the
asset purchase agreement and (c) scheduling an auction and the Asset Sale
Hearing.

“Assignee Group” means two or more 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 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 D or any other form approved by the Agent.

 

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“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.

“Audited Financial Statements” means the audited consolidated balance sheet of
the Lead Borrower and its Subsidiaries for the Fiscal Year ended December 31,
2013, and the related consolidated statements of income or operations,
Shareholders’ Equity and cash flows for such Fiscal Year of the Lead Borrower
and its Subsidiaries, including the notes thereto.

“Auto-Extension Letter of Credit” shall have the meaning specified in
Section 2.03(b)(iii).

“Availability” means, as of any date of determination thereof by the Agent, the
result, if a positive number, of:

 

  (a) the Maximum Loan Amount,

minus

 

  (b) the Total Outstandings.

In calculating Availability at any time and for any purpose under this
Agreement, the Lead Borrower shall certify to the Agent that all post-petition
obligations are being paid within fifteen (15) days after the due date thereof
(or are being contested in good faith with adequate reserves established by the
Lead Borrower) and outstanding accounts payable as of the date of this Agreement
will be paid as contemplated under the Approved Budget.

“Availability Block” means an amount equal to (i) for the period commencing on
the Closing Date and ending on July 4, 2014, $2,768,000, (ii) so long as no
Default or Event of Default has occurred, including any Event of Default under
Section 6.26 hereof, for the period commencing on July 5, 2014 and ending on
July 31, 2014, $2,000,000, and (iii) so long as no Default or Event of Default
has occurred, including any Event of Default under Section 6.26 hereof, at all
other times, an amount equal to $500,000 or, if an Event of Default exists, such
other amount established by the Agent.

“Availability Period” means the period from and including the Closing Date to
the earliest of (a) the Maturity Date, (b) the date of termination of the
Aggregate Commitments pursuant to Section 2.06, and (c) the date of termination
of the commitment of each Lender to make Committed Loans and of the obligation
of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.

 

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“Availability Reserves” means, without duplication of any other Reserves or
items to the extent such items are otherwise addressed or excluded through
eligibility criteria, such reserves as the Agent from time to time determines in
its Permitted Discretion as being appropriate (a) to reflect the impediments to
the Agent’s ability to realize upon the Collateral, (b) to reflect claims and
liabilities that the Agent determines will need to be satisfied in connection
with the realization upon the Collateral, including without limitation, amounts
entitled to priority under Section 503(b) of the Bankruptcy Code, as determined
by the Agent in its Permitted Discretion, (c) to reflect criteria, events,
conditions, contingencies or risks which adversely affect any component of the
Borrowing Base, or the assets, business, financial performance or financial
condition of any Loan Party, or (d) to reflect that a Default or an Event of
Default then exists. Without limiting the generality of the foregoing,
Availability Reserves may include, in the Agent’s Permitted Discretion, (but are
not limited to) reserves based on: (i) rent; (ii) customs duties, and other
costs to release Inventory which is being imported into the United States;
(iii) outstanding Taxes and other governmental charges, including, without
limitation, ad valorem, real estate, personal property, sales, claims of the
PBGC and other Taxes which may have priority over the interests of the Agent in
the Collateral; (iv) salaries, wages and benefits due to employees of any
Borrower, (v) Customer Credit Liabilities, (vi) Customer Deposits,
(vii) reserves for reasonably anticipated changes in the Appraised Value of
Eligible Inventory between appraisals, (viii) warehousemen’s or bailee’s charges
and other Permitted Encumbrances which may have priority over the interests of
the Agent in the Collateral, (ix) amounts due to vendors on account of consigned
goods, (x) Cash Management Reserves, (x) Bank Product Reserves,
(xii) liabilities in connection with returned goods, and (xiii) fees or
royalties payable in respect of licensed merchandise.

“Bankruptcy Code” has the meaning specified in the Recitals hereto.

“Bankruptcy Court” has the meaning specified in the Recitals hereto.

“Bank Products” means any services of facilities provided to any Loan Party by
the Agent or any of its Affiliates (but excluding Cash Management Services)
including, without limitation, on account of (a) Swap Contracts, (b) merchant
services constituting a line of credit, (c) leasing, (d) Factored Receivables,
and (e) supply chain finance services, including, without limitation, trade
payable services and supplier accounts receivable purchases.

“Bank Product Reserves” means such reserves as the Agent from time to time
determines in its Permitted Discretion as being appropriate to reflect the
liabilities and obligations of the Loan Parties with respect to Bank Products
then provided or outstanding.

“Base Rate” means a variable rate of interest per annum equal to the prime rate
of interest from time to time published by www.bankrate.com. The applicable
prime rate for any date not set forth therein shall be the rate set forth the
immediately preceding date. In the event that www.bankrate.com ceases to publish
a prime rate or its equivalent, the term “Base Rate” shall mean a variable rate
of interest per annum equal to the highest of the “prime rate”, “reference
rate”, “base rate”, or other similar rate announced from time to time by any of
the three largest banks (based on combined capital and surplus) headquartered in
New York, New York and published in The Wall Street Journal (with the
understanding that any such rate may merely be a reference rate and may not
necessarily represent the lowest or best rate actually charged to any customer
by any such bank or by the Agent or any Lender).

 

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“Blocked Account” has the meaning provided in Section 6.13(a)(i).

“Blocked Account Agreement” means with respect to a DDA established by a Loan
Party, an agreement, in form and substance reasonably satisfactory to the Agent,
establishing control (as defined in the UCC) of such DDA by the Agent and
whereby the bank maintaining such DDA agrees to comply only with the
instructions originated by the Agent without the further consent of any Loan
Party.

“Blocked Account Bank” means each bank with whom DDAs are maintained in which
any funds of any of the Loan Parties from one or more DDAs are concentrated and
with whom a Blocked Account Agreement has been, or is required to be, executed
in accordance with the terms hereof.

“Board of Directors” means, with respect to the Lead Borrower, the board of
directors of the Lead Borrower or any committee thereof duly authorized to act
on behalf of the board of directors.

“Borrower Materials” has the meaning specified in Section 6.02.

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

“Borrowing Base Certificate” means a certificate substantially in the form of
Exhibit E hereto (with such changes therein as may be required by the Agent to
reflect the components of and reserves against the Tranche A Borrowing Base and
the Tranche A-1 Borrowing Base as provided for hereunder from time to time),
executed and certified as accurate and complete by a Responsible Officer of the
Lead Borrower which shall include appropriate exhibits, schedules, supporting
documentation, and additional reports as reasonably requested by the Agent.

“Business” means the design, marketing and distribution of branded infant and
juvenile consumer products.

“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.

“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.

 

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“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.

“Carve-Out” means, collectively, the sum of: (i) all fees required to be paid to
the Clerk of the Bankruptcy Court and to the Office of the United States Trustee
pursuant to 28 U.S.C. §1930(a) and Section 3717 of title 31 of the United States
Code and (ii) the aggregate amount of Allowed Professional Fees of Case
Professionals and the reimbursement of expenses of the Statutory Committee,
which amounts shall be equal to the sum of (a) $400,000 (which is being
deposited into the Professional Fee Escrow Account on the Closing Date in
accordance with the Approved Budget) and (b) an amount equal to $200,000 per
week, which shall be funded into the Professional Fee Escrow Account on
Wednesday of each week (or such other day of the week selected by the Borrowers)
pursuant to the Approved Budget; provided that (x) the Borrowers have sufficient
Availability on such date, (y) no Event of Default has occurred and is
continuing and (z) the Termination Date has not occurred. No portion of the
Carve-Out, nor any cash collateral or proceeds of the Loans may be used in
violation of the Interim Financing Order or Final Financing Order, as
applicable. Notwithstanding anything to the contrary contained in this
Agreement, (A) until an Event of Default or the Termination Date has occurred,
the Borrowers shall be permitted to borrow under this Agreement on a weekly
basis to fund the Professional Fee Escrow Account in the amounts contemplated
under clause (b) of this definition, subject to there being sufficient
Availability for such borrowings, and (B) the Loan Parties shall be permitted to
pay, from the Professional Fee Escrow Account, as and when the same may become
due and payable, fees and expenses of Case Professionals payable under 11 U.S.C.
§330 and §331 pursuant to court order, regardless of whether an Event of Default
has occurred and is continuing at such time. Any amounts in the Professional Fee
Escrow Account after the payment in full of all Allowed Professional Fees of
Case Professionals pursuant to final fee applications and orders shall be
returned to the Agent, which amounts shall be applied to the Obligations in the
order proscribed in Section 8.03 of this Agreement.

“Case Professionals” means the Loan Parties’ and any Statutory Committee’s
professionals, retained by either of them by final order of the Bankruptcy Court
(which order has not been reversed, vacated or stayed unless such stay is no
longer effective) under Sections 327, 328 or 1103(a) of the Bankruptcy Code.

“Cash Collateralize” has the meaning specified in Section 2.03(g). Derivatives
of such term have corresponding meanings.

“Cash Management Bank” means a financial institution selected by Lead Borrower
and approved by Agent in its reasonable discretion.

“Cash Management Order” means the order of the Bankruptcy Court entered in the
Chapter 11 Case, together with all extensions, modifications and amendments that
are in form and substance acceptable to the Agent in its Permitted Discretion,
which, among other matters, authorizes the Loan Parties to use their cash
management system, substantially in the form of Exhibit H.

“Cash Management Reserves “ means such reserves as the Agent, from time to time,
determines in its Permitted Discretion as being appropriate to reflect the
reasonably anticipated liabilities and obligations of the Loan Parties with
respect to Cash Management Services then provided or outstanding.

 

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“Cash Management Services” means any cash management services or facilities
provided to any Loan Party by the Agent or any of its Affiliates, including,
without limitation: (a) ACH transactions, (b) controlled disbursement services,
treasury, depository, overdraft, and electronic funds transfer services,
(c) credit or debit cards, (d) credit card processing services, and (e) purchase
cards.

“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 or application thereof by any Governmental
Authority or (c) the making or issuance of any request, guideline or directive
(whether or not having the force of law) by any Governmental Authority;
provided, however, for the purposes of this Agreement: (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 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 each occurrence of any of the following:

(a) any “person” or “group” (within the meaning of Sections 13(d) and 14(d) of
the Exchange Act), other than Permitted Holders, becomes the beneficial owner
(as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of a
majority of the ordinary voting power for the election of the Board of
Directors,

(b) a majority of the members of the Board of Directors do not constitute
Continuing Directors,

(c) the Lead Borrower ceases to own and control, directly or indirectly, 100% of
the Equity Interests of the other Loan Parties, unless otherwise permitted
hereunder,

(d) any Borrower ceases to own and control, directly or indirectly, 100% of the
Equity Interests of any Loan Party which is its Subsidiary, unless otherwise
permitted hereunder,

 

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(e) any “change in control” or “sale” or “disposition” or similar event as
defined in any Organizational Document of any Loan Party or any document
governing Material Indebtedness of any Loan Party; or

(f) the Lead Borrower (i) consolidates with or merges with or into another
entity (other than a Loan Party) and is not the surviving entity or
(ii) conveys, transfers or leases all or substantially all of its property and
assets to any Person (other than a Loan Party).

“Chapter 11 Case” has the meaning specified in the Recitals hereto.

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

“CoCaLo” means CoCaLo, Inc., a California corporation.

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

“Collateral” means any and all “Collateral” or “Mortgaged Property” 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.

“Collateral Access Agreement” means an agreement reasonably satisfactory in form
and substance to the Agent executed by (a) a bailee or other Person in
possession of Collateral, and (b) any landlord of Real Estate leased by any Loan
Party, pursuant to which such Person (i) acknowledges the Agent’s Lien on the
Collateral, (ii) releases or subordinates such Person’s Liens in the Collateral
held by such Person or located on such Real Estate, (iii) provides the Agent
with access to the Collateral held by such bailee or other Person or located in
or on such Real Estate, (iv) as to any landlord, provides the Agent with a
reasonable time to sell and dispose of the Collateral from such Real Estate, and
(v) makes such other agreements with the Agent as the Agent may reasonably
require.

“Collateral Monitoring Fee” has the meaning specified in Section 2.09.

“Combined Borrowing Base” means the sum of the Tranche A Borrowing Base plus the
Tranche A-1 Borrowing Base.

“Commercial Letter of Credit” means any Letter of Credit issued for the purpose
of providing the primary payment mechanism in connection with the purchase of
any materials, goods or services by a Loan Party in the ordinary course of
business of such Loan Party.

“Commitment” means, as to each Lender, its obligation to make Committed Loans to
the Borrowers pursuant to Section 2.01, in an aggregate principal amount at any
one time outstanding not to exceed the amount set forth opposite such Lender’s
name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such
Lender becomes a party hereto, as applicable, as such amount may be adjusted
from time to time in accordance with this Agreement.

 

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“Commitment Fee” has the meaning specified in Section 2.09(a).

“Committed Borrowing” means a borrowing consisting of simultaneous Committed
Loans made by each of the Lenders pursuant to Section 2.01.

“Committed Loan” means individually, a Tranche A Loan or a Tranche A-1 Loan, and
collectively, all Tranche A Loans and all Tranche A-1 Loans.

“Committed Loan Notice” means a notice of a Committed Borrowing, pursuant to
Section 2.02, which, if in writing, shall be substantially in the form of
Exhibit A.

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

“Concentration Account” has the meaning provided in Section 6.13(c).

“Consent” means actual consent given by a Lender from whom such consent is
sought; or the passage of five (5) 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 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.

“Consultant” has the meaning provided in Section 6.23.

“Continuing Director” means (a) any member of the Board of Directors who was a
director of the Lead Borrower on the Closing Date, and (b) any individual who
becomes a member of the Board of Directors after the Closing Date if such
individual was appointed or nominated for election to the Board of Directors by
a majority of the Continuing Directors.

“Contractual Obligation” means, as to any Person, any provision 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.

“Corporate Account” means, each of the deposit accounts ending in 1245 and 8373
in the name of the Lead Borrower and I & J Holdco, Inc., respectively, at
JPMorgan Chase Bank, N.A., so long as such accounts exist, which accounts shall
have, at the end of any day, in the aggregate for all such accounts, a balance
not to exceed all outstanding checks written against such accounts on such day
plus the applicable minimum balance for the depository bank. For the avoidance
of doubt, Corporate Accounts shall be subject to springing Blocked Account
Agreements, which, prior to activation by the Agent, shall be under the control
of the Borrowers.

 

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“Cost” means the lower of cost or market value of Inventory, based upon the
Borrowers’ accounting practices, known to the Agent, which practices are in
effect on the Closing Date as such calculated cost is determined from invoices
received by the Borrowers, the Borrowers’ purchase journals or the Borrowers’
stock ledger. “Cost” does not include inventory capitalization costs or other
non-purchase price charges (such as freight) used in the Borrowers’ calculation
of cost of goods sold.

“CPSC Matter” means the charges brought by the United States Consumer Product
Safety Commission in accordance with the Consumer Product Safety Act against the
Lead Borrower and LaJobi.

“Credit Card Issuer” shall mean any person (other than a Borrower or other Loan
Party) who issues or whose members issue credit cards, including, without
limitation, MasterCard or VISA bank credit cards or other bank credit cards
issued through MasterCard International, Inc., Visa, U.S.A., Inc. or Visa
International and American Express, Discover, Diners Club, Carte Blanche and
other non-bank credit, including, without limitation, credit cards issued by or
through American Express Travel Related Services Company, Inc., and Novus
Services, Inc. and other issuers approved by the Agent.

“Credit Card Processor” shall mean any servicing or processing agent or any
factor or financial intermediary who facilitates, services, processes or manages
the credit authorization, billing transfer and/or payment procedures with
respect to any Borrower’s sales transactions involving credit card or debit card
purchases by customers using credit cards or debit cards issued by any Credit
Card Issuer.

“Credit Card Receivables” means each “payment intangible” (as defined in the
UCC) together with all income, payments and proceeds thereof, owed by a Credit
Card Issuer or Credit Card Processor to a Loan Party resulting from charges by a
customer of a Loan Party on credit or debit cards issued by such issuer in
connection with the sale of goods by a Loan Party, or services performed by a
Loan Party, in each case in the ordinary course of its business.

“Credit Extensions” mean each of the following: (a) a Committed Borrowing and
(b) an L/C Credit Extension.

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

 

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“Credit Party Expenses” means, without limitation, (a) all reasonable
out-of-pocket expenses incurred by the Agent and its Affiliates and any Lender
in connection with this Agreement, the other Loan Documents, and the Interim and
Final Financing Orders, including without limitation (i) the reasonable fees,
charges and disbursements of (A) counsel for the Agent and Lenders, (B) outside
consultants for the Agent, (C) appraisers, (D) commercial finance examinations,
and (E) all such reasonable and documented out-of-pocket expenses incurred
during any workout, restructuring or negotiations in respect of the Obligations,
(ii) in connection with (A) the syndication or financing of the credit
facilities provided for herein, including any expenses or fees incurred in
connection with obtaining a rating for such credit facilities, (B) 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 and the Interim and Final Financing Orders
(whether or not the transactions contemplated hereby or thereby shall be
consummated), (C) the enforcement or protection of their rights in connection
with this Agreement or the Loan Documents or efforts to monitor, preserve,
protect, collect, or enforce the Collateral, or (D) any workout, restructuring
or negotiations in respect of any Obligations, and (b) with respect to any L/C
Issuer, and its Affiliates, all reasonable and documented out-of-pocket expenses
incurred in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder; and (c) all customary
fees and charges (as adjusted from time to time) of the Agent and the Lenders
with respect to access to online Loan information, the disbursement of funds (or
the receipt of funds) to or for the account of Loan Parties (whether by wire
transfer or otherwise), together with any reasonable and documented
out-of-pocket costs and expenses incurred in connection therewith; and (d) upon
the occurrence and during the continuance of an Event of Default or upon any
increase in the amount of the Aggregate Commitments after the Closing Date, all
reasonable out-of-pocket expenses incurred by the Credit Parties who are not the
Agent, a L/C Issuer or any Affiliate of any of them, provided that such Credit
Parties shall be entitled to reimbursement for no more than one counsel
representing all such Credit Parties (absent a conflict of interest in which
case the Credit Parties may engage and be reimbursed for additional counsel).

“Cumulative Period” means the period from the Petition Date through the most
recent week ended.

“Cumulative Four Week Period” shall mean the four-week period up to and through
the Sunday of the most recent week then ended, or if a four-week period has not
then elapsed from the Petition Date, such shorter period since the Petition Date
through the Sunday of the most recent week then ended.

“Customer Credit Liabilities” means at any time, the aggregate remaining value
at such time of (a) outstanding gift certificates and gift cards of the
Borrowers entitling the holder thereof to use all or a portion of the
certificate or gift card to pay all or a portion of the purchase price for any
Inventory, (b) outstanding merchandise credits of the Borrowers, and
(c) liabilities in connection with frequent shopping programs of the Borrowers.

“Customer Deposits” means at any time, the aggregate amount at such time of
(a) deposits made by customers with respect to the purchase of goods or the
performance of services and (b) layaway obligations of the Borrowers.

“Customs Broker/Carrier Agreement” means an agreement in form and substance
satisfactory to the Agent among a Borrower, a customs broker, freight forwarder,
consolidator or carrier, and the Agent, in which the customs broker, freight
forwarder, consolidator or carrier acknowledges that it has control over and
holds the documents evidencing ownership of the subject Inventory for the
benefit of the Agent and agrees, upon notice from the Agent, to hold and dispose
of the subject Inventory solely as directed by the Agent.

 

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“Customs Matter” means the various governmental investigations arising out of
the Duty Events (including, without limitation, U.S. Customs and Border
Protection, U.S. Attorney’s Office for the District of New Jersey and Securities
and Exchange Commission).

“DDA” means each checking, savings or other demand deposit account maintained by
any of the Loan Parties (other than Excluded Accounts). All funds in each DDA
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 DDA.

“DDA Notification” has the meaning provided therefor in Section 6.13(a)(ii).

“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 and affecting the rights of creditors
generally.

“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, (a) with respect to the Tranche A Loans, the Tranche A
Interest Rate plus 3.5% per annum, and (b) with respect to the Tranche A-1
Loans, the Tranche A-1 Interest Rate plus 3.5% per annum.

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of
the Committed Loans required to be funded by it hereunder within one
(1) Business Day of the date required to be funded by it hereunder, (b) has
otherwise failed to pay over to the Agent or any other Lender any other amount
required to be paid by it hereunder within one (1) Business Day of the date when
due, (c) has failed or refused to abide by any of its obligations under this
Agreement, or (d) has been deemed insolvent or become the subject of a
bankruptcy or insolvency proceeding.

“Deteriorating Lender” means any Defaulting Lender or any Lender as to which
(a) the Agent has a good faith belief that such Lender has defaulted in
fulfilling its obligations under one or more other syndicated credit facilities,
or (b) a Person that Controls such Lender has been deemed insolvent or become
the subject of a bankruptcy, insolvency or similar proceeding.

“DIP Exit Fee” has the meaning specified in Section 2.09(c).

“Disposition” or “Dispose” means the sale, transfer, license, lease or other
disposition (whether in one transaction or in a series of transactions, and
including any sale and leaseback transaction and any sale, transfer, license or
other disposition) of any property (including, without limitation, any Equity
Interests) 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.

 

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“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; provided, however, that
(i) only the portion of such Equity Interests which so matures or is mandatorily
redeemable, is so convertible or exchangeable or is so redeemable at the option
of the holder thereof prior to such date shall be deemed to be Disqualified
Stock and (ii) with respect to any Equity Interests issued to any employee or to
any plan for the benefit of employees of the Lead Borrower or its Subsidiaries
or by any such plan to such employees, such Equity Interest shall not constitute
Disqualified Stock solely because it may be required to be repurchased by the
Lead Borrower or one of its Subsidiaries in order to satisfy applicable
statutory or regulatory obligations or as a result of such employee’s
termination, resignation, death or disability and if any class of Equity
Interest of such Person that by its terms authorizes such Person to satisfy its
obligations thereunder by delivery of an Equity Interest that is not
Disqualified Stock, such Equity Interests shall not be deemed to be Disqualified
Stock. Notwithstanding the preceding sentence, any Equity Interest that would
constitute Disqualified Stock solely because the holders thereof have the right
to require a Loan Party to repurchase such Equity Interest upon the occurrence
of a change of control or an asset sale shall not constitute Disqualified Stock.
The amount of Disqualified Stock deemed to be outstanding at any time for
purposes of this Agreement will be the maximum amount that the Lead 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.

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

“Duty Amounts” means all customs duties, interest, penalties and any other
amounts payable or owed to U.S. Customs and Border Protection by LaJobi, Kids
Line, CoCaLo or Sassy, to the extent that such customs duties, interest,
penalties and other amounts relate to the Duty Events.

“Duty Events” means (i) the nonpayment or incorrect payment by LaJobi of import
duties to U.S. Customs and Border Protection on certain wooden furniture
imported by LaJobi from vendors in China, resulting in a violation prior to
March 30, 2011 of anti-dumping regulations, and the related misconduct on the
part of certain LaJobi employees, including the misidentification of the
manufacturer and shipper of such products, (ii) LaJobi’s business and staffing
practices in Asia prior to March 30, 2011 relating thereto, and (iii) the
filings by Kids Line, CoCaLo and Sassy of certain incorrect entries and invoices
with U.S. Customs.

“Earnout Consideration” shall have the meaning given to such term in the
Acquisition Agreement executed in connection with the LaJobi Acquisition (as in
effect on the Closing Date).

 

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“Eligible In-Transit Inventory” means, as of any date of determination thereof,
without duplication of other Eligible Inventory, In-Transit Inventory:

(a) which has been shipped from a foreign location for receipt by a Borrower,
but which has not yet been delivered to such Borrower, which In-Transit
Inventory has been in transit for forty-two (42) days or less from the date of
shipment of such Inventory;

(b) for which the purchase order is in the name of a Borrower and title and risk
of loss has passed to such Borrower;

(c) for which an Acceptable Document of Title has been issued (over which, if
requested by the Agent after the occurrence and during the continuance of a
Default or Event of Default, the Agent is perfected by the delivery of a Customs
Broker/Carrier Agreement);

(d) which is insured to the reasonable satisfaction of the Agent (including,
without limitation, marine cargo insurance);

(e) the Foreign Vendor with respect to such In-Transit Inventory is an Approved
Foreign Vendor;

(f) for which payment of the purchase price has been made by the Borrower or has
not been made by the Borrower in accordance with credit terms agreed by the
applicable Foreign Vendor, or the purchase price is supported by a Commercial
Letter of Credit; and

(g) which otherwise would constitute Eligible Inventory;

provided that the Agent may, in its Permitted Discretion, exclude any particular
Inventory from the definition of “Eligible In-Transit Inventory” in the event
the Agent determines that such Inventory is subject to any Person’s right of
reclamation, repudiation, stoppage in transit or any event has occurred or is
reasonably anticipated by the Agent to arise which may otherwise materially and
adversely impact the ability of the Agent to realize upon such Inventory.

“Eligible Intellectual Property” means Intellectual Property deemed by the Agent
in its Permitted Discretion to be eligible for inclusion in the calculation of
the Tranche A-1 Borrowing Base and which, except as otherwise agreed by the
Agent in its Permitted Discretion, satisfies all of the following conditions:

(a) Such Intellectual Property is validly registered with the U.S. Patent and
Trademark Office or the U.S. Copyright Office, as applicable;

(b) A Borrower owns such Intellectual Property or exclusively licenses such
Intellectual Property from a third party;

 

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(c) Such Borrower is in compliance in all material respects with the
representations, warranties and covenants set forth in the Security Agreement
relating to such Intellectual Property;

(d) The Agent shall have received evidence that all actions that the Agent may
reasonably deem necessary or appropriate in order to create valid first and
subsisting Liens (subject only to Permitted Encumbrances (other than
Encumbrances securing Indebtedness) which have priority over the Lien of the
Agent by operation of Law) on such Intellectual Property (including, without
limitation, filings at the U.S. Patent and Trademark Office or the U.S.
Copyright Office, as applicable) has been taken; and

(e) The Agent shall have received an appraisal of such Intellectual Property by
a third party appraiser reasonably acceptable to the Agent and otherwise in form
and substance reasonably satisfactory to the Agent.

“Eligible Inventory” means, as of the date of determination thereof, without
duplication, items of Inventory of a Borrower that are finished goods,
merchantable and readily saleable to the public in the ordinary course of the
Borrowers’ business and deemed by the Agent in its Permitted Discretion to be
eligible for inclusion in the calculation of the Tranche A Borrowing Base, in
each case that, except as otherwise agreed by the Agent, (A) complies with each
of the representations and warranties respecting Inventory made by the Borrowers
in the Loan Documents, and (B) is not excluded as ineligible by virtue of one or
more of the criteria set forth below. Except as otherwise agreed by the Agent,
in its Permitted Discretion, the following items of Inventory shall not be
included in Eligible Inventory:

(a) Inventory that is not solely owned by a Borrower or a Borrower does not have
good and valid title thereto;

(b) Inventory that is leased by or is on consignment to a Borrower or which is
consigned by a Borrower to a Person which is not a Loan Party;

(c) (i) In-Transit Inventory (other than Eligible In-Transit Inventory in an
aggregate amount not to exceed $10,000,000 valued at Cost, at any time) and
(ii) Inventory that is not located in the United States of America (excluding
territories or possessions of the United States);

(d) Inventory that is not located at a location that is owned or leased by a
Borrower, except (i) Inventory in transit between such owned or leased locations
or locations which meet the criteria set forth in clause (ii) below, or (ii) to
the extent that the Borrowers have furnished the Agent with (A) any UCC
financing statements or other documents that the Agent may determine to be
necessary to perfect its security interest in such Inventory at such location,
and (B) a Collateral Access Agreement executed by the Person owning any such
location on terms reasonably acceptable to the Agent;

(e) Inventory that is located: (i) in a distribution center leased by a Borrower
unless the applicable lessor has delivered to the Agent a Collateral Access
Agreement, or (ii) at any leased location in a Landlord Lien State unless the
applicable lessor has delivered to the Agent a Collateral Access Agreement or
the Agent has implemented Reserves for such location;

 

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(f) Inventory that is comprised of goods which (i) are damaged, defective,
“seconds,” or otherwise unmerchantable, (ii) are to be returned to the vendor,
(iii) are custom items, work in process, raw materials, or that constitute
samples, spare parts, promotional, marketing, labels, bags and other packaging
and shipping materials or supplies used or consumed in a Borrower’s business,
(iv) are not in compliance with all standards imposed by any Governmental
Authority having regulatory authority over such Inventory, its use or sale, or
(v) are bill and hold goods;

(g) Inventory that is not subject to a perfected first priority security
interest in favor of the Agent;

(h) Inventory that is not insured in compliance with the provisions of
Section 5.10 hereof;

(i) Inventory that has been sold but not yet delivered or as to which a Borrower
has accepted a deposit;

(j) Inventory that is subject to any licensing, patent, royalty, trademark,
trade name or copyright agreement with any third party from which any Borrower
or any of its Subsidiaries has received notice of a material dispute in respect
of any such agreement;

(k) Inventory which is not of the type usually sold in the ordinary course of
the Borrowers’ business, unless and until the Agent has completed or received
(A) an appraisal of such Inventory from appraisers reasonably satisfactory to
the Agent and establishes an Inventory Advance Rate and Inventory Reserves (if
applicable) therefor, and otherwise agrees that such Inventory shall be deemed
Eligible Inventory, and (B) such other due diligence as the Agent may require,
all of the results of the foregoing to be reasonably satisfactory to the Agent;
or

(l) Inventory that is subject to any license under which one or more Borrowers
is the licensee and which would restrict the Administrative Agent’s ability to
sell or otherwise dispose of such Inventory or prohibit the Agent’s Lien to
secure the Obligations, except for (x) licensed Inventory for which the
Borrowers provide appropriate waivers and documentation from applicable
licensors consenting to the grant of a security interest in favor of the Agent,
in each case satisfactory to the Agent in the Agent’s Permitted Discretion or
(y) at the Permitted Discretion of the Agent, other licensed Inventory subject
to an associated Availability Reserve for all license fees owed.

