Exhibit 10.17
REVOLVING CREDIT
AND
SECURITY AGREEMENT
PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)
WITH
VALUEVISION MEDIA, INC.
VALUEVISION INTERACTIVE, INC.
VVI FULFILLMENT CENTER, INC.
VALUEVISION MEDIA ACQUISITIONS, INC.
VALUEVISION RETAIL, INC.
(BORROWERS)
November 25, 2009

 

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TABLE OF CONTENTS

                Page
I. DEFINITIONS
    1  
 
       
1.1. Accounting Terms
    1  
1.2. General Terms
    1  
1.3. Uniform Commercial Code Terms
    27  
1.4. Certain Matters of Construction
    27  
1.5. Fiscal Periods
    28  
 
       
II. ADVANCES, PAYMENTS
    28  
 
       
2.1. Revolving Advances
    28  
2.2. Procedure for Revolving Advances Borrowing
    29  
2.3. Disbursement of Advance Proceeds
    31  
2.4. Intentionally Omitted
    32  
2.5. Maximum Advances
    32  
2.6. Repayment of Advances
    32  
2.7. Repayment of Excess Advances
    32  
2.8. Statement of Account
    33  
2.9. Letters of Credit
    33  
2.10. Issuance of Letters of Credit
    33  
2.11. Requirements For Issuance of Letters of Credit
    34  
2.12. Disbursements, Reimbursement
    34  
2.13. Repayment of Participation Advances
    36  
2.14. Documentation
    36  
2.15. Determination to Honor Drawing Request
    36  
2.16. Nature of Participation and Reimbursement Obligations
    37  
2.17. Indemnity
    38  
2.18. Liability for Acts and Omissions
    38  
2.19. Additional Payments
    40  
2.20. Manner of Borrowing and Payment
    40  
2.21. Mandatory Prepayments
    41  
2.22. Use of Proceeds
    41  
2.23. Defaulting Lender
    42  
 
       
III. INTEREST AND FEES
    43  
 
       
3.1. Interest
    43  
3.2. Letter of Credit Fees
    43  
3.3. Closing Fee and Facility Fee
    44  
3.4. Collateral Evaluation Fee, Collateral Monitoring Fee and Appraisal Fee
    44  
3.5. Computation of Interest and Fees
    45  
3.6. Maximum Charges
    45  
3.7. Increased Costs
    45  
3.8. Basis For Determining Interest Rate Inadequate or Unfair
    46  
3.9. Capital Adequacy
    47  

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                Page
3.10. Gross Up for Taxes
    47  
3.11. Withholding Tax Exemption
    47  
 
       
IV. COLLATERAL: GENERAL TERMS
    48  
 
       
4.1. Security Interest in the Collateral
    48  
4.2. Perfection of Security Interest
    49  
4.3. Disposition of Collateral
    49  
4.4. Preservation of Collateral
    49  
4.5. Ownership of Collateral
    50  
4.6. Defense of Agent’s and Lenders’ Interests
    50  
4.7. Books and Records
    51  
4.8. Financial Disclosure
    51  
4.9. Compliance with Laws
    51  
4.10. Inspection of Premises
    51  
4.11. Insurance
    52  
4.12. Failure to Pay Insurance
    52  
4.13. Payment of Taxes
    53  
4.14. Payment of Leasehold Obligations
    53  
4.15. Receivables
    53  
4.16. Inventory
    56  
4.17. Maintenance of Equipment
    56  
4.18. Exculpation of Liability
    56  
4.19. Environmental Matters
    56  
4.20. Financing Statements
    58  
 
       
V. REPRESENTATIONS AND WARRANTIES
    58  
 
       
5.1. Authority
    58  
5.2. Formation and Qualification
    59  
5.3. Survival of Representations and Warranties
    59  
5.4. Tax Returns
    59  
5.5. Financial Statements
    59  
5.6. Entity Names
    60  
5.7. OSHA and Environmental Compliance
    60  
5.8. Solvency; No Litigation, Violation, Indebtedness or Default; ERISA
Compliance
    61  
5.9. Patents, Trademarks, Copyrights and Licenses
    62  
5.10. Licenses and Permits
    62  
5.11. Default of Indebtedness
    63  
5.12. No Default
    63  
5.13. No Burdensome Restrictions
    63  
5.14. No Labor Disputes
    63  
5.15. Margin Regulations
    63  
5.16. Investment Company Act
    63  
5.17. Disclosure
    63  
5.18. Intentionally Omitted
    63  
5.19. Swaps
    64  
5.20. Conflicting Agreements
    64  
5.21. Application of Certain Laws and Regulations
    64  

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                Page
5.22. Business and Property of Borrowers
    64  
5.23. Section 20 Subsidiaries
    64  
5.24. Anti-Terrorism Laws
    64  
5.25. Trading with the Enemy
    65  
5.26. Federal Securities Laws
    65  
5.27. Equity Interests
    65  
5.28. Credit Card Arrangements
    65  
5.29. Inactive Subsidiaries
    66  
 
       
VI. AFFIRMATIVE COVENANTS
    66  
 
       
6.1. Payment of Fees
    66  
6.2. Conduct of Business and Maintenance of Existence and Assets
    66  
6.3. Violations
    66  
6.4. Government Receivables
    66  
6.5. Financial Covenants
    66  
6.6. Execution of Supplemental Instruments
    67  
6.7. Payment of Indebtedness
    67  
6.8. Standards of Financial Statements
    67  
6.9. Federal Securities Laws
    68  
6.10. Post Closing Matters
    68  
 
       
VII. NEGATIVE COVENANTS
    68  
 
       
7.1. Merger, Consolidation, Acquisition and Sale of Assets
    68  
7.2. Creation of Liens
    69  
7.3. Guarantees
    69  
7.4. Investments
    69  
7.5. Loans
    69  
7.6. Capital Expenditures
    69  
7.7. Dividends
    69  
7.8. Indebtedness
    70  
7.9. Nature of Business
    70  
7.10. Transactions with Affiliates
    70  
7.11. Leases
    70  
7.12. Subsidiaries
    70  
7.13. Fiscal Year and Accounting Changes
    70  
7.14. Pledge of Credit
    70  
7.15. Amendment of Articles of Incorporation, By-Laws
    70  
7.16. Compliance with ERISA
    71  
7.17. Prepayment of Indebtedness
    71  
7.18. Anti-Terrorism Laws
    71  
7.19. Trading with the Enemy Act
    72  
7.20. Credit Card Arrangements
    72  
7.21. Inactive Subsidiaries
    72  
7.22. Direct TV Payment
    72  
 
       
VIII. CONDITIONS PRECEDENT
    72  
 
       
8.1. Conditions to Initial Advances
    72  

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                Page
8.2. Conditions to Each Advance
    75  
 
       
IX. INFORMATION AS TO BORROWERS
    75  
 
       
9.1. Disclosure of Material Matters
    76  
9.2. Schedules
    76  
9.3. Environmental Reports
    76  
9.4. Litigation
    76  
9.5. Material Occurrences
    76  
9.6. Government Receivables
    77  
9.7. Annual Financial Statements
    77  
9.8. Quarterly Financial Statements
    77  
9.9. Monthly Financial Statements
    77  
9.10. Other Reports
    78  
9.11. Additional Information
    78  
9.12. Projected Operating Budget
    78  
9.13. Variances From Operating Budget
    78  
9.14. Notice of Suits, Adverse Events
    78  
9.15. ERISA Notices and Requests
    78  
9.16. Additional Documents
    79  
 
       
X. EVENTS OF DEFAULT
    79  
 
       
10.1. Nonpayment
    79  
10.2. Breach of Representation
    79  
10.3. Financial Information
    80  
10.4. Judicial Actions
    80  
10.5. Noncompliance
    80  
10.6. Judgments
    80  
10.7. Bankruptcy
    80  
10.8. Inability to Pay
    80  
10.9. Affiliate Bankruptcy
    80  
10.10. Material Adverse Effect
    81  
10.11. Lien Priority
    81  
10.12. Intentionally Omitted
    81  
10.13. Cross Default
    81  
10.14. Breach of Guaranty or Pledge Agreement
    81  
10.15. Change of Ownership
    81  
10.16. Invalidity
    81  
10.17. Licenses
    81  
10.18. Seizures
    81  
10.19. Pension Plans
    82  
10.20. Direct TV
    82  
 
       
XI. LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT
    82  
 
       
11.1. Rights and Remedies
    82  
11.2. Agent’s Discretion
    83  
11.3. Setoff
    84  
11.4. Rights and Remedies not Exclusive
    84  

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                Page
11.5. Allocation of Payments After Event of Default
    84  
 
       
XII. WAIVERS AND JUDICIAL PROCEEDINGS
    85  
 
       
12.1. Waiver of Notice
    85  
12.2. Delay
    85  
12.3. Jury Waiver
    85  
 
       
XIII. EFFECTIVE DATE AND TERMINATION.
    85  
 
       
13.1. Term
    85  
13.2. Termination
    86  
 
       
XIV. REGARDING AGENT
    86  
 
       
14.1. Appointment
    86  
14.2. Nature of Duties
    87  
14.3. Lack of Reliance on Agent and Resignation
    87  
14.4. Certain Rights of Agent
    88  
14.5. Reliance
    88  
14.6. Notice of Default
    88  
14.7. Indemnification
    88  
14.8. Agent in its Individual Capacity
    88  
14.9. Delivery of Documents
    89  
14.10. Borrowers’ Undertaking to Agent
    89  
14.11. No Reliance on Agent’s Customer Identification Program
    89  
14.12. Other Agreements
    89  
 
       
XV. BORROWING AGENCY
    89  
 
       
15.1. Borrowing Agency Provisions
    89  
15.2. Waiver of Subrogation
    90  
 
       
XVI. MISCELLANEOUS
    90  
 
       
16.1. Governing Law
    90  
16.2. Entire Understanding
    91  
16.3. Successors and Assigns; Participations; New Lenders
    93  
16.4. Application of Payments
    95  
16.5. Indemnity
    95  
16.6. Notice
    96  
16.7. Survival
    98  
16.8. Severability
    98  
16.9. Expenses
    98  
16.10. Injunctive Relief
    98  
16.11. Consequential Damages
    98  
16.12. Captions
    98  
16.13. Counterparts; Facsimile Signatures
    99  
16.14. Construction
    99  
16.15. Confidentiality; Sharing Information
    99  
16.16. Publicity
    99  
16.17. Certifications From Banks and Participants; USA PATRIOT Act
    99  

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LIST OF EXHIBITS AND SCHEDULES

     
Exhibits
   
 
   
Exhibit 1
  Certificate of Designation
Exhibit 1.2
  Borrowing Base Certificate
Exhibit 2.1(a)
  Revolving Credit Note
Exhibit 4.15(d)(ii)
  Credit Card Notifications
Exhibit 8.1(i)
  Financial Condition Certificate
Exhibit 16.3
  Commitment Transfer Supplement
 
   
Schedules
   
 
   
Schedule 1.2
  Permitted Encumbrances
Schedule 4.5
  Equipment and Inventory Locations
Schedule 4.15(h)
  Deposit and Investment Accounts
Schedule 4.19
  Real Property
Schedule 5.1
  Consents
Schedule 5.2(a)
  States of Qualification and Good Standing
Schedule 5.2(b)
  Subsidiaries
Schedule 5.4
  Federal Tax Identification Number
Schedule 5.6
  Prior Names
Schedule 5.7
  Environmental
Schedule 5.8(b)
  Litigation
Schedule 5.8(d)
  Plans
Schedule 5.9
  Intellectual Property, Source Code Escrow Agreements
Schedule 5.10
  Licenses and Permits
Schedule 5.14
  Labor Disputes
Schedule 5.27
  Equity Interests
Schedule 5.28
  Credit Card Arrangements
Schedule 7.3
  Guarantees

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REVOLVING CREDIT
AND
SECURITY AGREEMENT
Revolving Credit and Security Agreement dated as of November 25, 2009 among
ValueVision Media, Inc., a Minnesota corporation (“ValueVision”); ValueVision
Interactive, Inc., a Minnesota corporation; VVI Fulfillment Center, Inc., a
Minnesota corporation; ValueVision Media Acquisitions, Inc., a Delaware
corporation; ValueVision Retail, Inc., a Delaware corporation (each a
“Borrower”, and collectively “Borrowers”), the financial institutions which are
now or which hereafter become a party hereto (collectively, the “Lenders” and
each individually a “Lender”) and PNC Bank, National Association (“PNC”), as
agent for Lenders (PNC, in such capacity, the “Agent”).
     IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrowers, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
     1.1. Accounting Terms. As used in this Agreement, the Other Documents or
any certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrowers for the fiscal year ended January 31,
2009.
     1.2. General Terms. For purposes of this Agreement the following terms
shall have the following meanings:
     “Accountants” shall have the meaning set forth in Section 9.7 hereof.
     “Advance Rates” shall have the meaning set forth in Section 2.1(a)(y)(ii)
hereof.
     “Advances” shall mean and include the Revolving Advances, Letters of
Credit.
     “Affiliate” of any Person shall mean (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director, managing member, general
partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or indirect, (x) to
vote 5% or more of the Equity Interests having ordinary voting power for the
election of directors of such Person or other Persons performing similar
functions for any such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by ownership of Equity Interests,
contract or otherwise.

 

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     “Agent” shall have the meaning set forth in the preamble to this Agreement
and shall include its successors and assigns.
     “Agreement” shall mean this Revolving Credit and Security Agreement, as the
same may be amended, restated, supplemented or otherwise modified from time to
time.
     “Alternate Base Rate” shall mean, for any day, a rate per annum equal to
the higher of (i) the Base Rate in effect on such day, (ii) the Federal Funds
Open Rate in effect on such day plus one half of one-percent (1/2 of 1%), and
(iii) the sum of the Daily LIBOR Rate in effect on such day plus one percent
(1.0%), so long as a Daily LIBOR Rate is offered, ascertainable and not
unlawful.
     “Anti-Terrorism Laws” shall mean any Applicable Laws relating to terrorism
or money laundering, including Executive Order No. 13224, the USA PATRIOT Act,
the Applicable Laws comprising or implementing the Bank Secrecy Act, and the
Applicable Laws administered by the United States Treasury Department’s Office
of Foreign Asset Control (as any of the foregoing Applicable Laws may from time
to time be amended, renewed, extended, or replaced).
     “Applicable Law” shall mean all laws, rules and regulations applicable to
the Person, conduct, transaction, covenant, Other Document or contract in
question, including all applicable common law and equitable principles; all
provisions of all applicable state, federal and foreign constitutions, statutes,
rules, regulations, treaties, directives and orders of any Governmental Body,
and all orders, judgments and decrees of all courts and arbitrators.
     “Applicable Margin” for Revolving Advances and the Unused Line Fee shall
mean, as of the Closing Date through April 30, 2011, the applicable percentage
specified below:

                  APPLICABLE MARGINS   APPLICABLE MARGINS   APPLICABLE MARGIN
FOR FOR DOMESTIC RATE LOANS   FOR EURODOLLAR RATE LOANS   UNUSED LINE FEE
Revolving Advances
  Revolving Advances        
3.50%
    4.50 %     .50 %

     (a) If on April 30, 2011 or the last day of any fiscal quarter thereafter,
Borrowers’ Ninety (90) Day Average Undrawn Availability is greater than
$20,000,000 (as evidenced by a Compliance Certificate acceptable to Agent), then
effective: (i) with respect to the fiscal quarter ending April 30, 2011, as of
the first Business Day following receipt by Agent of the annual financial
statements of Borrowers on a Consolidated Basis for the fiscal year ending
January 29, 2011 required under Section 9.7; and (ii) with respect to any fiscal
quarter thereafter, upon receipt of the quarterly financial statements of
Borrowers on a Consolidated Basis required under Section 9.8 for such fiscal
quarter (each day of such delivery, an “Adjustment Date”), the Applicable Margin
for Revolving Advances and the Unused Line Fee shall be adjusted, if necessary,
to the applicable percent per annum set forth in the pricing table set forth
below corresponding to the Ninety (90) Average Undrawn Availability:

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                      NINETY (90) AVERAGE   APPLICABLE MARGINS   APPLICABLE
MARGINS   APPLICABLE MARGINS UNDRAWN AVAILABILITY   FOR BASE RATE RATE LOANS  
FOR EURODOLLAR RATE LOANS   FOR UNUSED LINE FEE
 
  Revolving Advances   Revolving Advances    
 
                   
Greater than $20,000,000
    3.00 %     4.00 %   .50% to be reduced to .375% if the average outstanding
balance of Revolving Advances during such quarter are greater than $10,000,000

     (b) If on April 30, 2011 or the last day of any fiscal quarter thereafter,
Borrowers’ Ninety (90) Day Average Undrawn Availability is less than $20,000,000
(as evidenced by a Compliance Certificate acceptable to Agent), then effective
on the next Adjustment Date, the Applicable Margin for Revolving Advances and
the Unused Line Fee shall be adjusted, if necessary, to the applicable percent
per annum set forth in the pricing table set forth below corresponding to the
Fixed Charge Coverage Ratio for the trailing twelve month period ending on the
last day of the most recently completed fiscal quarter prior to the applicable
Adjustment Date:

              FIXED CHARGE   APPLICABLE MARGINS   APPLICABLE MARGINS  
APPLICABLE MARGINS COVERAGERATIO   FOR BASE RATE RATE LOANS   FOR EURODOLLAR
RATE LOANS   FOR UNUSED LINE FEE
 
  Revolving Advances   Revolving Advances    
 
           
Less than 1.10 to 1.00
  4.00%   5.00%   .50% to be reduced
 
          to .375% if the
 
          average outstanding
 
          balance of
 
          Revolving Advances
 
          during such quarter
 
          are greater than

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              FIXED CHARGE   APPLICABLE MARGINS   APPLICABLE MARGINS  
APPLICABLE MARGINS COVERAGERATIO   FOR BASE RATE RATE LOANS   FOR EURODOLLAR
RATE LOANS   FOR UNUSED LINE FEE
 
          $10,000,000
Greater than or equal
  3.50%   4.50%   .50% to be reduced
to 1.10 to 1.00 but
          to .375% if the
less than 1.50 to
          average outstanding
1.00
          balance of
 
          Revolving Advances
 
          during such quarter
 
          are greater than
 
          $10,000,000
Greater than or equal
  3.00%   4.00%   .50% to be reduced
to 1.50 to 1.00
          to .375% if the
 
          average outstanding
 
          balance of
 
          Revolving Advances
 
          during such quarter
 
          are greater than
 
          $10,000,000

     (c) If the Borrowers shall fail to deliver the financial statements,
certificates and/or other information required under Sections 9.7 or 9.8 by the
dates required pursuant to such sections or fails to deliver the information
required to determine the Ninety (90) Day Average Undrawn Availability, each
Applicable Margin shall be conclusively presumed to equal the highest Applicable
Margin specified in the pricing tables set forth above until the date of
delivery of such financial statements, certificates and/or other information, at
which time the rate will be adjusted based upon the Ninety (90) Average Undrawn
Availability or Fixed Charge Coverage Ratio, as applicable, reflected in such
certificates and/or statements.
     (d) If, as a result of any restatement of, or other adjustment to, the
certificates or financial statements of Borrowers on a Consolidated Basis or for
any other reason, the Agent determines that (a) the Ninety (90) Day Average
Undrawn Availability or Fixed Charge Coverage Ratio as previously calculated as
of any applicable date was inaccurate, and (b) a proper calculation of the
Ninety (90) Day Average Undrawn Availability or Fixed Charge Coverage Ratio
would have resulted in different pricing for any period, then (i) if the proper
calculation of the Ninety (90) Day Average Undrawn Availability or Fixed Charge
Coverage Ratio would have resulted in higher pricing for such period, the
Borrowers shall automatically and retroactively be delegated to pay to the
Agent, promptly upon demand by the Agent, an amount equal to the excess of the
amount of interest and the Unused Line Fee that should have been paid for such
period over the amount of interest and the Unused Line Fee actually paid for
such period; and (ii) if the proper calculation of the Ninety (90) Day Average
Undrawn Availability or Fixed Charge Coverage Ratio would have resulted in lower
pricing for such

4

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period, Lenders shall have no obligation to repay interest or the Unused Line
Fee to the Borrowers; provided, that, if as a result of any restatement or other
event a proper calculation of the Ninety (90) Day Average Undrawn Availability
or Fixed Charge Coverage Ratio would have resulted in higher pricing for one or
more periods and lower pricing for one or more other periods (due to the
shifting of income or expenses from one period to another period or any similar
reason), then the amount payable by the Borrowers pursuant to clause (i) above
shall be based upon the excess, if any, of the amount of interest and the Unused
Line Fee that should have been paid for all applicable periods over the amounts
of interest and the Unused Line Fee actually paid for such periods.
     “Authority” shall have the meaning set forth in Section 4.19(d) hereof.
     “Availability Block” shall mean Ten Million Dollars ($10,000,000) or such
lesser amounts agreed to by Agent in its sole discretion after delivery of
Borrowers’ audited financial statements as required by Section 9.7 hereof;
provided that Agent shall not consider any reduction of the Availability Block
until such time as Borrowers’ achieve positive net income on an annual basis.
     “Average FICO Score” shall mean, on any date of determination, the average
FICO Score of all Persons participating in the Value Pay Plan for whom a FICO
score has been obtained, as determined by Borrowing Agent in accordance with its
practices in the Ordinary Course of Business in effect on the Closing Date.
     “Base Rate” shall mean the base commercial lending rate of PNC as publicly
announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.
     “Benefited Lender” shall have the meaning set forth in Section 2.20(d)
hereof.
     “Blocked Accounts” shall have the meaning set forth in Section 4.15(h)
hereof.
     “Blocked Account Bank” shall have the meaning set forth in Section 4.15(h)
hereof.
     “Blocked Person” shall have the meaning set forth in Section 5.24(b)
hereof.
     “Borrower” or “Borrowers” shall have the meaning set forth in the preamble
to this Agreement and shall extend to all permitted successors and assigns of
such Persons.
     “Borrowers on a Consolidated Basis” shall mean the consolidation in
accordance with GAAP of the accounts or other items of the Borrowers and their
respective Subsidiaries.
     “Borrowers’ Account” shall have the meaning set forth in Section 2.8
hereof.
     “Borrowing Agent” shall mean ValueVision.

5

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     “Borrowing Base Certificate” shall mean a certificate in substantially the
form of Exhibit 1.2 duly executed by the President, Chief Financial Officer or
Controller of the Borrowing Agent and delivered to the Agent, appropriately
completed, by which such officer shall certify to Agent the Formula Amount and
calculation thereof as of the date of such certificate.
     “Business Day” shall mean any day other than Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed
for business in East Brunswick, New Jersey and, if the applicable Business Day
relates to any Eurodollar Rate Loans, such day must also be a day on which
dealings are carried on in the London interbank market.
     “Capital Expenditures” shall mean expenditures made or liabilities incurred
for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the total principal portion of Capitalized Lease Obligations,
which, in accordance with GAAP, would be classified as capital expenditures.
     “Capitalized Lease Obligation” shall mean any Indebtedness of any Borrower
represented by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
     “CERCLA” shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.
     “Change of Ownership” shall mean (a) 100% of the Equity Interests of any
Borrower (other than ValueVision) is no longer owned or controlled by
ValueVision (including for the purposes of the calculation of percentage
ownership, any Equity Interests into which any Equity Interests of any Borrower
held by ValueVision are convertible or for which any such Equity Interests of
any Borrower or of any other Person may be exchanged and any Equity Interests
issuable to ValueVision upon exercise of any warrants, options or similar rights
which may at the time of calculation be held by ValueVision), (b) (i) any person
or group of persons (within the meaning of Section 13(d) or 14(a) of the
Exchange Act) shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the SEC under the Exchange Act) of 20% or more of the
voting Equity Interest of ValueVision; or (ii) from and after the date hereof,
individuals who on the date hereof constitute the Board of Directors of
ValueVision (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of ValueVision
was approved by a vote of a majority of the directors then still in office who
were either directors on the date hereof or whose election or nomination for
election was previously approved) cease for any reason to constitute a majority
of the board of directors of ValueVision then in office; or (c) any merger,
consolidation or sale of substantially all of the property or assets of any
Borrower or any direct or indirect Subsidiary of any Borrower except as
permitted by Section 7.1; provided however it shall not be deemed to be a Change
of Ownership under (a) section (b)(i) of this definition, if (1) any person or
group of persons (within the meaning of Section 13(d) or 14(a) of the Exchange
Act) acquires beneficial ownership of (within the meaning of Rule 13d-3
promulgated by the SEC under the Exchange Act) 20% or more of the voting Equity
Interest of ValueVision and Agent provides prior written consent, which consent
shall not be unreasonably withheld or delayed or (2) the entity or entities
acquiring the voting Equity Interests are one or more of the “Restricted
Parties” as defined in the

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Shareholder Agreement, or (b) section (b)(ii) of this definition, if the change
in the individuals constituting the Board of Directors of ValueVision results
from the designation of directors by the holders of Series B Redeemable
Preferred Stock pursuant to the ValueVision Certificate of Designation or by GE
Capital Equity Investments, Inc. pursuant to the Shareholder Agreement.
     “Charges” shall mean all taxes, charges, fees, imposts, levies or other
assessments, including all net income, gross income, gross receipts, sales, use,
ad valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation and property taxes, custom duties, fees,
assessments, liens, claims and charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts, imposed by
any taxing or other authority, domestic or foreign (including the Pension
Benefit Guaranty Corporation or any environmental agency or superfund), upon the
Collateral, any Borrower or any of its Affiliates.
     “Closing Date” shall mean November 25, 2009 or such other date as may be
agreed to by the parties hereto.
     “Code” shall mean the Internal Revenue Code of 1986, as the same may be
amended or supplemented from time to time, and any successor statute of similar
import, and the rules and regulations thereunder, as from time to time in
effect.
     “Collateral” shall mean and include:
          (a) all Receivables (including Credit Card Receivables);
          (b) all Equipment;
          (c) all General Intangibles;
          (d) all Inventory;
          (e) all Investment Property;
          (f) all Subsidiary Stock;
          (g) all of each Borrower’s right, title and interest in and to,
whether now owned or hereafter acquired and wherever located; (i) its respective
goods and other property including, but not limited to, all merchandise returned
or rejected by Customers, relating to or securing any of the Receivables;
(ii) all of each Borrower’s rights as a consignor, a consignee, an unpaid
vendor, mechanic, artisan, or other lienor, including stoppage in transit,
setoff, detinue, replevin, reclamation and repurchase; (iii) all additional
amounts due to any Borrower from any Customer relating to the Receivables;
(iv) other property, including warranty claims, relating to any goods securing
the Obligations; (v) all of each Borrower’s contract rights, rights of payment
which have been earned under a contract right, instruments (including promissory
notes), documents, chattel paper (including electronic chattel paper), warehouse
receipts, deposit accounts, letters of credit and money; (vi) all commercial
tort claims (whether now existing or hereafter arising); (vii) if and when
obtained by any Borrower, all real and personal property of third parties in
which such Borrower has been granted a lien or security interest as security for

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the payment or enforcement of Receivables; (viii) all letter of credit rights
(whether or not the respective letter of credit is evidenced by a writing);
(ix) all supporting obligations; and (x) any other goods, personal property or
real property now owned or hereafter acquired in which any Borrower has
expressly granted a security interest or may in the future grant a security
interest to Agent hereunder, or in any amendment or supplement hereto or
thereto, or under any other agreement between Agent and any Borrower;
          (h) all of each Borrower’s ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by any Borrower or in which it has an interest), computer
programs, tapes, disks and documents relating to (a), (b), (c), (d), (e), (f) or
(g) of this paragraph; and
          (i) all proceeds and products of (a), (b), (c), (d), (e), (f), (g) and
(h) in whatever form, including, but not limited to: cash, deposit accounts
(whether or not comprised solely of proceeds), certificates of deposit,
insurance proceeds (including hazard, flood and credit insurance), negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements, documents, eminent domain proceeds, condemnation proceeds
and tort claim proceeds.
Notwithstanding the foregoing, “Collateral” shall expressly exclude, and the
Borrowers shall not be deemed to have granted a security interest in, any
Excluded Collateral.
     “Commitment Percentage” of any Lender shall mean the percentage set forth
below such Lender’s name on the signature page hereof as same may be adjusted
upon any assignment by a Lender pursuant to Section 16.3(c) or (d) hereof.
     “Commitment Transfer Supplement” shall mean a document in the form of
Exhibit 16.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.
     “Compliance Certificate” shall mean a compliance certificate to be signed
by the Chief Financial Officer or Controller of Borrowing Agent, which shall
state that, based on an examination sufficient to permit such officer to make an
informed statement, no Default or Event of Default exists, or if such is not the
case, specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by Borrowers with respect to
such default and, such certificate shall have appended thereto calculations
which set forth Borrowers’ compliance with the requirements or restrictions
imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8, 7.10 and 7.11.
     “Consents” shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Bodies and
other third parties, domestic or foreign, necessary to carry on any Borrower’s
business or necessary (including to avoid a conflict or breach under any
agreement, instrument, other document, license, permit or other authorization)
for the execution, delivery or performance of this Agreement, the Other
Documents, including any Consents required under all applicable federal, state
or other Applicable Law.

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     “Consigned Inventory” shall mean Inventory of any Borrower that is in the
possession of another Person on a consignment, sale or return, or other basis
that does not constitute a final sale and acceptance of such Inventory.
     “Controlled Group” shall mean, at any time, each Borrower and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control and all other entities which, together
with any Borrower, are treated as a single employer under Section 414 of the
Code.
     “Credit Card Notifications” shall have meaning set forth in
Section 4.15(d)(ii) hereof.
     “Credit Card Receivables” means each “Account” (as defined in the UCC)
together with all income, payments and proceeds thereof, owed by a major credit
or debit card issuer (including, but not limited to, Visa, Mastercard and
American Express and such other issuers approved by the Agent in its sole
discretion) to a Borrower resulting from charges by a Customer of a Borrower on
credit or debit cards issued by such issuer in connection with the sale of goods
by a Borrower in the Ordinary Course of Business.
     “Customer” shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Borrower,
pursuant to which such Borrower is to deliver any personal property or perform
any services.
     “Customs” shall have the meaning set forth in Section 2.11(b) hereof.
     “Daily LIBOR Rate” shall mean, for any day, the rate per annum determined
by the Agent by dividing (x) the Published Rate by (y) a number equal to 1.00
minus the Reserve Percentage.
     “Debt Payments” shall mean and include (a) all cash actually expended by
any Borrower to make interest payments on any Advances hereunder, plus
(b) accrued but unpaid interest on account of Eurodollar Rate Loans, plus
(c) all cash actually expended by any Borrower to make payments for all fees,
commissions and charges set forth herein and with respect to any Advances, plus
(d) all cash actually expended by any Borrower to make payments on Capitalized
Lease Obligations, plus (e) all cash actually expended by any Borrower to make
payments with respect to any other Indebtedness for borrowed money.
     “Default” shall mean an event, circumstance or condition which, with the
giving of notice or passage of time or both, would constitute an Event of
Default.
     “Default Rate” shall have the meaning set forth in Section 3.1 hereof.
     “Defaulting Lender” shall have the meaning set forth in Section 2.23(a)
hereof.
     “Depository Accounts” shall have the meaning set forth in Section 4.15(h)
hereof.
     “Designated Lender” shall have the meaning set forth in Section 16.2(b)
hereof.

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     “Direct TV” shall mean DIRECTV, Inc., a California corporation.
     “Direct TV Agreement” shall mean that certain letter agreement dated
July 1, 1999, among Direct TV, CNBC, Inc., MSNBC Cable, L.L.C., National
Broadcasting Company, Inc. and ValueVision, as amended by that certain letter
agreement dated April 13, 2001, that certain letter agreement dated
September 23, 2004, that certain letter agreement dated November 22, 2005 and
that certain letter agreement dated October 22, 2009.
     “Direct TV Reserve” shall mean (i) commencing on November 1, 2010, $978,919
plus an additional $978,919 on the first day of each of December 2010 and
January 2011 (for a total reserve as of January 1, 2011 of $2,936,757) which
shall be reduced to Zero Dollars ($0) upon Borrowers delivery of evidence to
Agent that the $5,873,518 due February 2011 to Direct TV under the Direct TV
Agreement has been paid by Borrowers and (ii) commencing on October 1, 2011,
$1,564,796 plus an additional $1,564,796 on the first day of each of
November 2011, December 2011, January 2012, February 2012 and March 2012 (for a
total reserve of $9,388,766) which shall be reduced to Zero Dollars ($0) upon
Borrowers delivery of evidence to Agent that the $18,777,552 due March 2012 to
Direct TV under the Direct TV Agreement has been paid by Borrowers. For the
avoidance of doubt, the reserves identified above shall commence on the first
date noted above, shall increase on the first day of each subsequent month noted
therein and shall be in effect for every day during such period (as increased)
until the applicable payment required under the Agreement has been made.
     “Direct TV Security Documents” shall mean, collectively, that certain
(i) Mortgage and Security Agreement and Fixture Financing Statement executed by
ValueVision in favor of Direct TV dated, and as in effect only, as of the
Closing Date and (ii) Mortgage and Security Agreement executed by Norwell
Television, LLC in favor of Direct TV dated, and as in effect only, as of the
Closing Date.
     “Documents” shall have the meaning set forth in Section 8.1(c) hereof.
     “Dollar” and the sign “$” shall mean lawful money of the United States of
America.
     “Domestic Rate Loan” shall mean any Advance that bears interest based upon
the Alternate Base Rate.
     “Drawing Date” shall have the meaning set forth in Section 2.12(b) hereof.
     “Early Termination Date” shall have the meaning set forth in Section 13.1
hereof.
     “Earnings Before Interest and Taxes” shall mean for any period the sum of
(i) net income (or loss) of Borrowers on a Consolidated Basis for such period
(excluding extraordinary gains and losses), plus (ii) all interest expense of
Borrowers on a Consolidated Basis for such period, plus (iii) all charges
against income of Borrowers on a Consolidated Basis for such period for federal,
state and local taxes.
     “EBITDA” shall mean for any period the sum of (i) Earnings Before Interest
and Taxes for such period, plus (ii) depreciation expenses for such period, plus
(iii) amortization expenses for such period, plus (iv) non-cash impairment
charges and write-downs for such period, plus

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(vi) non-cash equity based compensation expenses incurred by Borrowers for such
period in an amount not to exceed to $4,500,000 (only to the extent deducted in
calculating net income), plus (vii) non recurring restructuring and chief
executive office transition costs incurred by Borrowers within one hundred
twenty (120) days of the Closing Date in an amount not to exceed $3,000,000
(only to the extent deducted in calculating net income), plus (viii) strategic
transaction and restructuring costs actually incurred by Borrowers for such
period in an amount not to exceed $2,750,000 in any twelve (12) month period
(only to the extent deducted in calculating net income).
     “Eligible Consumer Receivables” shall mean and include with respect to each
Borrower, each Receivable of such Borrower arising in the Ordinary Course of
Business under the Value Pay Plan and which Agent, in its sole credit judgment,
shall deem to be an Eligible Consumer Receivable, based on such considerations
as Agent may from time to time deem appropriate. A Receivable shall not be
deemed eligible unless such Receivable is subject to Agent’s first priority
perfected security interest and no other Lien (other than Permitted
Encumbrances), and is evidenced by an invoice or other documentary evidence
satisfactory to Agent. In addition, no Receivable shall be an Eligible Consumer
Receivable if:
          (a) if the Customer fails to make two or more payments due under the
Value Pay Plan;
          (b) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
          (c) the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property or call
a meeting of its creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors,
(iv) commence a voluntary case or proceeding under any state or federal
bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt
or insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, any petition which is filed against it in any involuntary case under
such bankruptcy laws, or (viii) take any action for the purpose of effecting any
of the foregoing;
          (d) the sale is to a Customer outside the continental United States of
America or Canada;
          (e) the Receivables of the Customer exceed a credit limit determined
by Agent, in its sole discretion, to the extent such Receivable exceeds such
limit;
          (f) the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim (to the extent of such offset, deduction, defense or
counterclaim);
          (g) any return, rejection or repossession of the merchandise has
occurred;
          (h) such Receivable is not payable to a Borrower; or