 

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“Eligible Trade Receivables” means Accounts deemed by the Agent in its Permitted
Discretion to be eligible for inclusion in the calculation of the Tranche A
Borrowing Base arising from the sale of the Borrowers’ Inventory (other than
those consisting of Credit Card Receivables) that satisfies the following
criteria at the time of creation and continues to meet the same at the time of
such determination: such Account (i) has been earned by performance and
represents the bona fide amounts due to a Borrower from an account debtor, and
in each case originated in the ordinary course of business of such Borrower, and
(ii) in each case is acceptable to the Agent in its Permitted Discretion, and is
not ineligible for inclusion in the calculation of the Tranche A Borrowing Base
pursuant to any of clauses (a) through (v) below. Without limiting the
foregoing, to qualify as an Eligible Trade Receivable, an Account shall indicate
no Person other than a Borrower as payee or remittance party. In determining the
amount to be so included, the face amount of an Account shall be reduced by,
without duplication, to the extent not reflected in such face amount, (i) the
amount of all accrued and actual discounts, claims, credits or credits pending,
promotional program allowances, price adjustments, finance charges or other
allowances (including any amount that a Borrower may be obligated to rebate to a
customer pursuant to the terms of any agreement or understanding (written or
oral)) and (ii) the aggregate amount of all cash received in respect of such
Account but not yet applied by the Borrowers to reduce the amount of such
Eligible Trade Receivable. Except as otherwise agreed by the Agent, any Account
included within any of the following categories shall not constitute an Eligible
Trade Receivable:

(a) Accounts that are not evidenced by an invoice;

(b) Accounts that have been outstanding for more than sixty (60) days past the
due date or more than 100 days from the date of sale; provided that Accounts
owed by Babies “R” Us or Walmart which are outstanding for more than 100 days
from the date of sale but less than 120 days from the date of sale, in an
aggregate amount not to exceed $2,000,000, shall be deemed Eligible Trade
Receivables;

(c) Accounts due from any account debtor of which more than fifty percent
(50%) of Accounts due from such account debtor are described in clause (b),
above;

(d) (i) All Accounts owed by an account debtor (other than Babies “R” Us or
Walmart) and/or its Affiliates together exceed twenty five percent (25%) of the
amount of all Accounts at any one time, (ii) Accounts owed by Babies “R” Us that
exceed 50% (such percentage being subject to reduction by Agent in its Permitted
Discretion) of all Accounts at any one time or (iii) Accounts owed by Walmart
that exceed 50% (such percentage being subject to reduction by Agent in its
Permitted Discretion) of all Accounts at any one time, but in each case of
clauses (i), (ii) and (iii), the portion of the Accounts not in excess of the
applicable percentages shall be deemed Eligible Trade Receivables, in the
Agent’s Permitted Discretion;

(e) Accounts (i) that are not subject to a perfected first priority security
interest in favor of the Agent, or (ii) with respect to which a Borrower does
not have good, valid and marketable title thereto, free and clear of any Lien
(other than Liens granted to the Agent pursuant to the Security Documents);

(f) Accounts which are disputed or with respect to which a claim, counterclaim,
offset or chargeback has been asserted, but only to the extent of such dispute,
counterclaim, offset or chargeback;

(g) Accounts which arise out of any sale made not in the ordinary course of
business, made on a basis other than upon credit terms usual to the business of
the Borrowers;

 

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(h) Accounts which are owed by any Affiliate or any employee of a Loan Party;

(i) Accounts for which all consents, approvals or authorizations of, or
registrations or declarations with any Governmental Authority required to be
obtained, effected or given in connection with the performance of such Account
by the account debtor or in connection with the enforcement of such Account by
the Agent have not been duly obtained, effected or given and are not in full
force and effect;

(j) Accounts due from an account debtor which is the subject of any bankruptcy
or insolvency proceeding, has had a trustee or receiver appointed for all or a
substantial part of its property, has made an assignment for the benefit of
creditors or has suspended its business;

(k) Accounts due from any Governmental Authority except to the extent that the
subject account debtor is the federal government of the United States of America
and has complied with the Federal Assignment of Claims Act of 1940 and any
similar state legislation;

(l) Accounts (i) owing from any Person that is also a supplier to or creditor of
a Loan Party or any of its Subsidiaries or (ii) representing any manufacturer’s
or supplier’s credits, discounts, incentive plans or similar arrangements
entitling a Loan Party or any of its Subsidiaries to discounts on future
purchase therefrom;

(m) Accounts arising out of sales on a bill-and-hold, guaranteed sale,
sale-or-return, sale on approval or consignment basis or subject to any right of
return, set off or charge back;

(n) Accounts arising out of sales to account debtors outside the United States,
Canada or Puerto Rico unless such Accounts are fully backed by an irrevocable
letter of credit on terms, and issued by a financial institution, reasonably
acceptable to the Agent and such irrevocable letter of credit is in the
possession of the Agent;

(o) Accounts payable other than in Dollars or Canadian Dollars or that are
otherwise on terms other than those normal and customary in the Loan Parties’
business;

(p) Accounts evidenced by a promissory note or other instrument;

(q) Accounts consisting of amounts due from vendors as rebates or allowances;

(r) Accounts which are in excess of the credit limit for such account debtor
established by the Loan Parties in the ordinary course of business and
consistent with past practices;

(s) Accounts which include extended payment terms (datings) beyond those
generally furnished to other account debtors in the ordinary course of business;

 

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(t) Accounts which constitute Credit Card Receivables; or

(u) Accounts which the Agent determines in its Permitted Discretion to be
unacceptable for inclusion in the Tranche A Borrowing Base after notice of such
determination is given to the Lead Borrower.

“Environmental Laws” means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements 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 substances or wastes, air emissions and discharges to waste or public
systems.

“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 any 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.

“Equipment” has the meaning set forth in the UCC.

“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 nonvoting, 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 Lead 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).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Lead Borrower or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it 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 Lead 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 Plan amendment as a termination under Sections 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an 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 or Multiemployer Plan; or (f) 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 Lead
Borrower or any ERISA Affiliate.

 

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“Event of Default” has the meaning specified in Section 8.01.

“Exchange Act” means the Securities Exchange Act of 1934.

“Excluded Accounts” means (a) deposit accounts used exclusively and in the
ordinary course of business for payroll, payroll taxes or employee benefits and
(b) Zero Balance Accounts (if any). Excluded Accounts shall not be subject to
Blocked Account Agreements, or to the requirements of Section 6.13.

“Excluded Disbursement Accounts” means deposit accounts funded exclusively by
the proceeds of the Loans or funds from another Excluded Disbursement Account
and having at the end of any day, in the aggregate for all such accounts, a
balance not to exceed all outstanding checks written against such accounts on
such day plus $100,000. Excluded Disbursement Accounts shall be subject to
springing Blocked Account Agreements, which, prior to activation by the Agent,
shall be under the control of the Borrowers.

“Excluded Taxes” means, with respect to the Agent, any Lender, the L/C Issuer or
any other recipient of any payment to be made by or on account of any obligation
of the Loan Parties hereunder, (a) Taxes imposed on or measured by its overall
net income (however denominated), and franchise taxes imposed on it (in lieu of
net income taxes), by (i) the United States of America or by the jurisdiction
(or any political subdivision thereof) under the laws of which such recipient is
organized or in which its principal office is located (or any political
subdivision of any such jurisdictions) or, in the case of any Lender, in which
its applicable Lending Office is located or (ii) 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, or
engaged in any other transactional pursuant to any Loan Document), (b) any
branch profits taxes imposed by the United States or any similar tax imposed by
any other jurisdiction in which any Loan Party is located, (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Lead
Borrower under Section 10.13), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
hereto (or designates a new Lending Office) or is attributable to such Foreign
Lender’s failure or inability (other than as a result of a Change in Law) to
comply with Section 3.01(e), except to the extent that such Foreign Lender (or
its assignor, if any) was entitled, at the time of designation of a new Lending
Office (or assignment), to receive additional amounts from the Loan Parties with
respect to such withholding tax pursuant to Section 3.01(a), (d) any U.S.
federal, state or local backup withholding tax, and (e) any U.S. federal
withholding tax imposed under FATCA.

 

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

“Existing Letters of Credit” means those letters of credit identified on
Schedule 1.03 which were issued by Bank of America, N.A.

“Extraordinary Receipt” means any cash received by or paid to or for the account
of any Person not in the ordinary course of business, including any tax refunds,
pension plan reversions, proceeds of insurance (other than proceeds of business
interruption insurance to the extent such proceeds constitute compensation for
lost earnings), condemnation awards (and payments in lieu thereof), indemnity
payments, any purchase price adjustments and litigation proceeds.

“Facility Guaranty” means any Guarantee made by a Guarantor in favor of the
Agent and the other Credit Parties, in form and substance reasonably
satisfactory to the Agent, as may be amended, modified, supplemented, renewed,
restated or replaced.

“FATCA” means current Section 1471 through 1474 of the Code or any amended
version or successor provision that is substantively similar to and, in each
case, any regulations promulgated thereunder and any interpretation and other
guidance issued in connection therewith.

“Factored Receivables” means any Accounts originally owed or owing by a Loan
Party to another Person which have been purchased by or factored with Salus or
any of its Affiliates pursuant to a factoring arrangement or otherwise with the
Person that sold the goods or rendered the services to the Loan Party which gave
rise to such Account.

“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 Salus on
such day on such transactions as determined by the Agent.

“Final Financing Order” means, collectively, the order of the Bankruptcy Court
entered in the Chapter 11 Case after a final hearing under Bankruptcy Rule
4001(c)(2) or such other procedures as approved by the Bankruptcy Court, which
order shall be satisfactory in form and substance to the Agent, and from which
no appeal or motion to reconsider has been filed, together with all extensions,
modifications and amendments thereto, in form and substance satisfactory to the
Agent, which, among other matters but not by way of limitation, authorizes the
Borrowers to obtain credit, incur the Obligations, and grant Liens under this
Agreement and the other Loan Documents, as the case may be, and provides for the
super priority of the Agent’s claims.

“Final Order Entry Date” means the date on which the Bankruptcy Court enters the
Final Financing Order.

 

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“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 Loan Parties.

“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
Loan Parties.

“Fiscal Year” means any period of twelve (12) consecutive months ending on
December 31st 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 Lead 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.

“Foreign Subsidiary” means any Subsidiary that is not organized under the laws
of the United States, any state of the United States or the District of
Columbia.

“Foreign Vendor” means a Person that sells Inventory to a Borrower.

“Foreign Vendor Agreement” means an agreement between a Foreign Vendor and the
Agent in form and substance reasonably satisfactory to the Agent and pursuant to
which, among other things, the parties shall agree upon their relative rights
with respect to Inventory of a Borrower purchased from such Foreign Vendor.

“Fronting Fee” has the meaning assigned to such term in Section 2.03(j).

“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).

 

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“Gross Sales Report” means, with respect to any Fiscal Month, a sales report
indicating gross sales figures for the immediately preceding completed fiscal
month, prepared by the Lead Borrower in the form attached hereto as Exhibit G.

“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 as determined by the
guaranteeing Person in good faith. The term “Guarantee” as a verb has a
corresponding meaning.

“Guarantor” means each Subsidiary of the Lead Borrower that shall be required to
execute and deliver a Facility Guaranty pursuant to Section 6.12.

“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, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

“Honor Date” means the date of any payment by the L/C Issuer under a Letter of
Credit.

“Immaterial Foreign Subsidiary” means, at any time of determination, any Foreign
Subsidiary that has total assets (on a subconsolidated basis with its
Subsidiaries) not exceeding $1,000,000 and has total annual revenues (on a
subconsolidated basis with its Subsidiaries) not exceeding $1,000,000.

 

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“Inactive Subsidiary” means, (i) at any time of determination, any Subsidiary
that (a) does not own or lease assets (other than intercompany accounts with
Loan Parties) having an aggregate fair market value in excess of $50,000, (b) is
not obligated in respect of liabilities exceeding $50,000 in the aggregate
(other than liabilities owed by an Inactive Subsidiary to a Loan Party) and
(c) does not engage in any business and (ii) Kids Line UK Limited; provided that
commencing six months after the Closing Date, if Kids Line UK Limited does not
meet the criteria of clause (i) of “Inactive Subsidiary” Kids Line UK Limited
shall cease to be an Inactive Subsidiary. For the avoidance of doubt, no
Inactive Subsidiary shall constitute a “Loan Party”.

“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 sixty (60) days after
the date on which such trade account payable was created);

(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.

 

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“Indemnified Taxes” means Taxes other than Excluded Taxes.

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

“Information” has the meaning specified in Section 10.07.

“Intellectual Property” means all present and future: trade secrets, know-how
and other proprietary information; trademarks, trademark applications, internet
domain names, service marks, trade dress, trade names, business names, designs,
logos, slogans (and all translations, adaptations, derivations and combinations
of the foregoing) indicia and other source and/or business identifiers, and all
registrations or applications for registrations which have heretofore been or
may hereafter be issued thereon throughout the world; copyrights and copyright
applications; (including copyrights for computer programs) and all tangible and
intangible property embodying the copyrights, unpatented inventions (whether or
not patentable); patents and patent applications; industrial design applications
and registered industrial designs; license agreements related to any of the
foregoing and income therefrom; books, records, writings, computer tapes or
disks, flow diagrams, specification sheets, computer software, source codes,
object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; all other
intellectual property; and all common law and other rights throughout the world
in and to all of the foregoing.

“Intellectual Property Advance Rate” means 62.0%.

“Intellectual Property Reserves” means such reserves as the Agent from time to
time determines in its Permitted Discretion as being appropriate to reflect the
impediments to the Agent’s ability to realize upon any Eligible Intellectual
Property or to reflect claims and liabilities that the Agent determines will
need to be satisfied in connection with the realization upon any Eligible
Intellectual Property.

“Interest Payment Date” means the first day after the end of each month and the
Maturity Date.

“Interim Financing Order” means, collectively, the order of the Bankruptcy Court
entered in the Chapter 11 Case after an interim hearing, together with all
extension, modifications, and amendments thereto, in form and substance
satisfactory to the Agent in its Permitted Discretion, which, among other
matters but not by way of limitation, authorizes, on an interim basis, the Loan
Parties to execute and perform under the terms of this Agreement and the other
Loan Documents, substantially in the form of Exhibit I.

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

“In-Transit Inventory” means Inventory of a Borrower which is in the possession
of a common carrier and is in transit from a Foreign Vendor of a Borrower from a
location outside of the continental United States to a location of a Borrower
that is within the continental United States.

 

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“Inventory” has the meaning given that term in the UCC, and shall also include,
without limitation, all: (a) goods which (i) are leased by a Person as lessor,
(ii) are held by a Person for sale or lease or to be furnished under a contract
of service, (iii) are furnished by a Person under a contract of service, or
(iv) consist of raw materials, work in process, or materials used or consumed in
a business; (b) goods of said description in transit; (c) goods of said
description which are returned, repossessed or rejected; and (d) packaging,
advertising, and shipping materials related to any of the foregoing.

“Inventory Advance Rate” means sixty-eight percent (68%).

“Inventory Reserves” means such reserves as may be established from time to time
by the Agent in its Permitted Discretion with respect to the determination of
the saleability, at retail, of the Eligible Inventory, which reflect such other
factors as affect the market value of the Eligible Inventory or which reflect
claims and liabilities that the Agent determines will need to be satisfied in
connection with the realization upon the Inventory. Without limiting the
generality of the foregoing, Inventory Reserves may, in the Agent’s Permitted
Discretion, include (but are not limited to) reserves based on:

(a) Obsolescence;

(b) Seasonality;

(c) Shrink;

(d) Imbalance;

(e) Change in Inventory character;

(f) Change in Inventory composition;

(g) Change in Inventory mix;

(h) Markdowns (both permanent and point of sale);

(i) Retail markons and markups inconsistent with prior period practice and
performance, industry standards, current business plans or advertising calendar
and planned advertising events;

(j) Out-of-date and/or expired Inventory;

(k) to the extent Collateral Access Agreements have not been provided to the
Agent for any of the Borrowers’ owned, leased or third-party warehouse sites,
appropriate Inventory Reserves against the Tranche A Borrowing Base in the
Agent’s Permitted Discretion;

(l) capitalized freight; and

 

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(m) with respect to In-Transit Inventory, any applicable duty or freight
charges.

“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.

“Investment Banker” has the meaning provided in Section 6.23.

“IRS” means the United States Internal Revenue Service.

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

“Issuer Documents” means with respect to any Letter of Credit, the Letter Credit
Application, the Standby Letter of Credit Agreement, and any other document,
agreement and instrument entered into by the applicable L/C Issuer and a
Borrower (or any Subsidiary thereof) or in favor of the applicable L/C Issuer
and relating to any such Letter of Credit.

“Joinder” means an agreement, in form and substance reasonably satisfactory to
the Agent pursuant to which, among other things, a Person becomes a party to,
and bound by the terms of, this Agreement and/or the other Loan Documents in the
same capacity and to the same extent as either a Borrower or a Guarantor, as the
Agent may reasonably determine.

“Kids Line” means Kids Line, LLC, a Delaware limited liability company.

“LaJobi” means LaJobi, Inc., a Delaware corporation.

“LaJobi Acquisition” means the purchase by LaJobi of substantially all of the
assets of LaJobi Industries pursuant to and in accordance with the Acquisition
Agreement and related documents.

“LaJobi Industries” means LaJobi Industries, Inc., a New Jersey corporation.

“Landlord Lien State” means such state(s) in which a landlord’s claim for rent
may have priority over the Lien of the Agent in any of the Collateral.

“Laws” means each international, foreign, Federal, state and local statute,
treaty, rule, guideline, regulation, ordinance, code and administrative or
judicial precedent or authority, including the interpretation or administration
thereof by any Governmental Authority charged with the enforcement,
interpretation or administration thereof, and each applicable administrative
order, directed duty, request, license, authorization and permit of, and
agreement with, any Governmental Authority, in each case whether or not having
the force of law.

 

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“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance
thereof or extension of the expiry date thereof, or the increase of the amount
thereof.

“L/C Issuer” means (a) Salus, (b) any other financial institution that, with the
consent of the Agent (and subject to such financial institution’s entry into
agreements reasonably satisfactory to the Agent), agrees to become an L/C Issuer
for the purpose of issuing Letters of Credit hereunder, and (c) any successor
issuer of Letters of Credit hereunder (which successor may only be a Lender
selected by the Agent in its reasonable discretion). Any L/C Issuer may, in its
discretion, arrange for one or more Letters of Credit to be issued by Affiliates
of such L/C Issuer and/or for such Affiliate to act as an advising,
transferring, confirming and/or nominated bank in connection with the issuance
or administration of any such Letter of Credit, in which case the term “L/C
Issuer” shall include any such Affiliate with respect to Letters of Credit
issued by such Affiliate.

“L/C Obligations” means, as at any date of determination, the aggregate undrawn
amount available to be drawn under all outstanding Letters of Credit. For
purposes of computing the amounts available to be drawn under any Letter of
Credit, the amount of such Letter of Credit shall be determined in accordance
with Section 1.06. For all purposes of this Agreement, if on any date of
determination a Letter of Credit has expired by its terms but any amount may
still be drawn thereunder by reason of the operation of any “rule” under the ISP
or any article of UCP 600, such Letter of Credit shall be deemed to be
“outstanding” in the amount so remaining available to be drawn.

“Lead Borrower” has the meaning assigned to such term in the preamble of this
Agreement.

“Lease” means any written agreement no matter how styled or structured, pursuant
to which a Loan Party is entitled to the use or occupancy of any space in a
structure, land, improvements or premises 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
described as such in such Lender’s Administrative Questionnaire, or such other
office or offices as a Lender may from time to time notify the Lead Borrower and
the Agent.

“Letter of Credit” means each Standby Letter of Credit issued hereunder.

“Letter of Credit Application” means an application for the issuance or
amendment of a Letter of Credit in the form from time to time in use by the
applicable L/C Issuer.

“Letter of Credit Expiration Date” means the day that is seven days prior to the
Maturity Date then in effect (or, if such day is not a Business Day, the next
preceding Business Day).

 

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“Letter of Credit Sublimit” means an amount equal to $5,000,000. The Letter of
Credit Sublimit is part of, and not in addition to, the Tranche A Commitments. A
permanent reduction of the Tranche A Commitments shall not require a
corresponding pro rata reduction in the Letter of Credit Sublimit; provided,
however, that if the Tranche A Commitments are reduced to an amount less than
the Letter of Credit Sublimit, then the Letter of Credit Sublimit shall be
reduced to an amount equal to (or, at Lead Borrower’s option, less than) the
Tranche A Commitments.

“LIBO Borrowing” means a Committed Borrowing comprised of LIBO Rate Loans.

“LIBO Rate” means, at any date of determination, the greater of (i) 0.50% per
annum, and (ii) the rate per annum for LIBOR (“LIBOR”), as published by
Bankrate.com (or other commercially available source providing quotations of
LIBOR as designated by the Agent from time to time) for an interest period of
thirty (30) days. If such rate is not available at such time for any reason,
then the “LIBO Rate” shall be the rate per annum determined by the Agent to be
the rate at which deposits in Dollars in the approximate outstanding amount of
the Loans would be offered to major banks in the London interbank eurodollar
market in which Salus participates for an interest period of thirty (30) days.

“LIBO Rate Loan” means a Committed Loan that bears interest at a rate based on
the Adjusted LIBO Rate.

“Lien” means (a) 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) and (b) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.

“Liquidation” means the exercise by the Agent of those rights and remedies
accorded to the Agent under the Loan Documents and applicable Law as a creditor
of the Loan Parties with respect to the realization on the Collateral, including
(after the occurrence and during the continuation of an Event of Default) the
conduct by the Loan Parties acting with the consent of the Agent, of any public,
private or “going out of business”, “store closing”, or other similarly themed
sale or other disposition of the Collateral for the purpose of liquidating the
Collateral. Derivations of the word “Liquidation” (such as “Liquidate”) are used
with like meaning in this Agreement.

“Loan” means any extension of credit by a Lender to the Borrowers under Article
II in the form of a Committed Loan or otherwise.

“Loan Account” has the meaning assigned to such term in Section 2.11(a).

“Loan Documents” means this Agreement, each Note, each Issuer Document, all
Borrowing Base Certificates, the Blocked Account Agreements, the DDA
Notifications, the Security Documents, each Facility Guaranty and any other
instrument or agreement now or hereafter executed and delivered in connection
herewith, or in connection with any transaction arising out of any Cash
Management Services and Bank Products provided by the Agent or any of its
Affiliates, each as amended and in effect from time to time.

 

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

“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, liabilities (actual
or contingent) or condition (financial or otherwise) of the Lead Borrower and
its Subsidiaries taken as a whole; (b) a material impairment of the ability of
any Loan Party to perform in any material respect its obligations under any Loan
Document to which it is a party; or (c) a material impairment of the rights and
remedies, taken as a whole, of the Agent or any Lender under any Loan Document
or a material adverse effect upon the legality, validity, binding effect or
enforceability against any Loan Party of any Loan Document to which it is a
party. In determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event in and of itself does not have
such effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then-existing events would result
in a Material Adverse Effect. Notwithstanding the foregoing, (i) the filing of
the Chapter 11 Case and (ii) events specifically stated in the Declaration of
the Chief Restructuring Officer in Support of Chapter 11 Petitions and First Day
Motions, dated on or about the date hereof, will not be deemed to have a
Material Adverse Effect.

“Material Contract” means, with respect to any Person, each contract to which
such Person is a party involving aggregate consideration payable to or by such
Person of $500,000 or more in any Fiscal Year or otherwise material to the
business, condition (financial or otherwise), operations, performance or
properties of such Person.

“Material Indebtedness” means the Subordinated Indebtedness and any other
Indebtedness (other than the Obligations) of the Loan Parties in an aggregate
principal amount exceeding $500,000. 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.

“Maturity Date” means June 15, 2015.

“Maximum Loan Amount” means, at any time of determination, the lesser of (a) the
Aggregate Commitments and (b) the sum of the Tranche A Loan Cap and the Tranche
A-1 Loan Cap.

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

“Measurement Period” means, at any date of determination, the most recently
completed twelve consecutive fiscal months of the Lead Borrower.

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

 

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“Mortgages” means each and every fee and leasehold mortgage or deed of trust,
security agreement and assignment by and between the Loan Party owning or
holding the leasehold interest in the Real Estate encumbered thereby in favor of
the Agent.

“Multiemployer Plan” means any “multiemployer plan”(as such term is defined in
Section 4001(a)(3) of ERISA), to which the Lead 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.

“Net Proceeds” means (a) with respect to any Disposition by any Loan Party or
any of its Subsidiaries, or any Extraordinary Receipt received or paid to the
account of any Loan Party or any of its Subsidiaries, 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 or such Subsidiary 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)); and

(b) with respect to the sale or issuance of any Equity Interest by any Loan
Party or any of its Subsidiaries, or the incurrence or issuance of any
Indebtedness by any Loan Party or any of its Subsidiaries, the excess of (i) the
sum of the cash and cash equivalents received in connection with such
transaction over (ii) the underwriting discounts and commissions, and other
reasonable and customary out-of-pocket expenses, incurred by such Loan Party or
such Subsidiary in connection therewith.

“Non-Extension Notice Date” has the meaning specified in Section 2.03(b)(iii).

“Note” means (a) a Tranche A Note and (b) a Tranche A-1 Note, as each may be
amended, supplemented or modified from time to time.

“NPL” means the National Priorities List under CERCLA.

“Obligations” means (a) 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 Loan or Letter of Credit (including payments in
respect of reimbursement of disbursements, interest thereon and obligations to
provide cash collateral therefor), 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 or
any Affiliate thereof 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, and
(b) any Other Liabilities.

 

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“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.

“Other Liabilities” means (a) any obligation on account of (i) any Cash
Management Services furnished to any of the Loan Parties or any of their
Subsidiaries and/or (ii) any transaction with the Agent or any of its Affiliates
that arises out of any Bank Product entered into with any Loan Party and any
such Person, as each may be amended from time to time.

“Other Taxes” means all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any
payment made hereunder or under any other Loan Document or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
other Loan Document.

“Outstanding Amount” means (i) with respect to Committed Loans on any date, the
aggregate outstanding principal amount thereof after giving effect to any
borrowings and prepayments or repayments of Committed Loans occurring on such
date; and (ii) with respect to any L/C Obligations on any date, the amount of
such L/C Obligations on such date after giving effect to any L/C Credit
Extension occurring on such date and any other changes in the aggregate amount
of the L/C Obligations as of such date.

“Overadvance” means a Credit Extension to the extent that, immediately after its
having been made, Availability is less than zero.

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

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

“PBGC” means the Pension Benefit Guaranty Corporation.

“Pension Plan” means any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by the Lead Borrower
or any ERISA Affiliate or to which the Lead Borrower or any ERISA Affiliate
contributes or has an obligation to contribute, or in the case of a multiple
employer or other plan described in Section 4064(a) of ERISA, has made
contributions at any time during the immediately preceding five plan years.

 

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“Permitted Acquisition” means any Acquisition by the Loans Parties; provided
that (i) the Lead Borrower would be in pro forma compliance recomputed as of the
last day of the most recently ended Fiscal Quarter of the Lead Borrower for
which financial statements are available with the covenants set forth in
Section 7.15, (ii) the Lead Borrower shall deliver to the Agent a certificate of
a financial officer of the Lead Borrower setting forth calculations in
reasonable detail demonstrating compliance with the conditions set forth in
clause (i) above, (iii) such Acquisition is initiated and consummated on a
friendly basis, (iv) no Default or Event of Default has occurred and is
continuing or would result from such Acquisition and (iv) the aggregate
consideration (including all Acquired Debt) for all such Permitted Acquisitions
does not exceed $500,000.

“Permitted Disposition” means any of the following:

(a) Dispositions of inventory in the ordinary course of business;

(b) (i) Non-exclusive licenses of Intellectual Property of a Loan Party or any
of its Subsidiaries in the ordinary course of business and on commercially
reasonable terms and (ii) with the Consent of the Agent in its Permitted
Discretion (not to be unreasonably withheld), exclusive licenses (having a fixed
term) of Intellectual Property of a Loan Party or any of its Subsidiaries on
commercially reasonable terms and which would not adversely impact the Loan
Parties’ and their Subsidiaries’ use of such Intellectual Property in the
ordinary course of business;

(c) Dispositions of Equipment in the ordinary course of business 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) sales, transfers and Dispositions among the Loan Parties or by any
Subsidiary to a Loan Party;

(e) sales, transfers and Dispositions by any Subsidiary which is not a Loan
Party to another Subsidiary that is not a Loan Party;

(f) abandonment of Intellectual Property rights in the ordinary course of
business, which are not material to the Business;

(g) other Dispositions of assets (other than Equity Interests of Subsidiaries
and accounts receivable) for at least fair market value (as determined by the
Board of Directors) so long, as (x) no Default or Event of Default has occurred
and is continuing, or would result therefrom and (y) the fair market value of
all assets Disposed of under this clause (g) in any Fiscal Year does not exceed
$500,000;

(h) in the case of its Equity Interests, as permitted pursuant to
Section 7.03(c)(i) or Section 7.04;

(i) with the Consent of the Agent in its Permitted Discretion (not to be
unreasonably withheld), Dispositions of the assets of or the Equity Interests in
RB Trademark Holdco, LLC for at least fair market value (as determined by the
Board of Directors of the Lead Borrower);

 

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(j) Dispositions of accounts receivable in connection with the collection or
compromise thereof in the ordinary course of business; and

(k) the dissolution or liquidation of any Inactive Subsidiary if the Lead
Borrower determines in good faith that any such dissolution or liquidation is in
the best interest of the Loan Parties.

“Permitted Discretion” means a determination made in good faith and in the
exercise of reasonable business judgment from the perspective of a secured,
asset-based commercial lender.

“Permitted Encumbrances” means:

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

(b) Liens arising in the ordinary course of business such as Carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens
imposed by applicable Law and securing obligations that are not overdue 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, building code laws, zoning
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 are
disclosed by current surveys that, in each case, do not materially interfere
with the current use of the real property;

(g) Liens existing on the Closing Date and listed on Schedule 7.01;

(h) Liens on (x) fixed or capital assets acquired by any Loan Party which are
permitted under clause (c) of the definition of Permitted Indebtedness so long
as (i) such Liens and the Indebtedness secured thereby are incurred prior to or
within one-hundred and twenty (120) days after such acquisition, (ii) the
Indebtedness secured thereby does not exceed the cost of acquisition of such
fixed or capital assets and (iii) such Liens shall not extend to any other
property or assets of the Loan Parties and (y) Liens of the type described in
subclause (x) existing on property at the time of the acquisition thereof by any
Loan Party (and not created in contemplation of such acquisition) pursuant to
any Permitted Acquisition;

 

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(i) Liens in favor of the Agent;

(j) Statutory Liens of landlords and lessors in respect of rent not in default;

(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
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; and

(n) Liens in favor of customs and revenues authorities imposed by applicable Law
(A) arising in the ordinary course of business in connection with the
importation of goods and securing obligations that are being contested in good
faith by appropriate proceedings and (B) the applicable Loan Party or Subsidiary
has set aside on its books adequate reserves with respect thereto in accordance
with GAAP;

(o) Liens on deposit accounts granted or arising in the ordinary course of
business in favor of depositary banks maintaining such deposit accounts solely
to secure customary account fees and charges payable in respect of such deposit
accounts and overdrafts;

(p) the replacement, extension or renewal of any Lien permitted by clause
(h) above upon or in the same property subject thereto arising out of the
extension, renewal or replacement of the Indebtedness secured thereby (without
increase in the amount or priority thereof or the security or collateral
therefor or decrease in the weighted average life to maturity thereof);

(q) Liens on assets of Foreign Subsidiaries securing Indebtedness of such
Foreign Subsidiaries; and

(r) Liens on cash collateral to secure obligations with respect to existing
letters of credit.

 

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“Permitted Holder” means Prentice Capital Management or its Affiliates or any
investment fund managed or advised by Prentice Capital Management or its
Affiliates.

“Permitted Indebtedness” means each of the following :

(a) Indebtedness outstanding on the Closing Date and listed on Schedule 7.03;

(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 or secured by a Lien on any such assets prior to
the acquisition thereof; provided, however, that the aggregate principal amount
of Indebtedness permitted by this clause (c) shall not exceed $500,000 at any
time outstanding; provided, further, that if requested by the Agent, the Loan
Parties shall cause the holders of such Indebtedness to enter into a Collateral
Access Agreement on terms reasonably satisfactory to the Agent;

(d) obligations (contingent or otherwise) of any Loan Party or any Subsidiary
thereof existing or arising under any Swap Contract, provided that 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”; provided, that the aggregate Swap
Termination Value thereof shall not exceed $250,000 at any time outstanding;

(e) Subordinated Indebtedness;

(f) the Obligations;

(g) (i) unsecured Indebtedness owing by Subsidiaries that are not Loan Parties
to the Loan Parties outstanding as of the Closing Date, (ii) unsecured
Indebtedness owing by Loan Parties to Subsidiaries that are not Loan Parties
outstanding as of the Closing Date, (iii) unsecured Indebtedness owing among
Subsidiaries that are not Loan Parties, (iv) unsecured Indebtedness incurred
after the Closing Date by Loan Parties to Foreign Subsidiaries or Inactive
Subsidiaries in an aggregate amount not to exceed $2,500,000 at any time
outstanding, provided that any such Indebtedness shall be subordinated to the
Obligations in a manner satisfactory to the Agent, and (v) so long as no Default
or Event of Default has occurred and is continuing and so long as Availability,
before and after giving effect to an such incurrence is at least $5,000,000,
unsecured Indebtedness incurred after the Closing Date by Foreign Subsidiaries
or Inactive Subsidiaries to Loan Parties in an amount not to exceed an aggregate
of $500,000 at any time outstanding;

(h) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn against
insufficient funds in the ordinary course of business; provided, however, that
such Indebtedness is extinguished within five Business Days of incurrence;

 

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(i) Indebtedness arising in connection with endorsement of instruments for
deposit in the ordinary course of business;

(j) unsecured contingent liabilities arising with respect to customary
indemnification obligations in favor of sellers in connection with Permitted
Acquisitions and purchasers in connection with Permitted Dispositions;

(k) up to $500,000 at any time outstanding of Acquired Debt assumed in Permitted
Acquisitions, which, if secured, the Liens thereunder would be of a type
permitted pursuant to clause (h) of the definition of “Permitted Encumbrances”;

(l) deferred payments on account of insurance premiums;

(m) guaranty obligations with respect to Indebtedness permitted by this
definition provided that any guaranty by a Loan Party of obligations of a
Subsidiary that is not a Loan Party must otherwise be permitted by this
Agreement; and

(n) Indebtedness not otherwise specifically described herein in an aggregate
principal amount not to exceed $250,000 at any time outstanding.