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          (j) such Receivable is not otherwise satisfactory to Agent as
determined in good faith by Agent in the exercise of its discretion in a
reasonable manner.
     “Eligible Inventory” shall mean and include Inventory, excluding work in
process, with respect to each Borrower, valued at the lower of cost or market
value, determined on a first-in-first-out basis, which is not, in Agent’s
opinion, obsolete, slow moving or unmerchantable and which Agent, in its sole
discretion, shall not deem ineligible Inventory, based on such considerations as
Agent may from time to time deem appropriate including whether the Inventory is
subject to a perfected, first priority security interest in favor of Agent and
no other Lien (other than a Permitted Encumbrance). In addition, Inventory shall
not be Eligible Inventory if it (i) does not conform to all standards imposed by
any Governmental Body which has regulatory authority over such goods or the use
or sale thereof, (ii) is in transit, (iii) is located outside the continental
United States or at a location that is not otherwise in compliance with this
Agreement, (iv) constitutes Consigned Inventory, (v) is the subject of an
Intellectual Property Claim; (vi) is subject to a License Agreement or other
agreement that limits, conditions or restricts any Borrower’s or Agent’s right
to sell or otherwise dispose of such Inventory, unless Agent is a party to a
Licensor/Agent Agreement with the Licensor under such License Agreement;
(vii) is situated at a location not owned by a Borrower unless the owner or
occupier of such location has executed in favor of Agent a Lien Waiver
Agreement; or (viii) or if the sale of such Inventory would result in an
ineligible Receivable.
     “Eligible Credit Card Receivables” shall mean and include with respect to
each Borrower, each Credit Card Receivable of such Borrower arising in the
Ordinary Course of Business and which Agent, in its sole credit judgment, shall
deem to be an Eligible Credit Card Receivable, based on such considerations as
Agent may from time to time deem appropriate. A Credit Card Receivable shall not
be deemed eligible unless such Credit Card Receivable is subject to Agent’s
first priority perfected security interest and no other Lien (other than
Permitted Encumbrances), and is evidenced by an invoice or other documentary
evidence satisfactory to Agent. In addition, no Credit Card Receivable shall be
an Eligible Credit Card Receivable if:
          (a) such Credit Card Receivable is outstanding for more than five
(5) Business Days from the date of sale;
          (b) such Borrower does not have good, valid and marketable title, free
and clear of any Lien (other than a Permitted Encumbrance) with respect to such
Credit Card Receivables;
          (c) such Credit Card Receivable is not subject to a first priority
security interest in favor of the Agent (it being the intent that chargebacks in
the ordinary course by the credit card processors shall not be deemed violative
of this clause);
          (d) such Credit Card Receivable is in dispute, is with recourse to
such Borrower, or subject to a claim, counterclaim, offset or chargeback (to the
extent of such claim, counterclaim, offset or chargeback);

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          (e) such Credit Card Receivable is subject a repurchase obligation by
any Borrower in favor of the credit card processor;
          (f) such Credit Card Receivable is due from an issuer or payment
processor of the applicable credit card which is the subject of any bankruptcy
or insolvency proceedings;
          (g) such Credit Card Receivable is not a valid, legally enforceable
obligation of the applicable issuer with respect thereto;
          (h) such Credit Card Receivable does not conform to all
representations, warranties or other provisions in this Agreement or the Other
Documents relating to Credit Card Receivables;
          (i) such Credit Card Receivable is evidenced by “chattel paper” or an
“instrument” of any kind unless such “chattel paper” or “instrument” is in the
possession of the Agent, and to the extent necessary or appropriate, endorsed to
the Agent; or
          (j) Agent has determined in its sole discretion that such Credit Card
Receivable is uncertain of collection.
     “Environmental Complaint” shall have the meaning set forth in
Section 4.19(d) hereof.
     “Environmental Laws” shall mean all federal, state and local environmental,
land use, zoning, health, chemical use, safety and sanitation laws, statutes,
ordinances and codes relating to the protection of the environment and/or
governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of federal, state and local governmental agencies and authorities
with respect thereto.
     “Equipment” shall mean and include as to each Borrower all of such
Borrower’s goods (other than Inventory) whether now owned or hereafter acquired
and wherever located including all equipment, machinery, apparatus, motor
vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all
replacements and substitutions therefor or accessions thereto.
     “Equity Interests” of any Person shall mean any and all shares, rights to
purchase, options, warrants, general, limited or limited liability partnership
interests, member interests, participation or other equivalents of or interest
in (regardless of how designated) equity of such Person, whether voting or
nonvoting, including common stock, preferred stock, convertible securities or
any other “equity security” (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.
     “Eurodollar Rate” shall mean for any Eurodollar Rate Loan for the then
current Interest Period relating thereto, the interest rate per annum determined
by Agent by dividing (the resulting quotient rounded upwards, if necessary, to
the nearest 1/100th of 1% per annum) (i) the rate which appears on the Bloomberg
Page BBAM1 (or on such other substitute Bloomberg page

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that displays rates at which US dollar deposits are offered by leading banks in
the London interbank deposit market), or the rate which is quoted by another
source selected by Agent which has been approved by the British Bankers’
Association as an authorized information vendor for the purpose of displaying
rates at which U.S. dollar deposits are offered by leading banks in the London
interbank deposit market (an “Alternate Source”), at approximately 11:00 a.m.,
London time, two (2) Business Days prior to the commencement of such Interest
Period as the London interbank offered rate for U.S. Dollars for an amount
comparable to such Eurodollar Rate Loan and having a borrowing date and a
maturity comparable to such Interest Period (or if there shall at any time, for
any reason, no longer exist a Bloomberg Page BBAM1 (or any substitute page) or
any Alternate Source, a comparable replacement rate determined by Agent at such
time (which determination shall be conclusive absent manifest error)), by (ii) a
number equal 1.00 minus the Reserve Percentage. The Eurodollar Rate may also be
expressed by the following formula:

                          Average of London interbank offered rates quoted by
Bloomberg or appropriate Successor as shown on
 
               
 
  Eurodollar Rate =    Bloomberg Page BBAM1
 
       
 
      1.00 — Reserve Percentage        

     The Eurodollar Rate shall be adjusted with respect to any Eurodollar Rate
Loan that is outstanding on the effective date of any change in the Reserve
Percentage as of such effective date. The Agent shall give prompt notice to the
Borrowing Agent of the Eurodollar Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive absent manifest error.
     “Eurodollar Rate Loan” shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.
     “Event of Default” shall have the meaning set forth in Article X hereof.
     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
     “Excluded Collateral” shall mean
          (i) Borrowers’ Real Property located at 6740 Shady Oak Road, Eden
Prairie, Minnesota and 2 Bert Drive #4, West Bridgewater, Massachusetts and all
of Borrowers’ fixtures, machinery and Equipment located at each of the foregoing
locations, which shall be subject to the Direct TV Security Documents, but in no
event shall Excluded Collateral include any of Borrowers’ Receivables,
Inventory, General Intangibles, Investment Property, Documents, or any of the
property identified in subsection (g), (h) or (i) of the definition of
Collateral
          (ii) any contract in which Borrowers have any right, title or interest
if and to the extent such contract includes a provision containing a restriction
on assignment such that the creation of a security interest in the right, title
or interest of such Borrower therein would be prohibited and would, in and of
itself, cause or result in a default thereunder enabling another person party to
such contract to enforce any remedy with respect thereto; provided, however,
that

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the foregoing exclusion shall not apply if (i) such prohibition has been waived
or such other person has otherwise consented to the creation hereunder of a
security interest in such contract, instrument or chattel paper, or (ii) such
prohibition would be rendered ineffective pursuant to Sections 9-407(a) or
9-408(a) of the UCC, as applicable, or any other applicable provision of the UCC
and as then in effect in any relevant jurisdiction, or any other applicable law
(including applicable bankruptcy and insolvency law) or principles of equity;
provided further that immediately upon the ineffectiveness, lapse or termination
of any such provision, the term “Collateral” shall include, and Borrowers shall
be deemed to have granted a security interest in, all its rights, title and
interests in and to such contract as if such provision had never been in effect;
and provided further that the foregoing exclusion shall in no way be construed
so as to limit, impair or otherwise affect the Agent’s unconditional continuing
security interest in and to all rights, title and interests of Borrowers in or
to any payment obligations or other rights to receive monies due or to become
due under any such contract and in any such monies and other proceeds of such
contract.
     “Executive Order No. 13224” shall mean the Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001, as the same has been, or
shall hereafter be, renewed, extended, amended or replaced.
     “Fanbuzz” shall mean Fanbuzz, Inc., a Delaware corporation.
     “Fanbuzz Retail” shall mean Fanbuzz Retail, Inc., a Delaware corporation.
     “Federal Funds Effective Rate” for any day shall mean the rate per annum
(based on a year of 360 days and actual days elapsed and rounded upward to the
nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the “Federal Funds
Effective Rate” as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
“Federal Funds Effective Rate” for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
     “Federal Funds Open Rate” for any day shall mean the rate per annum (based
on a year of 360 days and actual days elapsed) which is the daily federal funds
open rate as quoted by ICAP North America, Inc. (or any successor) as set forth
on the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on
such other substitute Bloomberg Screen that displays such rate), or as set forth
on such other recognized electronic source used for the purpose of displaying
such rate as selected by PNC (an “Alternate Source”) (or if such rate for such
day does not appear on the Bloomberg Screen BTMM (or any substitute screen) or
on any Alternate Source, or if there shall at any time, for any reason, no
longer exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate
Source, a comparable replacement rate determined by the PNC at such time (which
determination shall be conclusive absent manifest error); provided however, that
if such day is not a Business Day, the Federal Funds Open Rate for such day
shall be the “open” rate on the immediately preceding Business Day. If and when
the Federal Funds Open Rate changes, the rate of interest with respect to any
advance to which

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the Federal Funds Open Rate applies will change automatically without notice to
the Borrowers, effective on the date of any such change.
     “Fixed Charge Coverage Ratio” shall mean and include, with respect to any
fiscal period, the ratio of (a) EBITDA, minus Unfunded Capital Expenditures made
during such period, minus distributions (including tax distributions made during
such period) and dividends made during such period, minus cash taxes paid during
such period to (b) all Debt Payments made during such period.
     “Foreign Subsidiary” of any Person, shall mean any Subsidiary of such
Person that is not organized or incorporated in the United States or any State
or territory thereof.
     “Formula Amount” shall have the meaning set forth in Section 2.1(a) hereof.
     “GAAP” shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
     “General Intangibles” shall mean and include as to each Borrower all of
such Borrower’s general intangibles, whether now owned or hereafter acquired,
including all payment intangibles, all choses in action, causes of action,
corporate or other business records, inventions, designs, patents, patent
applications, equipment formulations, manufacturing procedures, quality control
procedures, trademarks, trademark applications, service marks, trade secrets,
goodwill, copyrights, design rights, software, computer information, source
codes, codes, records and updates, registrations, licenses, franchises, customer
lists, tax refunds, tax refund claims, computer programs, all claims under
guaranties, security interests or other security held by or granted to such
Borrower to secure payment of any of the Receivables by a Customer (other than
to the extent covered by Receivables) all rights of indemnification and all
other intangible property of every kind and nature (other than Receivables).
     “Governmental Acts” shall have the meaning set forth in Section 2.17
hereof.
     “Governmental Body” shall mean any nation or government, any state or other
political subdivision thereof or any entity, authority, agency, division or
department exercising the legislative, judicial, regulatory or administrative
functions of or pertaining to a government.
     “Guarantor” shall mean any Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations and “Guarantors” means
collectively all such Persons.
     “Guarantor Security Agreement” shall mean any security agreement executed
by any Guarantor in favor of Agent securing the Obligations or the Guaranty of
such Guarantor, in form and substance satisfactory to Agent.
     “Guaranty” shall mean any guaranty of the Obligations executed by a
Guarantor in favor of Agent for its benefit and for the ratable benefit of
Lenders, in form and substance satisfactory to Agent.
     “Hazardous Discharge” shall have the meaning set forth in Section 4.19(d)
hereof.

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     “Hazardous Substance” shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 5101, et seq.), RCRA or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
     “Hazardous Wastes” shall mean all waste materials subject to regulation
under CERCLA, RCRA or applicable state law, and any other applicable Federal and
state laws now in force or hereafter enacted relating to hazardous waste
disposal.
     “Hedge Liabilities” shall have the meaning provided in the definition of
“Lender-Provided Interest Rate Hedge”.
     “Indebtedness” of a Person at a particular date shall mean all obligations
of such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
indebtedness, debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required prepayment
dates of such indebtedness, and all indebtedness secured by a Lien on assets
owned by such Person, whether or not such indebtedness actually shall have been
created, assumed or incurred by such Person. Any indebtedness of such Person
resulting from the acquisition by such Person of any assets subject to any Lien
shall be deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or not
actually so created, assumed or incurred.
     “Ineligible Security” shall mean any security which may not be underwritten
or dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.
     “Intellectual Property” shall mean property constituting under any
Applicable Law a patent, patent application, copyright, trademark, service mark,
trade name, mask work, trade secret or license or other right to use any of the
foregoing.
     “Intellectual Property Claim” shall mean the assertion by any Person of a
claim (whether asserted in writing, by action, suit or proceeding or otherwise)
that any Borrower’s ownership, use, marketing, sale or distribution of any
Inventory, Equipment, Intellectual Property or other property or asset is
violative of any ownership of or right to use any Intellectual Property of such
Person.
     “Interest Period” shall mean the period provided for any Eurodollar Rate
Loan pursuant to Section 2.2(b).
     “Interest Rate Hedge” shall mean an interest rate exchange, collar, cap,
swap, adjustable strike cap, adjustable strike corridor or similar agreements
entered into by any Borrower or its Subsidiaries in order to provide protection
to, or minimize the impact upon, such Borrower, any Guarantor and/or their
respective Subsidiaries of increasing floating rates of interest applicable to
Indebtedness.

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     “Inventory” shall mean and include as to each Borrower all of such
Borrower’s now owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any consignment arrangement,
contract of service or held for sale or lease, all raw materials, work in
process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in such Borrower’s business
or used in selling or furnishing such goods, merchandise and other personal
property, and all documents of title or other documents representing them.
     “Inventory Advance Rate” shall have the meaning set forth in
Section 2.1(a)(y)(ii) hereof.
     “Investment Property” shall mean and include as to each Borrower, all of
such Borrower’s now owned or hereafter acquired securities (whether certificated
or uncertificated), securities entitlements, securities accounts, commodities
contracts and commodities accounts.
     “Iosota” shall mean Iosota, Inc., a Minnesota corporation.
     “Issuer” shall mean any Person who issues a Letter of Credit and/or accepts
a draft pursuant to the terms hereof.
     “Lender” and “Lenders” shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.
     “Lender Default” shall have the meaning set forth in Section 2.23(a)
hereof.
     “Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge
which is provided by any Lender and with respect to which the Agent confirms
meets the following requirements: such Interest Rate Hedge (i) is documented in
a standard International Swap Dealer Association Agreement, (ii) provides for
the method of calculating the reimbursable amount of the provider’s credit
exposure in a reasonable and customary manner, and (iii) is entered into for
hedging (rather than speculative) purposes. The liabilities of any Borrower to
the provider of any Lender-Provided Interest Rate Hedge (the “Hedge
Liabilities”) shall be “Obligations” hereunder, guaranteed obligations under the
Guaranty and secured obligations under the Guarantor Security Agreement and
otherwise treated as Obligations for purposes of each of the Other Documents.
The Liens securing the Hedge Liabilities shall be pari passu with the Liens
securing all other Obligations under this Agreement and the Other Documents.
     “Letter of Credit Fees” shall have the meaning set forth in Section 3.2
hereof.
     “Letter of Credit Borrowing” shall have the meaning set forth in
Section 2.12(d) hereof.
     “Letter of Credit Sublimit” shall mean Ten Million Dollars ($10,000,000).
     “Letters of Credit” shall have the meaning set forth in Section 2.9 hereof.
     “License Agreement” shall mean any agreement between any Borrower and a
Licensor pursuant to which such Borrower is authorized to use any Intellectual
Property in connection

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with the manufacturing, marketing, sale or other distribution of any Inventory
of such Borrower or otherwise in connection with such Borrower’s business
operations.
     “Licensor” shall mean any Person from whom any Borrower obtains the right
to use (whether on an exclusive or non-exclusive basis) any Intellectual
Property in connection with such Borrower’s manufacture, marketing, sale or
other distribution of any Inventory or otherwise in connection with such
Borrower’s business operations.
     “Licensor/Agent Agreement” shall mean an agreement between Agent and a
Licensor, in form and content satisfactory to Agent, by which Agent is given the
unqualified right, vis-a-vis such Licensor, to enforce Agent’s Liens with
respect to and to dispose of any Borrower’s Inventory with the benefit of any
Intellectual Property applicable thereto, irrespective of such Borrower’s
default under any License Agreement with such Licensor.
     “Lien” shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including any conditional sale or other title retention
agreement, any lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction.
     “Lien Waiver Agreement” shall mean an agreement which is executed in favor
of Agent by a Person who owns or occupies premises at which any Collateral may
be located from time to time and by which such Person shall waive any Lien that
such Person may ever have with respect to any of the Collateral and shall
authorize Agent from time to time to enter upon the premises to inspect or
remove the Collateral from such premises or to use such premises to store or
dispose of such Inventory.
     “Material Adverse Effect” shall mean a material adverse effect on (a) the
condition (financial or otherwise), results of operations, assets, business,
properties or prospects of any Borrower or any Guarantor, (b) any Borrower’s
ability to duly and punctually pay or perform the Obligations in accordance with
the terms thereof, (c) the value of the Collateral, or Agent’s Liens on the
Collateral or the priority of any such Lien or (d) the practical realization of
the benefits of Agent’s and each Lender’s rights and remedies under this
Agreement and the Other Documents.
     “Maximum Face Amount” shall mean, with respect to any outstanding Letter of
Credit, the face amount of such Letter of Credit including all automatic
increases provided for in such Letter of Credit, whether or not any such
automatic increase has become effective.
     “Maximum Revolving Advance Amount” shall mean Twenty Million Dollars
($20,000,000).
     “Maximum Undrawn Amount” shall mean with respect to any outstanding Letter
of Credit, the amount of such Letter of Credit that is or may become available
to be drawn, including all automatic increases provided for in such Letter of
Credit, whether or not any such automatic increase has become effective.

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     “Modified Commitment Transfer Supplement” shall have the meaning set forth
in Section 16.3(d) hereof.
     “Multiemployer Plan” shall mean a “multiemployer plan” as defined in
Sections 3(37) and 4001(a)(3) of ERISA to which contributions are required by
any Borrower or any member of the Controlled Group.
     “Multiple Employer Plan” shall mean a Plan which has two or more
contributing sponsors (including any Borrower or any member of the Controlled
Group) at least two of whom are not under common control, as such a plan is
described in Section 4064 of ERISA.
     “Ninety (90) Day Average Undrawn Availability” shall mean, as of any date
of determination, the sum of Borrowers’ Undrawn Availability (Modified) for each
of the previous ninety (90) days divided by ninety (90).
     “Non-Defaulting Lender” shall have the meaning set forth in Section 2.23(b)
hereof.
     “Obligations” shall mean and include any and all loans (including without
limitation, all Advances), advances, debts, liabilities, obligations, covenants
and duties owing by any Borrower to Lenders or Agent or to any other direct or
indirect subsidiary or affiliate of Agent or any Lender of any kind or nature,
present or future (including any interest or other amounts accruing thereon, and
any costs and expenses of any Person payable by Borrower and any indemnification
obligations payable by Borrower arising or payable after maturity, or after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding relating to any Borrower, whether or not a
claim for post-filing or post-petition interest or other amounts is allowable or
allowed in such proceeding), whether or not evidenced by any note, guaranty or
other instrument, whether arising under any agreement, instrument or document,
(including this Agreement and the Other Documents) whether or not for the
payment of money, whether arising by reason of an extension of credit, opening
of a letter of credit, loan, equipment lease or guarantee, under any interest or
currency swap, future, option or other similar agreement, or in any other
manner, whether arising out of overdrafts or deposit or other accounts or
electronic funds transfers (whether through automated clearing houses or
otherwise) or out of the Agent’s or any Lenders non-receipt of or inability to
collect funds or otherwise not being made whole in connection with depository
transfer check or other similar arrangements, whether direct or indirect
(including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated, regardless of how
such indebtedness or liabilities arise or by what agreement or instrument they
may be evidenced or whether evidenced by any agreement or instrument, including,
but not limited to, any and all of any Borrower’s Indebtedness and/or
liabilities under this Agreement, the Other Documents or under any other
agreement between Agent or Lenders and any Borrower and any amendments,
extensions, renewals or increases and all costs and expenses of Agent and any
Lender incurred in the documentation, negotiation, modification, enforcement,
collection or otherwise in connection with any of the foregoing, including but
not limited to reasonable attorneys’ fees and expenses and all obligations of
any Borrower to Agent or Lenders to perform acts or refrain from taking any
action.

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     “Ordinary Course of Business” shall mean with respect to any Borrower, the
ordinary course of such Borrower’s business as conducted on the Closing Date.
     “Other Documents” shall mean the Revolving Credit Note, the Perfection
Certificates, any Guaranty, any Guarantor Security Agreement, the Credit Card
Notifications, any Pledge Agreement, any Lender-Provided Interest Rate Hedge and
any and all other agreements, instruments and documents, including intercreditor
agreements, guaranties, pledges, powers of attorney, consents, interest or
currency swap agreements or other similar agreements and all other writings
heretofore, now or hereafter executed by any Borrower or any Guarantor and/or
delivered to Agent or any Lender in respect of the transactions contemplated by
this Agreement.
     “Out-of-Formula Loans” shall have the meaning set forth in Section 16.2(b).
     “Parent” of any Person shall mean a corporation or other entity owning,
directly or indirectly at least 50% of the shares of stock or other ownership
interests having ordinary voting power to elect a majority of the directors of
the Person, or other Persons performing similar functions for any such Person.
     “Participant” shall mean each Person who shall be granted the right by any
Lender to participate in any of the Advances and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.
     “Participation Advance” shall have the meaning set forth in Section 2.12(d)
hereof.
     “Participation Commitment” shall mean each Lender’s obligation to buy a
participation of the Letters of Credit issued hereunder.
     “Payee” shall have the meaning set forth in Section 3.10 hereof.
     “Payment Office” shall mean initially Two Tower Center Boulevard, East
Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrowing Agent and to each Lender to be the
Payment Office.
     “PBGC” shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor.
     “Pension Benefit Plan” shall mean at any time any employee pension benefit
plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Code and either (i) is maintained or to which
contributions are required by any member of the Controlled Group for employees
of any member of the Controlled Group; or (ii) has at any time within the
preceding five years been maintained or to which contributions have been
required by any entity which was at such time a member of the Controlled Group
for employees of any entity which was at such time a member of the Controlled
Group.
     “Perfection Certificates” shall mean collectively, the Perfection
Certificates and the responses thereto provided by each Borrower and delivered
to Agent.

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     “Permitted Acquisitions” shall mean acquisitions of the assets or Equity
Interests of another Person so long as: (a) the total costs and liabilities
(including without limitation, all assumed liabilities, all earn-out payments,
deferred payments and the value of any other stock or assets transferred,
assigned or encumbered with respect to such acquisitions) of all such
acquisitions do not exceed $100,000 for any single acquisition; (b) with respect
to the acquisition of Equity Interests, such acquired company shall be added as
a Borrower to this Agreement and be jointly and severally liable for all
Obligations; (c) the acquired company or property is used or useful in the same
or a similar line of business as the Borrowers were engaged in on the Closing
Date (or any reasonable extensions or expansions thereof); (d) Agent shall have
received a first-priority security interest in all acquired assets and Equity
Interests, subject to documentation satisfactory to Agent; (e) if such
acquisition includes general partnership interests or any other Equity Interest
that does not have a corporate (or similar) limitation on liability of the
owners thereof, then such acquisition shall be effected by having such Equity
Interests acquired by a corporate holding company directly or indirectly
wholly-owned by a Borrower and newly formed for the sole purpose of effecting
such acquisition; and (f) no Default or Event of Default shall have occurred or
will occur after giving pro forma effect to such acquisition.
     “Permitted Encumbrances” shall mean: (a) Liens in favor of Agent for the
benefit of Agent and Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent or being Properly Contested; (c) Liens
disclosed in the financial statements referred to in Section 5.5, the existence
of which Agent has consented to in writing; (d) deposits or pledges to secure
obligations under worker’s compensation, social security or similar laws, or
under unemployment insurance; (e) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the Ordinary Course of Business; (f) Liens arising by virtue of the
rendition, entry or issuance against Borrower or any Subsidiary, or any property
of Borrower or any Subsidiary, of any judgment, writ, order, or decree for so
long as each such Lien (I) is in existence for less than 20 consecutive days
after it first arises or is being Properly Contested and (II) is at all times
junior in priority to any Liens in favor of Agent; (g) mechanics’, workers’,
materialmen’s or other like Liens arising in the Ordinary Course of Business
with respect to obligations which are not due or which are being Properly
Contested; (h) Liens placed upon fixed assets hereafter acquired to secure a
portion of the purchase price thereof, provided that (I) any such lien shall not
encumber any other property of Borrower and (II) the aggregate amount of
Indebtedness secured by such Liens incurred as a result of such purchases during
any fiscal year shall not exceed the amount provided for in Section 7.6;
(i) easements, rights-of-way, zoning restrictions, minor defects or
irregularities in title and other charges or encumbrances, in each case, which
do not interfere in any material respect with the Ordinary Course of Business of
the Borrowers and their Subsidiaries; (j) Liens granted to Direct TV pursuant to
the Direct TV Security Documents and (k) Liens disclosed on Schedule 1.2
provided that such Liens shall secure only those obligations which they secure
on the Closing Date and shall not subsequently apply to any other property or
assets of any Borrower other than the property and assets to which they apply as
of the Closing Date.
     “Permitted Redemption Payments” shall mean any payments made pursuant to
Sections V(a)(iii) and (iv) of the ValueVision Certificate of Designation.

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     “Person” shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, limited liability
partnership, institution, public benefit corporation, joint venture, entity or
Governmental Body (whether federal, state, county, city, municipal or otherwise,
including any instrumentality, division, agency, body or department thereof).
     “Plan” shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA (including a Pension Benefit Plan and a Multiemployer
Plan), maintained for employees of any Borrower or any member of the Controlled
Group or any such Plan to which any Borrower or any member of the Controlled
Group is required to contribute.
     “Pledge Agreement” shall mean that certain Collateral Pledge Agreement
executed by ValueVision in favor of Agent dated as of the Closing Date and any
other pledge agreements executed subsequent to the Closing Date by any other
Person to secure the Obligations.
     “PNC” shall have the meaning set forth in the preamble to this Agreement
and shall extend to all of its successors and assigns.
     “Pro Forma Balance Sheet” shall have the meaning set forth in
Section 5.5(a) hereof.
     “Pro Forma Financial Statements” shall have the meaning set forth in
Section 5.5(b) hereof.
     “Properly Contested” shall mean, in the case of any Indebtedness or Lien,
as applicable, of any Person (including any taxes) that is not paid as and when
due or payable by reason of such Person’s bona fide dispute concerning its
liability to pay same or concerning the amount thereof: (i) such Indebtedness or
Lien, as applicable, is being properly contested in good faith by appropriate
proceedings promptly instituted and diligently conducted; (ii) such Person has
established appropriate reserves as shall be required in conformity with GAAP;
(iii) the non-payment of such Indebtedness will not have a Material Adverse
Effect and will not result in the forfeiture of any assets of such Person;
(iv) no Lien is imposed upon any of such Person’s assets with respect to such
Indebtedness unless such Lien is at all times junior and subordinate in priority
to the Liens in favor of the Agent (except only with respect to property taxes
that have priority as a matter of applicable state law) and enforcement of such
Lien is stayed during the period prior to the final resolution or disposition of
such dispute; (v) if such Indebtedness or Lien, as applicable, results from, or
is determined by the entry, rendition or issuance against a Person or any of its
assets of a judgment, writ, order or decree, enforcement of such judgment, writ,
order or decree is stayed pending a timely appeal or other judicial review; and
(vi) if such contest is abandoned, settled or determined adversely (in whole or
in part) to such Person, such Person forthwith pays such Indebtedness and all
penalties, interest and other amounts due in connection therewith.
     “Projections” shall have the meaning set forth in Section 5.5(b) hereof.
     “Published Rate” shall mean the rate of interest published each Business
Day in the Wall Street Journal “Money Rates” listing under the caption “London
Interbank Offered Rates” for a one month period (or, if no such rate is
published therein for any reason, then the Published Rate

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shall be the Eurodollar Rate for a one month period as published in another
publication selected by the Agent).
     “Purchasing CLO” shall have the meaning set forth in Section 16.3(d)
hereof.
     “Purchasing Lender” shall have the meaning set forth in Section 16.3(c)
hereof.
     “RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§
6901 et seq., as same may be amended from time to time.
     “Real Property” shall mean all of each Borrower’s right, title and interest
in and to the owned and leased premises identified on Schedule 4.19 hereto or
which is hereafter owned or leased by any Borrower.
     “Receivables” shall mean and include, as to each Borrower, all of such
Borrower’s accounts, contract rights, instruments (including those evidencing
indebtedness owed to such Borrower by its Affiliates), documents, chattel paper
(including electronic chattel paper), general intangibles relating to accounts,
drafts and acceptances, credit card receivables and all other forms of
obligations owing to such Borrower arising out of or in connection with the sale
or lease of Inventory or the rendition of services, all supporting obligations,
guarantees and other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or assigned
to Agent hereunder.
     “Receivables Advance Rate” shall have the meaning set forth in
Section 2.1(a)(y)(i) hereof.
     “Register” shall have the meaning set forth in Section 16.3(e) hereof.
     “Reimbursement Obligation” shall have the meaning set forth in
Section 2.12(b) hereof.
     “Release” shall have the meaning set forth in Section 5.7(c)(i) hereof.
     “Reportable Event” shall mean a reportable event described in Section
4043(c) of ERISA or the regulations promulgated thereunder.
     “Required Lenders” shall mean Lenders holding at least fifty one percent
(51%) of the Advances and, if no Advances are outstanding, shall mean Lenders
holding fifty one percent (51%) of the Commitment Percentages; provided,
however, if there are fewer than three (3) Lenders, Required Lenders shall mean
all Lenders.
     “Reserve Percentage” shall mean as of any day the maximum percentage in
effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as “Eurocurrency
Liabilities”.
     “Revolving Advances” shall mean Advances made other than Letters of Credit.

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     “Revolving Credit Note” shall mean, collectively, the promissory notes
referred to in Section 2.1(a) hereof.
     “Revolving Interest Rate” shall mean an interest rate per annum equal to
(a) the sum of the Alternate Base Rate plus the Applicable Margin with respect
to Domestic Rate Loans and (b) the sum of the Applicable Margin plus the greater
of one percent (1.00%) or the Eurodollar Rate with respect to Eurodollar Rate
Loans.
     “SEC” shall mean the Securities and Exchange Commission or any successor
thereto.
     “Section 20 Subsidiary” shall mean the Subsidiary of the bank holding
company controlling PNC, which Subsidiary has been granted authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible Securities.
     “Securities Act” shall mean the Securities Act of 1933, as amended.
     “Series B Redeemable Preferred Stock” shall have the meaning set forth in
the ValueVision Certificate of Designation.
     “Settlement Date” shall mean the Closing Date and thereafter Wednesday or
Thursday of each week or more frequently if Agent deems appropriate unless such
day is not a Business Day in which case it shall be the next succeeding Business
Day.
     “Shareholder Agreement” shall mean that certain Amended and Restated
Shareholder Agreement dated February 25, 2009 among ValueVision, GE Capital
Equity Investments, Inc. and NBC Universal, Inc.
     “Subsidiary” of any Person shall mean a corporation or other entity of
whose Equity Interests having ordinary voting power (other than Equity Interests
having such power only by reason of the happening of a contingency) to elect a
majority of the directors of such corporation, or other Persons performing
similar functions for such entity, are owned, directly or indirectly, by such
Person.
     “Subsidiary Stock” shall mean all of the issued and outstanding Equity
Interests of any Subsidiary owned by any Borrower (not to exceed 65% of the
Equity Interests of any Foreign Subsidiary).
     “Tangible Net Worth” shall mean, at a particular date, (a) the aggregate
amount of all assets of Borrowers on a Consolidated Basis as may be properly
classified as such in accordance with GAAP consistently applied excluding such
other assets as are properly classified as intangible assets under GAAP, less
(b) the aggregate amount of all liabilities of Borrowers on a Consolidated
Basis.
     “Term” shall have the meaning set forth in Section 13.1 hereof.
     “Termination Event” shall mean (i) a Reportable Event with respect to any
Plan; (ii) the withdrawal of any Borrower or any member of the Controlled Group
from a Plan during a plan year in which such entity was a “substantial employer”
as defined in Section 4001(a)(2) of

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ERISA; (iii) the providing of notice of intent to terminate a Plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the institution by the
PBGC of proceedings to terminate a Plan; (v) any event or condition (a) which
might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan, or (b) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or
(vi) the partial or complete withdrawal within the meaning of Section 4203 or
4205 of ERISA, of any Borrower or any member of the Controlled Group from a
Multiemployer Plan.
     “Thirty (30) Day Average Undrawn Availability” shall mean, as of any date
of determination, the sum of Borrowers’ Undrawn Availability for each of the
previous thirty (30) days divided by thirty (30).
     “Toxic Substance” shall mean and include any material present on the Real
Property or the Leasehold Interests which has been shown to have significant
adverse effect on human health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., applicable state law,
or any other applicable Federal or state laws now in force or hereafter enacted
relating to toxic substances. “Toxic Substance” includes but is not limited to
asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.
     “Trading with the Enemy Act” shall mean the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) and any enabling legislation or executive order relating
thereto.
     “Transferee” shall have the meaning set forth in Section 16.3(d) hereof.
     “Undrawn Availability” at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance
Amount less the Maximum Undrawn Amount of all outstanding Letters of Credit,
minus (b) the sum of (i) the outstanding amount of Advances, plus (ii) all
amounts due and owing to any Borrower’s trade creditors which are sixty
(60) days beyond the due date thereof, plus (iii) fees and expenses for which
Borrowers are liable but which have not been paid or charged to Borrowers’
Account.
     “Undrawn Availability (Modified)” at a particular date shall mean an amount
equal to (a) the Formula Amount minus (b) the sum of (i) the outstanding amount
of Advances, plus (ii) all amounts due and owing to any Borrower’s trade
creditors which are sixty (60) days beyond the due date thereof, plus (iii) fees
and expenses for which Borrowers are liable but which have not been paid or
charged to Borrowers’ Account.
     “Unfunded Capital Expenditures” shall mean Capital Expenditures made
through Revolving Advances or out of Borrowers’ own funds other than through
equity contributed subsequent to the Closing Date or purchase money or other
financing or lease transactions permitted hereunder.
     “Uniform Commercial Code” shall have the meaning set forth in Section 1.3
hereof.
     “Unused Line Fee” shall have the meaning set forth in Section 3.3(b)
hereof.