“Permitted Investments” means each of the following:

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

(b) (i) Investments by any Loan Party and its Subsidiaries in their respective
Subsidiaries outstanding on the Closing Date, and (ii) additional Investments by
any Loan Party and its Subsidiaries in Loan Parties;

(c) 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;

(d) Guarantees constituting Permitted Indebtedness;

(e) Investments by any Loan Party in Swap Contracts entered into in the ordinary
course of business and for bona fide business (and not speculative) purposes to
protect against fluctuations in interest rates in respect of the Obligations;

(f) 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;

(g) advances to officers, directors and employees of the Loan Parties and
Subsidiaries in the ordinary course of business in an amount not to exceed
$25,000 to any individual at any time or in an aggregate amount not to exceed
$100,000 at any time outstanding, in each case for travel, entertainment,
relocation and analogous ordinary business purposes; and

 

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(h) Capital contributions made by any Loan Party to another Loan Party;

(i) Investments consisting of (i) intercompany loans by and among the Loan
Parties so long as the Agent has a first priority, perfected Lien in such
intercompany loans and has received a promissory note evidence such intercompany
loans (if the Agent so requests), together with transfer powers executed in
blank in connection therewith and (ii) intercompany loans made by any Subsidiary
to any Loan Party on terms and conditions acceptable to the Agent, including the
Agent’s receipt of a subordination agreement with respect thereto, inform and
substance acceptable to the Agent;

(j) Investments by any Subsidiary that is not a Loan Party in any other
Subsidiary that is not a Loan Party;

(k) loans by the Loan Parties to Foreign Subsidiaries or Inactive Subsidiaries
pursuant to clause (g)(v) of the definition of “Permitted Indebtedness”; and

(l) Permitted Acquisitions.

“Permitted Overadvance” means an Overadvance made by the Agent, in its Permitted
Discretion, which (i) is made to maintain, protect or preserve the Collateral
and/or the Credit Parties’ rights under the Loan Documents or which is otherwise
for the benefit of the Credit Parties; (ii) is made to enhance the likelihood
of, or to maximize the amount of, repayment of any Obligation; or (iii) is made
to pay any other amount chargeable to any Loan Party hereunder; provided,
however, that the foregoing shall not result in any claim or liability against
the Agent (regardless of the amount of any Overadvance) for Unintentional
Overadvances and such Unintentional Overadvances shall not reduce the amount of
Permitted Overadvances allowed hereunder; provided, further, that in no event
shall the Agent make an Overadvance, if after giving effect thereto, the
principal amount of the Credit Extensions would exceed the Aggregate Commitments
(as in effect prior to any termination of the Commitments pursuant to
Section 2.06 hereof).

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

“Petition Date” has the meaning specified in the Recitals to this Agreement.

“Plan” means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by the Lead Borrower or, with respect to any
such plan that is subject to Section 412 of the Code or Title IV of ERISA, any
ERISA Affiliate.

“Prepayment Event” means:

(a) Any Disposition (including pursuant to a sale and leaseback transaction) of
any property or asset of a Loan Party in an amount in excess of $100,000;

 

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(b) Any casualty or other insured damage to, or any taking under power of
eminent domain or by condemnation or similar proceeding of (and payments in lieu
thereof), any property or asset of a Loan Party in an amount in excess of
$100,000, unless (i) the proceeds therefrom are required to be paid to the
holder of a Lien on such property or asset having priority over the Lien of the
Agent or (ii) the proceeds therefrom are deposited into a segregated account and
utilized for purposes of replacing or repairing the assets in respect of which
such proceeds, awards or payments were received within 180 days of the
occurrence of the damage to or loss of the assets being repaired or replaced;

(c) The issuance by a Loan Party of any Equity Interests, other than any such
issuance of Equity Interests as a compensatory issuance to any employee,
director, or consultant (including under any option plan);

(d) The incurrence by a Loan Party of any Indebtedness for borrowed money
(except as permitted hereunder) or Subordinated Indebtedness; or

(e) The receipt by any Loan Party of any Extraordinary Receipts.

“Pre-Petition” means occurring or arising before the Petition Date.

“Pre-Petition Credit Agreement” means that certain Credit Agreement dated as of
December 21, 2012, among the Loan Parties, Salus Capital Partners, LLC, as
agent, and a syndicate of lenders, as amended prior to and in effect on the
Petition Date.

“Pre-Petition Indebtedness” shall mean Indebtedness of any Loan Party that was
incurred or accrued prior to the commencement of the Chapter 11 Case.

“Pre-Petition Permitted Liens” has the meaning specified in the Interim
Financing Order.

“Professional Fee Escrow Account” means an escrow account initially in the
amount of $400,000.00, established and maintained by the Borrowers for the
purpose of collecting the Carve-Out.

“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 and all leases, tenancies, and occupancies thereof.

“Receipts and Collections” has the meaning specified in Section 6.13(c).

“Receivables Reserves” means such reserves as may be established from time to
time by the Agent in the Agent’s Permitted Discretion with respect to the
determination of the collectability in the ordinary course of Eligible Trade
Receivables, including, without limitation, dilution reserves.

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

 

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“Registered Public Accounting Firm” has the meaning specified by the Securities
Laws and shall be independent of the Lead 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 and advisors 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 thirty (30) day notice period has been
waived.

“Reports” has the meaning provided in Section 9.12(b).

“Request for Credit Extension” means (a) with respect to a Committed Borrowing
of Committed Loans, a Committed Loan Notice, and (b) with respect to an L/C
Credit Extension, a Letter of Credit Application and, if required by the
applicable L/C Issuer, a Standby Letter of Credit Agreement.

“Required Lenders” means, as of any date of determination, Lenders holding more
than fifty percent (50%) of the Aggregate Commitments or, if the Aggregate
Commitments and the obligation of the L/C Issuer to make L/C Credit Extensions
have been terminated pursuant to Section 8.02, Lenders holding in the aggregate
more than fifty percent (50%) of the sum of the Total Outstandings; provided,
that the Commitment of, and the portion in the aggregate of the Total
Outstandings held or deemed held by, any Defaulting Lender or Deteriorating
Lender shall be excluded for purposes of making a determination of Required
Lenders.

“Reserves” means all Inventory Reserves, Receivables Reserves and Availability
Reserves.

“Responsible Officer” means the chief executive officer, chief restructuring
officer, president, chief financial officer, treasurer or assistant treasurer,
secretary or any other executive officer 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 (and for purposes of any certificate to be
delivered pursuant to Section 4.01(a)(iii), the assistant secretary); provided,
that, in the case of any such other authorized signatory the Agent has received
a satisfactory background check with respect to the applicable individual. 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.

“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.

 

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

“Salus” means Salus Capital Partners, LLC and its successors.

“Salus Entity” has the meaning provided in Section 10.06(i).

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

“Sassy” means Sassy, Inc., an Illinois corporation.

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

“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.

“Security Agreement” means the Security Agreement dated as of the Closing Date
among the Loan Parties and the Agent, as the same now exists or may hereafter be
amended, modified, supplemented, renewed, restated or replaced.

“Security Documents” means the Security Agreement, the Blocked Account
Agreements, the Mortgages, the DDA Notifications, 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.

“Settlement Date” has the meaning provided in Section 2.14(a).

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

“Shrink” means Inventory which has been lost, misplaced, stolen, or is otherwise
unaccounted for.

“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, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person’s ability to pay as such debts mature, and
(e) 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.

 

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“Spot Rate” has the meaning given to such term in Section 1.07 hereof.

“Standby Letter of Credit” means any Letter of Credit that is not a commercial
letter of credit and that (a) is used in lieu or in support of performance
guaranties or performance, surety or similar bonds (excluding appeal bonds)
arising in the ordinary course of business, (b) is used in lieu or in support of
stay or appeal bonds, (c) supports the payment of insurance premiums for
reasonably necessary casualty insurance carried by any of the Loan Parties, or
(d) supports payment or performance for identified purchases or exchanges of
products or services in the ordinary course of business.

“Standby Letter of Credit Agreement” means the Standby Letter of Credit
Agreement relating to the issuance of a Standby Letter of Credit in the form
from time to time in use by the applicable L/C Issuer.

“Stated Amount” means at any time the maximum amount for which a Letter of
Credit may be honored.

“Statutory Committee” means any statutory committee in the Chapter 11 Case
appointed by the Bankruptcy Court pursuant to Section 1102 of the Bankruptcy
Code.

“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 LIBO 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. LIBO Rate
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.

“Subordinated Indebtedness” means Indebtedness which is expressly subordinated
in right of payment to the prior payment in full of the Obligations and which is
in form and on terms approved in writing by the Agent.

“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.

 

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“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.

“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, 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 date of Agent’s notice
in writing to Lead Borrower of the occurrence of an Event of Default by the
Borrowers, (ii) a sale of substantially all of the assets of any Borrower,
(iii) the confirmation of a Plan of Reorganization or Liquidation, (iv) the date
all obligations under this Agreement are paid in full other than contingent
indemnification obligations, or (v) the Maturity Date.

 

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“Total Outstandings” means the aggregate Outstanding Amount of all Loans and all
L/C Obligations.

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

“Tranche A Applicable Percentage” means with respect to any Tranche A Lender at
any time, the percentage (carried out to the fourth decimal place) of the
Aggregate Tranche A Commitments represented by such Tranche A Lender’s Tranche A
Commitment at such time. If the commitment of each Tranche A Lender to make
Tranche A Loans and the obligation of the L/C Issuer to make L/C Credit
Extensions have been terminated pursuant to Section 2.06 or Article VIII or if
the Aggregate Tranche A Commitments have expired, then the Tranche A Applicable
Percentage of each Lender shall be determined based on the Tranche A Applicable
Percentage of such Tranche A Lender most recently in effect, giving effect to
any subsequent assignments. The initial Tranche A Applicable Percentage of each
Tranche A Lender is set forth opposite the name of such Tranche A Lender on
Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Tranche
A Lender becomes a party hereto, as applicable.

“Tranche A Borrowing Base” means, at any time of calculation, an amount equal to
without duplication:

(a) the face amount of Eligible Trade Receivables, net of Receivables Reserves,
multiplied by 95%;

plus

(b) the lesser of (i) the Inventory Advance Rate multiplied by the Cost of
Eligible Inventory, net of Inventory Reserves, and (ii) the Cost of Eligible
Inventory, net of Inventory Reserves multiplied by the Appraisal Percentage
multiplied by the Appraised Value applicable to Eligible Inventory;

minus

(c) the Availability Block;

minus

(d) the then amount of all Availability Reserves.

“Tranche A Commitment” means, with respect to each Tranche A Lender, the
commitment of such Lender hereunder set forth as its Tranche A Commitment
opposite its name on Schedule 2.01 hereto or as may subsequently be set forth in
the Register from time to time, as the same may be adjusted from time to time
pursuant to the terms of this Agreement. As of the Closing Date the aggregate
Tranche A Commitments are in the amount of $27,000,000.

“Tranche A Interest Rate” means at any time of determination, the Adjusted LIBO
Rate plus the Applicable Margin.

 

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“Tranche A Lender” means each Lender having a Tranche A Commitment as set forth
on Schedule 2.01 hereto or in the Assignment and Acceptance by which it becomes
a Tranche A Lender.

“Tranche A Loan Cap” means, at any time of determination, the lesser of (a) the
Aggregate Tranche A Commitments or (b) the Tranche A Borrowing Base.

“Tranche A Loans” has the meaning set forth in Section 2.01.

“Tranche A Note” means a promissory note made by the Borrowers in favor of a
Tranche A Lender evidencing the Tranche A Loans made by such Tranche A Lender,
substantially in the form of Exhibit B-1.

“Tranche A-1 Applicable Percentage” means with respect to any Tranche A-1 Lender
at any time, the percentage (carried out to the fourth decimal place) of the
Aggregate Tranche A-1 Commitments represented by such Tranche A-1 Lender’s
Tranche A-1 Commitment at such time. If the commitment of each Tranche A-1
Lender to make Tranche A-1 Loans has been terminated pursuant to Section 2.06 or
Article VIII or if the Aggregate Tranche A-1 Commitments have expired, then the
Tranche A-1 Applicable Percentage of each Lender shall be determined based on
the Tranche A-1 Applicable Percentage of such Tranche A-1 Lender most recently
in effect, giving effect to any subsequent assignments. The initial Tranche A-1
Applicable Percentage of each Tranche A-1 Lender is set forth opposite the name
of such Tranche A-1 Lender on Schedule 2.01 or in the Assignment and Acceptance
pursuant to which such Tranche A-1 Lender becomes a party hereto, as applicable.

“Tranche A-1 Borrowing Base” means at any time of calculation, an amount equal
to the lesser of (i) the Appraised Value of the Eligible Intellectual Property,
net of Intellectual Property Reserves, multiplied by the Intellectual Property
Advance Rate and (ii) the Aggregate Tranche A-1 Commitments at such time.

“Tranche A-1 Commitment” shall mean, with respect to each Tranche A-1 Lender,
the commitment of such Tranche A-1 Lender hereunder set forth as its Tranche A-1
Commitment opposite its name on Schedule 2.01 hereto or as may subsequently be
set forth in the Register from time to time, as the same may be adjusted from
time to time pursuant to this Agreement. As of the Closing Date the Tranche A-1
Commitments are in the aggregate amount of $22,000,000.

“Tranche A-1 Interest Rate” means at any time of determination, the Adjusted
LIBO Rate plus the Applicable Margin.

“Tranche A-1 Lender” means each Lender having a Tranche A-1 Commitment as set
forth on Schedule 2.01 hereto or in the Assignment and Acceptance by which it
becomes a Tranche A-1 Lender.

“Tranche A-1 Loan Cap” means the least of (i) the Aggregate Tranche A-1
Commitments, (ii) the Tranche A-1 Borrowing Base and (iii) 40.0% of the Combined
Borrowing Base.

 

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“Tranche A-1 Loans” has the meaning set forth in Section 2.01.

“Tranche A-1 Note” means a promissory note made by the Borrowers in favor of a
Tranche A-1 Lender evidencing the Tranche A-1 Loans made by such Tranche A-1
Lender, substantially in the form of Exhibit B-2.

“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
of the Uniform Commercial Code; 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.

“UCP 600” means the rules of the Uniform Customs and Practice for Documentary
Credits, as most recently published by the International Chamber of Commerce and
in effect as of July 1, 2007 (or such later version thereof as may be in effect
at the time of issuance).

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

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

“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan’s assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.

“Unintentional Overadvance” means an Overadvance which, to the Agent’s
knowledge, did not constitute an Overadvance when made but which has become an
Overadvance resulting from changed circumstances beyond the control of the
Credit Parties, including, without limitation, a reduction in the Appraised
Value of property or assets included in the Tranche A Borrowing Base or the
Tranche A-1 Borrowing Base or misrepresentation by the Loan Parties.

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

“Wage Order” means the order of the Bankruptcy Court entered in the Chapter 11
Case, together with all extensions, modifications and amendments that are in
form and substance acceptable to the Agent in its Permitted Discretion, which,
among other matters, authorizes and directs the Loan Parties to pay certain
pre-petition wages, benefits and other amounts owing to employees.

“Zero Balance Accounts” means deposit accounts used in the ordinary course of
business for daily accounts payable and that have an ending daily balance of
zero.

 

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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
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.

(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 with respect to Letters of Credit and Bank
Products (other than Swap Contracts) and any other contingent Obligations,
providing Cash Collateralization or other collateral as may be requested by the
Agent) of all of the Obligations (including the payment of any termination
amount then applicable (or which would or could become applicable as a result of
the repayment of the other Obligations) under Swap Contracts) other than
(i) unasserted contingent indemnification Obligations, (ii) any Obligations
relating to Bank Products (other than Swap Contracts) that, at such time, are
allowed by the applicable Bank Product provider to remain outstanding without
being required to be repaid or Cash Collateralized or otherwise collateralized
as may be requested by the Agent, and (iii) any Obligations relating to Swap
Contracts that, at such time, are allowed by the applicable provider of such
Swap Contracts to remain outstanding without being required to be repaid.

 

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1.03 Accounting Terms Generally.

(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, 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 Lead Borrower or the Required Lenders shall so request,
the Agent, the Lenders and the Lead 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
Lead 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.

1.04 Rounding. Any financial ratios required to be maintained by the Borrowers
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).

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).

1.06 Letter of Credit Amounts. Unless otherwise specified, all references herein
to the amount of a Letter of Credit at any time shall be deemed to be the Stated
Amount of such Letter of Credit in effect at such time; provided, however, that
with respect to any Letter of Credit that, by its terms or the terms of any
Issuer Documents related thereto, provides for one or more automatic increases
in the Stated Amount thereof, the amount of such Letter of Credit shall be
deemed to be the maximum Stated Amount of such Letter of Credit after giving
effect to all such increases, whether or not such maximum Stated Amount is in
effect at such time.

1.07 Currency Equivalents Generally. Any amount specified in this Agreement
(other than in Article II, Article IX and Article X) or any of the other Loan
Documents to be in Dollars shall also include the equivalent of such amount in
any currency other than Dollars, such equivalent amount thereof in the
applicable currency to be determined by the Agent at such time on the basis of
the Spot Rate (as defined below) for the purchase of such currency with Dollars.
For purposes of this Section 1.07, the “Spot Rate” for a currency means the rate
determined by the Agent to be the rate quoted by the Person acting in such
capacity as the spot rate for the purchase by such Person of such currency with
another currency through its principal foreign exchange trading office at
approximately 11:00 a.m. on the date two Business Days prior to the date of such
determination; provided that the Agent may obtain such spot rate from another
financial institution designated by the Agent if the Person acting in such
capacity does not have as of the date of determination a spot buying rate for
any such currency.

 

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ARTICLE II

THE COMMITMENTS AND CREDIT EXTENSIONS

2.01 Committed Loans; Reserves.

(a) Subject to the terms and conditions set forth herein, (i) each Tranche A
Lender severally agrees to make loans (each such loan, a “Tranche A Loan”) to
the Borrowers from time to time, on any Business Day during the Availability
Period on which the Agent’s offices are open to conduct business, in an
aggregate amount not to exceed at any time outstanding the lesser of (x) the
amount of such Lender’s Tranche A Commitment, or (y) such Lender’s Tranche A
Applicable Percentage of the Tranche A Borrowing Base and (ii) each Tranche A-1
Lender severally agrees to make loans (each such loan, a “Tranche A-1 Loan”) to
the Borrowers from time to time, on any Business Day during the Availability
Period, in an aggregate amount not to exceed at any time outstanding the lesser
of (x) the amount of such Lender’s Tranche A-1 Commitment, or (y) such Lender’s
Tranche A-1 Applicable Percentage of the Tranche A-1 Loan Cap, subject in each
case to the following limitations:

(i) after giving effect to any Committed Borrowing, the Total Outstandings shall
not exceed the sum of the Tranche A Loan Cap and the Tranche A-1 Loan Cap;

(ii) after giving effect to any Borrowing of Tranche A Loans, the aggregate
Outstanding Amount of the Tranche A Loans of any Tranche A Lender shall not
exceed the lesser of (x) such Tranche A Lender’s Tranche A Commitment and
(y) such Tranche A Lender’s Tranche A Applicable Percentage of the Tranche A
Borrowing Base;

(iii) the aggregate outstanding principal amount of Tranche A Loans and L/C
Obligations shall not at any time exceed the Aggregate Tranche A Commitments;

(iv) after giving effect to any Borrowing of Tranche A-1 Loans, the aggregate
Outstanding Amount of the Tranche A-1 Loans of any Tranche A-1 Lender, shall not
exceed the lesser of (x) such Tranche A-1 Lender’s Tranche A-1 Commitment and
(y) such Tranche A-1 Lender’s Tranche A-1 Applicable Percentage of the Tranche
A-1 Loan Cap;

(v) the aggregate outstanding principal amount of the Tranche A-1 Loans shall
not exceed the Aggregate Tranche A-1 Commitments;

(vi) the Outstanding Amount of all L/C Obligations shall not at any time exceed
the Letter of Credit Sublimit; and

 

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(vii) after giving effect to any Committed Borrowing, the Total Outstandings
shall not exceed the Maximum Loan Amount.

Within the limits of each Lender’s Commitment, and subject to the other terms
and conditions hereof, the Borrowers may borrow under this Section 2.01, prepay
under Section 2.05, and reborrow Committed Loans under this Section 2.01.

(b) The Inventory Reserves and Availability Reserves as of the Closing Date are
set forth in the Borrowing Base Certificate delivered pursuant to
Section 4.01(c) hereof.

(c) The Agent shall have the right, at any time and from time to time after the
Closing Date in its Permitted Discretion to establish, modify or eliminate
Reserves.

2.02 Borrowings of Committed Loans.

(a) The Committed Loans shall be Loans and Obligations for all purposes of this
Agreement and the other Loan Documents.

(b) Each Committed Borrowing shall be made upon the Lead Borrower’s irrevocable
written notice to the Agent via a Request for Credit Extension, which. notice
must be received by the Agent not later than 12:00 p.m. on the requested day of
any Committed Borrowing, appropriately completed and signed by a Responsible
Officer of the Lead Borrower. Each Request for Credit Extension shall include
the most recently submitted Borrowing Base Certificate submitted by the Lead
Borrower to the Agent pursuant to Section 6.02(c) and shall specify (i) the
requested date of the Committed Borrowing (which shall be a Business Day), and
(ii) the principal amount of Committed Loans to be borrowed. Each Committed
Borrowing shall be in a principal amount of $100,000 or a whole multiple of
$10,000 in excess thereof.

(c) Notwithstanding anything to the contrary contained in this Agreement, the
Borrowers shall not request, and the Tranche A Lenders shall be under no
obligation to fund, any Tranche A Loan unless the Borrowers have borrowed the
full amount available under the Tranche A-1 Loan Cap. If any Tranche A-1 Loan is
prepaid in whole or part pursuant to Section 2.05, any Committed Loans to the
Borrowers thereafter requested shall automatically be Tranche A-1 Loans until
the maximum principal amount of Tranche A-1 Loans outstanding equals the Tranche
A-1 Loan Cap in effect at such time and thereafter shall be Tranche A Loans.

(d) Following receipt of a Request for Credit Extension, the Agent shall
promptly notify each Appropriate Lender of the amount of its Applicable
Percentage of the applicable Committed Loans. Each Lender shall make the amount
of its Committed Loan available to the Agent in immediately available funds at
the Agent’s Office not later than 2:00 p.m. on the Business Day specified in the
applicable Request for Credit Extension. Upon satisfaction of the applicable
conditions set forth in Section 4.02 (and, if such Committed Borrowing is the
initial Committed Borrowing, Section 4.01), the Agent shall make all funds so
received available to the Borrowers in like funds by no later than 4:00 p.m. on
the day of receipt by the Agent by wire transfer of such funds in accordance
with instructions provided to (and reasonably acceptable to) the Agent by the
Lead Borrower.

 

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(e) Each Borrowing of Tranche A Loans shall be made by the Tranche A Lenders pro
rata in accordance with their respective Tranche A Applicable Percentage and
each Borrowing of Tranche A-1 Loans shall be made by the Tranche A-1 Lenders pro
rata in accordance with their respective Tranche A-1 Applicable Percentage. The
failure of any Lender to make any Loan shall neither relieve any other Lender of
its obligation to fund its Loan in accordance with the provisions of this
Agreement nor increase the obligation of any such other Lender.

(f) The Agent, without the request of the Lead Borrower, may advance any
interest, fee, service charge (including direct wire fees), Credit Party
Expenses, or other payment to which any Credit Party is entitled from the Loan
Parties pursuant hereto or any other Loan Document and may charge the same to
the Loan Account notwithstanding that an Overadvance may result thereby. The
Agent shall advise the Lead Borrower of any such advance or charge promptly
after the making thereof. Such action on the part of the Agent shall not
constitute a waiver of the Agent’s rights and the Borrowers’ obligations under
Section 2.05(b). Any amount which is added to the principal balance of the Loan
Account as provided in this Section 2.02(e) shall bear interest at the interest
rate then and thereafter applicable to the Tranche A Loans.

(g) At any time that any Loans are outstanding, the Agent shall promptly notify
the Lead Borrower and the Lenders of changes in the LIBO Rate used in
determining the applicable interest rate.

(h) The Agent, the Lenders and the L/C Issuer shall have no obligation to make
any Loan or to provide any Letter of Credit if an Overadvance would result. The
Agent may, in its Permitted Discretion, make Permitted Overadvances without the
consent of the Borrowers, the Lenders and the L/C Issuer and the Borrowers and
each Lender and L/C Issuer shall be bound thereby. A Permitted Overadvance is
for the account of the Borrowers and shall constitute a Loan and an Obligation
and shall be repaid by the Borrowers in accordance with the provisions of
Section 2.05(b). The making of any such Permitted Overadvance on any one
occasion shall not obligate the Agent or any Lender to make or permit any
Permitted Overadvance on any other occasion or to permit such Permitted
Overadvances to remain outstanding. The Agent shall have no liability for, and
no Loan Party or Credit Party shall have the right to, or shall, bring any claim
of any kind whatsoever against the Agent with respect to Unintentional
Overadvances regardless of the amount of any such Overadvances.

2.03 Letters of Credit.

(a) The Letter of Credit Commitment.

(i) Subject to the terms and conditions set forth herein, each L/C Issuer shall
from time to time on any Business Day during the period from the Closing Date
until the Letter of Credit Expiration Date, issue Letters of Credit for the
account of the Borrowers, and amend or extend Letters of Credit previously
issued by it, in accordance with Section 2.03(b) below, and honor drawings under
the Letters of Credit; provided, that after giving effect to any L/C Credit
Extension with respect to any Letter of Credit and any Committed Loans made in
accordance with Section 2.03(g) below, (x) the Total Outstandings shall not
exceed the sum of the Tranche A Loan Cap plus the Tranche A-1 Loan Cap, (y) the
aggregate Outstanding Amount of the Tranche A Loans of any Tranche A Lender,
plus such Lender’s Tranche A Applicable Percentage of the Outstanding Amount of
all L/C Obligations shall not exceed such Tranche A Lender’s Commitment, and
(z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of
Credit Sublimit. Each request by the Lead Borrower for the issuance or amendment
of a Letter of Credit shall be deemed to be a representation by the Borrowers
that the L/C Credit Extension so requested complies with the conditions set
forth in the proviso to the preceding sentence. Within the foregoing limits, and
subject to the terms and conditions hereof, the Borrowers’ ability to obtain
Letters of Credit shall be fully revolving, and accordingly the Borrowers may,
during the foregoing period, obtain Letters of Credit to replace Letters of
Credit that have expired or that have been drawn upon and reimbursed.

 

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(ii) No Letter of Credit shall be issued if:

(A) subject to Section (b)(iii), the expiry date of such requested Letter of
Credit would occur more than twelve months after the date of issuance or last
extension, unless the Required Lenders have approved such expiry date; or

(B) the expiry date of such requested Letter of Credit would occur after the
Letter of Credit Expiration Date, unless all the Lenders have approved such
expiry date.

(iii) No Letter of Credit shall be issued without the prior consent of the Agent
if:

(A) any order, judgment or decree of any Governmental Authority or arbitrator
shall by its terms purport to enjoin or restrain the applicable L/C Issuer from
issuing such Letter of Credit, or any Law applicable to the applicable L/C
Issuer or any request or directive (whether or not having the force of law) from
any Governmental Authority with jurisdiction over the applicable L/C Issuer
shall prohibit, or request that the applicable L/C Issuer refrain from, the
issuance of letters of credit generally or such Letter of Credit in particular
or shall impose upon the applicable L/C Issuer with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which the applicable
L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing
Date, or shall impose upon the applicable L/C Issuer any unreimbursed loss, cost
or expense which was not applicable on the Closing Date and which the applicable
L/C Issuer in good faith deems material to it;

(B) the issuance of such Letter of Credit would violate one or more policies of
the applicable L/C Issuer applicable to letters of credit generally;

(C) except as otherwise agreed by the Agent and the applicable L/C Issuer, such
Letter of Credit is in an initial Stated Amount less than $25,000;

(D) such Letter of Credit is to be denominated in a currency other than Dollars;
provided, that if the applicable L/C Issuer, with the consent of the Agent,
issues a Letter of Credit denominated in a currency other than Dollars, all
reimbursements by the Borrowers of the honoring of any drawing under such Letter
of Credit shall be paid in Dollars based on the Spot Rate; or

 

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(E) such Letter of Credit contains any provisions for automatic reinstatement of
the Stated Amount after any drawing thereunder.

(iv) The applicable L/C Issuer shall not amend any Letter of Credit if (A) such
L/C Issuer would not be permitted at such time to issue such Letter of Credit in
its amended form under the terms hereof or (B) the beneficiary of such Letter of
Credit does not accept the proposed amendment to such Letter of Credit.

(v) Each L/C Issuer shall have all of the benefits and immunities (A) provided
to the Agent in Article IX with respect to any acts taken or omissions suffered
by such L/C Issuer in connection with Letters of Credit issued by it or proposed
to be issued by it and Issuer Documents pertaining to such Letters of Credit as
fully as if the term “Agent” as used in Article IX included such L/C Issuer with
respect to such acts or omissions, and (B) as additionally provided herein with
respect to such L/C Issuer.

(b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension
Letters of Credit.

(i) Each Letter of Credit shall be issued or amended, as the case may be, upon
the request of the Lead Borrower delivered to the applicable L/C Issuer (with a
copy to the Agent) in the form of a Letter of Credit Application, appropriately
completed and signed by a Responsible Officer of the Lead Borrower. Such Letter
of Credit Application must be received by such L/C Issuer and the Agent not
later than 11:00 a.m. at least two Business Days (or such other date and time as
the Agent and such L/C Issuer may agree in a particular instance in their sole
discretion) prior to the proposed issuance date or date of amendment, as the
case may be. In the case of a request for an initial issuance of a Letter of
Credit, such Letter of Credit Application shall specify in form and detail
satisfactory to the Agent and such L/C Issuer: (A) the proposed issuance date of
the requested Letter of Credit (which shall be a Business Day); (B) the amount
thereof; (C) the expiry date thereof; (D) the name and address of the
beneficiary thereof; (E) the documents to be presented by such beneficiary in
case of any drawing thereunder; (F) the full text of any certificate to be
presented by such beneficiary in case of any drawing thereunder; and (G) such
other matters as the Agent or such L/C Issuer may reasonably require. In the
case of a request for an amendment of any outstanding Letter of Credit, such
Letter of Credit Application shall specify in form and detail satisfactory to
the Agent and the applicable L/C Issuer (A) the Letter of Credit to be amended;
(B) the proposed date of amendment thereof (which shall be a Business Day);
(C) the nature of the proposed amendment; and (D) such other matters as the
Agent or such L/C Issuer may reasonably require. Additionally, the Lead Borrower
shall furnish to the applicable L/C Issuer and the Agent such other documents
and information pertaining to such requested Letter of Credit issuance or
amendment, and any Issuer Documents (including, if requested by the applicable
L/C Issuer, a Standby Letter of Credit Agreement), as the applicable L/C Issuer
or the Agent may reasonably require.

 

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(ii) Promptly after receipt of any Letter of Credit Application, the applicable
L/C Issuer will confirm with the Agent (by telephone or in writing) that the
Agent has received a copy of such Letter of Credit Application from the Lead
Borrower and, if not, such L/C Issuer will provide the Agent with a copy
thereof. Unless the applicable L/C Issuer has received written notice from any
Lender, the Agent or any Loan Party, at least one Business Day prior to the
requested date of issuance or amendment of the applicable Letter of Credit, that
one or more applicable conditions contained in Article IV shall not then be
satisfied or unless such L/C Issuer would not be permitted, or would have no
obligation, at such time to issue such Letter of Credit under the terms hereof
(by reason of the provisions of clause (ii) or (iii) of Section 2.03(a) or
otherwise), then, subject to the terms and conditions hereof, such L/C Issuer
shall, on the requested date, issue a Letter of Credit for the account of the
applicable Borrower or enter into the applicable amendment, as the case may be,
in each case in accordance such the L/C Issuer’s usual and customary business
practices.