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     “USA PATRIOT Act” shall mean the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.
     “Value Pay Plan” shall mean that certain purchase plan offered by Borrowers
to consumer Customers pursuant to which a consumer Customer may be approved to
purchase Inventory through a payment plan of up to six (6) payments over five
(5) months.
     “ValueVision” shall have the meaning set forth in the preamble to this
Agreement.
     “ValueVision Certificate of Designation” shall mean the ValueVision
Series B Redeemable Preferred Stock Certificate of Designation, as filed with
the State of Minnesota on February 25, 2009 and as attached hereto as Exhibit 1.
     “Week” shall mean the time period commencing with the opening of business
on a Wednesday and ending on the end of business the following Tuesday.
     1.3. Uniform Commercial Code Terms. All terms used herein and defined in
the Uniform Commercial Code as adopted in the State of Illinois from time to
time (the “Uniform Commercial Code”) shall have the meaning given therein unless
otherwise defined herein. Without limiting the foregoing, the terms “accounts”,
“chattel paper”, “commercial tort claims”, “instruments”, “general intangibles”,
“goods”, “payment intangibles”, “proceeds”, “supporting obligations”,
“securities”, “investment property”, “documents”, “deposit accounts”,
“software”, “letter of credit rights”, “inventory”, “equipment” and “fixtures”,
as and when used in the description of Collateral shall have the meanings given
to such terms in Articles 8 or 9 of the Uniform Commercial Code. To the extent
the definition of any category or type of collateral is expanded by any
amendment, modification or revision to the Uniform Commercial Code, such
expanded definition will apply automatically as of the date of such amendment,
modification or revision.
     1.4. Certain Matters of Construction. The terms “herein”, “hereof” and
“hereunder” and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. All references
herein to Articles, Sections, Exhibits and Schedules shall be construed to refer
to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Any
pronoun used shall be deemed to cover all genders. Wherever appropriate in the
context, terms used herein in the singular also include the plural and vice
versa. All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. Unless otherwise
provided, all references to any instruments or agreements to which Agent is a
party, including references to any of the Other Documents, shall include any and
all modifications, supplements or amendments thereto, any and all restatements
or replacements thereof and any and all extensions or renewals thereof. All
references herein to the time of day shall mean the time in New York, New York.
Unless otherwise provided, all financial calculations shall be performed with
Inventory valued on a first-in, first-out basis. Whenever the words “including”
or “include” shall be used, such words shall be understood to mean “including,
without limitation” or “include, without limitation”. A Default or Event of
Default shall be deemed to exist at all times during the period commencing on
the date that such Default or Event of Default occurs to the date on which such
Default or

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Event of Default is waived in writing pursuant to this Agreement or, in the case
of a Default, is cured within any period of cure expressly provided for in this
Agreement; and an Event of Default shall “continue” or be “continuing” until
such Event of Default has been waived in writing by the Required Lenders or all
Lenders, as applicable. Any Lien referred to in this Agreement or any of the
Other Documents as having been created in favor of Agent, any agreement entered
into by Agent pursuant to this Agreement or any of the Other Documents, any
payment made by or to or funds received by Agent pursuant to or as contemplated
by this Agreement or any of the Other Documents, or any act taken or omitted to
be taken by Agent, shall, unless otherwise expressly provided, be created,
entered into, made or received, or taken or omitted, for the benefit or account
of Agent and Lenders. Wherever the phrase “to the best of Borrowers’ knowledge”
or words of similar import relating to the knowledge or the awareness of any
Borrower are used in this Agreement or Other Documents, such phrase shall mean
and refer to (i) the actual knowledge of a senior officer of any Borrower or
(ii) the knowledge that a senior officer would have obtained if he had engaged
in good faith and diligent performance of his duties, including the making of
such reasonably specific inquiries as may be necessary of the employees or
agents of such Borrower and a good faith attempt to ascertain the existence or
accuracy of the matter to which such phrase relates. All covenants hereunder
shall be given independent effect so that if a particular action or condition is
not permitted by any of such covenants, the fact that it would be permitted by
an exception to, or otherwise within the limitations of, another covenant shall
not avoid the occurrence of a default if such action is taken or condition
exists. In addition, all representations and warranties hereunder shall be given
independent effect so that if a particular representation or warranty proves to
be incorrect or is breached, the fact that another representation or warranty
concerning the same or similar subject matter is correct or is not breached will
not affect the incorrectness of a breach of a representation or warranty
hereunder.
     1.5. Fiscal Periods. For purposes hereunder, whenever a provision of this
Agreement refers to a quarter ending April 30, July 31, October 31 or January 31
or a fiscal year ending January 31, such references shall mean the actual date
which corresponds with the end of Borrower’s fiscal quarter or fiscal year based
on Borrower’s accounting cycle.
II. ADVANCES, PAYMENTS.
     2.1. Revolving Advances.
          (a) Amount of Revolving Advances. Subject to the terms and conditions
set forth in this Agreement including Section 2.1(b), each Lender, severally and
not jointly, will make Revolving Advances to Borrowers in aggregate amounts
outstanding at any time equal to such Lender’s Commitment Percentage of the
lesser of (x) the Maximum Revolving Advance Amount less the aggregate Maximum
Undrawn Amount of all outstanding Letters of Credit or (y) an amount equal to
the sum of:
               (i) up to 50%, subject to the provisions of Section 2.1(b) hereof
(“Receivables Advance Rate”), of Eligible Consumer Receivables and Eligible
Credit Card Receivables, plus

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               (ii) up to the lesser of (A) 50%, subject to the provisions of
Section 2.1(b) and (c) hereof, of the value of the Eligible Inventory
(“Inventory Advance Rate” and together with the Receivables Advance Rate,
collectively, the “Advance Rates”), (B) 85% of the appraised net orderly
liquidation value of Eligible Inventory (as evidenced by an Inventory appraisal
satisfactory to Agent in its sole discretion exercised in good faith), minus
               (iii) the aggregate Maximum Undrawn Amount of all outstanding
Letters of Credit, minus
               (iv) the Availability Block, minus
               (v) the Direct TV Reserve, minus
               (vi) such reserves as Agent may reasonably deem proper and
necessary from time to time.
     The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and (ii) minus
(y) Sections 2.1(a)(y)(iii), (iv), (v) and (vi) at any time and from time to
time shall be referred to as the “Formula Amount”. The Revolving Advances shall
be evidenced by one or more secured promissory notes (collectively, the
“Revolving Credit Note”) substantially in the form attached hereto as
Exhibit 2.1(a).
          (b) Discretionary Rights. The Advance Rates may be increased or
decreased by Agent at any time and from time to time in the exercise of its
reasonable discretion. Each Borrower consents to any such increases or decreases
and acknowledges that decreasing the Advance Rates or increasing or imposing
reserves may limit or restrict Advances requested by Borrowing Agent. Agent
shall give Borrowing Agent five (5) days prior written notice of its intention
to decrease the Advance Rates. The rights of Agent under this subsection are
subject to the provisions of Section 16.2(b).
          (c) Sublimit for Revolving Advances made against Eligible Inventory.
The aggregate amount of Revolving Advances made to Borrowers against Eligible
Inventory shall not exceed in the aggregate, at any one time outstanding, the an
amount equal to fifty percent (50%) of the outstanding aggregate amount of all
Revolving Advances made hereunder.
     2.2. Procedure for Revolving Advances Borrowing.
          (a) Borrowing Agent on behalf of any Borrower may notify Agent prior
to 10:00 a.m. on a Business Day of a Borrower’s request to incur, on that day, a
Revolving Advance hereunder. Should any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or any other
agreement with Agent or Lenders, or with respect to any other Obligation, become
due, same shall be deemed a request for a Revolving Advance maintained as a
Domestic Rate Loan as of the date such payment is due, in the amount required to
pay in full such interest, fee, charge or Obligation under this Agreement or any
other agreement with Agent or Lenders, and such request shall be irrevocable.
          (b) Notwithstanding the provisions of subsection (a) above, in the
event any Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent
shall give Agent written

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notice by no later than 10:00 a.m. on the day which is three (3) Business Days
prior to the date such Eurodollar Rate Loan is to be borrowed, specifying
(i) the date of the proposed borrowing (which shall be a Business Day), (ii) the
type of borrowing and the amount on the date of such Advance to be borrowed,
which amount shall be in a minimum amount of $1,000,000 and in integral
multiples of $100,000 thereafter, and (iii) the duration of the first Interest
Period therefor. Interest Periods for Eurodollar Rate Loans shall be for one,
two or three months; provided, if an Interest Period would end on a day that is
not a Business Day, it shall end on the next succeeding Business Day unless such
day falls in the next succeeding calendar month in which case the Interest
Period shall end on the next preceding Business Day. No Eurodollar Rate Loan
shall be made available to any Borrower during the continuance of a Default or
an Event of Default. After giving effect to each requested Eurodollar Rate Loan,
including those which are converted from a Domestic Rate Loan under
Section 2.2(d), there shall not be outstanding more than four (4) Eurodollar
Rate Loans, in the aggregate.
          (c) Each Interest Period of a Eurodollar Rate Loan shall commence on
the date such Eurodollar Rate Loan is made and shall end on such date as
Borrowing Agent may elect as set forth in subsection (b)(iii) above provided
that the exact length of each Interest Period shall be determined in accordance
with the practice of the interbank market for offshore Dollar deposits and no
Interest Period shall end after the last day of the Term.
     Borrowing Agent shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to
Section 2.2(d), as the case may be. Borrowing Agent shall elect the duration of
each succeeding Interest Period by giving irrevocable written notice to Agent of
such duration not later than 10:00 a.m. on the day which is three (3) Business
Days prior to the last day of the then current Interest Period applicable to
such Eurodollar Rate Loan. If Agent does not receive timely notice of the
Interest Period elected by Borrowing Agent, Borrowing Agent shall be deemed to
have elected to convert to a Domestic Rate Loan subject to Section 2.2(d)
hereinbelow.
          (d) Provided that no Event of Default shall have occurred and be
continuing, Borrowing Agent may, on the last Business Day of the then current
Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any
Business Day with respect to Domestic Rate Loans, convert any such loan into a
loan of another type in the same aggregate principal amount provided that any
conversion of a Eurodollar Rate Loan shall be made only on the last Business Day
of the then current Interest Period applicable to such Eurodollar Rate Loan. If
Borrowing Agent desires to convert a loan, Borrowing Agent shall give Agent
written notice by no later than 10:00 a.m. (i) on the day which is three
(3) Business Days’ prior to the date on which such conversion is to occur with
respect to a conversion from a Domestic Rate Loan to a Eurodollar Rate Loan, or
(ii) on the day which is one (1) Business Day prior to the date on which such
conversion is to occur with respect to a conversion from a Eurodollar Rate Loan
to a Domestic Rate Loan, specifying, in each case, the date of such conversion,
the loans to be converted and if the conversion is from a Domestic Rate Loan to
any other type of loan, the duration of the first Interest Period therefor.
          (e) At its option and upon written notice given prior to 10:00 a.m.
(New York time) at least three (3) Business Days’ prior to the date of such
prepayment, any Borrower may

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prepay the Eurodollar Rate Loans in whole at any time or in part from time to
time with accrued interest on the principal being prepaid to the date of such
repayment. Such Borrower shall specify the date of prepayment of Advances which
are Eurodollar Rate Loans and the amount of such prepayment. In the event that
any prepayment of a Eurodollar Rate Loan is required or permitted on a date
other than the last Business Day of the then current Interest Period with
respect thereto, such Borrower shall indemnify Agent and Lenders therefor in
accordance with Section 2.2(f) hereof.
               (f) Each Borrower shall indemnify Agent and Lenders and hold
Agent and Lenders harmless from and against any and all losses or expenses that
Agent and Lenders may sustain or incur as a consequence of any prepayment,
conversion of or any default by any Borrower in the payment of the principal of
or interest on any Eurodollar Rate Loan or failure by any Borrower to complete a
borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan
after notice thereof has been given, including, but not limited to, any interest
payable by Agent or Lenders to lenders of funds obtained by it in order to make
or maintain its Eurodollar Rate Loans hereunder. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by Agent
or any Lender to Borrowing Agent shall be conclusive absent manifest error.
          (g) Notwithstanding any other provision hereof, if any Applicable Law,
treaty, regulation or directive, or any change therein or in the interpretation
or application thereof, shall make it unlawful for any Lender (for purposes of
this subsection (g), the term “Lender” shall include any Lender and the office
or branch where any Lender or any corporation or bank controlling such Lender
makes or maintains any Eurodollar Rate Loans) to make or maintain its Eurodollar
Rate Loans, the obligation of Lenders to make Eurodollar Rate Loans hereunder
shall forthwith be cancelled and Borrowers shall, if any affected Eurodollar
Rate Loans are then outstanding, promptly upon request from Agent, either pay
all such affected Eurodollar Rate Loans or convert such affected Eurodollar Rate
Loans into loans of another type. If any such payment or conversion of any
Eurodollar Rate Loan is made on a day that is not the last day of the Interest
Period applicable to such Eurodollar Rate Loan, Borrowers shall pay Agent, upon
Agent’s request, such amount or amounts as may be necessary to compensate
Lenders for any loss or expense sustained or incurred by Lenders in respect of
such Eurodollar Rate Loan as a result of such payment or conversion, including
(but not limited to) any interest or other amounts payable by Lenders to lenders
of funds obtained by Lenders in order to make or maintain such Eurodollar Rate
Loan. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Lenders to Borrowing Agent shall be conclusive
absent manifest error.
     2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed from
whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrowers to Agent or Lenders,
shall be charged to Borrowers’ Account on Agent’s books. During the Term,
Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by Borrowing Agent on behalf of any
Borrower or deemed to have been requested by any Borrower under Section 2.2(a)
hereof shall, with respect to requested Revolving Advances to the extent Lenders
make such Revolving Advances, be made available to the applicable Borrower on
the day so requested by way of

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credit to such Borrower’s operating account at PNC, or such other bank as
Borrowing Agent may designate following notification to Agent, in immediately
available federal funds or other immediately available funds or, with respect to
Revolving Advances deemed to have been requested by any Borrower, be disbursed
to Agent to be applied to the outstanding Obligations giving rise to such deemed
request.
     2.4. Intentionally Omitted.
     2.5. Maximum Advances. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving
Advance Amount less the Maximum Undrawn Amount of all issued and outstanding
Letters of Credit or (b) the Formula Amount.
     2.6. Repayment of Advances.
          (a) The Advances shall be due and payable in full on the last day of
the Term subject to earlier prepayment as herein provided.
          (b) Each Borrower recognizes that the amounts evidenced by checks,
notes, drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by Agent on the date received. In
consideration of Agent’s agreement to conditionally credit Borrowers’ Account as
of the next Business Day following Agent’s receipt of those items of payment,
each Borrower agrees that, in computing the charges under this Agreement, all
items of payment shall be deemed applied by Agent on account of the Obligations
one (1) Business Day after (i) the Business Day following Agent’s receipt of
such payments via wire transfer or electronic depository check or (ii) in the
case of payments received by Agent in any other form, the Business Day such
payment constitutes good funds in Agent’s account. Agent is not, however,
required to credit Borrowers’ Account for the amount of any item of payment
which is unsatisfactory to Agent and Agent may charge Borrowers’ Account for the
amount of any item of payment which is returned to Agent unpaid.
          (c) All payments of principal, interest and other amounts payable
hereunder, or under any of the Other Documents shall be made to Agent at the
Payment Office not later than 1:00 P.M. (New York time) on the due date therefor
in lawful money of the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all Obligations due and owing hereunder by charging Borrowers’
Account or by making Advances as provided in Section 2.2 hereof.
          (d) Borrowers shall pay principal, interest, and all other amounts
payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
     2.7. Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be

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immediately due and payable without the necessity of any demand, at the Payment
Office, whether or not a Default or Event of Default has occurred.
     2.8. Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account (“Borrowers’ Account”) in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
Borrowing Agent a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Agent and Borrowers during such month. The monthly statements shall be deemed
correct and binding upon Borrowers in the absence of manifest error and shall
constitute an account stated between Lenders and Borrowers unless Agent receives
a written statement of Borrowers’ specific exceptions thereto within thirty
(30) days after such statement is received by Borrowing Agent. The records of
Agent with respect to the loan account shall be conclusive evidence absent
manifest error of the amounts of Advances and other charges thereto and of
payments applicable thereto.
     2.9. Letters of Credit. Subject to the terms and conditions hereof, Agent
shall issue or cause the issuance of standby and/or trade letters of credit
(“Letters of Credit”) for the account of any Borrower; provided, however, that
Agent will not be required to issue or cause to be issued any Letters of Credit
to the extent that the issuance thereof would then cause the sum of (i) the
outstanding Revolving Advances plus (ii) the Maximum Undrawn Amount of all
outstanding Letters of Credit to exceed the lesser of (x) the Maximum Revolving
Advance Amount minus the Maximum Undrawn Amount of all outstanding Letters of
Credit or (y) the Formula Amount. The Maximum Undrawn Amount of outstanding
Letters of Credit shall not exceed in the aggregate at any time the Letter of
Credit Sublimit. All disbursements or payments related to Letters of Credit
shall be deemed to be Domestic Rate Loans consisting of Revolving Advances and
shall bear interest at the Revolving Interest Rate for Domestic Rate Loans;
Letters of Credit that have not been drawn upon shall not bear interest.
     2.10. Issuance of Letters of Credit.
          (a) Borrowing Agent, on behalf of Borrowers, may request Agent to
issue or cause the issuance of a Letter of Credit by delivering to Agent at the
Payment Office, prior to 10:00 a.m. (New York time), at least five (5) Business
Days’ prior to the proposed date of issuance, Agent’s form of Letter of Credit
Application (the “Letter of Credit Application”) completed to the satisfaction
of Agent; and, such other certificates, documents and other papers and
information as Agent may reasonably request. Borrowing Agent, on behalf of
Borrowers, also has the right to give instructions and make agreements with
respect to any application, any applicable letter of credit and security
agreement, any applicable letter of credit reimbursement agreement and/or any
other applicable agreement, any letter of credit and the disposition of
documents, disposition of any unutilized funds, and to agree with Agent upon any
amendment, extension or renewal of any Letter of Credit.
          (b) Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts, other written demands for payment, or acceptances
of usance drafts

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when presented for honor thereunder in accordance with the terms thereof and
when accompanied by the documents described therein and (ii) have an expiry date
not later than twelve (12) months after such Letter of Credit’s date of issuance
and in no event later than the last day of the Term. Each standby Letter of
Credit shall be subject either to the Uniform Customs and Practice for
Documentary Credits as most recently published by the International Chamber of
Commerce at the time a Letter of Credit is issued (the “UCP”) or the
International Standby Practices (ISP98-International Chamber of Commerce
Publication Number 590) (the “ISP98 Rules”), and any subsequent revision thereof
at the time a standby Letter of Credit is issued, as determined by Agent, and
each trade Letter of Credit shall be subject to the UCP.
          (c) Agent shall use its reasonable efforts to notify Lenders of the
request by Borrowing Agent for a Letter of Credit hereunder.
          (d) Nothing contained in this Agreement shall be construed under any
circumstances as an agreement by Agent and/or Lenders to extend the Term or
require or obligate in any way Agent, Lenders and/or Issuer to make any
Revolving Advances or to issue any new Letters of Credit (or extend or renew any
existing Letters of Credit) on or after the last day of the Term.
     2.11. Requirements For Issuance of Letters of Credit.
          (a) Borrowing Agent shall authorize and direct any Issuer to name the
applicable Borrower as the “Applicant” or “Account Party” of each Letter of
Credit. If Agent is not the Issuer of any Letter of Credit, Borrowing Agent
shall authorize and direct the Issuer to deliver to Agent all instruments,
documents, and other writings and property received by the Issuer pursuant to
the Letter of Credit and to accept and rely upon Agent’s instructions and
agreements with respect to all matters arising in connection with the Letter of
Credit, the application therefor or any acceptance therefor.
          (b) In connection with all Letters of Credit issued or caused to be
issued by Agent under this Agreement, each Borrower hereby appoints Agent, or
its designee, as its attorney, with full power and authority if an Event of
Default shall have occurred, (i) to sign and/or endorse such Borrower’s name
upon any warehouse or other receipts, letter of credit applications and
acceptances, (ii) to sign such Borrower’s name on bills of lading; (iii) to
clear Inventory through the United States of America Customs Department
(“Customs”) in the name of such Borrower or Agent or Agent’s designee, and to
sign and deliver to Customs officials powers of attorney in the name of such
Borrower for such purpose; and (iv) to complete in such Borrower’s name or
Agent’s, or in the name of Agent’s designee, any order, sale or transaction,
obtain the necessary documents in connection therewith, and collect the proceeds
thereof. Neither Agent nor its attorneys will be liable for any acts or
omissions nor for any error of judgment or mistakes of fact or law, except for
Agent’s or its attorney’s willful misconduct. This power, being coupled with an
interest, is irrevocable as long as any Letters of Credit remain outstanding.
     2.12. Disbursements, Reimbursement.

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          (a) Immediately upon the issuance of each Letter of Credit, each
Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from Agent a participation in such Letter of Credit and each drawing
thereunder in an amount equal to such Lender’s Commitment Percentage of the
Maximum Face Amount of such Letter of Credit and the amount of such drawing,
respectively.
          (b) In the event of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, Agent will promptly notify Borrowing
Agent. Provided that Borrowing Agent shall have received such notice, the
Borrowers shall reimburse (such obligation to reimburse Agent shall sometimes be
referred to as a “Reimbursement Obligation”) Agent prior to 12:00 Noon, New York
time on each date that an amount is paid by Agent under any Letter of Credit
(each such date, a “Drawing Date”) in an amount equal to the amount so paid by
Agent. In the event Borrowers fail to reimburse Agent for the full amount of any
drawing under any Letter of Credit by 12:00 Noon, New York time, on the Drawing
Date, Agent will promptly notify each Lender thereof, and Borrowers shall be
deemed to have requested that a Revolving Advance maintained as a Domestic Rate
Loan be made by the Lenders to be disbursed on the Drawing Date under such
Letter of Credit, subject to the amount of the unutilized portion of the lesser
of (i) the Maximum Revolving Advance Amount, less the Maximum Undrawn Amount of
all outstanding Letters of Credit, or (ii) the Formula Amount and, in each case,
subject to Section 8.2 hereof. Any notice given by Agent pursuant to this
Section 2.12(b) may be oral 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.
          (c) Each Lender shall upon any notice pursuant to Section 2.12(b) make
available to Agent an amount in immediately available funds equal to its
Commitment Percentage of the amount of the drawing, whereupon the participating
Lenders shall (subject to Section 2.12(d)) each be deemed to have made a
Revolving Advance maintained as a Domestic Rate Loan to Borrowers in that
amount. If any Lender so notified fails to make available to Agent the amount of
such Lender’s Commitment Percentage of such amount by no later than 2:00 p.m.,
New York time on the Drawing Date, then interest shall accrue on such Lender’s
obligation to make such payment, from the Drawing Date to the date on which such
Lender makes such payment (i) at a rate per annum equal to the Federal Funds
Effective Rate during the first three days following the Drawing Date and
(ii) at a rate per annum equal to the rate applicable to Revolving Advances
maintained as a Domestic Rate Loans on and after the fourth day following the
Drawing Date. Agent will promptly give notice of the occurrence of the Drawing
Date, but failure of Agent to give any such notice on the Drawing Date or in
sufficient time to enable any Lender to effect such payment on such date shall
not relieve such Lender from its obligation under this Section 2.12(c), provided
that such Lender shall not be obligated to pay interest as provided in
Section 2.12(c) (i) and (ii) until and commencing from the date of receipt of
notice from Agent of a drawing.
          (d) With respect to any unreimbursed drawing that is not converted
into a Revolving Advance maintained as a Domestic Rate Loan to Borrowers in
whole or in part as contemplated by Section 2.12(b), because of Borrowers’
failure to satisfy the conditions set forth in Section 8.2 (other than any
notice requirements) or for any other reason, Borrowers shall be deemed to have
incurred from Agent a borrowing (each a “Letter of Credit Borrowing”) in the
amount of such drawing. Such Letter of Credit Borrowing shall be due and payable
on demand

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(together with interest) and shall bear interest at the rate per annum
applicable to a Revolving Advance maintained as a Domestic Rate Loan. Each
Lender’s payment to Agent pursuant to Section 2.12(c) shall be deemed to be a
payment in respect of its participation in such Letter of Credit Borrowing and
shall constitute a “Participation Advance” from such Lender in satisfaction of
its Participation Commitment under this Section 2.12.
          (e) Each Lender’s Participation Commitment shall continue until the
last to occur of any of the following events: (x) Agent ceases to be obligated
to issue or cause to be issued Letters of Credit hereunder; (y) no Letter of
Credit issued or created hereunder remains outstanding and uncancelled; and
(z) all Persons (other than the Borrowers) have been fully reimbursed for all
payments made under or relating to Letters of Credit.
     2.13. Repayment of Participation Advances.
          (a) Upon (and only upon) receipt by Agent for its account of
immediately available funds from Borrowers (i) in reimbursement of any payment
made by the Agent under the Letter of Credit with respect to which any Lender
has made a Participation Advance to Agent, or (ii) in payment of interest on
such a payment made by Agent under such a Letter of Credit, Agent will pay to
each Lender, in the same funds as those received by Agent, the amount of such
Lender’s Commitment Percentage of such funds, except Agent shall retain the
amount of the Commitment Percentage of such funds of any Lender that did not
make a Participation Advance in respect of such payment by Agent.
          (b) If Agent is required at any time to return to any Borrower, or to
a trustee, receiver, liquidator, custodian, or any official in any insolvency
proceeding, any portion of the payments made by Borrowers to Agent pursuant to
Section 2.13(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Lender shall, on demand of Agent, forthwith return
to Agent the amount of its Commitment Percentage of any amounts so returned by
Agent plus interest at the Federal Funds Effective Rate.
     2.14. Documentation. Each Borrower agrees to be bound by the terms of the
Letter of Credit Application and by Agent’s interpretations of any Letter of
Credit issued on behalf of such Borrower and by Agent’s written regulations and
customary practices relating to letters of credit, though Agent’s
interpretations may be different from such Borrower’s own. In the event of a
conflict between the Letter of Credit Application and this Agreement, this
Agreement shall govern. It is understood and agreed that, except in the case of
gross negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final non-appealable judgment), Agent shall not be liable for
any error, negligence and/or mistakes, whether of omission or commission, in
following the Borrowing Agent’s or any Borrower’s instructions or those
contained in the Letters of Credit or any modifications, amendments or
supplements thereto.
     2.15. Determination to Honor Drawing Request. In determining whether to
honor any request for drawing under any Letter of Credit by the beneficiary
thereof, Agent shall be responsible only to determine that the documents and
certificates required to be delivered under such Letter of Credit have been
delivered and that they comply on their face with the

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requirements of such Letter of Credit and that any other drawing condition
appearing on the face of such Letter of Credit has been satisfied in the manner
so set forth.
     2.16. Nature of Participation and Reimbursement Obligations. Each Lender’s
obligation in accordance with this Agreement to make the Revolving Advances or
Participation Advances as a result of a drawing under a Letter of Credit, and
the obligations of Borrowers to reimburse Agent upon a draw under a Letter of
Credit, shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Section 2.16 under all
circumstances, including the following circumstances:
               (i) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against Agent, any Borrower or any other Person for
any reason whatsoever;
               (ii) the failure of any Borrower or any other Person to comply,
in connection with a Letter of Credit Borrowing, with the conditions set forth
in this Agreement for the making of a Revolving Advance, it being acknowledged
that such conditions are not required for the making of a Letter of Credit
Borrowing and the obligation of the Lenders to make Participation Advances under
Section 2.12;
               (iii) any lack of validity or enforceability of any Letter of
Credit;
               (iv) any claim of breach of warranty that might be made by
Borrower or any Lender against the beneficiary of a Letter of Credit, or the
existence of any claim, set-off, recoupment, counterclaim, cross-claim, defense
or other right which any Borrower or any Lender may have at any time against a
beneficiary, any successor beneficiary or any transferee of any Letter of Credit
or the proceeds thereof (or any Persons for whom any such transferee may be
acting), Agent or any Lender or any other Person, whether in connection with
this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between any Borrower or any
Subsidiaries of such Borrower and the beneficiary for which any Letter of Credit
was procured);
               (v) the lack of power or authority of any signer of (or any
defect in or forgery of any signature or endorsement on) or the form of or lack
of validity, sufficiency, accuracy, enforceability or genuineness of any draft,
demand, instrument, certificate or other document presented under or in
connection with any Letter of Credit, or any fraud or alleged fraud in
connection with any Letter of Credit, or the transport of any property or
provisions of services relating to a Letter of Credit, in each case even if
Agent or any of Agent’s Affiliates has been notified thereof;
               (vi) payment by Agent under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit;
               (vii) the solvency of, or any acts or omissions by, any
beneficiary of any Letter of Credit, or any other Person having a role in any
transaction or obligation relating to a Letter of Credit, or the existence,
nature, quality, quantity, condition, value or other characteristic of any
property or services relating to a Letter of Credit;

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               (viii) any failure by the Agent or any of Agent’s Affiliates to
issue any Letter of Credit in the form requested by Borrowing Agent, unless the
Agent has received written notice from Borrowing Agent of such failure within
three (3) Business Days after the Agent shall have furnished Borrowing Agent a
copy of such Letter of Credit and such error is material and no drawing has been
made thereon prior to receipt of such notice;
               (ix) any Material Adverse Effect;
               (x) any breach of this Agreement or any Other Document by any
party thereto;
               (xi) the occurrence or continuance of an insolvency proceeding
with respect to any Borrower or any Guarantor;
               (xii) the fact that a Default or Event of Default shall have
occurred and be continuing;
               (xiii) the fact that the Term shall have expired or this
Agreement or the Obligations hereunder shall have been terminated; and
               (xiv) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
     2.17. Indemnity. In addition to amounts payable as provided in
Section 16.5, each Borrower hereby agrees to protect, indemnify, pay and save
harmless Agent and any of Agent’s Affiliates that have issued a Letter of Credit
from and against any and all claims, demands, liabilities, damages, taxes,
penalties, interest, judgments, losses, costs, charges and expenses (including
reasonable fees, expenses and disbursements of counsel and allocated costs of
internal counsel) which the Agent or any of Agent’s Affiliates may incur or be
subject to as a consequence, direct or indirect, of the issuance of any Letter
of Credit, other than as a result of (a) the gross negligence or willful
misconduct of the Agent as determined by a final and non-appealable judgment of
a court of competent jurisdiction or (b) the wrongful dishonor by the Agent or
any of Agent’s Affiliates of a proper demand for payment made under any Letter
of Credit, except if such dishonor resulted from any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto Governmental
Body (all such acts or omissions herein called “Governmental Acts”).
     2.18. Liability for Acts and Omissions. As between Borrowers and Agent and
Lenders, each Borrower assumes all risks of the acts and omissions of, or misuse
of the Letters of Credit by, the respective beneficiaries of such Letters of
Credit. In furtherance and not in limitation of the respective foregoing, Agent
shall not be responsible for: (i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for an issuance of any such Letter of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged (even if Agent shall have been notified
thereof); (ii) the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any such 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; (iii) the failure of the
beneficiary of any such Letter of Credit, or any other party

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to which such Letter of Credit may be transferred, to comply fully with any
conditions required in order to draw upon such Letter of Credit or any other
claim of any Borrower against any beneficiary of such Letter of Credit, or any
such transferee, or any dispute between or among any Borrower and any
beneficiary of any Letter of Credit or any such transferee; (iv) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, facsimile, telex or otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of Agent, including any governmental acts, and
none of the above shall affect or impair, or prevent the vesting of, any of
Agent’s rights or powers hereunder. Nothing in the preceding sentence shall
relieve Agent from liability for Agent’s gross negligence or willful misconduct
(as determined by a court of competent jurisdiction in a final non-appealable
judgment) in connection with actions or omissions described in such clauses
(i) through (viii) of such sentence. In no event shall Agent or Agent’s
Affiliates be liable to any Borrower for any indirect, consequential,
incidental, punitive, exemplary or special damages or expenses (including
without limitation attorneys’ fees), or for any damages resulting from any
change in the value of any property relating to a Letter of Credit.
     Without limiting the generality of the foregoing, Agent and each of its
Affiliates (i) may rely on any oral or other communication believed in good
faith by Agent or such Affiliate to have been authorized or given by or on
behalf of the applicant for a Letter of Credit, (ii) may honor any presentation
if the documents presented appear on their face substantially to comply with the
terms and conditions of the relevant Letter of Credit; (iii) may honor a
previously dishonored presentation under a Letter of Credit, whether such
dishonor was pursuant to a court order, to settle or compromise any claim of
wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the
same extent as if such presentation had initially been honored, together with
any interest paid by Agent or its Affiliates; (iv) may honor any drawing that is
payable upon presentation of a statement advising negotiation or payment, upon
receipt of such statement (even if such statement indicates that a draft or
other document is being delivered separately), and shall not be liable for any
failure of any such draft or other document to arrive, or to conform in any way
with the relevant Letter of Credit; (v) may pay any paying or negotiating bank
claiming that it rightfully honored under the laws or practices of the place
where such bank is located; and (vi) may settle or adjust any claim or demand
made on Agent or its Affiliate in any way related to any order issued at the
applicant’s request to an air carrier, a letter of guarantee or of indemnity
issued to a carrier or any similar document (each an “Order”) and honor any
drawing in connection with any Letter of Credit that is the subject of such
Order, notwithstanding that any drafts or other documents presented in
connection with such Letter of Credit fail to conform in any way with such
Letter of Credit.
     In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by Agent under or in
connection with the Letters of Credit issued by it or any documents and
certificates delivered thereunder, if taken or omitted in good faith and without
gross negligence (as determined by a court of competent jurisdiction in a final
non-appealable judgment), shall not put Agent under any resulting liability to
any Borrower or any Lender.