(iii) If the Lead Borrower so requests in any applicable Letter of Credit
Application, the applicable L/C Issuer may, in its sole and absolute discretion,
agree to issue a Standby Letter of Credit that has automatic extension
provisions (each, an “Auto-Extension Letter of Credit”); provided, that any such
Auto-Extension Letter of Credit must permit the applicable L/C Issuer to prevent
any such extension at least once in each twelve-month period (commencing with
the date of issuance of such Standby Letter of Credit) by giving prior notice to
the beneficiary thereof not later than a day (the “Non-Extension Notice Date”)
in each such twelve-month period to be agreed upon at the time such Standby
Letter of Credit is issued. Unless otherwise directed by the Agent or the
applicable L/C Issuer, the Lead Borrower shall not be required to make a
specific request to the Agent or the applicable L/C Issuer for any such
extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders
shall be deemed to have authorized (but may not require) the applicable L/C
Issuer to permit the extension of such Standby Letter of Credit at any time to
an expiry date not later than the Letter of Credit Expiration Date; provided,
however, that the Agent shall instruct the applicable L/C Issuer not to permit
any such extension if (A) the applicable L/C Issuer has determined that it would
not be permitted, or would have no obligation, at such time to issue such
Standby Letter of Credit in its revised form (as extended) under the terms
hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a)
or otherwise), or (B) the applicable L/C Issuer has received notice (which may
be by telephone or in writing) on or before the day that is five Business Days
before the Non-Extension Notice Date (1) from the Agent that the Required
Lenders have elected not to permit such extension or (2) from the Agent, any
Lender or the Lead Borrower that one or more of the applicable conditions
specified in Section 4.02 is not then satisfied, and in each such case directing
the applicable L/C Issuer not to permit such extension.

(iv) Promptly after its delivery of any Letter of Credit or any amendment to a
Letter of Credit to an advising bank with respect thereto or to the beneficiary
thereof, the applicable L/C Issuer will also deliver to the Lead Borrower and
the Agent a true and complete copy of such Letter of Credit or amendment.

 

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(c) Drawings. Upon receipt from the beneficiary of any Letter of Credit of any
notice of a drawing under such Letter of Credit, the applicable L/C Issuer shall
notify the Lead Borrower and the Agent thereof not less than two (2) Business
Days prior to the Honor Date; provided, however, that any failure to give or
delay in giving such notice shall not relieve the Borrowers of their obligation
to reimburse the applicable L/C Issuer with respect to any such payment. Any
notice given by the applicable L/C Issuer or the Agent pursuant to this
Section 2.03(c) may be given by telephone if immediately confirmed in writing;
provided, that the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice.

(d) Reserved.

(e) Obligations Absolute. The obligation of the Borrowers to reimburse the
applicable L/C Issuer for each drawing under each Letter of Credit shall be
absolute, unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances, including
the following:

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

(ii) the existence of any claim, counterclaim, setoff, defense or other right
that the Borrowers or any Subsidiary may have at any time against any
beneficiary or any transferee of such Letter of Credit (or any Person for whom
any such beneficiary or any such transferee may be acting), the applicable L/C
Issuer or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by such Letter of Credit or any agreement or
instrument relating thereto, or any unrelated transaction;

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

(iv) any payment by the applicable L/C Issuer under such Letter of Credit
against presentation of a draft or certificate that does not strictly comply
with the terms of such Letter of Credit; or any payment made by the applicable
L/C Issuer under such Letter of Credit to any Person purporting to be a trustee
in bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any beneficiary
or any transferee of such Letter of Credit, including any arising in connection
with any proceeding under any Debtor Relief Law;

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

 

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

The Lead Borrower shall promptly examine a copy of each Letter of Credit and
each amendment thereto that is delivered to it and, in the event of any claim of
noncompliance with the Lead Borrower’s instructions or other irregularity, the
Lead Borrower will immediately notify the Agent and the applicable L/C Issuer.
The Borrowers shall be conclusively deemed to have waived any such claim against
the applicable L/C Issuer and its correspondents unless such notice is given as
aforesaid.

(f) Role of L/C Issuer. Each Lender and the Borrowers agree that, in paying any
drawing under a Letter of Credit, the applicable L/C Issuer shall not have any
responsibility to obtain any document (other than any sight draft, certificates
and documents expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document. None of the applicable L/C
Issuer, the Agent, any of their respective Related Parties nor any
correspondent, participant or assignee of the applicable L/C Issuer shall be
liable to any Lender for (i) any action taken or omitted in connection herewith
at the request or with the approval of the Lenders or the Required Lenders, as
applicable; (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; (iii) any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit or any error in interpretation of technical
terms; or (iv) the due execution, effectiveness, validity or enforceability of
any document or instrument related to any Letter of Credit or Issuer Document.
The Borrowers hereby assume all risks of the acts or omissions of any
beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Borrowers’ pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. None of the
applicable L/C Issuer, the Agent, any of their respective Related Parties nor
any correspondent, participant or assignee of the applicable L/C Issuer shall be
liable or responsible for any of the matters described in clauses (i) through
(v) of Section 2.03(e) or for any action, neglect or omission under or in
connection with any Letter of Credit or Issuer Documents, including, without
limitation, the issuance or any amendment of any Letter of Credit, the failure
to issue or amend any Letter of Credit, or the honoring or dishonoring of any
demand under any Letter of Credit, and such action or neglect or omission will
bind the Borrowers; provided, however, that anything in such clauses to the
contrary notwithstanding, the Borrowers may have a claim against the applicable
L/C Issuer, and the applicable L/C Issuer may be liable to the Borrowers, to the
extent, but only to the extent, of any direct, as opposed to consequential,
exemplary or punitive damages suffered by the Borrowers which the Borrowers
prove were caused by the applicable L/C Issuer’s willful misconduct or gross
negligence or the applicable L/C Issuer’s willful failure to pay under any
Letter of Credit after the presentation to it by the beneficiary of a sight
draft and certificate(s) strictly complying with the terms and conditions of a
Letter of Credit; provided, further, that any claim against the applicable L/C
Issuer by the Borrowers for any loss suffered or incurred by the Borrowers shall
be reduced by an amount equal to the sum of (i) the amount (if any) saved by the
Borrowers as a result of the breach or other wrongful conduct that allegedly
caused such loss, and (ii) the amount (if any) of the loss that would have been
avoided had the Borrowers taken all reasonable steps to mitigate such loss,
including, without limitation, by enforcing their rights against any beneficiary
and, in case of a claim of wrongful dishonor, by specifically and timely
authorizing the applicable L/C Issuer to cure such dishonor. In furtherance and
not in limitation of the foregoing, the applicable L/C Issuer may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary
(or the applicable L/C Issuer may refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit and may disregard any requirement in a Letter of Credit that
notice of dishonor be given in a particular manner and any requirement that
presentation be made at a particular place or by a particular time of day), and
the applicable L/C Issuer shall not be responsible for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason. The applicable L/C Issuer shall not be responsible
for the wording of any Letter of Credit (including, without limitation, any
drawing conditions or any terms or conditions that are ineffective, ambiguous,
inconsistent, unduly complicated or reasonably impossible to satisfy),
notwithstanding any assistance the applicable L/C Issuer may provide to the
Borrowers with drafting or recommending text for any Letter of Credit
Application or with the structuring of any transaction related to any Letter of
Credit, and the Borrowers hereby acknowledge and agree that any such assistance
will not constitute legal or other advice by the applicable L/C Issuer or any
representation or warranty by the applicable L/C Issuer that any such wording or
such Letter of Credit will be effective. Without limiting the foregoing, the
applicable L/C Issuer may, as it deems appropriate, modify or alter and use in
any Letter of Credit the terminology contained on the Letter of Credit
Application for such Letter of Credit.

 

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(g) Cash Collateral. The Borrowers shall immediately Cash Collateralize, with
the proceeds of Committed Loans, the Outstanding Amount of all L/C Obligations
with respect to all Letters of Credit upon the issuance thereof. In furtherance
thereof, on the date of issuance of each Letter of Credit hereunder the
Borrowers shall request a Committed Borrowing to be disbursed on such date in
order to Cash Collateralize the Outstanding Amount of all L/C Obligations with
respect to such Letter of Credit in accordance with this Section 2.03(g).
Sections 2.05 and 8.02(c) set forth certain additional requirements to deliver
Cash Collateral hereunder. For purposes of this Section 2.03, Section 2.05 and
Section 8.02(c), “Cash Collateralize” means to pledge and deposit with or
deliver to the applicable L/C Issuer for its benefit, as collateral for the
applicable L/C Obligations, cash or deposit account balances in an amount equal
to 103% (or such other percentage required by the applicable L/C Issuer) of the
Outstanding Amount of such L/C Obligations (other than L/C Obligations with
respect to Letters of Credit denominated in a currency other than Dollars, which
L/C Obligations shall be Cash Collateralized in an amount equal to 105% (or such
other percentage acceptable to the applicable L/C Issuer) of the Outstanding
Amount of such L/C Obligations), pursuant to documentation in form and substance
satisfactory to the Agent and the applicable L/C Issuer (which documents are
hereby Consented to by the Lenders). Cash Collateral shall be maintained in an
interest bearing account established with the applicable L/C Issuer. If at any
time the Agent or the applicable L/C Issuer determines that any funds held as
Cash Collateral are subject to any right or claim of any Person other than the
Agent or the applicable L/C Issuer or that the total amount of such funds is
less than the aggregate Outstanding Amount of all L/C Obligations, the Borrowers
will, forthwith upon demand by the Agent, pay to the Agent, as additional funds
to be deposited as Cash Collateral, an amount equal to the excess of (x) such
aggregate Outstanding Amount over (y) the total amount of funds, if any, then
held as Cash Collateral that the Agent determines to be free and clear of any
such right and claim. Upon the drawing of any Letter of Credit for which funds
are on deposit as Cash Collateral, such funds shall be applied, to the extent
permitted under applicable Laws, to reimburse the applicable L/C Issuer and, to
the extent not so applied, shall thereafter be applied to satisfy other
Obligations.

 

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(h) Applicability of ISP and UCP 600. Unless otherwise expressly agreed by the
applicable L/C Issuer and the Lead Borrower when a Letter of Credit is issued,
the rules of the ISP and the UCP 600 shall apply.

(i) Reserved.

(j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer.
The Borrowers shall pay directly to the applicable L/C Issuer, for its own
account, a customary fronting fee (the “Fronting Fee”) computed in a manner
determined by the applicable L/C Issuer. Such Fronting Fees shall be due and
payable on the first day after the end of each month, commencing with the first
such date to occur after the issuance of such Letter of Credit, on the Letter of
Credit Expiration Date and thereafter on demand, or such other dates as
determined by the applicable L/C Issuer. For purposes of computing the daily
amount available to be drawn under any Letter of Credit, the amount of the
Letter of Credit shall be determined in accordance with Section 1.06. In
addition, the Borrowers shall pay directly to the applicable L/C Issuer, for its
own account, the customary issuance, presentation, amendment and other
processing fees and other standard costs and charges, of the applicable L/C
Issuer relating to letters of credit as from time to time in effect. Such
customary fees and standard costs and charges are due and payable on demand and
are nonrefundable.

(k) Conflict with Issuer Documents. In the event of any conflict between the
terms hereof and the terms of any Issuer Document, the terms hereof shall
control.

2.04 Reserved.

2.05 Prepayments.

(a) Subject to Section 2.09, the Borrowers may, upon irrevocable notice from the
Lead Borrower to the Agent, at any time or from time to time voluntarily prepay
Loans in whole or in part without premium or penalty; 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; and (ii) any prepayment shall be in a
principal amount of $100,000 or a whole multiple of $10,000 in excess thereof
or, if less, the entire principal amount thereof then outstanding; provided that
prepayments applied to the Obligations pursuant to Section 6.13(d) shall not be
subject to any prepayment minimums or notice requirements. Except as provided in
Section 2.05(b)(z) below or in connection with a permanent reduction in the
Aggregate Tranche A-1 Commitment permitted hereunder, all payments shall be
first applied to Tranche A Loans, and upon payment of Tranche A Loans in full,
to Tranche A-1 Loans. Each such notice shall specify the date and amount of such
prepayment. The Agent will promptly notify each Appropriate 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 Lead Borrower and
is not later revoked, the Borrowers shall make such prepayment and the payment
amount specified in such notice shall be due and payable on the date specified
therein. Any prepayment shall be accompanied by all accrued interest on the
amount prepaid. Each such prepayment shall be applied to the Committed Loans of
the Lenders in accordance with their respective Applicable Percentages.

 

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(b) (x) If for any reason the Total Outstandings at any time exceed the sum of
the Tranche A Loan Cap plus the Tranche A-1 Loan Cap, each as then in effect,
the Borrowers shall immediately prepay in an aggregate amount necessary to
eliminate such excess, (i) first, the Tranche A Loans, and (ii) second, if there
remains an excess after the payments made under clause (i) above, the Tranche
A-1 Loans; (y) if for any reason the sum of the aggregate Outstanding Amount of
the Tranche A Loans and the L/C Obligations at any time exceeds the Tranche A
Loan Cap as then in effect, the Borrowers shall immediately prepay the Tranche A
Loans in an aggregate amount equal to such excess and (z) if for any reason the
aggregate Outstanding Amount of the Tranche A-1 Loans of the Tranche A-1 Lenders
at any time exceeds the Tranche A-1 Loan Cap as then in effect, the Borrowers
shall, after making any payments required pursuant to clauses (x) and (y) above,
immediately prepay Tranche A-1 Loans in an aggregate amount equal to such
excess.

(c) Upon the expiration of any Letter of Credit, or any reduction in the amount
of any Letter of Credit, the Borrowers shall immediately prepay the Committed
Loans then outstanding with the cash collateral held by the applicable issuer
thereof on account of such Letter of Credit in an amount equal to (i) in the
case of the expiration of such Letter of Credit, the aggregate amount of cash
collateral held by the applicable issuer thereof on account of such Letter of
Credit prior to giving effect to such prepayment, and (ii) in the case of any
reduction in the amount of such Letter of Credit, (A) the aggregate amount of
cash collateral held by the applicable issuer thereof on account of such Letter
of Credit prior to giving effect to such prepayment minus (ii) the amount of
cash collateral required to cash collateralize the aggregate undrawn amount
available to be drawn on such Letter of Credit, after giving effect to the
reduction thereof, in accordance with Section 2.03(g).

(d) The Borrowers shall prepay the Loans and Cash Collateralize the L/C
Obligations (to the extent that any such L/C Obligations are not already Cash
Collateralized) with proceeds and collections received by the Loan Parties in
accordance with the provisions of Section 6.13 hereof.

(e) The Borrowers shall prepay the Loans and Cash Collateralize the L/C
Obligations (to the extent that any such L/C Obligations are not already Cash
Collateralized) in an amount equal to the Net Cash Proceeds received by a Loan
Party on account of a Prepayment Event.

(f) Prepayments made pursuant to Section (d) and (e) above, first, shall be
applied ratably to the outstanding Tranche A Loans, second, shall be applied to
the outstanding Tranche A-1 Loans, third, shall be used to Cash Collateralize
the remaining L/C Obligations (to the extent that any such L/C Obligations are
not already Cash Collateralized), and, fourth, the amount remaining, if any, may
be retained by the Borrowers for use in the ordinary course of their business.

 

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2.06 Termination or Reduction of Commitments.

(a) Subject to Section 2.09, the Borrowers may, upon irrevocable notice from the
Lead Borrower to the Agent (which may be revocable if such notice states that
prepayment is contingent upon the refinancing in full of the credit facility
provided for hereunder), terminate the` Aggregate Tranche A Commitments, the
Aggregate Tranche A-1 Commitments or the Letter of Credit Sublimit or from time
to time permanently reduce the Aggregate Tranche A Commitments, the Aggregate
Tranche A-1 Commitments or the Letter of Credit Sublimit; provided, that (i) any
such notice shall be received by the Agent not later than 11:00 a.m. three
Business Days prior to the date of termination or reduction, (ii) any such
partial reduction shall be in an aggregate amount of $1,000,000 or any whole
multiple of $500,000 in excess thereof, (iii) the Borrowers shall not terminate
or reduce (A) the Tranche A Commitments if, after giving effect thereto and to
any concurrent prepayments hereunder, the aggregate Outstanding Amount of the
Tranche A Loans and the L/C Obligations would exceed the Aggregate Tranche A
Commitments, (B) the Tranche A-1 Commitments if, after giving effect thereto and
to any concurrent prepayments hereunder, the aggregate Outstanding Amount of the
Tranche A-1 Loans would exceed the Aggregate Tranche A-1 Commitments, and
(C) the Letter of Credit Sublimit if, after giving effect thereto, the
Outstanding Amount of L/C Obligations would exceed the Letter of Credit
Sublimit, and (iv) the Borrowers shall not reduce the Aggregate Tranche A-1
Commitments to less than $15,000,000 at any time while the Tranche A Commitments
remain outstanding.

(b) If, after giving effect to any reduction of the Aggregate Tranche A
Commitments, the Letter of Credit Sublimit exceeds the amount of the Aggregate
Tranche A Commitments, such Letter of Credit Sublimit shall be automatically
reduced by the amount of such excess.

(c) In the event that the Tranche A Commitments are terminated or are reduced to
zero, the Tranche A-1 Commitments shall be automatically terminated.

(d) The Agent will promptly notify the Lenders of any termination or reduction
of the Letter of Credit Sublimit, the Aggregate Tranche A Commitments or the
Aggregate Tranche A-1 Commitments under this Section 2.06. Upon any reduction of
the Aggregate Tranche A Commitments, the Tranche A Commitment of each Tranche A
Lender shall be reduced by such Tranche A Lender’s Applicable Percentage of such
reduction amount. Upon any reduction of the Aggregate Tranche A-1 Commitments,
the Tranche A-1 Commitment of each Tranche A-1 Lender shall be reduced by such
Tranche A-1 Lender’s Applicable Percentage of such reduction amount. All fees
(including, without limitation, commitment fees) and interest in respect of the
Aggregate Tranche A Commitments or Aggregate Tranche A-1 Commitments, as
applicable, accrued until the effective date of any termination of the Aggregate
Commitments shall be paid on the effective date of such termination.

2.07 Repayment of Loans. The Borrowers shall repay to the Lenders on the
Termination Date the aggregate principal amount of Committed Loans outstanding
on such date.

2.08 Interest.

(a) Subject to the provisions of Section 2.08(b) below, each Tranche A Loan
shall bear interest on the outstanding principal amount thereof from the
applicable borrowing date at a rate per annum equal to the Tranche A Interest
Rate and each Tranche A-1 Loan shall bear interest on the outstanding principal
amount thereof from the applicable borrowing date at a rate per annum equal to
the Tranche A-1 Interest Rate.

 

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(b) (i) If any amount payable under any Loan Document is not paid when due,
whether at stated maturity, by acceleration or otherwise, such amount shall
thereafter bear interest at a fluctuating interest rate per annum at all times
that such amount remains unpaid equal to the Default Rate to the fullest extent
permitted by applicable Laws.

(ii) If any other Event of Default exists, then the Agent may notify the Lead
Borrower that all outstanding Obligations shall thereafter bear interest at a
fluctuating interest rate per annum at all times during such existing Event of
Default equal to the Default Rate and thereafter such Obligations shall bear
interest at the Default Rate to the fullest extent permitted by applicable Laws.

(iii) Accrued and unpaid interest on past due amounts (including interest on
past due interest) shall be due and payable upon demand.

(c) 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.

2.09 Fees. In addition to certain fees described in Section 2.03(j):

(a) Commitment Fee. The Borrowers shall pay to the Agent, (x) for the account of
each Tranche A Lender in accordance with its Tranche A Applicable Percentage or
as otherwise determined by the Agent, a commitment fee, calculated on a per
annum basis, equal to one-half of one percent (0.50%) times the average daily
amount by which the Tranche A Commitments exceed the aggregate Outstanding
Amount of the Tranche A Loans and (y) for the account of each Tranche A-1 Lender
in accordance with its Tranche A-1 Applicable Percentage, or as otherwise
determined by the Agent, a commitment fee, calculated on a per annum basis equal
to 0.50% multiplied by the actual daily amount by which the Aggregate Tranche
A-1 Commitments exceed the aggregate Outstanding Amount of the Tranche A-1 Loans
(collectively, the “Commitment Fee”). The Commitment Fee shall accrue at all
times during the Availability Period, including at any time during which one or
more of the conditions in Article IV is not met, and shall be due and payable
monthly in arrears on the first day after the end of each month, commencing with
the first such date to occur after the Closing Date, and on the last day of the
Availability Period.

(b) Collateral Monitoring Fee. The Borrowers shall pay to the Agent, for its own
account, a collateral monitoring fee (the “Collateral Monitoring Fee”). The
Collateral Monitoring Fee shall be paid by the Borrowers in monthly
installments, each in the amount of $25,000, on the Closing Date (pro rated for
the number of days remaining in such month) and on the first day of each month
thereafter until the later of (i) the Maturity Date and (ii) for so long as any
obligation shall be outstanding under this Agreement or any Lender or other
secured party shall have any obligations hereunder (other than contingent
indemnification obligations). The entire Collateral Monitoring Fee shall be
fully earned on the Closing Date and shall not be refundable for any reason
whatsoever, and shall be paid on the first day of each calendar month. Any
unpaid balance of the Collateral Monitoring Fee outstanding on the Termination
Date shall be paid on the Termination Date.

 

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(c) DIP Exit Fee. On the earliest to occur of (i) a sale of substantially all of
any Borrower’s assets, (ii) the confirmation in the Chapter 11 Case of a plan of
reorganization or liquidation, (iii) the Termination Date (whether in connection
with an acceleration or refinancing of the Obligations or otherwise), Borrowers
shall pay the Agent, for its own account, a fee in an amount equal to two and
one-half percent (2.5%) of the Aggregate Commitments as of the Closing Date,
which is equal to $1,225,000 (the “DIP Exit Fee”), which DIP Exit Fee shall be
fully earned on the Closing Date.

2.10 Computation of Interest and Fees. All 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. For purposes of
the calculation of interest on the Loans and the Outstanding Amount, all
payments made by or on account of the Borrowers shall be deemed to have been
applied to the Loans one (1) Business Day after receipt of such payments by the
Agent (as such receipt is determined pursuant to Section 2.12). Each
determination by the Agent of an interest rate or fee hereunder shall be
conclusive and binding for all purposes, absent manifest error.

2.11 Evidence of Debt.

(a) The Credit Extensions 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 Credit Extensions made by the Lenders to the Borrowers 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 Borrowers
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 Borrowers shall execute
and deliver to such Lender (through the Agent) a Note, which shall evidence such
Lender’s Committed 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 Borrowers will issue, in
lieu thereof, a replacement Note in favor of such Lender, in the same principal
amount thereof and otherwise of like tenor.

 

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(b) Agent shall render monthly statements regarding the Loan Account to the Lead
Borrower including principal, interest, fees, and including an itemization of
all charges and expenses constituting Credit Party Expenses owing, and such
statements, absent manifest error, shall be conclusively presumed to be correct
and accurate and constitute an account stated between Borrowers and the Credit
Parties unless, within thirty (30) days after receipt thereof by the Lead
Borrower, the Lead Borrower shall deliver to Agent written objection thereto
describing the error or errors contained in any such statements.

2.12 Payments Generally; Agent’s Clawback.

(a) General. All payments to be made by the Borrowers shall be made without
condition or deduction for any counterclaim, defense, recoupment or setoff.
Except as otherwise expressly provided herein, all payments by the Borrowers
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 shall be deemed received on the next succeeding
Business Day and any applicable interest or fee shall continue to accrue and
shall be calculated pursuant to Section 2.10. If any payment to be made by the
Borrowers 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) (i) Funding by Lenders; Presumption by Agent. Unless the Agent shall have
received notice from a Lender prior to 12:00 noon on the date of such Committed
Borrowing that such Lender will not make available to the Agent such Lender’s
share of such Committed Borrowing, the Agent may assume that such Lender has
made such share available on such date in accordance with and at the time
required by Section 2.02 and may, in reliance upon such assumption, make
available to the Borrowers a corresponding amount. In such event, if a Lender
has not in fact made its share of the applicable Committed Borrowing available
to the Agent, then the applicable Lender and the Borrowers severally agree to
pay to the Agent forthwith on demand such corresponding amount in immediately
available funds with interest thereon, for each day from and including the date
such amount is made available to the Borrowers to but excluding the date of
payment to the Agent, at (A) in the case of a payment to be made by such Lender,
the greater of the Federal Funds Rate and a rate determined by the Agent in
accordance with banking industry rules on interbank compensation plus any
administrative processing or similar fees customarily charged by the Agent in
connection with the foregoing, and (B) in the case of a payment to be made by
the Borrowers, the interest rate applicable to the Committed Loans. If the
Borrowers and such Lender shall pay such interest to the Agent for the same or
an overlapping period, the Agent shall promptly remit to the Borrowers the
amount of such interest paid by the Borrowers for such period. If such Lender
pays its share of the applicable Committed Borrowing to the Agent, then the
amount so paid shall constitute such Lender’s Committed Loan included in such
Committed Borrowing. Any payment by the Borrowers shall be without prejudice to
any claim the Borrowers may have against a Lender that shall have failed to make
such payment to the Agent.

 

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(ii) Payments by Borrowers; Presumptions by Agent. Unless the Agent shall have
received notice from the Lead Borrower prior to the time at which any payment is
due to the Agent for the account of the Lenders or the applicable L/C Issuer
hereunder that the Borrowers will not make such payment, the Agent may assume
that the Borrowers have made such payment on such date in accordance herewith
and may, in reliance upon such assumption, distribute to the Lenders or the
applicable L/C Issuer, as the case may be, the amount due. In such event, if the
Borrowers have not in fact made such payment, then each of the Lenders or the
applicable L/C Issuer, as the case may be, severally agrees to repay to the
Agent forthwith on demand the amount so distributed to such Lender or the
applicable L/C Issuer, 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.

A notice of the Agent to any Lender or the Lead Borrower with respect to any
amount owing under this subsection (b) shall be conclusive, absent manifest
error.

(c) Failure to Satisfy Conditions Precedent. If any Lender makes available to
the Agent funds for any Loan to be made by such Lender as provided in the
foregoing provisions of this Article II, and such funds are not made available
to the Borrowers by the Agent because the conditions to the applicable Credit
Extension set forth in Article IV are not satisfied or waived in accordance with
the terms hereof (subject to the provisions of the last paragraph of
Section 4.02 hereof), the Agent shall return such funds (in like funds as
received from such Lender) to such Lender, without interest.

(d) Obligations of Lenders Several. The obligations of the Lenders hereunder to
make Committed Loans and to make payments hereunder are several and not joint.
The failure of any Lender to make any Committed Loan or to make any payment
hereunder on any date required hereunder shall not relieve any other Lender of
its corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to so make its Committed Loan or
to make its payment hereunder.

(e) 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.

2.13 Sharing of Payments by Lenders. If any Credit Party 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
Obligations resulting in such Lender receiving payment of a proportion of the
aggregate amount of such Obligations 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 Credit Party receiving such greater proportion
shall (a) notify the Agent of such fact, and (b) purchase (for cash at face
value) participations in the Obligations of the other Credit Parties or make
such other adjustments as shall be equitable, so that the benefit of all such
payments shall be shared by the Credit Parties ratably and in the priorities set
forth in Section 8.03, provided that:

 

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(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 Committed Loans
to any assignee or participant, other than to the Borrowers or any Subsidiary
thereof (as to which the provisions of this Section shall apply).

Each Loan Party consents to the foregoing and agrees, to the extent it may
effectively do so under applicable 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.

2.14 Settlement Amongst Lenders.

(a) The amount of each Lender’s Applicable Percentage of outstanding Committed
Loans shall be computed weekly (or more frequently in the Agent’s discretion)
and shall be adjusted upward or downward based on all Committed Loans and
repayments of Committed Loans received by the Agent as of 3:00 p.m. on the first
Business Day (such date, the “Settlement Date”) following the end of the period
specified by the Agent.

(b) The Agent shall deliver to each of the Lenders promptly after a Settlement
Date a summary statement of the amount of outstanding Committed Loans for the
period and the amount of repayments received for the period. As reflected on the
summary statement, (i) the Agent shall transfer to each Tranche A Lender its
Tranche A Applicable Percentage of repayments of Tranche A Loans and shall
transfer to each Tranche A-1 Lender its Tranche A-1 Applicable Percentage of
repayments of Tranche A-1 Loans, and (ii) each Lender shall transfer to the
Agent (as provided below) or the Agent shall transfer to each Lender, such
amounts as are necessary to insure that, after giving effect to all such
transfers, the amount of Tranche A Loans and Tranche A-1 Loans, made by each
Lender shall be equal to such Lender’s Applicable Percentage of all Tranche A
Loans and Tranche A-1 Loans, as applicable, outstanding as of such Settlement
Date. If the summary statement requires transfers to be made to the Agent by the
Lenders and is received prior to 1:00 p.m. on a Business Day, such transfers
shall be made in immediately available funds no later than 3:00 p.m. that day;
and, if received after 1:00 p.m., then no later than 3:00 p.m. on the next
Business Day. The obligation of each Lender to transfer such funds is
irrevocable, unconditional and without recourse to or warranty by the Agent. If
and to the extent any Lender shall not have so made its transfer to the Agent,
such Lender agrees to pay to the Agent, forthwith on demand such amount,
together with interest thereon, for each day from such date until the date such
amount is paid to the Agent, equal to the greater of the Federal Funds Rate and
a rate determined by the Agent in accordance with banking industry rules on
interbank compensation plus any administrative, processing, or similar fees
customarily charged by the Agent in connection with the foregoing.

 

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2.15 Release. Each Loan Party hereby acknowledges effective upon entry of the
Interim Financing Order, that no Loan Party has any defense, counterclaim,
offset, recoupment, cross-complaint, claim or demand of any kind or nature
whatsoever that can be asserted to reduce or eliminate all of any part of the
Loan Parties’ liability to repay the Credit Parties as provided in this
Agreement or to seek affirmative relief or damages of any kind or nature from
any Credit Party. Each Loan Party, on behalf of itself and its bankruptcy
estate, and on behalf of all its successors, assigns, Subsidiaries and any
Affiliates and any Person acting for and on behalf of, or claiming through them,
(collectively, the “Releasing Parties”), hereby fully, finally and forever
releases and discharges each Credit Party and its respective past and present
officers, directors, servants, agents, attorneys, assigns, heirs, parents,
subsidiaries, participants, and each Person acting for or on behalf of any of
them (collectively, the “Released Parties”) of and from any and all past,
present and future actions, causes of action, demands, suits, claims,
liabilities, Liens, lawsuits, adverse consequences, amounts paid in settlement,
costs, damages, debts, deficiencies, diminution in value, disbursements,
expenses, losses and other obligations of any kind or nature whatsoever, whether
in law, equity or otherwise (including, without limitation, those arising under
Sections 541 through 550 of the Bankruptcy Code and interest or other carrying
costs, penalties, legal, accounting and other professional fees and expenses,
and incidental, consequential and punitive damages payable to third parties),
whether known or unknown, fixed or contingent, direct, indirect, or derivative,
asserted or unasserted, foreseen or unforeseen, suspected or unsuspected, now
existing, heretofore existing or which may heretofore accrue against any of the
Released Parties, whether held in a personal or representative capacity, and
which are based on any act, fact, event or omission or other matter, cause or
thing occurring at or from any time prior to and including the date hereof in
any way, directly or indirectly arising out of, connected with or relating to
this Agreement, the Interim Financing Order, the Final Financing Order and the
transactions contemplated hereby or thereby, and all other agreements,
certificates, instruments and other documents and statements (whether written or
oral) related to any of the foregoing.

2.16 Waiver of any Priming Rights; Credit Bid. Upon the Closing Date, and on
behalf of itself and its estate, and for so long as any Obligations shall be
outstanding, each Loan Party hereby irrevocably waives any right or alleged
right, (i) pursuant to Sections 364(c) or 364(d) of the Bankruptcy Code or
otherwise, to grant any Lien of equal or greater priority than the Liens
securing the Obligations, or to approve a claim of equal or greater priority
than the Obligations (other than the Carve-Out and Pre-Petition Permitted
Liens); or (ii) to propose any sale or of reorganization or liquidation which
seeks to limit or eliminate the right of the Agent or Lenders to credit bid all
or any portion of the Obligations.

 

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ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY;

APPOINTMENT OF LEAD BORROWER

3.01 Taxes.

(a) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrowers hereunder or under any other Loan Document shall be
made free and clear of and without reduction or withholding for any Indemnified
Taxes or Other Taxes, provided that if the Borrowers shall be required by
applicable law to deduct any Indemnified Taxes (including any Other Taxes) from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions for Indemnified and Other Taxes (including
deductions for Indemnified and Other Taxes applicable to additional sums payable
under this Section) the Agent, the Lender or the applicable L/C Issuer, as the
case may be, receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrowers shall make such deductions and
(iii) the Borrowers shall timely pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable Law.

(b) Payment of Other Taxes by the Borrowers. Without limiting the provisions of
subsection (a) above, the Borrowers shall timely pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable Law.

(c) Indemnification by the Loan Parties. The Loan Parties shall indemnify the
Agent, each Lender and each L/C Issuer, within ten (10) days after demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) paid by the Agent, such Lender or such L/C
Issuer, as the case may be, and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes
or Other 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 Lead Borrower by a Lender or a L/C Issuer (with a
copy to the Agent), or by the Agent on its own behalf or on behalf of the Agent,
a Lender or a L/C Issuer, shall be conclusive absent manifest error.

(d) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrowers to a Governmental Authority,
the Lead Borrower shall deliver to the Agent the original or a certified copy of
a receipt issued by such Governmental Authority evidencing such payment, a copy
of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Agent.

(e) Status of Lenders. Each Lender that is a “United States person,” within the
meaning of Code Section 7701(a)(30), shall deliver to the Lead Borrower (with a
copy to the Agent) executed originals of Internal Revenue Service Form W-9, or
such other documentation or information prescribed by applicable Laws (or
reasonably requested by Lead Borrower or the Agent), as will enable the Lead
Borrower or the Agent, as the case may be, to determine whether or not such
Lender is subject to backup withholding or information reporting. Any Foreign
Lender that is entitled to an exemption from or reduction of withholding tax
under the law of the jurisdiction in which any Borrower is resident for tax
purposes, or any treaty to which such jurisdiction is a party, with respect to
payments hereunder or under any other Loan Document shall deliver to the Lead
Borrower (with a copy to the Agent), at the time or times prescribed by
applicable law or reasonably requested by the Lead Borrower or the Agent, such
properly completed and executed documentation prescribed by applicable Laws as
will permit such payments to be made without withholding or at a reduced rate of
withholding. Such delivery shall be provided on the Closing Date and on or
before such documentation expires or becomes obsolete or after the occurrence of
an event requiring a change in the documentation most recently delivered. In
addition, any Lender, if requested by the Lead Borrower or the Agent, shall
deliver such other documentation prescribed by applicable Laws (including,
without limitations, FATCA) or reasonably requested by the Lead Borrower or the
Agent as will enable the Lead Borrower or the Agent to determine whether or not
such Lender is subject to backup withholding or information reporting
requirements.

 

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Without limiting the generality of the foregoing, in the event that any Borrower
is resident for tax purposes in the United States, any Foreign Lender shall
deliver to the Lead 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
request of the Lead Borrower or the Agent, but only if such Foreign Lender is
legally entitled to do so), whichever of the following is applicable:

(i) duly completed copies of Internal Revenue Service Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States is a
party,

(ii) duly completed copies of Internal Revenue Service 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 to the
effect that such Foreign Lender is not (A) a “bank” within the meaning of
section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the
Borrowers within the meaning of section 881(c)(3)(B) of the Code, or (C) a
“controlled foreign corporation” described in section 881(c)(3)(C) of the Code
and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or

(iv) any other form prescribed by applicable Laws as a basis for claiming
exemption from or a reduction in United States Federal withholding tax duly
completed together with such supplementary documentation as may be prescribed by
applicable Laws to permit the Lead Borrower to determine the withholding or
deduction required to be made.

(f) Treatment of Certain Refunds. If the Agent, any Lender or any L/C Issuer
determines, in its sole discretion, that it has received a refund of any Taxes
or Other Taxes as to which it has been indemnified by the Borrowers or with
respect to which the Borrowers have paid additional amounts pursuant to this
Section, it shall pay to the Borrowers an amount equal to such refund (but only
to the extent of indemnity payments made, or additional amounts paid, by the
Borrowers under this Section with respect to the Taxes or Other Taxes giving
rise to such refund), net of all out-of-pocket expenses of the Agent, such
Lender or such L/C Issuer, as the case may be, and without interest (other than
any interest paid by the relevant Governmental Authority with respect to such
refund), provided that the Borrowers, upon the request of the Agent, such Lender
or such L/C Issuer, agree to repay the amount paid over to the Borrowers (plus
any penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Agent, such Lender or such L/C Issuer in the event the Agent,
such Lender or such L/C Issuer is required to repay such refund to such
Governmental Authority. This subsection shall not be construed to require the
Agent, any Lender or any L/C Issuer to make available its tax returns (or any
other information relating to its taxes that it deems confidential) to the
Borrowers or any other Person.

 

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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 rates based
upon the LIBO 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 Lead Borrower through the Agent, any obligation of such
Lender to determine or charge interest rates based upon the LIBO Rate shall be
suspended until such Lender notifies the Agent and the Lead Borrower that the
circumstances giving rise to such determination no longer exist. Upon receipt of
such notice, interest on the Committed Loans shall accrue at interest rates
based on the Base Rate plus a margin determined by the Agent to result in
interest rates similar to those based on the LIBO Rate, until the Agent (upon
the instruction of the Required Lenders) revokes such notice.

3.03 Inability to Determine Rates. If the Required Lenders determine that for
any reason in connection with any request for a LIBO Rate Loan thereof that
(a) adequate and reasonable means do not exist for determining the LIBO Rate or
(b) the LIBO Rate does not adequately and fairly reflect the cost to such
Lenders of funding such Loan, the Agent will promptly so notify the Lead
Borrower and each Lender. Upon receipt of such notice, interest on the Committed
Loans shall accrue at interest rates based on the Base Rate plus a margin
reasonably determined by the Agent to result in interest rates similar to those
based on the LIBO Rate, until the Agent (upon the instruction of the Required
Lenders) revokes such notice. Upon receipt of such notice, the Borrowers may
revoke any pending request for LIBO Rate Loans.

3.04 Increased Costs; Reserves on LIBO Rate Loans.

(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 LIBO Rate) or any L/C Issuer;

(ii) subject any Lender or any L/C Issuer to any tax of any kind whatsoever with
respect to this Agreement, any Letter of Credit or any LIBO Rate Loan made by
it, or change the basis of taxation of payments to such Lender or such L/C
Issuer in respect thereof (except for Indemnified Taxes or Other Taxes covered
by Section 3.01 and the imposition of, or any change in the rate of, any
Excluded Tax payable by such Lender or such L/C Issuer); or

 

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(iii) impose on any Lender or any L/C Issuer any other condition, cost or
expense affecting this Agreement or LIBO Rate Loans made by such Lender or any
Letter of Credit;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Loan (or of maintaining its obligation to
make any such Loan), or to increase the cost to such L/C Issuer of issuing or
maintaining any Letter of Credit (or of maintaining its obligation to issue any
Letter of Credit), or to reduce the amount of any sum received or receivable by
such Lender or such L/C Issuer hereunder (whether of principal, interest or any
other amount) then, upon request of such Lender or such L/C Issuer, the
Borrowers will pay to such Lender or such L/C Issuer, as the case may be, such
additional amount or amounts as will compensate such Lender or such L/C Issuer,
as the case may be, for such additional costs incurred or reduction suffered.

(b) Capital Requirements. If any Lender or any L/C Issuer determines that any
Change in Law affecting such Lender or such L/C Issuer or any Lending Office of
such Lender or such Lender’s or such L/C Issuer’s holding company, if any,
regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender’s or such L/C Issuer’s capital or on the capital of
such Lender’s or such L/C Issuer’s holding company, if any, as a consequence of
this Agreement, the Commitments of such Lender or the Loans made by such Lender,
or the Letters of Credit issued by such L/C Issuer, to a level below that which
such Lender or such L/C Issuer or such Lender’s or such L/C Issuer’s holding
company could have achieved but for such Change in Law (taking into
consideration such Lender’s or such L/C Issuer’s policies and the policies of
such Lender’s or such L/C Issuer’s holding company with respect to capital
adequacy), then from time to time the Borrowers will pay to such Lender or such
L/C Issuer, as the case may be, such additional amount or amounts as will
compensate such Lender or such L/C Issuer or such Lender’s or such L/C Issuer’s
holding company for any such reduction suffered.

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

(d) Delay in Requests. Failure or delay on the part of any Lender or any L/C
Issuer to demand compensation pursuant to the foregoing provisions of this
Section shall not constitute a waiver of such Lender’s or such L/C Issuer’s
right to demand such compensation, provided that the Borrowers shall not be
required to compensate a Lender or a L/C Issuer pursuant to the foregoing
provisions of this Section for any increased costs incurred or reductions
suffered more than six months prior to the date that such Lender or such L/C
Issuer, as the case may be, notifies the Lead Borrower of the Change in Law
giving rise to such increased costs or reductions and of such Lender’s or such
L/C Issuer’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 six-month period referred to above shall be extended to include the
period of retroactive effect thereof).

 

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(e) Reserves on LIBO Rate Loans. The Borrowers shall pay to each Lender, as long
as such Lender shall be required to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency funds or deposits
(currently known as “Eurocurrency liabilities”), additional interest on the
unpaid principal amount of each LIBO Rate Loan equal to the actual costs of such
reserves allocated to such Loan by such Lender (as determined by such Lender in
good faith, which determination shall be conclusive), which shall be due and
payable on each date on which interest is payable on such Loan, provided the
Lead Borrower shall have received at least 10 days’ prior notice (with a copy to
the Agent) of such additional interest from such Lender. If a Lender fails to
give notice 10 days prior to the relevant Interest Payment Date, such additional
interest shall be due and payable 10 days from receipt of such notice.

3.05 Reserved.

3.06 Mitigation Obligations; Replacement of Lenders.

(a) Designation of a Different Lending Office. If any Lender requests
compensation under Section 3.04, or the Borrowers are required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 3.01, 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, 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 Borrowers hereby
agree 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 Borrowers are 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 any Lender delivers notice pursuant to Section 3.02, the
Borrowers may replace such Lender in accordance with Section 10.13.

3.07 Survival. All of the Borrowers’ obligations under this Article III shall
survive termination of the Aggregate Commitments and repayment of the Committed
Loans and all other Obligations hereunder.

3.08 Designation of Lead Borrower as Borrowers’ Agent.

(a) Each Borrower hereby irrevocably designates and appoints the Lead Borrower
as such Borrower’s agent to obtain Credit Extensions, the proceeds of which
shall be available to each Borrower for such uses as are permitted under this
Agreement. As the disclosed principal for its agent, each Borrower shall be
obligated to each Credit Party on account of Credit Extensions so made as if
made directly by the applicable Credit Party to such Borrower, notwithstanding
the manner by which such Credit Extensions are recorded on the books and records
of the Lead Borrower and of any other Borrower. In addition, each Loan Party
other than the Borrowers hereby irrevocably designates and appoints the Lead
Borrower as such Loan Party’s agent to represent such Loan Party in all respects
under this Agreement and the other Loan Documents.

 

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(b) Each Borrower recognizes that credit available to it hereunder is in excess
of and on better terms than it otherwise could obtain on and for its own account
and that one of the reasons therefor is its joining in the credit facility
contemplated herein with all other Borrowers. Consequently, each Borrower hereby
assumes and agrees to discharge all Obligations of each of the other Borrowers.

(c) The Lead Borrower shall act as a conduit for each Borrower (including
itself, as a “Borrower”) on whose behalf the Lead Borrower has requested a
Credit Extension. Neither the Agent nor any other Credit Party shall have any
obligation to see to the application of such proceeds therefrom.

ARTICLE IV

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

4.01 Conditions of Initial Credit Extension. The obligation of each L/C Issuer
and each Lender to make its initial Credit Extension 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
properly executed by a Responsible Officer of the signing Loan Party or the
Lenders, as applicable, 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 reasonably satisfactory to the Agent:

(i) executed counterparts of this Agreement, sufficient in number for
distribution to the Agent, each Lender and the Lead Borrower; provided that the
form of this Agreement shall have been approved by the Agent’s credit
authorities;

(ii) a Note executed by the Borrowers in favor of each Lender requesting a Note,
if requested pursuant to Section 2.11(a);

(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 reasonably require evidencing (A) the authority of such 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 the Organization Documents of each Loan Party 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 and qualified to engage in business in each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification, except to the extent that
failure to so qualify in such jurisdiction could not reasonably be expected to
have a Material Adverse Effect;

 

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(v) reserved;

(vi) a certificate signed by a Responsible Officer of the Lead Borrower
certifying (A) that the conditions specified in Sections 4.02(a) and 4.02(b)
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, and (C) either that (1) no consents, licenses or approvals by any
Governmental Authority 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 or
would not have and reasonably could not be expected to have a Material Adverse
Effect;

(vii) evidence that all insurance required to be maintained pursuant to the Loan
Documents and all endorsements in favor of the Agent required under the Loan
Documents have been obtained and are in effect and Agent has been named loss
payee and additional insured on all applicable insurance policies;

(viii) a payoff letter from the agent for the lenders under the Pre-Petition
Credit Agreement reasonably satisfactory in form and substance to the Agent
evidencing that the Pre-Petition Credit Agreement has been or concurrently with
the Closing Date is being terminated, all obligations thereunder are being paid
in full other than contingent indemnification obligations, and all Liens
securing obligations under the Pre-Petition Credit Agreement have been or
concurrently with the Closing Date are being released;

(ix) the Security Documents and certificates evidencing any stock being pledged
thereunder, together with undated stock powers executed in blank, each duly
executed by the applicable Loan Parties, each of which shall have been approved
by the Agent’s credit authorities;

(x) all other Loan Documents, each duly executed by the applicable Loan Parties,
each of which shall have been approved by the Agent’s credit authorities;

(xi) 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 and releases,
satisfactions and discharges of any mortgages, and releases or subordination
agreements reasonably 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 and releases, satisfactions and
discharges have been made;

 

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(xii) (A) all documents and instruments, including Uniform Commercial Code
financing statements, 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 DDA Notifications and Blocked Account Agreements required
pursuant to Section 6.13 hereof, (C) control agreements with respect to the Loan
Parties’ securities and investment accounts, and (D) Collateral Access
Agreements as required by the Agent; and

(xiii) such other assurances, certificates, documents, consents or opinions as
the Agent reasonably may reasonably require.

(b) The Agent shall have received the Audited Financial Statements, together
with unaudited financial statements for the four month period ended April 30,
2014, each in accordance with GAAP, consistently applied;

(c) The Agent shall have received a Borrowing Base Certificate dated the Closing
Date, relating to the week ended June [    ], 2014, and executed by a
Responsible Officer of the Lead Borrower.

(d) [Reserved].

(e) The consummation of the transactions contemplated hereby shall not violate
any applicable Law or any Organization Document.

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

(g) The Borrowers shall have paid all fees, charges and disbursements of counsel
to the Agent to the extent invoiced prior to or on the Closing Date, plus such
additional amounts of such fees, charges and disbursements as shall constitute
its reasonable estimate of such fees, charges and disbursements incurred or to
be incurred by it through the Closing Date (provided that such estimate shall
not thereafter preclude a final settling of accounts between the Borrowers and
the Agent).

(h) The Agent and the Lenders shall have completed satisfactory background
checks of the Loan Parties’ shareholders and management and 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.

(i) No material changes in governmental regulations or policies affecting any
Loan Party or any Credit Party shall have occurred prior to the Closing Date.

(j) There shall not have occurred any disruption or material adverse change in
the United States financial or capital markets in general that has had, in the
reasonable opinion of the Agent, a material adverse effect on the market for
loan syndications or adversely affecting the syndication of the Loans.

 

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(k) The Agent shall have received evidence that the Loan Parties filed the
following “first day” motions on the Petition Date: motions seeking to retain
the Consultant and the Investment Banker on terms reasonably satisfactory to the
Agent.

(l) The Bankruptcy Court shall have entered the Interim Financing Order, the
Cash Management Order and the Wage Order (and all pre-petition amounts set forth
on Schedule 4.01(l)1, the payment of which has been authorized by the Wage
Order, shall have been paid).

(m) At least $400,000 of the Carve-Out shall be fully funded into the
Professional Fee Escrow Account in accordance with the Interim Financing Order.

(n) The Agent shall have received and, in its discretion, approved, the initial
Approved Budget.

(o) The principal amount of the Tranche A Loans shall be less than the Tranche A
Borrowing Base and the principal amount of the Tranche A-1 Loans shall be less
than the Tranche A-1 Borrowing Base.

(p) The Lead Borrower shall have retained and employed 360° Merchant Solutions
LLC or another nationally recognized liquidator acceptable to the Agent in its
reasonable discretion to liquidate the assets of the LaJobi furniture business.

(q) The Lead Borrower shall have retained a chief restructuring officer
acceptable to the Agent in its Permitted Discretion, at the Loan Parties’
expense and subject to an agreement reasonably acceptable to the Agent.

Without limiting the generality of the provisions of Section 9.04, for purposes
of determining compliance with the conditions specified in this Section 4.01,
each Lender that has signed this Agreement shall be deemed to have Consented to,
approved or accepted or to be satisfied with, each document or other matter
required thereunder to be Consented to or approved by or acceptable or
satisfactory to a Lender unless the Agent shall have received notice from such
Lender prior to the proposed Closing Date specifying its objection thereto.

4.02 Conditions to all Credit Extensions. The obligation of each Lender to honor
any Request for Credit Extension and each L/C Issuer to issue each Letter of
Credit is subject to the following conditions precedent:

(a) The representations and warranties of each other 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 (other than any representation or
warranty which is qualified by materiality or Material Adverse Effect, which
shall be true and correct in all respects) on and as of the date of such Credit
Extension, except (i) to the extent that such representations and warranties
specifically refer to an earlier date, in which case they shall be true and
correct in all material respects as of such earlier date and (ii) for purposes
of this Section 4.02, the representations and warranties contained in
subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most
recent statements furnished pursuant to clauses (a) and (b), respectively, of
Section 6.01; provided, however, that the representation and warranty contained
in Section 5.07 of the Credit Agreement, shall not include the Existing Events
of Default;

 

 

1  Lowenstein/PWC: Please provide.

 

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(b) No Default or Event of Default (except for the Existing Events of Default)
shall exist, or would result from such proposed Credit Extension or from the
application of the proceeds thereof;

(c) The Agent and, if applicable, the applicable L/C Issuer shall have received
a Request for Credit Extension in accordance with the requirements hereof;

(d) No event or circumstance which could reasonably be expected to result in a
Material Adverse Effect shall have occurred; and

(e) No Overadvance shall result from such Credit Extension, unless such
Overadvance is a Permitted Overadvance.

Each Request for Credit Extension submitted by the Borrower shall be deemed to
be a representation and warranty by the Borrowers that the conditions specified
in Sections 4.02(a) and 4.02(b) have been satisfied on and as of the date of the
applicable Credit Extension. The conditions set forth in this Section 4.02 are
for the sole benefit of the Credit Parties but until the Required Lenders
otherwise direct the Agent to cease making Committed Loans and direct each L/C
Issuer to cease issuing Letters of Credit, the Lenders will fund their
Applicable Percentage of all Committed Loans whenever made, which are requested
by the Lead Borrower and which, notwithstanding the failure of the Loan Parties
to comply with the provisions of this Article IV, agreed to by the Agent;
provided, however, the making of any such Loans or the issuance of any Letters
of Credit shall not be deemed a modification or waiver by any Credit Party of
the provisions of this Article IV on any future occasion or a waiver of any
rights or the Credit Parties as a result of any such failure to comply.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

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

5.01 Existence, Qualification and Power. Each Loan Party (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 each case referred to in clause (b)(i) or
(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.

 

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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 Law.

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.

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 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.

5.05 Financial Statements; No Material Adverse Effect.

(a) 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 Lead
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, in accordance with GAAP consistently applied, of the Lead
Borrower and its Subsidiaries as of the date thereof, including liabilities for
taxes, material commitments and Indebtedness.

 

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(b) The unaudited Consolidated balance sheet of the Lead Borrower and its
Subsidiaries dated March 31, 2014, and the related Consolidated and
consolidating 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 in all material
respects the financial condition of the Lead 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 Petition Date, 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) To the best knowledge of the Lead Borrower, other than as previously
disclosed to the Agent, no Internal Control Event exists as of the date hereof
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 the Tranche A Borrowing Base or
the Tranche A-1 Borrowing Base, (iii) of covenant compliance calculations
provided hereunder or (iv) of the assets, liabilities, financial condition or
results of operations of the Lead Borrower and its Subsidiaries on a
Consolidated basis.

5.06 Litigation. Except as set forth in Schedule 5.06, 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.

5.07 No Default. No Loan Party or any Subsidiary is in default under or with
respect to, or party to, any Material Contract or any Material Indebtedness. 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.

5.08 Ownership of Property; Liens.

(a) Each of the Loan Parties and each Subsidiary thereof has good record and
marketable title in fee simple to or valid leasehold interests in, all Real
Estate necessary or used in the ordinary conduct of its business. Each of the
Loan Parties and each Subsidiary has good and marketable title to, valid
leasehold interests in, or valid licenses to use all personal property and
assets material to the ordinary conduct of its business.

(b) Schedule 5.08(b)(1) sets forth the address (including street address, county
and state) of all Real Estate that is owned by the Loan Parties and each of
their Subsidiaries, together with a list of the holders of any mortgage or other
Lien thereon as of the Closing Date. Each Loan Party and each of its
Subsidiaries has good, marketable and insurable fee simple title to the Real
Estate owned by such Loan Party or such Subsidiary, free and clear of all Liens,
other than Permitted Encumbrances. Schedule 5.08(b)(2) sets forth the address
(including street address, county and state) of all Leases of the Loan Parties,
together with a list of the 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 the terms thereof.

 

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(c) Schedule 7.01 sets forth a complete and accurate list of all Liens reflected
in filed financing statements, on the property or assets of each Loan Party,
showing as of the Closing Date the lienholder thereof, the principal amount of
the obligations secured thereby and the property or assets of such Loan Party
subject thereto. The property of each Loan Party and each of its Subsidiaries is
subject to no Liens, other than Permitted Encumbrances.

(d) Schedule 7.02 sets forth a complete and accurate list of all Investments
(under clauses (a) or (b) of the definition thereof) held by any Loan Party on
the Closing Date, showing as of the Closing Date the amount, obligor or issuer
and maturity, if any, thereof.

(e) Schedule 7.03 sets forth a complete and accurate list of all
(i) Indebtedness described in clause (a) of the definition thereof and (ii) all
other material Indebtedness, of each Loan Party and of Kid Brands Australia Pty
Ltd. on the Closing Date, other than intercompany Indebtedness owed by a Loan
Party to another Loan Party or to any Inactive Subsidiary, showing as of the
Closing Date the amount, obligor or issuer and maturity thereof (if applicable).

5.09 Environmental Compliance.

(a) Except as specifically disclosed in Schedule 5.09, no Loan Party or any
Subsidiary thereof (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, as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

(b) Except as otherwise set forth in Schedule 5.09, none of the properties
currently or formerly owned or operated by any Loan Party or any Subsidiary
thereof is listed or proposed for listing on the NPL or on the CERCLIS or any
analogous foreign, state or local list or is adjacent to any such property;
there are no and never have been any underground or above-ground storage tanks
or any surface impoundments, septic tanks, pits, sumps or lagoons in which
Hazardous Materials are being or have been treated, stored or disposed on any
property currently owned or operated by any Loan Party or any Subsidiary thereof
or, to the best of the knowledge of the Loan Parties, on any property formerly
owned or operated by any Loan Party or Subsidiary thereof; there is no asbestos
or asbestos-containing material on any property currently owned or operated by
any Loan Party or Subsidiary thereof; and Hazardous Materials have not been
released, discharged or disposed of on any property currently or formerly owned
or operated by any Loan Party or any Subsidiary thereof.

 

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(c) Except as otherwise set forth on Schedule 5.09, no Loan Party or any
Subsidiary thereof is undertaking, and no Loan Party or any Subsidiary thereof
has completed, 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; and all Hazardous Materials generated, used, treated, handled
or stored at, or transported to or from, any property currently or formerly
owned or operated by any Loan Party or any Subsidiary thereof have been disposed
of in a manner not reasonably expected to result in material liability to any
Loan Party or any Subsidiary thereof.

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 amounts, with such deductibles and covering such risks
(including, without limitation, workmen’s compensation, public liability,
business interruption and property damage insurance) as are customarily carried
by companies engaged in similar businesses and owning similar properties in
localities where the Loan Parties. Schedule 5.10 sets forth a description of all
insurance maintained by or on behalf of the Loan Parties and their Subsidiaries
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.

5.11 Taxes. The Loan Parties and their Subsidiaries have filed all Federal,
state and other material tax returns and reports required to be filed, and have
paid all 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 which are being contested in good
faith by appropriate proceedings being diligently conducted, for which adequate
reserves have been provided in accordance with GAAP, and which contest
effectively suspends the collection of the contested obligation and the
enforcement of any Lien securing such obligation. There is no proposed tax
assessment against any Loan Party or any Subsidiary that would, if made, have a
Material Adverse Effect. No Loan Party or any Subsidiary thereof is a party to
any tax sharing agreement.

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 Federal or state Laws. Each
Pension Plan that is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS or an application for
such a letter is currently being processed by the IRS with respect thereto and,
to the knowledge of the Lead Borrower, nothing has occurred which would prevent,
or cause the loss of, such qualification. The Loan Parties and each ERISA
Affiliate have made required contributions to each Plan subject to Section 412
of the Code sufficient that no contribution failure would give rise to a Lien
under ERISA or otherwise would have or could reasonably be expected to have a
Material Adverse Effect, and no application for a funding waiver or an extension
of any amortization period pursuant to Section 412 of the Code has been made
with respect to any Plan. No Lien imposed under the Code or ERISA exists or is
likely to arise on account of any Plan.

 

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(b) There are no pending or, to the knowledge of the Lead 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 prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan that has resulted or would
reasonably be expected to result in a Material Adverse Effect.

(c) (i) No ERISA Event has occurred or is reasonably expected to occur which
would have or could reasonably be expected to have a Material Adverse Effect;
(ii) no Pension Plan has any Unfunded Pension Liability which would have or
could reasonably be expected to have a Material Adverse Effect; (iii) neither
any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA);
(iv) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability (and no event has occurred which, with the
giving of notice under Section 4219 of ERISA, would result in such liability)
under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan, which
would have or could reasonably expected to have a Material Adverse Effect; and
(v) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction
that could reasonably be expected to be subject to Sections 4069 or 4212(c) of
ERISA which would have or could reasonably be expected to have a Material
Adverse Effect.

5.13 Subsidiaries; Equity Interests. The Loan Parties have no Subsidiaries
(except for any Inactive Subsidiaries formed or acquired after the Closing Date)
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 (except for any Inactive Subsidiaries
formed or acquired after the Closing Date) have been validly issued, are fully
paid and non-assessable and are owned by a Loan Party (or a Subsidiary of a Loan
Party) in the amounts specified on Part (a) of Schedule 5.13 free and clear of
all Liens except for those created under the Security Documents and other
Permitted Encumbrances. Except as set forth in Schedule 5.13, there are no
outstanding rights to purchase any Equity Interests in any Subsidiary (except
for any Inactive Subsidiaries formed or acquired after the Closing Date). Other
than as disclosed in Part (a) of Schedule 5.13, 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 Borrower’s Subsidiaries which are Loan Parties have been validly issued,
and are fully paid and non-assessable and are owned free and clear of all Liens
except for those created under the Security Documents and other Permitted
Encumbrances. 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.

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
Credit Extensions 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 Credit Extensions to
be considered a “purpose credit” within the meaning of Regulations T, U, or X
issued by the FRB.

 

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(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.

5.15 Disclosure. Each Loan Party 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, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
No report, financial statement, certificate or other information 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) 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, not misleading as of the time when made or delivered. It being recognized
by the Agent and the Lenders that any projections and forecasts provided by any
Loan Party are subject to uncertainties and contingencies, are based on good
faith estimates and assumptions believed by the Loan Parties to be reasonable as
of the date of the applicable projections or forecasts and upon the best
information then reasonably available to the Loan Parties and that actual
results during the period or periods covered by any such projections and
forecasts may differ materially from projected or forecasted results.

5.16 Compliance with Laws. Each of the Loan Parties and each Subsidiary is in
compliance (a) 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 (i) such requirement of Law or
order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (ii) the failure to comply
therewith, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect, and (b) with Sections 10.17 and
10.18 hereof.

5.17 Intellectual Property; Licenses, Etc. The Loan Parties own, or possess the
right to use, all of the Intellectual Property, licenses, permits and other
authorizations that are reasonably necessary for the operation of their
respective businesses except for the failure to so own or license, which would
not have a Material Adverse Effect, without conflict with the rights of any
other Person. To the best knowledge of the Lead Borrower, no slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed, by any Loan Party infringes
upon any rights held by any other Person. Except as specifically disclosed in
Schedule 5.17, no claim or litigation regarding any of the foregoing is pending
or, to the best knowledge of the Lead Borrower, threatened, which, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

 

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5.18 Labor Matters. Except as set forth on Part (a) of Schedule 5.18 (i) there
are no strikes, lockouts, slowdowns or other material labor disputes against any
Loan Party or any Subsidiary thereof pending or, to the knowledge of any Loan
Party, threatened. (ii) the hours worked by and payments made to employees of
the Loan Parties comply with the Fair Labor Standards Act and any other
applicable federal, state, local or foreign Law dealing with such matters,
(iii) no Loan Party or any of its Subsidiaries has incurred any liability or
obligation under the Worker Adjustment and Retraining Act or similar state Law,
(iv) all payments due from any Loan Party and its Subsidiaries, or for which any
claim may be made against any Loan Party or any of its Subsidiaries, on account
of wages and employee health and welfare insurance and other benefits, have been
paid or properly accrued in accordance with GAAP as a liability on the books of
such Loan Party. Except as set forth on Part (b) of Schedule 5.18, no Loan Party
or any Subsidiary is a party to or bound by any material collective bargaining
agreement, management agreement, employment agreement, bonus, restricted stock,
stock option, or stock appreciation plan or agreement or any similar plan,
agreement or arrangement. Except as set forth on Part (a) of Schedule 5.18,
there are no representation proceedings pending or, to any Loan Party’s
knowledge, threatened to be filed with the National Labor Relations Board, and
no labor organization or group of employees of any Loan Party or any Subsidiary
has made a pending demand for recognition, (ii) there are no complaints, unfair
labor practice charges, grievances, arbitrations, unfair employment practices
charges or any other claims or complaints against any Loan Party or any
Subsidiary pending or, to the knowledge of any Loan Party, threatened to be
filed with any Governmental Authority or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment of any employee of any Loan Party or any of its Subsidiaries except
any such changes or claim that should not reasonably be expected to have a
Material Adverse Effect. The consummation of the transactions contemplated by
the Loan Documents will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which any Loan Party or any of its Subsidiaries is bound.

5.19 Security Documents.

(a) The Security Agreement creates in favor of the Agent, for the benefit of the
Secured Parties referred to therein, a legal, valid, continuing 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 financing statements, releases and other
filings are in appropriate form and have been or will be filed in the offices
specified in Schedule II of the Security Agreement. Upon such filings and
payment of any filing fees and/or the obtaining of “control” (as defined in the
UCC), 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 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) or
by obtaining control, under the UCC (in effect on the date this representation
is made) in each case prior and superior in right to any other Person.