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     2.19. Additional Payments. Any sums expended by Agent or any Lender due to
any Borrower’s failure to perform or comply with its obligations under this
Agreement or any Other Document including any Borrower’s obligations under
Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrowers’
Account as a Revolving Advance and added to the Obligations.
     2.20. Manner of Borrowing and Payment.
          (a) Each borrowing of Revolving Advances shall be advanced according
to the applicable Commitment Percentages of Lenders.
          (b) Each payment (including each prepayment) by any Borrower on
account of the principal of and interest on the Revolving Advances, shall be
applied to the Revolving Advances pro rata according to the applicable
Commitment Percentages of Lenders. Except as expressly provided herein, all
payments (including prepayments) to be made by any Borrower on account of
principal, interest and fees shall be made without set off or counterclaim and
shall be made to Agent on behalf of the Lenders to the Payment Office, in each
case on or prior to 1:00 P.M., New York time, in Dollars and in immediately
available funds.
          (c) (i) Notwithstanding anything to the contrary contained in
Sections 2.20(a) and (b) hereof, commencing with the first Business Day
following the Closing Date, each borrowing of Revolving Advances shall be
advanced by Agent and each payment by any Borrower on account of Revolving
Advances shall be applied first to those Revolving Advances advanced by Agent.
On or before 1:00 P.M., New York time, on each Settlement Date commencing with
the first Settlement Date following the Closing Date, Agent and Lenders shall
make certain payments as follows: (I) if the aggregate amount of new Revolving
Advances made by Agent during the preceding Week (if any) exceeds the aggregate
amount of repayments applied to outstanding Revolving Advances during such
preceding Week, then each Lender shall provide Agent with funds in an amount
equal to its applicable Commitment Percentage of the difference between (w) such
Revolving Advances and (x) such repayments and (II) if the aggregate amount of
repayments applied to outstanding Revolving Advances during such Week exceeds
the aggregate amount of new Revolving Advances made during such Week, then Agent
shall provide each Lender with funds in an amount equal to its applicable
Commitment Percentage of the difference between (y) such repayments and (z) such
Revolving Advances.
               (ii) Each Lender shall be entitled to earn interest at the
applicable Revolving Interest Rate on outstanding Advances which it has funded.
               (iii) Promptly following each Settlement Date, Agent shall submit
to each Lender a certificate with respect to payments received and Advances made
during the Week immediately preceding such Settlement Date. Such certificate of
Agent shall be conclusive in the absence of manifest error.
          (d) If any Lender or Participant (a “Benefited Lender”) shall at any
time receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other

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Lender’s Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such Benefited
Lender shall purchase for cash from the other Lenders a participation in such
portion of each such other Lender’s Advances, or shall provide such other Lender
with the benefits of any such Collateral, or the proceeds thereof, as shall be
necessary to cause such Benefited Lender to share the excess payment or benefits
of such Collateral or proceeds ratably with each of the other Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender’s Advances may exercise all rights of payment (including rights of
set-off) with respect to such portion as fully as if such Lender were the direct
holder of such portion.
          (e) Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent on the next Settlement Date and, in reliance
upon such assumption, make available to Borrowers a corresponding amount. Agent
will promptly notify Borrowing Agent of its receipt of any such notice from a
Lender. If such amount is made available to Agent on a date after such next
Settlement Date, such Lender shall pay to Agent on demand an amount equal to the
product of (i) the daily average Federal Funds Effective Rate (computed on the
basis of a year of 360 days) during such period as quoted by Agent, times (ii)
such amount, times (iii) the number of days from and including such Settlement
Date to the date on which such amount becomes immediately available to Agent. A
certificate of Agent submitted to any Lender with respect to any amounts owing
under this paragraph (e) shall be conclusive, in the absence of manifest error.
If such amount is not in fact made available to Agent by such Lender within
three (3) Business Days after such Settlement Date, Agent shall be entitled to
recover such an amount, with interest thereon at the rate per annum then
applicable to such Revolving Advances hereunder, on demand from Borrowers;
provided, however, that Agent’s right to such recovery shall not prejudice or
otherwise adversely affect Borrowers’ rights (if any) against such Lender.
     2.21. Mandatory Prepayments. Subject to Section 4.3 hereof, when any
Borrower sells or otherwise disposes of any Collateral other than Inventory in
the Ordinary Course of Business, Borrowers shall repay the Advances in an amount
equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable
costs of such sales or other dispositions), such repayments to be made promptly
but in no event more than one (1) Business Day following receipt of such net
proceeds, and until the date of payment, such proceeds shall be held in trust
for Agent. The foregoing shall not be deemed to be implied consent to any such
sale otherwise prohibited by the terms and conditions hereof. Such repayments
shall be applied to the Advances in such order as Agent may determine, subject
to Borrowers’ ability to reborrow Revolving Advances in accordance with the
terms hereof.
     2.22. Use of Proceeds.
          (a) Borrowers shall apply the proceeds of Advances to (i) pay fees and
expenses relating to this transaction, and (ii) provide for its working capital
needs and reimburse drawings under Letters of Credit.

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          (b) Without limiting the generality of Section 2.22(a) above, neither
the Borrowers, the Guarantors nor any other Person which may in the future
become party to this Agreement or the Other Documents as a Borrower or
Guarantor, intends to use nor shall they use any portion of the proceeds of the
Advances, directly or indirectly, for any purpose in violation of the Trading
with the Enemy Act.
     2.23. Defaulting Lender.
          (a) Notwithstanding anything to the contrary contained herein, in the
event any Lender (x) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its portion of
any Advance or (y) notifies either Agent or Borrowing Agent that it does not
intend to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a “Lender Default”), all rights and obligations hereunder of such Lender
(a “Defaulting Lender”) as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.23 while such Lender Default remains in effect.
          (b) Advances shall be incurred pro rata from Lenders (the
“Non-Defaulting Lenders”) which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender (other than any Defaulting Lender) pro rata based on the
aggregate of the outstanding Advances of that type of all Lenders at the time of
such application; provided, that, Agent shall not be obligated to transfer to a
Defaulting Lender any payments received by Agent for the Defaulting Lender’s
benefit, nor shall a Defaulting Lender be entitled to the sharing of any
payments hereunder (including any principal, interest or fees). Amounts payable
to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may
hold and, in its discretion, re-lend to a Borrower the amount of such payments
received or retained by it for the account of such Defaulting Lender.
          (c) A Defaulting Lender shall not be entitled to give instructions to
Agent or to approve, disapprove, consent to or vote on any matters relating to
this Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of “Required
Lenders”, a Defaulting Lender shall be deemed not to be a Lender and not to have
either Advances outstanding or a Commitment Percentage.
          (d) Other than as expressly set forth in this Section 2.23, the rights
and obligations of a Defaulting Lender (including the obligation to indemnify
Agent) and the other parties hereto shall remain unchanged. Nothing in this
Section 2.23 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.

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          (e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.
III. INTEREST AND FEES.
     3.1. Interest. Interest on Advances shall be payable in arrears on the
first day of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar Rate Loans, at the end of each Interest Period or, for Eurodollar
Rate Loans with an Interest Period in excess of three months, at the earlier of
(a) each three months from the commencement of such Eurodollar Rate Loan or
(b) the end of the Interest Period. Interest charges shall be computed on the
actual principal amount of Advances outstanding during the month at a rate per
annum equal to with respect to Revolving Advances, the applicable Revolving
Interest Rate. Whenever, subsequent to the date of this Agreement, the Alternate
Base Rate is increased or decreased, the Revolving Interest Rate for Domestic
Rate Loans shall be similarly changed without notice or demand of any kind by an
amount equal to the amount of such change in the Alternate Base Rate during the
time such change or changes remain in effect. The Eurodollar Rate shall be
adjusted with respect to Eurodollar Rate Loans without notice or demand of any
kind on the effective date of any change in the Reserve Percentage as of such
effective date. Upon and after the occurrence of an Event of Default, and during
the continuation thereof, (i) at the option of Agent or at the direction of
Required Lenders, the Obligations shall bear interest at the Revolving Interest
Rate for Domestic Loans plus two percent (2%) per annum (the “Default Rate”).
     3.2. Letter of Credit Fees.
          (a) Borrowers shall pay (x) to Agent, for the ratable benefit of
Lenders, fees for each Letter of Credit for the period from and excluding the
date of issuance of same to and including the date of expiration or termination,
equal to the average daily face amount of each outstanding Letter of Credit
multiplied by the Applicable Margin in effect for Eurodollar Rate Loans less
one-quarter of one percent (0.25%) per annum, such fees to be calculated on the
basis of a 360-day year for the actual number of days elapsed and to be payable
quarterly in arrears on the first day of each quarter and on the last day of the
Term, and (y) to the Issuer, a fronting fee of one quarter of one percent
(0.25%) per annum, together with any and all administrative, issuance,
amendment, payment and negotiation charges with respect to Letters of Credit and
all fees and expenses as agreed upon by the Issuer and the Borrowing Agent in
connection with any Letter of Credit, including in connection with the opening,
amendment or renewal of any such Letter of Credit and any acceptances created
thereunder and shall reimburse Agent for any and all fees and expenses, if any,
paid by Agent to the Issuer (all of the foregoing fees, the “Letter of Credit
Fees”). All such charges shall be deemed earned in full on the date when the
same are due and payable hereunder and shall not be subject to rebate or
pro-ration upon the termination of this Agreement for any reason. Any such
charge in effect at the time of a particular transaction shall be the charge for
that transaction, notwithstanding any subsequent change in the Issuer’s
prevailing charges for that type of transaction. All Letter of Credit Fees
payable hereunder shall be deemed earned in full on the date when the same are
due and payable hereunder and shall not be subject to rebate or pro-ration upon
the termination of this Agreement for any reason. Upon and after the occurrence
of an Event of Default, and during the continuation thereof, at the option of
Agent or at the direction of Required Lenders, the Letter of

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Credit Fees described in clause (x) of this Section 3.2(a) shall be increased by
an additional two percent (2.0%) per annum.
          (b) At any time following the occurrence of an Event of Default or the
expiration of the Term, Borrowers will cause cash to be deposited and maintained
in an account with Agent, as cash collateral, in an amount equal to one hundred
and five percent (105%) of the Maximum Undrawn Amount of all outstanding Letters
of Credit, and each Borrower hereby irrevocably authorizes Agent, in its
discretion, on such Borrower’s behalf and in such Borrower’s name, to open such
an account and to make and maintain deposits therein, or in an account opened by
such Borrower, in the amounts required to be made by such Borrower, out of the
proceeds of Receivables or other Collateral or out of any other funds of such
Borrower coming into any Lender’s possession at any time. Agent will invest such
cash collateral (less applicable reserves) in such short-term money-market items
as to which Agent and such Borrower mutually agree and the net return on such
investments shall be credited to such account and constitute additional cash
collateral. No Borrower may withdraw amounts credited to any such account except
upon the occurrence of all of the following: (x) payment and performance in full
of all Obligations; (y) expiration of all Letters of Credit; and (z) termination
of this Agreement.
     3.3. Closing Fee and Facility Fee.
          (a) Upon the execution of this Agreement, Borrowers shall pay to Agent
for the ratable benefit of Lenders a closing fee of $200,000.
          (b) If, for any month during the Term, the average daily unpaid
balance of the Revolving Advances plus the Maximum Undrawn Amount of all
outstanding Letters of Credit for each day of such month does not equal the
Maximum Revolving Advance Amount, then Borrowers shall pay to Agent for the
ratable benefit of Lenders a fee at a rate equal to the Unused Line Fee set
forth in the Applicable Margin on the amount by which the Maximum Revolving
Advance Amount exceeds such average daily unpaid balance (the “Unused Line
Fee”). Such fee shall be payable to Agent in arrears on the first day of each
month with respect to the previous month.
     3.4. Collateral Evaluation Fee, Collateral Monitoring Fee and Appraisal
Fee.
          (a) Borrowers shall pay Agent a collateral monitoring fee equal to
$2,000 per month commencing on the first day of the month following the Closing
Date and on the first day of each month thereafter during the Term. The
collateral monitoring fee shall be deemed earned in full on the date when same
is due and payable hereunder and shall not be subject to rebate or proration
upon termination of this Agreement for any reason.
          (b) Borrowers shall pay to Agent on the first day of each month
following any month in which Agent performs any collateral evaluation — namely
any field examination, collateral analysis or other business analysis, the need
for which is to be determined by Agent and which evaluation is undertaken by
Agent or for Agent’s benefit — a collateral evaluation fee in an amount equal to
$850 per day for each person employed to perform such evaluation, plus

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all costs and disbursements incurred by Agent in the performance of such
examination or analysis.
          (c) Agent may, in its sole discretion, exercised in a commercially
reasonable manner, at any time after the Closing Date, engage the services of an
independent appraisal firm or firms of reputable standing, satisfactory to
Agent, for the purpose of appraising the then current values of the Collateral.
Absent the occurrence and continuance of an Event of Default at such time, Agent
shall consult with Borrowers as to the identity of any such firm. All of the
fees and out-of-pocket costs and expense of any such firm (collectively,
“appraisal amounts”) shall be paid for when due, in full and without off-set, by
Borrowers. In the event the value of Borrowers’ Inventory, as so determined
pursuant to such appraisal, is less than anticipated by Agent or Lenders, such
that the Revolving Advances against Eligible Inventory, are in fact in excess of
such Advances permitted hereunder, then, promptly upon Agent’s demand for same,
Borrowers shall make mandatory prepayments of the then outstanding Revolving
Advances made against such Eligible Inventory so as to eliminate the excess
Advances.
     3.5. Computation of Interest and Fees. Interest and fees hereunder shall be
computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the Revolving
Interest Rate for Domestic Rate Loans during such extension.
     3.6. Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such excess amount shall be first applied
to any unpaid principal balance owed by Borrowers, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrowers and the provisions hereof
shall be deemed amended to provide for such permissible rate.
     3.7. Increased Costs. In the event that any Applicable Law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this
Section 3.7, the term “Lender” shall include Agent or any Lender and any
corporation or bank controlling Agent or any Lender) and the office or branch
where Agent or any Lender (as so defined) makes or maintains any Eurodollar Rate
Loans with any request or directive (whether or not having the force of law)
from any central bank or other financial, monetary or other authority, shall:
          (a) subject Agent or any Lender to any tax of any kind whatsoever with
respect to this Agreement or any Other Document or change the basis of taxation
of payments to Agent or any Lender of principal, fees, interest or any other
amount payable hereunder or under any Other Documents (except for changes in the
rate of tax on the overall net income of Agent or any Lender by the jurisdiction
in which it maintains its principal office);
          (b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or

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loans by, or other credit extended by, any office of Agent or any Lender,
including pursuant to Regulation D of the Board of Governors of the Federal
Reserve System; or
          (c) impose on Agent or any Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement or any Other Document;
     and the result of any of the foregoing is to increase the cost to Agent or
any Lender of making, renewing or maintaining its Advances hereunder by an
amount that Agent or such Lender deems to be material or to reduce the amount of
any payment (whether of principal, interest or otherwise) in respect of any of
the Advances by an amount that Agent or such Lender deems to be material, then,
in any case Borrowers shall promptly pay Agent or such Lender, upon its demand,
such additional amount as will compensate Agent or such Lender for such
additional cost or such reduction, as the case may be. Agent or such Lender
shall certify the amount of such additional cost or reduced amount to Borrowing
Agent, and such certification shall be conclusive absent manifest error.
     3.8. Basis For Determining Interest Rate Inadequate or Unfair. In the event
that Agent or any Lender shall have determined that:
          (a) reasonable means do not exist for ascertaining the Eurodollar Rate
applicable pursuant to Section 2.2 hereof for any Interest Period; or
          (b) Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,
     then Agent shall give Borrowing Agent prompt written or telephonic notice
of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing
Agent shall notify Agent no later than 10:00 a.m. (New York City time) two
(2) Business Days prior to the date of such proposed borrowing, that its request
for such borrowing shall be cancelled or made as an unaffected type of
Eurodollar Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which
was to have been converted to an affected type of Eurodollar Rate Loan shall be
continued as or converted into a Domestic Rate Loan, or, if Borrowing Agent
shall notify Agent, no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the proposed conversion, shall be maintained as an
unaffected type of Eurodollar Rate Loan, and (iii) any outstanding affected
Eurodollar Rate Loans shall be converted into a Domestic Rate Loan, or, if
Borrowing Agent shall notify Agent, no later than 10:00 a.m. (New York City
time) two (2) Business Days prior to the last Business Day of the then current
Interest Period applicable to such affected Eurodollar Rate Loan, shall be
converted into an unaffected type of Eurodollar Rate Loan, on the last Business
Day of the then current Interest Period for such affected Eurodollar Rate Loans.
Until such notice has been withdrawn, Lenders shall have no obligation to make
an affected type of Eurodollar Rate Loan or maintain outstanding affected
Eurodollar Rate Loans and no Borrower shall have the right to convert a Domestic
Rate Loan or an unaffected type of Eurodollar Rate Loan into an affected type of
Eurodollar Rate Loan.

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     3.9. Capital Adequacy.
          (a) In the event that Agent or any Lender shall have determined that
any Applicable Law, rule, regulation or guideline regarding capital adequacy, or
any change therein, or any change in the interpretation or administration
thereof by any Governmental Body, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Agent or any
Lender (for purposes of this Section 3.9, the term “Lender” shall include Agent
or any Lender and any corporation or bank controlling Agent or any Lender) and
the office or branch where Agent or any Lender (as so defined) makes or
maintains any Eurodollar Rate Loans with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on Agent or any Lender’s capital as a consequence of its
obligations hereunder to a level below that which Agent or such Lender could
have achieved but for such adoption, change or compliance (taking into
consideration Agent’s and each Lender’s policies with respect to capital
adequacy) by an amount deemed by Agent or any Lender to be material, then, from
time to time, Borrowers shall pay upon demand to Agent or such Lender such
additional amount or amounts as will compensate Agent or such Lender for such
reduction. In determining such amount or amounts, Agent or such Lender may use
any reasonable averaging or attribution methods. The protection of this
Section 3.9 shall be available to Agent and each Lender regardless of any
possible contention of invalidity or inapplicability with respect to the
Applicable Law, regulation or condition.
          (b) A certificate of Agent or such Lender setting forth such amount or
amounts as shall be necessary to compensate Agent or such Lender with respect to
Section 3.9(a) hereof when delivered to Borrowing Agent shall be conclusive
absent manifest error.
     3.10. Gross Up for Taxes. If any Borrower shall be required by Applicable
Law to withhold or deduct any taxes from or in respect of any sum payable under
this Agreement or any of the Other Documents to Agent, or any Lender, assignee
of any Lender, or Participant (each, individually, a “Payee” and collectively,
the “Payees”), (a) the sum payable to such Payee or Payees, as the case may be,
shall be increased as may be necessary so that, after making all required
withholding or deductions, the applicable Payee or Payees receives an amount
equal to the sum it would have received had no such withholding or deductions
been made (the “Gross-Up Payment”), (b) such Borrower shall make such
withholding or deductions, and (c) such Borrower shall pay the full amount
withheld or deducted to the relevant taxation authority or other authority in
accordance with Applicable Law. Notwithstanding the foregoing, no Borrower shall
be obligated to make any portion of the Gross-Up Payment that is attributable to
any withholding or deductions that would not have been paid or claimed had the
applicable Payee or Payees properly claimed a complete exemption with respect
thereto pursuant to Section 3.11 hereof.
     3.11. Withholding Tax Exemption.
          (a) Each Payee that is not incorporated under the Laws of the United
States of America or a state thereof (and, upon the written request of Agent,
each other Payee) agrees that it will deliver to Borrowing Agent and Agent two
(2) duly completed appropriate valid Withholding Certificates (as defined under
§1.1441-1(c)(16) of the Income Tax Regulations