(b) When the Security Agreement (or a short form thereof) is filed in the United
States Patent and Trademark Office and the United States Copyright Office and
when financing statements, releases and other filings in and payment of filing
or registration fees is made appropriate form are filed in the offices specified
in Schedule II of the Security Agreement, the Agent shall have a fully perfected
Lien on, and security interest in, all right, title and interest of the
applicable Loan Parties in the Intellectual Property (as defined in the Security
Agreement) in which a security interest may be perfected by filing, recording or
registering a security agreement, financing statement or analogous document in
the United States Patent and Trademark Office or the United States Copyright
Office, as applicable, in each case prior and superior in right to any other
Person (it being understood that subsequent recordings in the United States
Patent and Trademark Office and the United States Copyright Office may be
necessary to perfect a Lien on registered trademarks, trademark applications and
copyrights acquired by the Loan Parties after the Closing Date).

 

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5.20 Reserved.

5.21 Deposit Accounts. 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) whether it is a DDA, an Excluded
Account or an Excluded Disbursement Account.

5.22 Brokers. Except for East Wind Securities, LLC and Oppenheimer & Co. Inc.,
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.

5.23 Material Contracts. Schedule 5.24 sets forth all Material Contracts 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 the intention of any other party
thereto to terminate any Material Contract.

5.24 Casualty. Neither the businesses nor the properties of any Loan Party or
any of its Subsidiaries are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy or other casualty (whether or not covered by
insurance) that, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

5.25 Reserved.

5.26 Personally Identifiable Information. Borrowers maintain a policy for the
treatment, handling and storage of consumer information and personally
identifiable information in accordance with applicable Laws and a true, accurate
and complete copy of the current version thereof has been provided to the Agent.

5.27 Bankruptcy Matters.

(a) The Chapter 11 Case was commenced on the Petition Date in accordance with
applicable law and proper notice of (i) the motion seeking approval of the Loan
Documents and the Interim Financing Order and Final Financing Order, (ii) the
hearing for the entry of the Interim Financing Order, and (iii) the hearing for
the entry of the Final Financing Order has been or will be given. The Borrowers
shall give, on a timely basis as specified in the Interim Financing Order or the
Final Financing Order, as applicable, all notices required to be given to all
parties specified in the Interim Financing Order or Final Financing Order, as
applicable.

 

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(b) After the entry of the Interim Financing Order, and pursuant to and to the
extent permitted in the Interim Financing Order and the Final Financing Order,
the Obligations will constitute allowed administrative expense claims in the
Chapter 11 Case having priority over all administrative expense claims and
unsecured claims against the Loan Parties now existing or hereafter arising, of
any kind whatsoever, including, without limitation, all administrative expense
claims of the kind specified in Sections 105, 326, 330, 331, 503(b), 506(c),
507(a), 507(b), 546(c), 726, 1114 or any other provision of the Bankruptcy Code
or otherwise, as provided under Section 364(c)(l) of the Bankruptcy Code,
subject only to the Carve-Out.

(c) After the entry of the Interim Financing Order and pursuant to and to the
extent provided in the Interim Financing Order and the Final Financing Order,
the Obligations will be secured by a valid and perfected first priority Lien on
all of the Collateral subject, as to priority only, to the Carve-Out and
Pre-Petition Permitted Liens.

(d) The Interim Financing Order (with respect to the period on and after entry
of the Interim Financing Order and prior to entry of the Final Financing Order)
or the Final Financing Order (with respect to the period on and after entry of
the Final Financing Order), as the case may be, is in full force and effect and
has not been vacated.

(e) Notwithstanding the provisions of Section 362 of the Bankruptcy Code, and
subject to the applicable provisions of the Interim Financing Order or Final
Financing Order, as the case may be, upon the maturity (whether by acceleration
or otherwise) of any of the Indebtedness, the Credit Parties shall be entitled
to immediate payment of such Indebtedness and to enforce the remedies provided
for hereunder or under applicable law, without further application to or order
by the Bankruptcy Court.

(f) Proper notice for (i) the Asset Sale Motion, Asset Sale Procedures Order and
the Asset Sale Order, and (ii) the hearing for the approval of Asset Sale
Procedures Order and the Asset Sale Order will be given. Borrowers will give on
a timely basis all notices required to be given to all parties specified in the
Asset Sale Motion, Asset Sale Procedures Order and Asset Sale Order.

ARTICLE VI

AFFIRMATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other
Obligation hereunder shall remain unpaid or unsatisfied (other than contingent
indemnification obligations for which a claim has not been asserted), or any
Letter of Credit shall remain outstanding, the Loan Parties shall, and shall
(except in the case of the covenants set forth in Sections 6.01, 6.02, and 6.03)
cause each Subsidiary (other than any Inactive Subsidiary) to:

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

 

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(a) as soon as available, but in any event within ninety (90) days after the end
of each Fiscal Year of the Lead Borrower, a Consolidated and consolidating
balance sheet of the Lead Borrower and its Subsidiaries as at the end of such
Fiscal Year, and the related Consolidated and consolidating 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 (other than with
respect to the absence of footnotes), such Consolidated statements to be audited
and accompanied by a report and 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 such consolidating statements to be certified by a
Responsible Officer of the Lead Borrower to the effect that such statements are
fairly stated in all material respects when considered in relation to the
consolidated financial statements of the Lead Borrower and its Subsidiaries;

(b) as soon as available, but in any event within forty-five (45) days after the
end of each of the Fiscal Quarters of each Fiscal Year of the Lead Borrower, a
Consolidated and consolidating balance sheet of the Lead Borrower and its
Subsidiaries as at the end of such Fiscal Quarter, and the related Consolidated
and consolidating statements of income or operations, Shareholders’ Equity and
cash flows for such Fiscal Quarter and for the portion of the Lead Borrower’s
Fiscal Year then ended, setting forth in each case in comparative form the
figures for (A) such period set forth in the Approved Budget most recently
delivered pursuant to Section 6.01(d) hereof and accepted by the Agent in its
Permitted Discretion, (B) the corresponding Fiscal Quarter of the previous
Fiscal Year and (C) the corresponding portion of the previous Fiscal Year, all
in reasonable detail, such Consolidated statements to be certified by a
Responsible Officer of the Lead Borrower as fairly presenting in all material
respects the financial condition, results of operations, Shareholders’ Equity
and cash flows of the Lead Borrower and its Subsidiaries as of the end of such
Fiscal Quarter in accordance with GAAP, subject only to normal end-of-period
audit adjustments and the absence of footnotes, and such consolidating
statements to be certified by a Responsible Officer of the Lead Borrower to the
effect that such statements are fairly stated in all material respects when
considered in relation to the consolidated financial statements of the Lead
Borrower and its Subsidiaries;

(c) as soon as available, but in any event within thirty (30) days after the end
of each of the Fiscal Months of each Fiscal Year of the Lead Borrower (or
forty-five (45) days after the end of any Fiscal Month ending January 31 or
February 28 or 29), a monthly operating report;

(d)

(i) Any Committed Borrowing by the Borrowers under this Agreement and the other
Loan Documents shall be limited in accordance with the Approved Budget (subject
to any variances permitted under this Agreement or the Interim Financing Order
or the Final Financing Order, as applicable). The initial Approved Budget shall
depict, on a weekly basis, cash revenues, receipts, expenses and disbursements,
professional fees (excluding Credit Party Expenses), Availability and other
information for the first 13-week period from the Closing Date and such initial
Approved Budget shall be approved by, and in form and substance satisfactory to,
the Agent in its Permitted Discretion. The Approved Budget shall be updated,
modified or supplemented (with the consent and/or at the reasonable request of
the Agent) from time to time, but in any event not less than on a weekly basis
(with the delivery to the Agent on or before Wednesday of each week), and each
such updated, modified or supplemented budget shall be approved by, and in form
and substance satisfactory to, the Agent in its Permitted Discretion and no such
updated, modified or supplemented budget shall be effective until so approved
and once so approved shall be deemed an Approved Budget; provided, however, that
in the event that the Agent, on the one hand, and the Borrowers, on the other
hand, cannot, while acting in good faith, agree as to an updated, modified or
supplemented budget, such disagreement shall give rise to an Event of Default
hereunder once the period covered by the most recent Approved Budget has
terminated. Each Approved Budget delivered to the Agent shall be accompanied by
such supporting documentation as requested by the Agent in its Permitted
Discretion. Each Approved Budget shall be prepared in good faith based upon
assumptions which the Borrowers believe to be reasonable and are satisfactory to
the Agent in its Permitted Discretion.

 

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(ii) Simultaneously with delivery by the Borrowers to the Agent of each updated
proposed amendment to the then applicable Approved Budget in accordance with
this Section 6.01(d), commencing with the first such updated proposed amendment
following the Closing Date, the Borrowers shall also deliver to the Agent the
current Approved Budget Variance Report. In all events, however, the Borrowers
shall deliver an Approved Budget Variance Report to the Agent on a weekly basis,
to be delivered on Wednesday of each week.

6.02 Certificates; Other Information. Deliver to the Agent, in form and detail
reasonably 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 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 6.01(b) and 6.01(c) (commencing with the delivery of the
financial statements for the Fiscal Month ended June 30, 2014), (i) a duly
completed Compliance Certificate signed by a Responsible Officer of the Lead
Borrower, and in the event of any change in generally accepted accounting
principles used in the preparation of such financial statements, the Lead
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) (i) on each Business Day and (ii) concurrently with the delivery of each
Committed Loan Notice, a Borrowing Base Certificate showing the Tranche A
Borrowing Base and the Tranche A-1 Borrowing Base as of the close of business as
of the last day of the immediately preceding week (provided that the Appraised
Value percentage applied to the Eligible Inventory set forth in each Borrowing
Base Certificate shall be the percentage set forth in the most recent appraisal
obtained by the Agent pursuant to Section 6.10 hereof for the applicable month
in which such Borrowing Base Certificate is delivered), each Borrowing Base
Certificate to be certified as complete and correct by a Responsible Officer of
the Lead Borrower and accompanied by all applicable system generated material
documentation supporting the information contained within the Borrowing Base
Certificate, including but not limited to inventory reporting and, where
applicable, accounts receivable detail documentation and any additional material
documentation reasonably requested by the Agent;

 

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(d) promptly upon receipt or delivery thereof, 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 any Loan Party
by its Registered Public Accounting Firm in connection with the accounts or
books of the Loan Parties or any Subsidiary, or any audit of any of them,
including, without limitation, specifying any Internal Control Event;

(e) promptly after the same are available, without duplication, copies of each
annual report, proxy or financial statement or other report or communication
sent to the stockholders of the Loan Parties, and copies of all annual, regular,
periodic and special reports and registration statements which any Loan Party
may file or be required to file with the SEC under Section 13 or 15(d) (other
than on Form S-8) of the Securities Exchange Act of 1934 or with any national
securities exchange, and in any case not otherwise required to be delivered to
the Agent pursuant hereto;

(f) on the Wednesday of each Fiscal Week (or, if such day is not a Business Day,
on the next succeeding Business Day), evidence of payment of all Taxes by the
Loan Parties that were due and payable during such Fiscal Week;

(g) the financial and collateral reports described on Schedule 6.02 hereto, at
the times set forth in such Schedule;

(h) promptly after the furnishing thereof, copies of any statement or report
furnished to any holder of debt securities of any Loan Party or any Subsidiary
thereof pursuant to the terms of any indenture, loan or credit or similar
agreement and not otherwise required to be furnished to the Agent pursuant to
Section 6.01 or any other clause of this Section 6.02;

 

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(i) as soon as available, but in any event within thirty (30) days after the end
of each Fiscal Year of the Loan Parties, a report summarizing the insurance
coverage (specifying type, amount and carrier) in effect for each Loan Party and
its Subsidiaries and containing such additional information as the Agent, or any
Lender through the Agent, may reasonably specify;

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

(k) promptly, and in any event within five (5) Business Days after receipt
thereof by any Loan Party or any Subsidiary thereof, copies of each material
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 Subsidiary
thereof or any other matter which, if adversely determined, could reasonably
expected to have a Material Adverse Effect;

(l) promptly, upon the opening of any new DDAs or Blocked Accounts, a
description of the account along with (i) the name and address of the
depository; (ii) the account number; (iii) a contact person at such depository
and (iv) whether it is a DDA, an Excluded Account or an Excluded Disbursement
Account;

(m) promptly, without duplication, such additional information regarding the
business affairs, financial condition or operations of any Loan Party or any
Subsidiary, or compliance with the terms of the Loan Documents, as the Agent or
any Lender may from time to time reasonably request;

(n) on the seventh Business Day of each month, a Gross Sales Report covering the
immediately preceding completed fiscal month, certified as prepared in good
faith and based upon information available to the Borrowers at the time
delivered; and

(o) promptly, and in any event within one (1) Business Day after receipt thereof
by any Loan Party or any Subsidiary thereof, copies of any reclamation claim or
demand;

Documents required to be delivered pursuant to Sections 6.01(a), 6.01(b) or
6.01(c) or Section 6.02(d) (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 Lead Borrower posts such documents, or provides a link thereto on the Lead
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 Lead 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, upon the request of the Agent or any Lender, the
Lead Borrower shall deliver paper copies of such documents to the Agent or any
such Lender until a written request to cease delivering paper copies is given by
the Agent or such Lender. Notwithstanding anything contained herein, in every
instance the Lead Borrower shall be required to provide paper copies of the
Compliance Certificates required by Section 6.02(b) to the Agent. 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.

The Loan Parties hereby acknowledge that the Agent will make available to the
Lenders and each L/C Issuer materials and/or information provided by or on
behalf of the Loan Parties hereunder (collectively, “Borrower Materials”).

6.03 Notices. Promptly notify the Agent:

(a) of the occurrence of any Default or Event of Default;

 

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

(c) of any material breach or non-performance of, or any written notice of
default under, a Material Contract or with respect to Material Indebtedness of
any Loan Party or any Subsidiary thereof;

(d) of any dispute, litigation, investigation, proceeding or suspension between
any Loan Party or any Subsidiary thereof and any Governmental Authority or the
commencement of, or any material development in, any litigation or proceeding
affecting any Loan Party or any Subsidiary thereof, including pursuant to any
applicable Environmental Laws, except as could not reasonably be expected to
have a Material Adverse Effect;

(e) of the occurrence of any ERISA Event, which would have or could reasonably
be expected to result in any material liability to the Lead Borrower or any
ERISA Affiliate or the imposition of a Lien under ERISA;

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

(g) of any change in any Loan Party’s president, chief executive officer, chief
financial officer, any executive vice president or any other senior executive
officer;

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

(i) of any collective bargaining agreement or other labor contract to which a
Loan Party becomes a party, or the application for the certification of a
collective bargaining agent other than respect to renewals of the Agreement,
dated February 10, 2010, by and between Sassy, Inc. and General Teamsters Union,
Local No. 406. without material modifications;

(j) of the filing of any Lien for unpaid Taxes against any Loan Party in excess
of $50,000;

(k) of any casualty or other insured damage to any material portion of the
Collateral or the commencement of any action or proceeding for the taking of any
interest in a material portion of the Collateral under power of eminent domain
or by condemnation or similar proceeding or if any material portion of the
Collateral is damaged or destroyed;

(l) of any decision by any Loan Party not to pay rent, or the failure by any
Loan Party to pay rent, at any distribution centers or warehouses or any of such
Loan Party’s other locations;

(m) any cancellation, any material change or any increase (which increase is as
a result of deterioration in the risk profile of any Loan Party or Subsidiary)
in the deductible in any insurance policy or coverage maintained by any Loan
Party;

 

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(n) of any material notices of default, termination or acceleration or any other
material notices received from any holder or trustee of, under or with respect
to any Subordinated Indebtedness; and

(o) of any material developments in either the CPSC Matter or the Customs
Matter.

Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of the Lead Borrower setting forth details of the occurrence
referred to therein and stating what action the Lead Borrower has taken and
proposes to take with respect thereto. Each notice pursuant to Section 6.03(a)
shall describe with particularity any and all provisions of this Agreement and
any other Loan Document that have been breached.

6.04 Payment of Obligations. Pay and discharge as the same shall become due and
payable, all its material 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, and (c) all 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) the validity or
amount thereof is being contested in good faith by appropriate proceedings,
(ii) such Loan Party has set aside on its books adequate reserves with respect
thereto in accordance with GAAP, (iii) no Lien has been filed with respect
thereto. Nothing contained herein shall be deemed to limit the rights of the
Agent with respect to determining Reserves pursuant to this Agreement, (iv) the
failure to make payment pending such contest could not reasonably be expected to
result in a Material Adverse Effect.

6.05 Preservation of Existence, Etc. 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; (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; and (c) preserve
or renew all of its Intellectual Property, except to the extent such
Intellectual Property is no longer used or useful in the conduct of the business
of the Loan Parties, except to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect.

6.06 Maintenance of Properties. (a) 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 excepted; and (b) 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.

6.07 Maintenance of Insurance.

(a) Maintain with financially sound and reputable insurance companies reasonably
acceptable to the Agent 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 applicable
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 fire and extended coverage policies maintained with respect to any
Collateral to be endorsed or otherwise amended to include (i) a non-contributing
mortgage clause (regarding improvements to Real Estate) and lenders’ loss
payable clause (regarding personal property), in form and substance satisfactory
to the Agent, which endorsements or amendments shall provide that the insurer
shall pay all proceeds otherwise payable to the Loan Parties under the policies
directly to the Agent, (ii) a provision to the effect that none of the Loan
Parties, Credit Parties or any other Person shall be a co-insurer and (iii) such
other provisions as the Agent may reasonably require from time to time to
protect the interests of the Credit Parties; provided that if the insurer cannot
pay all proceeds directly to the Agent, the Loan Parties shall cause all such
payments to be directed to the Blocked Account pursuant to Section 6.13(b).

(c) Cause commercial general liability policies to be endorsed to name the Agent
as an additional insured.

(d) Cause business interruption policies to name the Agent as a loss payee and
to be endorsed or amended to include (i) a provision that, from and after the
Closing Date, the insurer shall pay all proceeds otherwise payable to the Loan
Parties under the policies directly to the Agent, (ii) a provision to the effect
that none of the Loan Parties, the Agent, any Lender or any other Credit Party
shall be a co insurer and (iii) such other provisions as the Agent may
reasonably require from time to time to protect the interests of the Credit
Parties; provided that if the insurer cannot pay all proceeds directly to the
Agent, the Loan Parties shall cause all such payments to be directed to the
Blocked Account pursuant to Section 6.13(b).

(e) Cause each such policy referred to in this Section 6.07 to also provide that
it shall not be canceled, modified or not renewed (i) 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 (ii) for any other reason except upon not less than
thirty (30) days’ prior written notice thereof by the insurer to the Agent.

(f) 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.

(g) [Reserved.]

(h) Maintain for themselves and their Subsidiaries, a Directors and Officers
insurance policy, and a “Blanket Crime” policy including employee dishonesty,
forgery or alteration, theft, disappearance and destruction, property, and
computer fraud coverage with responsible companies in such amounts as are
customarily carried by business entities engaged in similar businesses similarly
situated, and will upon request by the Agent furnish the Agent certificates
evidencing renewal of each such policy.

 

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(i) Permit any representatives that are designated by the Agent to inspect the
insurance policies maintained by or on behalf of the Loan Parties and to inspect
books and records related thereto and any properties covered thereby during
regular business hours upon reasonable prior notice; provided, that no such
notice shall be required during the continuance of a Default or Event of
Default.

(j) 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.

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 or (b) the failure to comply therewith could not
reasonably be expected to have a Material Adverse Effect.

6.09 Books and Records; Accountants.

(a) (i) 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 or such Subsidiary, as the case may be; and (ii) maintain such
books of record and account in material conformity with all applicable
requirements of any Governmental Authority having regulatory jurisdiction over
the Loan Parties or such Subsidiary, as the case may be.

(b) At all times retain a Registered Public Accounting Firm which is reasonably
satisfactory to the Agent and shall instruct such Registered Public Accounting
Firm to cooperate with, and be available to upon reasonable prior notice, 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.

 

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6.10 Inspection Rights.

(a) No more than three times within a Fiscal Year, permit representatives and
independent contractors of the Agent to visit and inspect any of its properties,
to examine its corporate, financial and operating records, and make copies
thereof or abstracts therefrom, and to discuss its affairs, finances and
accounts with its directors, officers, and Registered Public Accounting Firm,
and permit the Agent or professionals (including investment bankers,
consultants, accountants and lawyers) retained by the Agent to conduct
evaluations of the Approved Budget, forecasts and cash flows, 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, upon reasonable advance notice to the
Lead Borrower; provided, however, that when a Default or 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 at any time during normal
business hours and without advance notice and the limitation of three
inspections within a Fiscal Year above shall not apply.

(b) Upon the request of the Agent after reasonable prior notice, permit the
Agent or professionals (including investment bankers, consultants, accountants
and lawyers) retained by the Agent to conduct commercial finance examinations
and other evaluations, including, without limitation, of (i) the Lead Borrower’s
practices in the computation of the Tranche A Borrowing Base and the Tranche A-1
Borrowing Base, (ii) the assets included in the Tranche A Borrowing Base and the
Tranche A-1 Borrowing Base and related financial information such as, but not
limited to, sales, gross margins, payables, accruals and reserves, and (iii) the
Loan Parties’ Approved Budget and cash flows. The Loan Parties shall pay the
reasonable out-of-pocket fees and expenses of the Agent and such professionals
with respect to such examinations and evaluations. Without limiting the
foregoing, the Loan Parties acknowledge that the Agent may, in its reasonable
discretion, undertake up to three (3) commercial finance examinations each
Fiscal Year at the Loan Parties’ expense; provided that one such examination
shall be done no more than 90 days after the Closing Date. Notwithstanding the
foregoing, the Agent may cause additional commercial finance examinations to be
undertaken (A) as it in its reasonable discretion deems necessary or
appropriate, at its own expense or, (B) if required by Law or if a Default or
Event of Default shall have occurred and be continuing, at the expense of the
Loan Parties.

(c) Upon the request of the Agent after reasonable prior notice and during
reasonable business hours; provided, that no such notice shall be required
during the continuance of a Default or Event of Default, permit the Agent or
professionals (including appraisers) retained by the Agent to conduct appraisals
of the Collateral, including, without limitation, the assets included in the
Tranche A Borrowing Base and the Tranche A-1 Borrowing Base. The Loan Parties
shall pay the fees and expenses of the Agent and such professionals with respect
to such appraisals. The Loan Parties acknowledge that the Agent may, in its
reasonable discretion, undertake up to three (3) inventory appraisal each Fiscal
Year and up to one (1) Intellectual Property appraisal each Fiscal Year at the
Loan Parties’ expense. Notwithstanding the foregoing, the Agent may cause
additional appraisals to be undertaken (A) as it in its reasonable discretion
deems necessary or appropriate, at its own expense or, (B) if required by Law or
if a Default or Event of Default shall have occurred and be continuing, at the
expense of the Loan Parties.

 

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(d) Upon the request of Salus after reasonable prior notice, use commercially
reasonable efforts to assist Salus and any other Salus Entity (and any of their
lending or funding sources) in obtaining ratings for the credit facilities
provided for herein from one or more national rating agencies. Without limiting
the foregoing, senior management members of the Loan Parties shall attend or
host one or more meetings with such rating agencies and Salus upon reasonable
prior notice.

6.11 Use of Proceeds. Use the proceeds of the Credit Extensions (a) to repay
Indebtedness and other obligations owed under, or in connection with, the
Pre-Petition Credit Agreement, (b) to finance the acquisition of working capital
assets of the Borrowers, including the purchase of inventory and equipment, in
each case in the ordinary course of business,(c) to Cash Collateralize the
Outstanding Amount of L/C Obligations with respect to Letters of Credit, and
(d) for general corporate purposes of the Loan Parties, in each case to the
extent permitted under applicable Law, the Approved Budget and the Loan
Documents, including post-petition operating expenses set forth in the Approved
Budget and other expenses arising in the Chapter 11 Case as may be approved by
the Bankruptcy Court and the Agent.

6.12 Additional Loan Parties. Notify the Agent at the time that any Person
(x) becomes a Subsidiary (other than an Inactive Subsidiary) or (y) to the
extent such Person was an already existing Subsidiary and no longer constitutes
an Inactive Subsidiary, and in each case promptly thereafter (and in any event
within fifteen (15) days), cause any such Person (a) which is not an Inactive
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 reasonably deem appropriate for such purpose,
(ii) grant a Lien to the Agent on such Person’s assets of the same type that
constitute Collateral 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 favorable 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 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 may 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 6.12 waive or be
deemed a waiver or Consent to any transaction giving rise to the need to comply
with this Section 6.12 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 or permit the inclusion of
any acquired assets in the computation of the Tranche A Borrowing Base or the
Tranche A-1 Borrowing Base.

6.13 Cash Management.

(a) On or prior to the Closing Date:

(i) enter into a Blocked Account Agreement reasonably satisfactory in form and
substance to the Agent with each Blocked Account Bank (collectively, together
with the Concentration Account, the “Blocked Accounts”); and

 

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(ii) at the reasonable request of the Agent, deliver to the Agent copies of
notifications (each, a “DDA Notification”) substantially in the form attached
hereto as Exhibit F which have been executed on behalf of such Loan Party and
delivered to each depository institution at which DDAs are located or held on
Schedule 5.21(a).

(b) From and after the Closing Date, the Loan Parties shall ACH or wire transfer
to a Blocked Account no less frequently than daily, whether or not there are
then any outstanding Obligations, all of the following:

(i) all available amounts on deposit in each DDA (net of any minimum balance,
not to exceed $2,500.00, as may be required to be kept in the subject DDA by the
depository institution at which such DDA is maintained);

(ii) all cash receipts from the Disposition of Inventory and other assets
(whether or not constituting Collateral);

(iii) all proceeds of Accounts; and

(iv) all Net Proceeds, and all other cash payments received by a Loan Party from
any Person or from any source or on account of any Disposition or other
transaction or event, including, without limitation, any Prepayment Event.

(c) Each Blocked Account Agreement (except for Blocked Account Agreements
covering Excluded Disbursement Accounts or Corporate Accounts) shall require the
ACH or wire transfer no less frequently than daily (and whether or not there are
then any outstanding Obligations) to the concentration account controlled by the
Agent at Bank of America, N.A. (the “Concentration Account”), of all cash
receipts and collections received by each Loan Party from all sources (the
“Receipts and Collections”), including, without limitation, the following:

(i) the then available amounts of each Blocked Account (net of any minimum
balance, not to exceed $2,500.00, as may be required to be kept in the subject
Blocked Account by the Blocked Account Bank);

(ii) all amounts required to be deposited into the Blocked Accounts pursuant to
clause (b) above; and

(iii) any other cash amounts received by any Loan Party from any other source,
on account of any type of transaction or event;

provided, however, the Agent may, in its sole discretion, permit the Loan
Parties to have one or more “intermediate” Blocked Account Agreements, whereby
such agreements would provide, upon notice from the Agent, the ACH or wire
transfer no less frequently than daily (and whether or not there are then any
outstanding Obligations) all Receipts and Collections to another Blocked
Account, as opposed to the Concentration Account.

 

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(d) The Concentration Account shall at all times be under the sole dominion and
control of the Agent and all funds therein shall be wired to an account
specified by Agent no less frequently than daily. The Agent shall cause all
funds received by it from the Concentration Account to be applied to the
Obligations, which amounts shall be applied to the Obligations in the order
proscribed in either Section 2.05(f) or Section 8.03 of this Agreement, as
applicable. The Loan Parties hereby acknowledge and agree that (i) the Loan
Parties have no right of withdrawal from the Concentration Account, and (ii) the
funds on deposit in the Concentration Account shall at all times be collateral
security for all of the Obligations. In the event that, notwithstanding the
provisions of this Section 6.13, 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 Concentration Account or dealt with in
such other fashion as such Loan Party may be reasonably instructed by the Agent.

(e) Upon the reasonable request of the Agent, the Loan Parties shall 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.

(f) If the Agent does not require DDA Notifications to be delivered on the
Closing Date in accordance with Section 6.13(a) above, then the Loan Parties
shall, upon the request of the Agent at any time after the Closing Date, deliver
to the Agent copies of DDA Notifications, which have been executed on behalf of
the applicable Loan Party and delivered to each depository institution listed on
Schedule 5.21(a).

(g) From and after the Closing Date, the Borrowers shall ACH or wire transfer to
the Concentration Account all amounts on deposit in any Corporate Account (net
of any minimum balance, not to exceed $2,500.00 of book balance, as calculated
in the ordinary course of business, as may be required to be kept in such
Corporate Account by the depository institution at which such Corporate Account
is maintained) from time to time.

6.14 Information Regarding the Collateral.

(a) Furnish to the Agent at least thirty (30) days prior written notice of any
change in: (i) any Loan Party’s name or in any trade name used to identify it in
the conduct of its business or in the ownership of its properties; (ii) the
location of any Loan Party’s chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility);
(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 agree not to effect or permit any change referred
to in the preceding sentence unless all filings have been made 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 (subject to Permitted Encumbrances) in all the Collateral for
its own benefit and the benefit of the other Credit Parties.

 

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(b) Should any of the information on any of the Schedules hereto become
inaccurate or misleading in any material respect as a result of changes after
the Closing Date, the Lead Borrower shall advise the Agent in writing of such
revisions or updates as may be necessary or appropriate to update or correct the
same. From time to time as may be reasonably requested by the Agent, the Lead
Borrower shall supplement each Schedule hereto, or any representation herein or
in any other Loan Document, with respect to any matter arising after the Closing
Date that, if existing or occurring on the Closing Date, would have been
required to be set forth or described in such Schedule or as an exception to
such representation or that is necessary to correct any information in such
Schedule or representation which has been rendered inaccurate in any material
respect thereby (and, in the case of any supplements to any Schedule, such
Schedule shall be appropriately marked to show the changes made therein).
Notwithstanding the foregoing, no supplement or revision to any Schedule or
representation shall be deemed the Credit Parties’ consent to the matters
reflected in such updated Schedules or revised representations nor permit the
Loan Parties to undertake any actions otherwise prohibited hereunder or fail to
undertake any action required hereunder from the restrictions and requirements
in existence prior to the delivery of such updated Schedules or such revision of
a representation; nor shall any such supplement or revision to any Schedule or
representation be deemed the Credit Parties’ waiver of any Default or Event of
Default resulting from the matters disclosed therein.

6.15 Physical Inventories.

(a) Cause not less than one (1) physical inventory to be undertaken, at the
expense of the Loan Parties, in each Fiscal Year, and periodic cycle counts, in
each case consistent with past practices, conducted by such inventory takers as
are reasonably satisfactory to the Agent and following such methodology as is
consistent with the methodology used in the immediately preceding inventory or
as otherwise may be reasonably satisfactory to the Agent. The Agent, at the
expense of the Loan Parties, may participate in and/or observe each scheduled
physical count of Inventory which is undertaken on behalf of any Loan Party.

(b) Permit the Agent, in its reasonable discretion, if any Default or Event of
Default exists, to cause additional such inventories to be taken as the Agent
determines (each, at the expense of the Loan Parties).

(c) The Lead Borrower, within five (5) days following the completion of any such
inventory referred to in clause (a) or (b) above, shall provide the Agent with a
reconciliation of the results of such inventory (as well as of any other
physical inventory or cycle counts undertaken by a Loan Party) and shall post
such results to the Loan Parties’ stock ledgers and general ledgers, as
applicable.

6.16 Environmental Laws. (a) Conduct its operations and keep and maintain its
Real Estate in material compliance with all Environmental Laws; (b) obtain and
renew all environmental permits necessary for its operations and properties
except where failure to do so should not reasonably be expected to result in a
Material Adverse Effect; 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 unless failure to
do so could not reasonable be expected to result in a Material Adverse Effect,
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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6.17 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 applicable 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. The Loan Parties also agree to provide to the
Agent, from time to time upon request, evidence reasonably 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 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 (subject to Permitted
Encumbrances) under the Security Documents upon acquisition thereof), 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 reasonably requested by the Agent to grant and perfect such Liens,
including actions described in paragraph (a) of this Section 6.17, all at the
expense of the Loan Parties. In no event shall compliance with this Section 6.17
waive or be deemed a waiver or Consent to any transaction giving rise to the
need to comply with this Section 6.17 if such transaction was not otherwise
expressly permitted by this Agreement or constitute or be deemed to constitute
Consent to the inclusion of any acquired assets in the computation of the
Tranche A Borrowing Base or the Tranche A-1 Borrowing Base.

(c) Use, and cause each of the Subsidiaries (other than Foreign Subsidiaries) to
use, their commercially reasonable efforts to obtain lease terms in any Lease
entered into by any Loan Party after the Closing Date not expressly prohibiting
the recording in the relevant real estate filing office of an appropriate
memorandum of lease and the encumbrancing of the leasehold interest of such Loan
Party in the property that is the subject of such Lease.

(d) Upon the reasonable request of the Agent, use commercial reasonably efforts
to cause each of its customs brokers, freight forwarders, consolidators and/or
carriers to deliver an agreement (including, without limitation, a Customs
Broker/Carrier Agreement) to the Agent covering such matters and in such form as
the Agent may reasonably require.

(e) Upon the request of the Agent, use commercial reasonably efforts to cause
any of its landlords to deliver a Collateral Access Agreement to the Agent.

 

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6.18 Compliance with Terms of Leaseholds. Except as otherwise expressly
permitted hereunder or to the extent failure to do so could not reasonably be
expected to have a Material Adverse Effect, (a) make in accordance with the
Approved Budget all payments and otherwise perform all obligations, in each case
that are post-petition obligations, in respect of all Leases to which any Loan
Party or any of its Subsidiaries is a party, keep such Leases in full force and
effect unless such Loan Parry determines in its business judgment to do so,
(b) not allow such Leases to lapse or be terminated or any rights to renew such
Leases to be forfeited or cancelled unless such Loan Parry determines in its
business judgment to do so, (c) notify the Agent of any default by any party
with respect to such Leases and cooperate with the Agent in all respects to cure
any such default, and (d) cause each of its Subsidiaries to do the foregoing.

6.19 Material Contracts. Except to the extent failure to do so could not
reasonably be expected to have a Material Adverse Effect, (a) perform and
observe all the terms and provisions of each Material Contract to be performed
or observed by it, (b) maintain each such Material Contract in full force and
effect, (c) enforce each such Material Contract in accordance with its terms,
(d) after the occurrence and during the continuance of any Event of Default,
take all such action as may be from time to time requested by the Agent,
(e) upon request of the Agent, make to each other party to each such Material
Contract such demands and requests for information and reports or for action as
any Loan Party or any of its Subsidiaries is entitled to make under such
Material Contract, and (f) cause each of its Subsidiaries to do the foregoing.

6.20 Approved Budget. Each Loan Party shall conduct its business in a manner
consistent with the Approved Budget most recently delivered pursuant to this
Agreement and accepted by the Agent in its reasonable discretion.

6.21 Employee Benefit Plans.

(a) Maintain, and cause each ERISA Affiliate to maintain, each Pension Plan in
substantial compliance with all applicable Laws.

(b) Make, and cause each ERISA Affiliate to make, on a timely basis, all
required contributions to any Multiemployer Plan.

(c) Not, and not permit any ERISA Affiliate to (i) seek a waiver of the minimum
funding standards of ERISA, (ii) terminate or withdraw from any Pension Plan or
Multiemployer Plan or (iii) take any other action with respect to any Pension
Plan that would, or could reasonably be expected to, entitle the PBGC to
terminate, impose liability in respect of, or cause a trustee to be appointed to
administer, any Pension Plan, unless the actions or events described in clauses
(i), (ii) and (iii) above individually or in the aggregate would not have or
could not reasonably be expected to have a Material Adverse Effect.

6.22 Designation as Senior Debt. Designate all Obligations as constituting
senior indebtedness under and for purposes of any Subordinated Indebtedness.

6.23 Retention. At all times until the Obligations have been paid in full in
cash and all Commitments have been terminated, the Lead Borrower shall retain
and employ (i) PricewaterhouseCooper LLP, or another party reasonably acceptable
to the Agent as a consultant (the “Consultant”), (ii) an independent investment
banker (an “Investment Banker”) and (iii) a chief restructuring officer. The
terms and scope of the engagement of and responsibilities of the Consultant and
the Investment Banker shall be acceptable to the Agent in its Permitted
Discretion and, without limiting the foregoing, the engagement shall grant the
Agent the right to communicate directly with the Consultant and the Investment
Banker and authorize the Consultant and the Investment Banker to communicate
directly with the Agent and to furnish the Agent with such information as the
Agent may reasonably request, together with copies of all material written
materials provided to the board of directors of the Loan Parties by such
Consultant, subject to mutually acceptable exceptions. If requested by the
Agent, the Consultant and the Investment Banker shall provide the Agent with a
weekly update regarding the status of its respective efforts on behalf of the
Loan Parties, including the status of any sale efforts.

 

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6.24 Sale Pleadings; Notices to Agent.

(a) Notwithstanding anything to the contrary contained in this Agreement, if any
Loan Party or any other Person shall file any (i) sale motion pursuant to
Section 363 and/or 365 of the Bankruptcy Code seeking authority to sell a
material portion of any Borrower’s assets to a “stalking horse bidder”, subject
to the receipt of higher and better offers, pursuant to an asset purchase
agreement or similar agreement, the sale motion, stalking horse bidder, and
asset purchase agreement shall, in each case, be satisfactory in form and
substance to the Agent in its Permitted Discretion, or (ii) motion or series of
motions seeking approval by the Bankruptcy Court of bidding procedures related
to any such proposed sale, such motion shall be satisfactory in form and
substance to the Agent in its Permitted Discretion and shall include a
requirement that the Loan Parties and their professional advisors consult with
the Agent on all material aspects of any such sale process.

(b) To the extent any Loan Party commences or seeks to commence any sale
process, the Loan Parties shall promptly, upon any such information becoming
available to the Loan Parties, provide the Agent copies of any informational
packages provided to potential bidders in accordance with the any motions of the
type described in clause (a) above, and any order approving same, draft agency
or sale agreements, the deadlines established as to receipt of bids and, upon
request of the Agent, a status report and updated information relating to such
motions and permitted store closings, and copies of any bids received from any
proposed bidder for all or any portion of the Loan Parties’ assets and any
updates, modifications or supplements to such information and materials.

(c) If an Event of Default has occurred and is continuing and the Agent has
accelerated the repayment of the Obligations pursuant to Section 8.02, at the
request of the Agent, the Loan Parties shall promptly engage an Approved
Liquidator on terms and conditions acceptable to the Agent in its Permitted
Discretion.

6.25 Intellectual Property Licenses. The Loan Parties shall pay all
post-petition obligations under the licenses of Intellectual Property listed on
Schedule 6.25, as required by the Bankruptcy Code or the Bankruptcy Court,
except to the extent (i) any Loan Party is contesting any such obligations in
good faith by appropriate proceedings, (ii) such Loan Party has established
proper reserves as required under GAAP, and (iii) the nonpayment of which does
not result in the imposition of a Lien.

 

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6.26 Bankruptcy Milestones.

(a) Sale Process. The Loan Parties shall conduct a process for an Asset Sale. In
connection with the Asset Sale, the Loan Parties shall promptly, upon any such
information becoming available to the Loan Parties, provide the Agent copies of
any informational packages provided to potential bidders, and any draft order
approving an Asset Sale, all draft agency or sale agreements, the deadlines
established as to receipt of bids and, upon request of the Agent, a status
report and updated information relating to such motions and permitted store
closings, and copies of any bids received from any proposed bidder for all or
any portion of the Loan Parties’ assets and any updates, modifications or
supplements to such information and materials.

(b) Binding Asset Purchase Agreement. No later than July 3, 2014, the Loan
Parties shall enter into a binding asset purchase agreement (subject to
Bankruptcy Court approval and receipt of higher better offers) to sell all or
substantially all of their assets to a stalking horse bidder, on terms and
conditions acceptable to Agent in its Permitted Discretion.

(c) Sale and Bidding Procedures. (i) On or before July 9, 2014, the Loan Parties
shall file the Asset Sale Motion, which motion shall be in form and substance
acceptable to the Agent in its Permitted Discretion. (ii) On or before July 24,
2014, the Bankruptcy Court shall hold the Asset Sale Hearing and enter the Asset
Sale Procedures Order, which order shall be in form and substance acceptable to
the Agent in its Permitted Discretion.

(d) Winning Bidder; Sale. The Loan Parties shall choose a winning bidder no
later than July 31, 2014. The Bankruptcy Court must enter the Asset Sale Order
no later than August 5, 2014, which order shall be in form and substance
acceptable to the Agent in its Permitted Discretion. The Asset Sale Effective
Date must occur, and the Obligations be paid in full in cash, and all
commitments to lend shall be terminated, on or before August 8, 2014.

6.27 Financing Orders. The Loan Parties shall comply with the Interim Financing
Order and the Final Financing Order, as then in effect, in all respects.

6.28 Field Examination. No later than thirty (30) days following the Closing
Date, the Lead Borrower shall cooperate with a field examination conducted by
the Agent and/or its designees.

6.29 Post-Closing. Notwithstanding anything to the contrary in this Agreement or
in the other Loan Documents, the Loan Parties shall have twenty-one (21) days
from the Closing Date to obtain Blocked Account Agreements consistent with the
provisions of Section 6.13 and otherwise satisfactory to the Agent and
Collateral Access Agreements satisfactory to the Agent.

ARTICLE VII

NEGATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other
Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding (other than contingent indemnification obligations for
which a claim has not been asserted), no Loan Party shall, nor shall it permit
any Subsidiary (other than any Inactive Subsidiary) to, directly or indirectly:

 

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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 under the UCC or any similar Law or statute of any jurisdiction a financing
statement that names any Loan Party or any Subsidiary thereof 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 any of its Subsidiaries; or assign or otherwise
transfer any accounts or other rights to receive income, other than, as to all
of the above, Permitted Encumbrances and Pre-Petition Permitted Liens.

7.02 Investments. Make any Investments, except Permitted Investments.

7.03 Indebtedness; Disqualified Stock. (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, or
(c) issue and sell any other Equity Interests unless such Equity Interests
(i) shall be issued solely by the Lead Borrower and not by a Subsidiary of a
Loan Party or (ii) are permitted by Section 7.06 or Sections 7.09(d) or (f).

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

(c) any CFC that is not a Loan Party may merge into any CFC that is not a Loan
Party; and

(d) any Inactive Subsidiary may dissolve or liquidate if the Lead Borrower
determines in good faith that any such dissolution or liquidation is in the best
interest of the Loan Parties.

7.05 Dispositions. Make any Disposition or enter into any agreement to make any
Disposition, except Permitted Dispositions.

 

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7.06 Restricted Payments. Declare or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
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) each Subsidiary of a Loan Party may make Restricted Payments to any Loan
Party; and

(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; and

(c) the Lead Borrower may settle in cash equity awards pursuant to the Lead
Borrower’s Equity Incentive Plan in an aggregate amount not to exceed $250,000
in any Fiscal Year.

7.07 Prepayments of Indebtedness. Prepay, redeem, purchase, defease or otherwise
satisfy prior to the scheduled maturity thereof in any manner any Indebtedness,
or make any payment in violation of any subordination terms of any Subordinated
Indebtedness, except as long as no Default or Event of Default then exists,
regularly scheduled or mandatory repayments, repurchases, redemptions or
defeasances of Permitted Indebtedness (other than Subordinated Indebtedness,
except as permitted under subordination provisions related thereto).

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

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 (a) a transaction between or among
the Loan Parties and, to the extent otherwise expressly permitted hereunder,
intercompany transactions between Loan Parties and their Subsidiaries,
(b) transactions described on Schedule 7.09 hereto, (c) advances for
commissions, travel and other similar purposes in the ordinary course of
business to directors, officers and employees, (d) the issuance of Equity
Interests in the Lead Borrower to any officer, director, employee or consultant
of the Lead Borrower or any of its Subsidiaries, (e) the payment of reasonable
fees and out-of-pocket costs to directors, and compensation and employee benefit
arrangements paid to, indemnities provided for the benefit of, and insurance
arrangements entered into for the benefit of directors, officers or employees of
the Lead Borrower or any of its Subsidiaries, (f) any issuances of securities of
the Lead Borrower (other than Disqualified Stock and other Equity Interests not
permitted hereunder) or other payments, awards or grants in cash, securities or
otherwise pursuant to, or the funding of, employment agreements, stock options
and stock ownership plans (in each case in respect of Equity Interests in the
Lead Borrower) of the Lead Borrower or any of its Subsidiaries, and (g) entering
into perpetual, royalty-free (unless such royalty is payable to a Loan Party),
irrevocable licenses of Intellectual Property rights with other Loan Parties and
Subsidiaries in the ordinary course of business.

 

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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 a Foreign 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 a Foreign Subsidiary) to Guarantee the Obligations, (iii) of any
Subsidiary (other than a Foreign Subsidiary) to make or repay loans to a Loan
Party, or (iv) of the Loan Parties or any Subsidiary 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), (f) or (g) 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; provided, however, that this Section 7.10 shall not apply to any
(i) customary provisions in leases and other contracts restricting the
assignment or other transfer thereof, (ii) restrictions resulting from any
applicable law, rule or regulation (including, without limitation, applicable
currency control laws and applicable state corporate statutes restricting the
payment of dividends in certain circumstances), (iii) customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary of the
Borrower (or the assets of a Subsidiary of the Borrower) pending such sale,
provided such restrictions and conditions apply only to the Subsidiary of the
Borrower that is to be sold (or whose assets are to be sold) and such sale is
permitted hereunder and (iv) customary provisions with respect to the
disposition or distribution of assets or property in joint venture agreements,
limited liability company operating agreements, partnership agreements,
stockholders agreements, asset sale agreements, agreements in respect of sales
of Equity Interests and other similar agreements entered into in connection with
transactions not prohibited under this Agreement, provided that such encumbrance
or restriction shall only be effective against the assets or property that are
the subject of such agreements.

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
purposes other than those permitted under this Agreement.

7.12 Amendment of Material Documents. Amend, modify or waive any of a Loan
Party’s rights under (a) its Organization Documents in a manner materially
adverse to the Credit Parties, or (b) any Material Contract or Material
Indebtedness (other than on account of any refinancing thereof otherwise
permitted hereunder) to the extent that such amendment, modification or waiver
would result in a Default or Event of Default under any of the Loan Documents,
would be materially adverse to the Credit Parties or otherwise would be
reasonably likely to have a Material Adverse Effect.

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.

 

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7.14 Deposit Accounts. Open new DDAs or Blocked Accounts unless, within fifteen
(15) days of creation, the Loan Parties shall have delivered to the Agent
appropriate DDA Notifications (to the extent requested by Agent pursuant to the
provisions of Section 6.13(a)(ii) hereof) or Blocked Account Agreements
consistent with the provisions of Section 6.13 and otherwise satisfactory to the
Agent; provided that if such DDA Notifications (to the extent requested by Agent
pursuant to the provisions of Section 6.13(a)(ii) hereof) or Blocked Account
Agreements have not been delivered within such fifteen (15) day period, the
applicable Loan Party shall close the new DDA or Blocked Account. No Loan Party
shall maintain any bank accounts other than the ones expressly contemplated
herein or in Section 6.13 hereof.

7.15 Reserved.

7.16 Payments of Earnout or Duty Amounts. Make any payment with respect to the
Duty Amounts or the Earnout Consideration, unless, (a) no Default or Event of
Default is continuing or would result from the payment therefrom and
(b) Availability, both before and after giving effect to such payment, is at
least $10,000,000.

7.17 Inactive Subsidiaries.

(a) Permit any Inactive Subsidiary to (a) own any material properties or assets
(other than intercompany accounts with Loan Parties), (b) have any Subsidiaries,
Investments, Indebtedness or other material liabilities (other than liabilities
owed by an Inactive Subsidiary to a Loan Party), (c) grant any Liens on or
dispose of its assets other than as permitted by Section 7.04 or (d) conduct any
operations or business other than, activities related to its corporate existence
and any other activities relating to the foregoing in this clause (d).

(b) Make any payments of principal or interest or otherwise with respect to any
Indebtedness owed to any Inactive Subsidiary.

7.18 Financial Covenant. Permit the results in the Approved Budget Variance
Report to vary by more than five percent (5%) from the results projected in the
applicable Approved Budget with respect to the Cumulative Four Week Period and
the Cumulative Period (except to the extent such actual results are more
favorable) as to the following: disbursements, cash-on-hand, professional fees
(excluding the Agent’s professional fees) and expenses, Availability and
aggregate Outstanding Amount of the Loans; provided, that disbursements and
Availability shall be tested by Cumulative Period beginning with the conclusion
of the second Cumulative Period, which at the conclusion thereof, cumulative
disbursements and Availability must be within a 20% variance and the allowed
variance shall be (a) 15% at the conclusion of the third Cumulative Period,
(b) 10% at the conclusion of fourth Cumulative Period and (c) 5% at all times
thereafter, with respect to the Cumulative Four Week Period and the Cumulative
Period.

7.19 Repayment of Indebtedness. Without limiting any other provision hereof,
except pursuant to the Approved Budget, without the express prior written
consent of the Agent and pursuant to an order of the Bankruptcy Court after
notice and hearing, make any payment or transfer or assets with respect to any
Lien or Indebtedness incurred or arising prior to the Petition Date that is
subject to the automatic stay provisions of the Bankruptcy Code whether by way
of “adequate protection” under the Bankruptcy Code or otherwise.

 

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7.20 Reclamation Claims. (i) Enter into any agreement to return any of its
Inventory to any of its creditors for application against any Pre-Petition
Indebtedness, Pre-Petition trade payables or other Pre-Petition claims under
Section 546(c) of the Bankruptcy Code or allow any creditor to take any setoff
or recoupment against any of its Pre-Petition Indebtedness, Pre-Petition trade
payables or other Pre-Petition claims based upon any such return pursuant to
Section 553(b)(l) of the Bankruptcy Code or otherwise if, after giving effect to
any such agreement, setoff or recoupment, the aggregate amount applied to
Pre-Petition Indebtedness, Pre-Petition trade payables and other Pre-Petition
claims subject to all such agreements, setoffs and recoupments since the
Petition Date would exceed $10,000, (ii) make any payments on account of claims
or expenses arising under Section 503(b)(9) of the Bankruptcy Code, (iii) make
any payments under any management incentive plan or on account of claims or
expenses arising under Section 503(c) of the Bankruptcy Code, and (iv) make any
payments to “critical vendors;” provided that with respect to (iii) and
(iv) hereof, payments may be made in amounts and on terms and conditions that
(A) are approved by order of the Bankruptcy Court and (B) are expressly
permitted by the Approved Budget, or otherwise approved by the Agent in writing.

7.21 Chapter 11 Claims. Incur, create, assume, suffer to exist or permit any
other super-priority administrative claim which is pari passu with or senior to
the claims of the Agent against the Loan Parties.

7.22 Bankruptcy Actions. Seek, consent to, or permit to exist, without the prior
written consent of the Agent, any order granting authority to take any action
that is prohibited by the terms of this Agreement or the other Loan Documents or
refrain from taking any action that is required to be taken by the terms of this
Agreement or any of the other Loan Documents.

7.23 Professional Fee Escrow Account. Until all amounts outstanding under the
Pre-Petition Credit Agreement and this Agreement have been paid in full and all
applicable commitments to lend have terminated, pay the fees and expenses of the
estate’s professionals except as set forth in the Approved Budget and except
from amounts in the Professional Fee Escrow Account.

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

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

(a) Non-Payment. The Borrowers or any other Loan Party fails to pay when and as
required to be paid herein, (i) any amount of principal of any Loan or any L/C
Obligation, or deposit any funds as Cash Collateral in respect of L/C
Obligations, or (ii) within three (3) days after the same becomes due, (A) any
interest on any Loan or on any L/C Obligation, (B) any fee due hereunder, or
(C) 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 Section 6.01, 6.02, 6.03 (other than
clauses (d), (f), (g) or (i) thereof), 6.05, 6.07, 6.10, 6.11, 6.13, 6.14, 6.20,
6.23, 6.24, 6.25, 6.26, 6.27, 6.28, or Article VII; or

 

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(c) Other Defaults. Any Loan Party fails to perform or observe (i) any covenant
or agreement contained in any of Section 6.03(other than Section 6.03(a), which
is covered above) on its part to be performed or observed and such failure
continues for ten (10) days, or (ii) any other covenant or agreement (not
specified in subsection (a), (b) or (c)(i) above) contained in any Loan Document
on its part to be performed or observed and such failure continues for twenty
(20) days; or

(d) Representations and Warranties. Any representation, warranty, certification
or statement of fact made or deemed made by or on behalf of any Borrower or any
other Loan Party herein, in any other Loan Document, or in any document
delivered in connection herewith or therewith (including, without limitation,
any Borrowing Base Certificate) shall be incorrect or misleading in any material
respect when made or deemed made; or

(e) Cross-Default. (i) Any Loan Party or any Subsidiary thereof (A) fails to
make any payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) in respect of any Material Indebtedness
(including undrawn committed or available amounts and including amounts owing to
all creditors under any combined or syndicated credit arrangement), 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 (ii) there occurs under any Swap Contract an Early
Termination Date (as defined in such Swap Contract) resulting from (A) any event
of default under such Swap Contract as to which a Loan Party or any Subsidiary
thereof is the Defaulting Party (as defined in such Swap Contract) or (B) any
Termination Event (as so defined) under such Swap Contract as to which a Loan
Party or any Subsidiary thereof is an Affected Party (as so defined) and, in
either event, the Swap Termination Value owed by the Loan Party or such
Subsidiary as a result thereof is greater than $1,000,000; or

(f) Chapter 11 Case. The occurrence of any of the following in the Chapter 11
Case:

(i) if any Loan Party, without the Agent’s prior written consent, files a motion
with the Bankruptcy Court seeking the authority to liquidate all or
substantially all of any Loan Party’s assets or capital stock unless the
transactions that are the subject of the motion will result in payment in full
in cash of the Obligations;

(ii) other than in connection with the payment in full or refinancing of the
Obligations hereunder, the bringing of a motion, taking of any action or the
filing of any plan of reorganization or disclosure statement attendant thereto
by or on behalf of any Loan Party in the Chapter 11 Case: (A) to obtain
additional financing under Section 364(c) or (d) of the Bankruptcy Code not
otherwise permitted pursuant to this Agreement; (B) to grant any Lien other than
Permitted Encumbrances upon or affecting any Collateral; (C) except as provided
in the Interim Financing Order or Final Financing Order, as the case may be, to
use cash collateral under Section 363(c) of the Bankruptcy Code without the
prior written consent of the Agent; (D) that seeks to prohibit the Agent from
credit bidding on any or all of the Loan Parties’ assets during the pendency of
the Chapter 11 Case; or (E) any other action or actions materially adverse to
the Agent or its rights and remedies hereunder or its interest in the
Collateral;

 

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(iii) other than in connection with the payment in full or refinancing of the
Obligations hereunder, (A) the filing of any plan of reorganization or
disclosure statement attendant thereto, or any direct or indirect amendment to
such plan or disclosure statement, by any Loan Party or any other Person to
which the Agent does not consent or otherwise agree to treatment of its claims,
(B) the entry of any order terminating the Loan Parties’ exclusive right to file
a plan of reorganization, or (C) the expiration of the Loan Parties’ exclusive
right to file a plan of reorganization;

(iv) the entry of an order in any of the Chapter 11 Case confirming a plan of
reorganization that (A) is not acceptable to the Agent in its Permitted
Discretion or (B) does not contain a provision for termination of the
commitments and repayment in full in cash of all of the Obligations under this
Agreement on or before the effective date of such plan or plans;

(v) the entry of an order amending, supplementing, staying, vacating or
otherwise modifying the Loan Documents or the Interim Financing Order, the Final
Financing Order or the Cash Management Order, the Asset Sale Procedures Order,
the Asset Sale Order or any other order of the Bankruptcy Court affecting this
Agreement or any Loan Document or the Asset Sale, without the written consent of
the Agent or the filing of a motion for reconsideration with respect to the
Interim Financing Order or the Final Financing Order or the Interim Financing
Order, the Final Financing Order or the Cash Management Order are otherwise not
in full force and effect;

(vi) the Final Financing Order is not entered prior to the expiration of the
Interim Financing Order, and in any event within 35 days of the Petition Date;

(vii) except as set forth in the “first day” motions which have been reviewed by
the Agent, the payment of, or application for authority to pay, any Pre-Petition
Indebtedness or Pre-Petition claim without the Agent’s prior written consent
unless otherwise permitted under this Agreement or as requested in the “first
day” motions;

(viii) the allowance of any claim or claims under Section 506(c) of the
Bankruptcy Code or otherwise against the Agent, any other Credit Party or any of
the Collateral;

(ix) the appointment of an interim or permanent trustee in the Chapter 11 Case
or the appointment of a receiver or an examiner in the Chapter 11 Case with
expanded powers to operate or manage the financial affairs, the business, or
reorganization of the Loan Parties; or the sale without the Agent’s consent, of
all or substantially all of the Loan Parties’ assets either through a sale under
Section 363 of the Bankruptcy Code, through a confirmed plan of reorganization
in the Chapter 11 Case, or otherwise that does not provide for payment in full
in cash of the Obligations and termination of the Aggregate Commitments;

 

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(x) the dismissal of the Chapter 11 Case, or the conversion of the Chapter 11
Case from Chapter 11 to Chapter 7 of the Bankruptcy Code, or any Loan Party
files a motion or other pleading seeking the dismissal of the Chapter 11 Case
under Section 1112 of the Bankruptcy Code or otherwise;

(xi) the entry of an order by the Bankruptcy Court granting relief from or
modifying the automatic stay of Section 362 of the Bankruptcy Code (1) to allow
any creditor to execute upon or enforce a Lien on any Collateral having a value
of $100,000 or more, or (2) with respect to any Lien of or the granting of any
Lien on any Collateral to any state or local environmental or regulatory agency
or authority;

(xii) the commencement of a suit or action against either of the Agent or any
other Credit Party by or on behalf of any Loan Party, or its bankruptcy estates;

(xiii) the entry of an order in the Chapter 11 Case avoiding or permitting
recovery of any portion of the payments made on account of the Indebtedness
owing under this Agreement or the other Loan Documents;

(xiv) the failure of any Loan Party to perform any of its obligations under the
Interim Financing Order, the Final Financing Order or the Cash Management Order
or any of its material obligations under the any other order of the Bankruptcy
Court, which is not cured within two (2) Business Days of written notice to the
Lead Borrower of same;

(xv) if a Loan Party or any of its Subsidiaries suspends or discontinues or is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of the business affairs of Loan Parties and
their Subsidiaries, taken as a whole, or a trustee, receiver or custodian is
appointed for any Loan Party or any of its Subsidiaries, or any of their
respective properties, except to the extent such suspension or discontinuance of
business occurs in accordance with the terms of this Agreement;

(xvi) (1) the failure of the Bankruptcy Court to, within sixty (60) days after
the Petition Date (or such later date to which the Lender may otherwise agree),
grant an order extending the time period of the Loan Parties to assume or reject
unexpired leases of real property to a date that is 210 days from the Petition
Date, or, (2) if such date has been extended by order of the Bankruptcy Court,
the failure of the Bankruptcy Court to, within sixty (60) days prior to such
extended deadline (or such later date to which the Agent may otherwise agree),
grant an order further extending the time period of the Loan Parties to assume
or reject leases;

(xvii) the entry of an order in the Chapter 11 Case granting any other
super-priority administrative claim or Lien equal or superior to that granted to
the Agent;

 

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(xviii) the filing or approval of any proposed Asset Sale Order, or draft
thereof that does not provide for repayment in full in cash of all Obligations
before or at the Asset Sale Effective Date;

(xix) if the Borrowers fail to pay in full in cash all Obligations on or before
the earlier of (i) the Asset Sale Effective Date and (ii) the effective date of
a plan of reorganization or liquidation in the Chapter 11 Case;

(xx) if any plan or reorganization or liquidation is executed, filed, delivered,
or any confirmation order is entered which does not provide for repayment in
full in cash of all Obligations before or upon the effective date of a plan of
reorganization or liquidation in the Chapter 11 Case; or

(xxi) if there is a stay or injunction of the Asset Sale Order or any order
confirming a plan of reorganization or liquidation in the Chapter 11 Case in
effect precluding the consummation of the transactions contemplated thereby.

(g) License Terminations. The termination or attempted termination of any
license of Intellectual Property listed on Schedule 6.25.

(h) Judgments. There is entered against any Loan Party or any Subsidiary thereof
(i) one or more judgments or orders for the payment of money in an aggregate
amount (as to all such judgments and orders) exceeding $1,000,000 (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 thirty (30) 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 $1,000,000 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 $1,000,000 or which would reasonably likely
result in a Material Adverse Effect; or

(j) Invalidity of Loan Documents. (i) Any provision of any Loan Document, at any
time after its execution and delivery and for any reason other than as expressly
permitted hereunder or thereunder or satisfaction in full of all the Obligations
(other than contingent indemnification obligations), ceases to be in full force
and effect; or any Loan Party or any other Person (on behalf of any Loan Party)
contests in any manner the validity or enforceability of any provision of any
Loan Document; or any Loan Party denies that it has any or further liability or
obligation under any provision of any Loan Document, or purports to revoke,
terminate or rescind any 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 not to be, a
valid and perfected Lien on any Collateral, with the priority required by the
applicable Security Document; or

 

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

(l) Cessation of Business. Except as otherwise expressly permitted hereunder,
any Loan Party shall take any action to suspend the operation of its business in
the ordinary course, liquidate all or a material portion of its assets or store
locations (if any), or employ an agent or other third party to conduct a program
of closings, liquidations or “Going-Out-Of-Business” sales of any material
portion of its business; or

(m) Loss of Collateral. There occurs any uninsured loss to any material portion
of the Collateral; or

(n) Breach of Contractual Obligation. (i) Any Loan Party fails to make any
payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) in respect of any Material Contract,
(ii) any Loan Party fails to observe or perform any other agreement or condition
relating to any such Material Contract or contained in any instrument or
agreement evidencing, securing or relating thereto, or (iii) any other event
occurs, and in any case under clause (i), (ii) or (iii), the effect of which
default or other event is to cause, or to permit the counterparty to such
Material Contract to terminate such Material Contract and such termination could
reasonably be expected to have a Material Adverse Effect; or

(o) Indictment. The indictment or institution of any legal process or proceeding
against, any Loan Party thereof, under any federal, state, municipal, and other
criminal statute, rule, regulation, order, or other requirement having the force
of law for a felony;

(p) Guaranty. The termination or attempted termination by any Loan Party or any
other Person (on behalf of any Loan Party) of any Facility Guaranty except as
expressly permitted hereunder or under any other Loan Document; or

(q) 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 applicable
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 applicable
Subordinated Indebtedness, or realized from the liquidation of any property of
any Loan Party, shall be subject to any of the Subordination Provisions.

8.02 Remedies Upon Event of Default. If any Event of Default occurs and is
continuing, the Agent may, in its discretion, take any or all of the following
actions:

 

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(a) declare the Commitments of each Lender to make Committed Loans and any
obligation of any L/C Issuer to make L/C Credit Extensions to be terminated,
whereupon such Commitments and obligation shall be terminated;

(b) 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;

(c) require that the Loan Parties Cash Collateralize the L/C Obligations (to the
extent not already Cash Collateralized);

(d) capitalize any accrued and unpaid interest by adding such amount to the
outstanding principal balance of the Loans, at which time such capitalized
amount shall bear interest at the Default Rate;

(e) 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 applicable 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 Event of Default with respect
to any Loan Party or any Subsidiary thereof under Section 8.01(f), the
obligation of each Lender to make Loans and any obligation of each L/C Issuer to
make L/C Credit Extensions shall automatically terminate, the unpaid principal
amount of all outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable, and the obligation of the Loan
Parties to Cash Collateralize the L/C Obligations as aforesaid shall
automatically become effective, in each case 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.

8.03 Application of Funds. After the exercise of remedies provided for in
Section 8.02 (or after the Loans have automatically become immediately due and
payable and the L/C Obligations have automatically been required to be Cash
Collateralized 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, in each case whether or not such Obligations are allowed or
allowable in any bankruptcy or insolvency proceeding or under any Debtor Relief
Law:

First, to payment of that portion of the Obligations (excluding the Other
Liabilities) 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;

 

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Second, to payment of that portion of the Obligations (excluding the Other
Liabilities) constituting indemnities, Credit Party Expenses, and other amounts
(other than principal, interest and fees) payable to the Lenders and any L/C
Issuer (including fees, charges and disbursements of counsel to the respective
Lenders and L/C Issuers and amounts payable under Article III), ratably among
them in proportion to the amounts described in this clause Second payable to
them;

Third, to the extent not previously reimbursed by the Lenders, to payment to the
Agent of that portion of the Obligations constituting principal and accrued and
unpaid interest on any Permitted Overadvances;

Fourth, to payment of that portion of the Obligations constituting accrued and
unpaid interest on the Tranche A Loans and other Obligations (other than
Obligations owing to the Tranche A-1 Lenders), and fees (including Letter of
Credit Fees), ratably among the Tranche A Lenders and L/C Issuers in proportion
to the respective amounts described in this clause Fourth payable to them;

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

Sixth, to the Agent for the account of the L/C Issuers, to Cash Collateralize
that portion of L/C Obligations (to the extent not already Cash Collateralized)
comprised of the aggregate undrawn amount of Letters of Credit;

Seventh, to payment of that portion of the Obligations (excluding the Other
Liabilities) constituting indemnities, expenses, and other amounts (other than
principal, interest and fees) payable to the Tranche A-1 Lenders (including
fees, charges and disbursements of counsel to the respective Tranche A-1
Lenders), ratably among them in proportion to the amounts described in this
clause Seventh;

Eighth, ratably to pay any fees then due to the Tranche A-1 Lenders until paid
in full;

Ninth, ratably to pay interest accrued in respect of the Tranche A-1 Loans until
paid in full;

Tenth, ratably to pay principal due in respect of Tranche A-1 Loans ratably
among the Tranche A-1 Lenders, in proportion to the respective amounts described
in this clause Tenth held by them until paid in full;

Eleventh, to payment of all other Obligations (excluding any Other Liabilities,
ratably among the Credit Parties in proportion to the respective amounts
described in this clause Eleventh held by them

Twelfth, to payment of that portion of the Obligations arising from Cash
Management Services to the extent secured by the Security Documents, ratably
among the Credit Parties in proportion to the respective amounts described in
this clause Twelfth held by them;

 

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Thirteenth, to payment of all other Obligations arising from Bank Products to
the extent secured under the Security Documents, ratably among the Credit
Parties in proportion to the respective amounts described in this clause
Thirteenth 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.

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate
undrawn amount of Letters of Credit pursuant to clause Sixth above shall be
applied to satisfy drawings under such Letters of Credit as they occur. Subject
to Section 2.05(c), if any amount remains on deposit as Cash Collateral after
all Letters of Credit have either been fully drawn or expired, such remaining
amount shall be applied to the other Obligations, if any, in the order set forth
above.

ARTICLE IX

THE AGENT

9.01 Appointment and Authority. Each of the Lenders hereby irrevocably appoints
Salus to act on its behalf as the 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 and appearing in the Chapter 11 Case on behalf of the Lenders),
together with such actions and powers as are reasonably incidental thereto. The
provisions of this Article are solely for the benefit of the Agent, the Lenders
and the L/C Issuers, and no Loan Party or any Subsidiary thereof shall have
rights as a third party beneficiary of any of such provisions. Notwithstanding
anything to the contrary in this Agreement or in any other Loan Document, the
Agent shall be permitted to exercise the rights and remedies hereunder on behalf
of itself and the other Lenders.

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 they 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 hereunder
and without any duty to account therefor to the Lenders.

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:

 

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(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 Required Lenders (or such other number or
percentage of the Lenders as shall be expressly provided for herein or in the
other Loan Documents), 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 applicable 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 Required Lenders (or such other number or
percentage of the Lenders as shall be necessary, or 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.

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, a Lender or a L/C Issuer. Upon the
occurrence of a Default or 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 Required 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.

 

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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. In
determining compliance with any condition hereunder to the making of a Loan, or
the issuance of a Letter of Credit, that by its terms must be fulfilled to the
satisfaction of a Lender or a L/C Issuer, the Agent may presume that such
condition is satisfactory to such Lender or such L/C Issuer unless the Agent
shall have received written notice to the contrary from such Lender or such L/C
Issuer prior to the making of such Loan or the issuance of such Letter of
Credit. 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.

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, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as the Agent.

9.06 Resignation of Agent. The Agent may at any time give written notice of its
resignation to the Lenders and the Lead Borrower. Upon receipt of any such
notice of resignation, the Required Lenders shall have the right, in
consultation with the Lead 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 thirty (30) days after the retiring Agent gives notice of its
resignation, then the retiring Agent may on behalf of the Lenders and the L/C
Issuers, appoint a successor Agent meeting the qualifications set forth above;
provided that if the Agent shall notify the Lead 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 or the L/C Issuers 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 and each L/C Issuer 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
Borrowers to a successor Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Lead 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.

 

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Any resignation by Salus as Agent pursuant to this Section shall also constitute
its resignation as an L/C Issuer. Upon the acceptance of a successor’s
appointment as Agent hereunder, (a) such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of such retiring
L/C Issuer, (b) such retiring L/C Issuer shall be discharged from all of its
duties and obligations hereunder or under the other Loan Documents, and (c) the
successor L/C Issuer shall issue letters of credit in substitution for the
Letters of Credit, if any, issued by such retiring L/C Issuer and outstanding at
the time of such succession or make other arrangements satisfactory to such
retiring L/C Issuer to effectively assume the obligations of such retiring L/C
Issuer with respect to such Letters of Credit.

9.07 Non-Reliance on Agent and Other Lenders. Each Lender and each L/C Issuer
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 and each L/C Issuer 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 9.12, 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.

9.08 Reserved.

9.09 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 any Loan or L/C
Obligation 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:

(a) to file and prove a claim for the whole amount of the principal and interest
owing and unpaid in respect of the Loans, L/C Obligations 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 L/C
Issuers, the Agent and the other Credit Parties (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Lenders,
the L/C Issuers, the Agent, such Credit Parties and their respective agents and
counsel and all other amounts due the Lenders, the L/C Issuers the Agent and
such Credit Parties under Sections 2.03(j) and (k), as applicable, 2.09 and
10.04) allowed in such judicial proceeding; and

 

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(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 and each L/C Issuer to make such payments to the Agent and, if the
Agent shall consent to the making of such payments directly to the Lenders and
the L/C Issuers, 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 2.09 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 Lender or any L/C Issuer any plan
of reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Lender or any L/C Issuer or to authorize the
Agent to vote in respect of the claim of any Lender or any L/C Issuer in any
such proceeding.

9.10 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 termination of the Aggregate Commitments and payment
in full of all Obligations (other than contingent indemnification obligations
for which no claim has been asserted), and the expiration, termination or Cash
Collateralization of all Letters of Credit, (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 9.10. In each
case as specified in this Section 9.10, the Agent will, at the Loan Parties’
expense, execute and deliver promptly 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 9.10.

9.11 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
Assumption shall have become effective as set forth in Section 10.06.

 

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

(a) agrees to furnish the Agent, upon request, with a summary of all Other
Liabilities due or to become due to such Lender. In connection with any
distributions to be made hereunder, the Agent shall be entitled to assume that
no amounts are due to any Lender on account of Other Liabilities unless the
Agent has received written notice thereof from such Lender;

(b) is deemed to have requested that the Agent furnish such Lender, promptly
after they become available, copies of all Borrowing Base Certificates and
financial statements required to be delivered by the Lead Borrower hereunder and
all commercial finance examinations and appraisals of the Collateral received by
the Agent (collectively, the “Reports”);

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

(d) 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;

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

(f) 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 Borrowers, or the indemnifying Lender’s participation in, or the
indemnifying Lender’s purchase of, a Loan or 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.

9.13 Agency for Perfection. Each Lender hereby appoints each other Lender as
agent for the purpose of perfecting Liens for the benefit of the Agent and the
Lenders in assets which, in accordance with Article 9 of the UCC or any other
applicable Law of the United States, can be perfected only by possession. Should
any Lender (other than the Agent) obtain possession of any such Collateral, such
Lender 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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9.14 Indemnification of Agent. Without limiting the obligations of the Loan
Parties hereunder, the Lenders hereby agree to indemnify the Agent, each L/C
Issuer 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, such L/C Issuer 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, such L/C Issuer 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, such L/C Issuer’s and their Related Parties’ gross negligence
or willful misconduct as determined by a final and nonappealable judgment of a
court of competent jurisdiction.

9.15 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.

9.16 Defaulting Lenders.

(a) If for any reason any Lender shall become a Defaulting Lender and such
failure is not cured within one (1) Business Day after receipt from the Agent of
written notice thereof, then, in addition to the rights and remedies that may be
available to the other Credit Parties, the Loan Parties’ or any other party at
law or in equity (and not at limitation thereof): (i) any such Defaulting
Lender’s right to participate in the administration of, or decision-making
rights related to, the Obligations, this Agreement or the other Loan Documents
shall be suspended during the pendency of such failure or refusal, (ii) any such
Defaulting Lender shall be deemed to have assigned any and all payments due to
it from the Loan Parties, whether on account of outstanding Loans, interest,
fees or otherwise, to the remaining non-Defaulting Lenders for application to,
and reduction of, their proportionate shares of all outstanding Obligations, and
(iii) at the option of the Agent, any amount payable to such Defaulting Lender
hereunder (whether on account of principal, interest, fees or otherwise) shall,
in lieu of being distributed to such Defaulting Lender, be retained by the Agent
as cash collateral for future funding obligations of the Defaulting Lender in
respect of any Loan. Such Defaulting Lender’s decision-making and participation
rights and rights to payments as set forth in clauses (i), (ii), and
(iii) hereinabove shall be restored only upon the payment by the Defaulting
Lender of its Applicable Percentage of any Obligations or expenses as to which
it is delinquent, together with interest thereon at the rate set forth in
Section 2.12(b) hereof from the date when originally due until the date upon
which any such amounts are actually paid, or otherwise cure such default or
other cause of such Lender becoming a Defaulting Lender.

(b) Subject to Section 10.06, the non-Defaulting Lenders shall also have the
right, but not the obligation, in their respective sole and absolute discretion,
to cause the termination and assignment, without any further action by the
Defaulting Lender for no cash consideration (pro rata, based on the respective
Commitments of those Lenders electing to exercise such right), of the Defaulting
Lender’s Commitment to fund future Loans. Upon any such purchase of the
Applicable Percentage of any Defaulting Lender, the Defaulting Lender’s share in
future Credit Extensions and its rights under the Loan Documents with respect
thereto shall terminate on the date of purchase, and the Defaulting Lender shall
promptly execute all documents reasonably requested to surrender and transfer
such interest, including, if so requested, an Assignment and Assumption.

 

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(c) Each Defaulting Lender shall indemnify the Agent and each non-Defaulting
Lender from and against any and all loss, damage or expenses, including but not
limited to reasonable attorneys’ fees and funds advanced by the Agent or by any
non-Defaulting Lender, on account of a Defaulting Lender’s failure to timely
fund its Applicable Percentage of a Loan or to otherwise perform its obligations
under the Loan Documents.

ARTICLE X

MISCELLANEOUS

10.01 Amendments, Etc. 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 Lead 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:

(a) increase the Commitment of any Lender (or reinstate any Commitment
terminated pursuant to Section 8.02) without the written Consent of such Lender;

(b) as to any Lender, reduce the principal of any Loan held by such Lender; and

(c) as to any Lender, change Section 2.13 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.

Notwithstanding anything to the contrary in this Agreement or any other Loan
Document, no provider or holder of any Bank Products or Cash Management Services
shall have any voting or approval rights hereunder (or be deemed a Lender)
solely by virtue of its status as the provider or holder of such agreements or
products or the Obligations owing thereunder, nor shall the consent of any such
provider or holder be required (other than in their capacities as Lenders, to
the extent applicable) for any matter hereunder or under any of the other Loan
Documents, including as to any matter relating to the Collateral or the release
of Collateral or any Loan Party.

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:

 

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(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 Lender or any L/C Issuer, to the address, telecopier number,
electronic mail address or telephone number specified in its Administrative
Questionnaire.

Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier 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 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 Loan
Parties, the Lenders and the L/C Issuers hereunder may be delivered or furnished
by electronic communication (including e-mail and Internet or intranet websites)
pursuant to procedures approved by the Agent, provided that the foregoing shall
not apply to notices to any Lender or any L/C Issuer pursuant to Article II if
such Lender or such L/C Issuer, as applicable, has notified the Agent that it is
incapable of receiving notices under such Article by electronic communication.
The Agent 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), provided that if such notice or other communication is not
sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next Business Day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

(c) The Internet. In no event shall the Agent or any of its Related Parties
(collectively, the “Agent Parties”) have any liability to any Loan Party, any
Lender, any L/C Issuer or any other Person for losses, claims, damages,
liabilities or expenses of any kind (whether in tort, contract or otherwise)
arising out of the Loan Parties’ or the Agent’s transmission of Borrower
Materials through the Internet, except to the extent that such losses, claims,
damages, liabilities or expenses are determined by a court of competent
jurisdiction by a final and nonappealable judgment to have resulted from the bad
faith, gross negligence or willful misconduct of such Agent Party; provided,
however, that in no event shall any Agent Party have any liability to any Loan
Party, any Lender, any L/C Issuer or any other Person for indirect, special,
incidental, consequential or punitive damages (as opposed to direct or actual
damages).

 

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(d) 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 Lender and each L/C Issuer
may change its address, telecopier or telephone number for notices and other
communications hereunder by notice to the Lead 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.

(e) Reliance by Agent, L/C Issuers and Lenders. The Agent, the L/C Issuers and
the Lenders shall be entitled to rely and act upon any notices (including
telephonic Committed Loan 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 L/C Issuer, 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,
except to the extent that such losses, costs, expenses or liabilities are
determined by a court of competent jurisdiction by a final and nonappealable
judgment to have resulted from the bad faith, gross negligence or willful
misconduct of the Agent, such L/C Issuer, such Lender or any such Related Party.
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.

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
a Loan or issuance of a Letter of Credit 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.

10.04 Expenses; Indemnity; Damage Waiver.

(a) Costs and Expenses. The Borrowers shall pay all Credit Party Expenses upon
demand.

 

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(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 and
documented fees, charges and disbursements of any counsel for any Indemnitee;
provided that, in the case of legal fees and expenses, such fees and expenses
shall be limited to the fees and expenses of one counsel to all such
Indemnitees, taken as a whole, one firm of regulatory counsel for all such
Indemnitees, taken as a whole, and, if necessary, of a single local counsel in
each appropriate jurisdiction (which may include a single special counsel acting
in multiple jurisdictions) for all such Indemnitees, taken as a whole (and, in
the case of an actual or perceived conflict of interest where the Indemnitee
affected by such conflict informs you of such conflict and thereafter retains
its own counsel, of another firm of counsel for such affected Indemnitee)),
incurred by any Indemnitee or asserted or awarded 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 or the consummation of the transactions
contemplated hereby or thereby, or, in the case of the Agent (and any sub-agents
thereof) and their Related Parties only, the administration of this Agreement
and the other Loan Documents, (ii) any Loan or Letter of Credit or the use or
proposed use of the proceeds therefrom (including any refusal by any L/C Issuer
to honor a demand for payment under a Letter of Credit if the documents
presented in connection with such demand do not strictly comply with the terms
of such Letter of Credit, any bank advising or confirming a Letter of Credit or
any other nominated person with respect to a Letter of Credit seeking to be
reimbursed or indemnified or compensated, and any third party seeking to enforce
the rights of a Borrower, beneficiary, nominated person, transferee, assignee of
Letter of Credit proceeds, or holder of an instrument or document related to any
Letter of Credit), (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 of
its Subsidiaries, or any Environmental Liability related in any way to any Loan
Party or any of its Subsidiaries, (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, in all cases, whether or not caused
by or arising out of the comparative, contributory or sole negligence of the
Indemnitee; 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 nonappealable judgment to have resulted from the bad faith, gross
negligence or willful misconduct of such Indemnitee, (y) result from a claim
brought by a Borrower or any other Loan Party against an Indemnitee for breach
in bad faith of such Indemnitee’s obligations hereunder or under any other Loan
Document, if the Borrowers or such Loan Party has obtained a final and
nonappealable judgment in its favor on such claim as determined by a court of
competent jurisdiction or (z) results from any claim, litigation, investigation
or proceeding that does not involve an act or omission of any Loan Party or
their respective Subsidiaries or Affiliates and that is brought by an Indemnitee
against any other Indemnitee.

(c) Reimbursement by Lenders. Without limiting their obligations under
Section 9.14 hereof, to the extent that the Loan Parties for any reason fail to
indefeasibly pay any amount required under subsection (a) or (b) of this Section
to be paid by it, each Lender severally agrees to pay to the Agent (or any such
sub-agent), the applicable L/C Issuer or such Related Party, as the case may be,
such Lender’s Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount, provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against the Agent (or any such sub-agent) or such L/C Issuer in its
capacity as such, or against any Related Party of any of the foregoing acting
for the Agent (or any such sub-agent) or such L/C Issuer in connection with such
capacity. The obligations of the Lenders under this subsection (c) are subject
to the provisions of Section 2.12(d).

 

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(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
applicable 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, any Loan or Letter of Credit or the
use of the proceeds thereof. 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.

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

(f) Survival. The agreements in this Section shall survive the resignation of
any Agent and any L/C Issuer, the assignment of any Commitment or Loan by any
Lender, the replacement of any Lender, the termination of the Aggregate
Commitments and the repayment, satisfaction or discharge of all the other
Obligations.

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 and each L/C Issuer 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 and the L/C Issuers under clause (b) of the preceding sentence shall
survive the payment in full of the Obligations and the termination of this
Agreement.

 

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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.
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.

(b) Assignments by Lenders. Any Lender may at any time assign to one or more
Persons all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment(s) and 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 Commitment and the 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
aggregate amount of the Commitment (which for this purpose includes Loans
outstanding thereunder) or, if the Commitment is not then in effect, 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 the Agent 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 Person 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 or the Commitments
assigned.

(iii) Required Consents. The consent of the Agent (such consents not to be
unreasonably withheld or delayed), shall be required for assignments in respect
of any Commitment 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.

(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. The assignee, if it shall not be a Lender, shall deliver to
the Agent an Administrative Questionnaire.

 

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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 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 Sections 3.01, 3.04, and 10.04 with respect to facts and
circumstances occurring prior to the effective date of such assignment. Upon
request, the Borrowers (at their 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
Borrowers, shall maintain at the Agent’s Office a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitments of, and principal amounts of the
Loans owing to, each Lender 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 Lead Borrower
and any Lender at any reasonable time and from time to time upon reasonable
prior notice.

(d) Participations. 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 its Commitment and/or 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 and the L/C Issuers 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. 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
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 and 3.04 to the same extent
as if it were a Lender and had acquired its interest by assignment pursuant to
Section (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 2.13 as though it were a
Lender. Each Lender, acting for this purpose as an agent of the Loan Parties,
shall maintain at its offices a record of each agreement or instrument effecting
any participation and a register for the recordation of the names and addresses
of its Participants and their rights with respect to principal amounts and other
Obligations from time to time (each a “Participation Register”). The entries in
each Participation Register shall be conclusive absent manifest error and the
Loan Parties, the Administrative Agent, the L/C Issuers and the Lenders may
treat each Person whose name is recorded in a Participant Register as a
Participant for all purposes of this Agreement (including, for the avoidance of
doubt, for purposes of entitlement to benefits under Section 3.01, Section 3.04,
and Section 10.08). The Participation Register shall be available for inspection
by the Lead Borrower and any Lender, at any reasonable time and from time to
time upon reasonable prior notice.

 

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(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 Lead 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 Lead 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.

(g) Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be
deemed to include electronic signatures 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.

(h) Resignation as L/C Issuer after Assignment. Notwithstanding anything to the
contrary contained herein, if at any time Salus assigns all of its Commitment
and Committed Loans pursuant to subsection (b) above, Salus may, upon thirty
(30) days’ notice to the Lead Borrower and the Lenders, resign as a L/C Issuer.
In the event of any such resignation as a L/C Issuer, the Lead Borrower shall be
entitled to appoint from among the Lenders a successor L/C Issuer hereunder;
provided, however, that no failure by the Lead Borrower to appoint any such
successor shall affect the resignation of Salus as a L/C Issuer. If Salus
resigns as a L/C Issuer, it shall retain all the rights, powers, privileges and
duties of a L/C Issuer hereunder with respect to all Letters of Credit issued by
it and outstanding as of the effective date of its resignation as a L/C Issuer
and all L/C Obligations with respect thereto. Upon the appointment of a
successor L/C Issuer, (a) such successor shall succeed to and become vested with
all of the rights, powers, privileges and duties of such retiring L/C Issuer,
and (b) the successor L/C Issuer shall issue letters of credit in substitution
for the Letters of Credit, if any, issued by such retiring L/C Issuer and
outstanding at the time of such succession or make other arrangements
satisfactory to Salus to effectively assume the obligations of Salus with
respect to such Letters of Credit.

 

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(i) Transactions by Salus Entity. Notwithstanding anything in this Agreement or
any other Loan Document to the contrary, (A) neither Salus nor any Affiliate
thereof (each, a “Salus Entity”) shall be required to comply with this
Section 10.06 in connection with any transaction involving any other Salus
Entity or any of its or their lenders or funding or financing sources, and no
Salus Entity shall have any obligation to disclose any such transaction to any
Person, and (B) there shall be no limitation or restriction on (i) the ability
of any Salus Entity to assign or otherwise transfer its rights and/or
obligations under this Agreement or any other Loan Document, any Commitment, any
Loan, or any other Obligation to any other Salus Entity or any lender or
financing or funding source of a Salus Entity or (ii) any such lender’s or
funding or financing source’s ability to assign or otherwise transfer its rights
and/or obligations under this Agreement or any other Loan Document, any
Commitment, any Loan, or any other Obligation; provided, however, that Salus
shall continue to be liable as a “Lender” under this Agreement and the other
Loan Documents unless such other Person complies with the provisions of this
Agreement to become a “Lender”.

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 and to
its and its Affiliates’ 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 and such Person agrees 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, such as the National Association of Insurance Commissioners), (c) to
the extent required by applicable 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 a written
agreement 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 or
derivative transaction relating to any Loan Party and its obligations, (g) with
the consent of the Lead Borrower or (h) to the extent such Information
(x) becomes publicly available other than as a result of a breach of this
Section or (y) 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.

 

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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, provided
that, in the case of information received from any Loan Party or any Subsidiary
after the Closing Date, such information is clearly identified at the time of
delivery as confidential (it being agreed that any projections and unpublished
results of operations shall be deemed confidential regardless of whether marked
as such). 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 applicable Law, including Federal and state
securities Laws.

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, each L/C
Issuer 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 applicable law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by such Lender, such L/C
Issuer or any such Affiliate to or for the credit or the account of the
Borrowers 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 or such L/C Issuer, regardless of the adequacy of the Collateral, and
irrespective of whether or not such Lender or such L/C Issuer shall have made
any demand under this Agreement or any other Loan Document and although such
obligations of the Borrowers or such Loan Party may be contingent or unmatured
or are owed to a branch or office of such Lender or such L/C Issuer different
from the branch or office holding such deposit or obligated on such
indebtedness. The rights of each Lender, each L/C Issuer and their respective
Affiliates under this Section are in addition to other rights and remedies
(including other rights of setoff) that such Lender, such L/C Issuer or their
respective Affiliates may have. Each Lender and each L/C Issuer agrees to notify
the Lead 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.

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 applicable 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 or, if it exceeds such
unpaid principal, refunded to the Borrowers. 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 applicable 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.

 

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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.

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 at the time of any Credit
Extension, and shall continue in full force and effect as long as any Loan or
any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter
of Credit shall remain outstanding. Further, the provisions of Sections 3.01,
3.04, and 10.04 and Article IX shall survive and remain in full force and effect
regardless of the repayment of the Obligations, the expiration or termination of
the Letters of Credit and the Commitments or the termination of this Agreement
or any provision hereof. In connection with the termination of this Agreement
and the release and termination of the security interests in the Collateral, the
Agent may require such indemnities and collateral security as it shall
reasonably deem necessary or appropriate to protect the Credit Parties against
(x) loss on account of credits previously applied to the Obligations that may
subsequently be reversed or revoked, (y) any obligations that may thereafter
arise with respect to the Other Liabilities and (z) any Obligations that may
thereafter arise under Section 10.04.

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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10.13 Replacement of Lenders. If any Lender requests compensation under
Section 3.04, or if the Borrowers are 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 Defaulting Lender, then the Borrowers
may, at their 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 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 Borrowers 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 Borrowers (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; and

(d) such assignment does not conflict with applicable Laws.

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 Borrowers to require such assignment and delegation
cease to apply.

10.14 Governing Law; Jurisdiction; Etc.

(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT INCLUDING SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW, EXCEPT TO THE EXTENT THAT THE PROVISIONS OF THE
BANKRUPTCY CODE ARE APPLICABLE AND SPECIFICALLY CONFLICT WITH THE FOREGOING.

(b) SUBMISSION TO JURISDICTION. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF 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 THE UNITED STATES
BANKRUPTCY COURT FOR THE DISTRICT OF NEW JERSEY, AND ANY APPELLATE COURT FROM
ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH OF THE LOAN PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE LOAN PARTIES HERETO AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR 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.

 

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(c) WAIVER OF VENUE. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE 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 APPLICABLE 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 APPLICABLE LAW.

(e) ACTIONS COMMENCED BY LOAN PARTIES. EACH LOAN PARTY AGREES THAT ANY ACTION
COMMENCED BY ANY LOAN PARTY ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR
IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT
SOLELY IN A COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY OR ANY
FEDERAL COURT SITTING THEREIN OR THE UNITED STATES BANKRUPTCY COURT FOR THE
DISTRICT OF NEW JERSEY AS THE AGENT MAY ELECT IN ITS SOLE DISCRETION AND
CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH RESPECT TO ANY SUCH
ACTION.

 

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10.15 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
WHETHER INITIATED BY OR AGAINST ANY SUCH PERSON OR IN WHICH ANY SUCH PERSON IS
JOINED AS A PARTY LITIGANT). 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.

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.

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 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.

 

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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 Borrowers 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.

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

10.20 Press Releases; Cooperation.

(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 applicable Law or as may be required by any stock exchange which
lists the shares of the Lead Borrower 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, including any “tombstone” or comparable advertising, on
its website or in other marketing materials of Agent, relating to the financing
transactions contemplated by this Agreement using any Loan Party’s name, product
photographs, logo, trademark or other insignia. The Agent or such Lender shall
provide a draft reasonably in advance of any advertising material to the Lead
Borrower for review and comment prior to the publication thereof. The Agent
reserves the right to provide to industry trade organizations and loan
syndication and pricing reporting services information necessary and customary
for inclusion in league table measurements.

 

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10.21 Additional Waivers.

(a) The Obligations are the joint and several obligation of each Loan Party. To
the fullest extent permitted by Applicable 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, or (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.

(b) 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 after the termination of
the Commitments), 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. Without limiting the generality of the foregoing, the obligations of
each Loan Party hereunder shall not be discharged or impaired or otherwise
affected by the failure of the Agent or any other Credit Party to assert any
claim or demand or to enforce any remedy under this Agreement, any other Loan
Document or any other agreement, by any waiver or modification of any provision
of any thereof, 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 after the termination of the Commitments).

(c) To the fullest extent permitted by applicable 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 and the
termination of the Commitments. 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 the Obligations have been indefeasibly paid in full in cash and
the Commitments have been terminated. Each Loan Party waives any defense arising
out of any such election even though such election operates, pursuant to
applicable 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, as the case may be, or any security.

 

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(d) Each Borrower is obligated to repay the Obligations as joint and several
obligors under this Agreement. 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 the
Obligations and the termination of the Commitments. 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 Borrower shall, under this Agreement as a joint and
several obligor, repay any of the Obligations constituting Loans made to another
Borrower hereunder or other Obligations incurred directly and primarily by any
other Borrower (an “Accommodation Payment”), then the Borrower making such
Accommodation Payment shall be entitled to contribution and indemnification
from, and be reimbursed by, each of the other Borrowers in an amount, for each
of such other Borrowers, equal to a fraction of such Accommodation Payment, the
numerator of which fraction is such other Borrower’s Allocable Amount and the
denominator of which is the sum of the Allocable Amounts of all of the
Borrowers. As of any date of determination, the “Allocable Amount” of each
Borrower shall be equal to the maximum amount of liability for Accommodation
Payments which could be asserted against such Borrower hereunder without
(a) rendering such Borrower “insolvent” within the meaning of Section 101
(31) 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 Borrower 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 Borrower 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.

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.

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. In the event of
any conflict between any of the provisions of the Interim Order or the Final
Order, as the case may be, and the provisions of this Agreement, the provisions
of the Interim Order or the Final Order shall prevail.

[ Signature pages follow ]

 

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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.

 

KID BRANDS, INC., as the Lead Borrower By:  

/s/ Glenn R. Langberg

Name:   Glenn R. Langberg Title:   Chief Restructuring Officer KIDS LINE, LLC
SASSY, INC. I & J HOLDCO, INC. LAJOBI, INC. COCALO, INC.

RB TRADEMARK HOLDCO, LLC, each as

a Borrower

By:  

/s/ Glenn R. Langberg

Name:   Glenn R. Langberg Title:   Chief Restructuring Officer

 

[ SIGNATURE PAGE TO DEBTOR-IN-POSSESSION CREDIT AGREEMENT ]

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SALUS CAPITAL PARTNERS, LLC, as Administrative Agent and as Collateral Agent By:
 

/s/ Kyle C. Shonak

Name:   Kyle C. Shonak Title:   Executive Vice President By:  

/s/ Jonas D.L. McCray

Name:   Jonas D.L. McCray Title:   Senior Vice President

 

[ SIGNATURE PAGE TO DEBTOR-IN-POSSESSION CREDIT AGREEMENT ]

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SALUS CLO 2012-1, LTD., as a Lender By:   Salus Capital Partners II, LLC Its:  
Collateral Manager By:  

Kyle C. Shonak

Name:   Kyle C. Shonak Title:   Executive Vice President By:  

/s/ Robert Kuppens

Name:   Robert F. Kuppens Title:   Executive Vice President

 

[ SIGNATURE PAGE TO DEBTOR-IN-POSSESSION CREDIT AGREEMENT ]

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SALUS CAPITAL PARTNERS, LLC, as a Lender By:  

/s/ Kyle C. Shonak

Name:   Kyle C. Shonak Title:   Executive Vice President By:  

/s/ Robert Kuppens

Name:   Robert F. Kuppens Title:   Executive Vice President

 

[ SIGNATURE PAGE TO DEBTOR-IN-POSSESSION CREDIT AGREEMENT ]

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STERLING NATIONAL BANK, as a Lender By:  

/s/ Leonard Rudolph

Name:   Leonard Rudolph Title:   SVP

 

[ SIGNATURE PAGE TO DEBTOR-IN-POSSESSION CREDIT AGREEMENT ]

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Schedule 2.01 – Commitments and Applicable Percentages

 

Lender

   Commitment      Applicable
Percentage     Tranche A
Commitment      Tranche A
Applicable
Percentage     Tranche A-1
Commitment      Tranche A-1
Applicable
Percentage  

Salus CLO 2012-1, Ltd.

   $ 40,859,500         69.85 %    $ 18,859,500         69.85 %    $ 22,000,000
        100.0 % 

Sterling National Bank

   $ 8,140,500         30.15 %    $ 8,140,500         30.15 %    $ 0.00        
0.0 % 

Total:

   $ 49,000,000         100.0 %    $ 27,000,000         100.0 %    $ 22,000,000
        100.0 %