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(“Regulations”)) certifying its status (i.e., U.S. or foreign person) and, if
appropriate, making a claim of reduced, or exemption from, U.S. withholding tax
on the basis of an income tax treaty or an exemption provided by the Code. The
term “Withholding Certificate” means a Form W-9; a Form W-8BEN; a Form W-8ECI; a
Form W-8IMY and the related statements and certifications as required under
§1.1441-1(e)(2) and/or (3) of the Regulations; a statement described in
§1.871-14(c)(2)(v) of the Regulations; or any other certificates under the Code
or Regulations that certify or establish the status of a payee or beneficial
owner as a U.S. or foreign person.
          (b) Each Payee required to deliver to Borrowing Agent and Agent a
valid Withholding Certificate pursuant to Section 3.11(a) hereof shall deliver
such valid Withholding Certificate as follows: (i) each Payee which is a party
hereto on the Closing Date shall deliver such valid Withholding Certificate at
least five (5) Business Days prior to the first date on which any interest or
fees are payable by any Borrower hereunder for the account of such Payee;
(ii) each Payee shall deliver such valid Withholding Certificate at least five
(5) Business Days before the effective date of such assignment or participation
(unless Agent in its sole discretion shall permit such Payee to deliver such
Withholding Certificate less than five (5) Business Days before such date in
which case it shall be due on the date specified by Agent). Each Payee which so
delivers a valid Withholding Certificate further undertakes to deliver to
Borrowing Agent and Agent two (2) additional copies of such Withholding
Certificate (or a successor form) on or before the date that such Withholding
Certificate expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent Withholding Certificate so delivered by
it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by Borrowing Agent or Agent.
          (c) Notwithstanding the submission of a Withholding Certificate
claiming a reduced rate of or exemption from U.S. withholding tax required under
Section 3.11(b) hereof, Agent shall be entitled to withhold United States
federal income taxes at the full 30% withholding rate if in its reasonable
judgment it is required to do so under the due diligence requirements imposed
upon a withholding agent under §1.1441-7(b) of the Regulations. Further, Agent
is indemnified under §1.1461-1(e) of the Regulations against any claims and
demands of any Payee for the amount of any tax it deducts and withholds in
accordance with regulations under §1441 of the Code.
IV. COLLATERAL: GENERAL TERMS
     4.1. Security Interest in the Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, each Borrower hereby
assigns, pledges and grants to Agent for its benefit and for the ratable benefit
of each Lender a continuing security interest in and to and Lien on all of its
Collateral, whether now owned or existing or hereafter acquired or arising and
wheresoever located. Each Borrower shall mark its books and records as may be
necessary or appropriate to evidence, protect and perfect Agent’s security
interest and shall cause its financial statements to reflect such security
interest. Each Borrower shall promptly provide Agent with written notice of all
commercial tort claims, such notice to contain the case title together with the
applicable court and a brief description of the claim(s). Upon delivery of each
such notice, such Borrower shall be deemed to hereby grant to Agent a security
interest and lien in and to such commercial tort claims and all proceeds
thereof.

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     4.2. Perfection of Security Interest. Each Borrower shall take all action
that may be necessary or desirable, or that Agent may request, so as at all
times to maintain the validity, perfection, enforceability and priority of
Agent’s security interest in and Lien on the Collateral or to enable Agent to
protect, exercise or enforce its rights hereunder and in the Collateral,
including, but not limited to, (i) immediately discharging all Liens other than
Permitted Encumbrances, (ii) obtaining Lien Waiver Agreements, (iii) delivering
to Agent, endorsed or accompanied by such instruments of assignment as Agent may
specify, and stamping or marking, in such manner as Agent may specify, any and
all chattel paper, instruments, letters of credits and advices thereof and
documents evidencing or forming a part of the Collateral, (iv) entering into
warehousing, lockbox and other custodial arrangements satisfactory to Agent, and
(v) executing and delivering financing statements, control agreements,
instruments of pledge, mortgages, notices and assignments, in each case in form
and substance satisfactory to Agent, relating to the creation, validity,
perfection, maintenance or continuation of Agent’s security interest and Lien
under the Uniform Commercial Code or other Applicable Law. By its signature
hereto, each Borrower hereby authorizes Agent to file against such Borrower, one
or more financing, continuation or amendment statements pursuant to the Uniform
Commercial Code in form and substance satisfactory to Agent (which statements
may have a description of collateral which is broader than that set forth
herein). All charges, expenses and fees Agent may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be charged to Borrowers’
Account as a Revolving Advance of a Domestic Rate Loan and added to the
Obligations, or, at Agent’s option, shall be paid to Agent for its benefit and
for the ratable benefit of Lenders immediately upon demand.
     4.3. Disposition of Collateral. Each Borrower will safeguard and protect
all Collateral for Agent’s general account and make no disposition thereof
whether by sale, lease or otherwise except (a) the sale of Inventory in the
Ordinary Course of Business, (b) the disposition or transfer of obsolete and
worn-out Equipment in the Ordinary Course of Business during any fiscal year
only to the extent that (i) the proceeds of any such disposition are used to
acquire replacement Equipment which is subject to Agent’s first priority
security interest or (ii) the proceeds of which are remitted to Agent to be
applied pursuant to Section 2.21 and (c) upon the prior written consent of Agent
(such consent not to be unreasonably withheld), the sale of other assets (other
than Receivables, Inventory or General Intangibles) for reasonably equivalent
value and the proceeds of which shall be maintained by Borrowers for use in the
Ordinary Course of Business.
     4.4. Preservation of Collateral. Following the occurrence of a Default or
Event of Default, in addition to the rights and remedies set forth in
Section 11.1 hereof, Agent: (a) may at any time take such steps as Agent deems
necessary to protect Agent’s interest in and to preserve the Collateral,
including the hiring of such security guards or the placing of other security
protection measures as Agent may deem appropriate; (b) may employ and maintain
at any of any Borrower’s premises a custodian who shall have full authority to
do all acts necessary to protect Agent’s interests in the Collateral; (c) may
lease warehouse facilities to which Agent may move all or part of the
Collateral; (d) may use any Borrower’s owned or leased lifts, hoists, trucks and
other facilities or equipment for handling or removing the Collateral; and
(e) shall have, and is hereby granted, a right of ingress and egress to the
places where the Collateral is located, and may proceed over and through any of
Borrowers’ owned or leased property. Each Borrower shall cooperate fully with
all of Agent’s efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Agent may direct. All of Agent’s expenses of
preserving the

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Collateral, including any expenses relating to the bonding of a custodian, shall
be charged to Borrowers’ Account as a Revolving Advance maintained as a Domestic
Rate Loan and added to the Obligations.
     4.5. Ownership of Collateral.
          (a) With respect to the Collateral, at the time the Collateral becomes
subject to Agent’s security interest: (i) each Borrower shall be the sole owner
of and fully authorized and able to sell, transfer, pledge and/or grant a first
priority security interest in each and every item of the its respective
Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall
be free and clear of all Liens and encumbrances whatsoever; (ii) each document
and agreement executed by each Borrower or delivered to Agent or any Lender in
connection with this Agreement shall be true and correct in all respects;
(iii) all signatures and endorsements of each Borrower that appear on such
documents and agreements shall be genuine and each Borrower shall have full
capacity to execute same; and (iv) each Borrower’s Equipment and Inventory shall
be located as set forth on Schedule 4.5 and shall not be removed from such
location(s) without the prior written consent of Agent (it being acknowledged
that Borrowers may move equipment with a book value less than $100,000 in the
aggregate (in one or a series of moves) after the Closing Date from a location
not subject to the Direct TV Security Documents to a location subject to the
Direct TV Security Documents without the prior written consent of Agent) except
with respect to the sale of Inventory in the Ordinary Course of Business and
Equipment to the extent permitted in Section 4.3 hereof.
          (b) (i) There is no location at which any Borrower has any Inventory
(except for Inventory in transit) other than those locations listed on
Schedule 4.5; (ii) Schedule 4.5 hereto contains a correct and complete list, as
of the Closing Date, of the legal names and addresses of each warehouse at which
Inventory of any Borrower is stored; none of the receipts received by any
Borrower from any warehouse states that the goods covered thereby are to be
delivered to bearer or to the order of a named Person or to a named Person and
such named Person’s assigns; (iii) Schedule 4.5 hereto sets forth a correct and
complete list as of the Closing Date of (A) each place of business of each
Borrower and (B) the chief executive office of each Borrower; and (iv) Schedule
4.5 hereto sets forth a correct and complete list as of the Closing Date of the
location, by state and street address, of all Real Property owned or leased by
each Borrower, together with the names and addresses of any landlords.
     4.6. Defense of Agent’s and Lenders’ Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent’s interests in the Collateral shall continue in full force and
effect. During such period no Borrower shall, without Agent’s prior written
consent, pledge, sell (except Inventory in the Ordinary Course of Business and
Equipment to the extent permitted in Section 4.3 hereof), assign, transfer,
create or suffer to exist a Lien upon or encumber or allow or suffer to be
encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Each Borrower shall defend Agent’s interests in the Collateral
against any and all Persons whatsoever. At any time following demand by Agent
for payment of all Obligations, Agent shall have the right to take possession of
the indicia of the Collateral and the Collateral in whatever physical form
contained, including: labels, stationery, documents, instruments and advertising
materials. If Agent exercises this right to take possession of the Collateral,
Borrowers shall, upon demand, assemble it in the best

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manner possible and make it available to Agent at a place reasonably convenient
to Agent. In addition, with respect to all Collateral, Agent and Lenders shall
be entitled to all of the rights and remedies set forth herein and further
provided by the Uniform Commercial Code or other Applicable Law. Each Borrower
shall, and Agent may, at its option, instruct all suppliers, carriers,
forwarders, warehousers or others receiving or holding cash, checks, Inventory,
documents or instruments in which Agent holds a security interest to deliver
same to Agent and/or subject to Agent’s order and if they shall come into any
Borrower’s possession, they, and each of them, shall be held by such Borrower in
trust as Agent’s trustee, and such Borrower will immediately deliver them to
Agent in their original form together with any necessary endorsement.
     4.7. Books and Records. Each Borrower shall: (a) keep proper books of
record and account in which full, true and correct entries will be made of all
dealings or transactions of or in relation to its business and affairs; (b) set
up on its books accruals with respect to all taxes, assessments, charges, levies
and claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including by reason of enumeration, accruals for
premiums, if any, due on required payments and accruals for depreciation,
obsolescence, or amortization of properties), which should be set aside from
such earnings in connection with its business. All determinations pursuant to
this subsection shall be made in accordance with, or as required by, GAAP
consistently applied in the opinion of such independent public accountant as
shall then be regularly engaged by Borrowers.
     4.8. Financial Disclosure. Each Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by such Borrower at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
such Borrower’s financial statements, trial balances or other accounting records
of any sort in the accountant’s or auditor’s possession, and to disclose to
Agent and each Lender any information such accountants may have concerning such
Borrower’s financial status and business operations. Each Borrower hereby
authorizes all Governmental Bodies to furnish to Agent and each Lender copies of
reports or examinations relating to such Borrower, whether made by such Borrower
or otherwise; however, Agent and each Lender will attempt to obtain such
information or materials directly from such Borrower prior to obtaining such
information or materials from such accountants or Governmental Bodies.
     4.9. Compliance with Laws. Each Borrower shall comply with all Applicable
Laws with respect to the Collateral or any part thereof or to the operation of
such Borrower’s business the non-compliance with which could reasonably be
expected to have a Material Adverse Effect. Each Borrower may, however, contest
or dispute any Applicable Laws in any reasonable manner, provided that any
related Lien is inchoate or stayed and sufficient reserves are established to
the reasonable satisfaction of Agent to protect Agent’s Lien on or security
interest in the Collateral.
     4.10. Inspection of Premises. At all reasonable times Agent and each Lender
shall have full access to and the right to audit, check, inspect and make
abstracts and copies from each Borrower’s books, records, audits, correspondence
and all other papers relating to the Collateral and the operation of each
Borrower’s business. Agent, any Lender and their agents may enter upon any
premises of any Borrower at any time during business hours and at any other

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reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of such
Borrower’s business.
     4.11. Insurance. The assets and properties of each Borrower at all times
shall be maintained in accordance with the requirements of all insurance
carriers which provide insurance with respect to the assets and properties of
such Borrower so that such insurance shall remain in full force and effect. Each
Borrower shall bear the full risk of any loss of any nature whatsoever with
respect to the Collateral. At each Borrower’s own cost and expense in amounts
and with carriers acceptable to Agent, each Borrower shall: (a) keep all its
insurable properties and properties in which such Borrower has an interest
insured against the hazards of fire, flood, sprinkler leakage, those hazards
covered by extended coverage insurance and such other hazards, and for such
amounts, as is customary in the case of companies engaged in businesses similar
to such Borrower’s including business interruption insurance; (b) maintain a
bond in such amounts as is customary in the case of companies engaged in
businesses similar to such Borrower insuring against larceny, embezzlement or
other criminal misappropriation of insured’s officers and employees who may
either singly or jointly with others at any time have access to the assets or
funds of such Borrower either directly or through authority to draw upon such
funds or to direct generally the disposition of such assets; (c) maintain public
and product liability insurance against claims for personal injury, death or
property damage suffered by others; (d) maintain all such worker’s compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which such Borrower is engaged in business; (e) furnish Agent
with (i) copies of all policies and evidence of the maintenance of such policies
by the renewal thereof at least thirty (30) days before any expiration date, and
(ii) appropriate loss payable endorsements in form and substance satisfactory to
Agent, naming Agent as a co-insured and loss payee as its interests may appear
with respect to all insurance coverage referred to in clauses (a) and (c) above,
and providing (A) that all proceeds thereunder shall be payable to Agent, (B) no
such insurance shall be affected by any act or neglect of the insured or owner
of the property described in such policy, and (C) that such policy and loss
payable clauses may not be cancelled, amended or terminated unless at least
thirty (30) days’ prior written notice is given to Agent. In the event of any
loss thereunder, the carriers named therein hereby are directed by Agent and the
applicable Borrower to make payment for such loss to Agent and not to such
Borrower and Agent jointly. If any insurance losses are paid by check, draft or
other instrument payable to any Borrower and Agent jointly, Agent may endorse
such Borrower’s name thereon and do such other things as Agent may deem
advisable to reduce the same to cash. So long as no Event of Default has
occurred and is continuing, Borrowers shall have the right to adjust and
compromise claims in amounts less than $100,000 under insurance coverage
referred to in clauses (a) through (c) above; provided further that in the event
that any claim is equal to or exceeds $100,000, Borrower shall have the right to
adjust and compromise such claims subject to the consent of Agent which consent
shall not be unreasonably withheld. All loss recoveries received by Agent upon
any such insurance may be applied to the Obligations, in such order as Agent in
its sole discretion shall determine. Any surplus shall be paid by Agent to
Borrowers or applied as may be otherwise required by law. Any deficiency thereon
shall be paid by Borrowers to Agent, on demand.
     4.12. Failure to Pay Insurance. If any Borrower fails to obtain insurance
as hereinabove provided, or to keep the same in force, Agent, if Agent so
elects, may obtain such insurance and pay the premium therefor on behalf of such
Borrower, and charge Borrowers’ Account therefor

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as a Revolving Advance of a Domestic Rate Loan and such expenses so paid shall
be part of the Obligations.
     4.13. Payment of Taxes. Each Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon such Borrower or
any of the Collateral including real and personal property taxes, assessments
and charges and all franchise, income, employment, social security benefits,
withholding, and sales taxes. If any tax by any Governmental Body is or may be
imposed on or as a result of any transaction between any Borrower and Agent or
any Lender which Agent or any Lender may be required to withhold or pay or if
any taxes, assessments, or other Charges remain unpaid after the date fixed for
their payment, or if any claim shall be made which, in Agent’s or any Lender’s
opinion, may possibly create a valid Lien on the Collateral, Agent may without
notice to Borrowers pay the taxes, assessments or other Charges and each
Borrower hereby indemnifies and holds Agent and each Lender harmless in respect
thereof. Agent will not pay any taxes, assessments or Charges to the extent that
any applicable Borrower has Properly Contested those taxes, assessments or
Charges. The amount of any payment by Agent under this Section 4.13 shall be
charged to Borrowers’ Account as a Revolving Advance maintained as a Domestic
Rate Loan and added to the Obligations and, until Borrowers shall furnish Agent
with an indemnity therefor (or supply Agent with evidence satisfactory to Agent
that due provision for the payment thereof has been made), Agent may hold
without interest any balance standing to Borrowers’ credit and Agent shall
retain its security interest in and Lien on any and all Collateral held by
Agent.
     4.14. Payment of Leasehold Obligations. Each Borrower shall at all times
pay, when and as due, its rental obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Agent’s
request will provide evidence of having done so.
     4.15. Receivables.
          (a) Nature of Receivables. Each of the Receivables shall be a bona
fide and valid account representing a bona fide indebtedness incurred by the
Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of a Borrower, or work, labor or services theretofore
rendered by a Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with the applicable Borrower’s standard terms of
sale without dispute, setoff or counterclaim except as may be stated on the
accounts receivable schedules delivered by Borrowers to Agent.
          (b) Solvency of Customers. Each Customer, to the best of each
Borrower’s knowledge, as of the date each Receivable is created, is and will be
solvent and able to pay all Receivables on which the Customer is obligated in
full when due or with respect to such Customers of any Borrower who are not
solvent such Borrower has set up on its books and in its financial records bad
debt reserves adequate to cover such Receivables.
          (c) Location of Borrowers. Each Borrower’s chief executive office is
located at 6740 Shady Oak Road, Eden Prairie, Minnesota 55344. Until written
notice is given to Agent

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by Borrowing Agent of any other office at which any Borrower keeps its records
pertaining to Receivables, all such records shall be kept at such executive
office.
          (d) Collection of Receivables; Credit Card Notifications.
               (i) Borrowers shall instruct their Customers to deliver all
remittances upon Receivables to such lockbox account or Blocked Account as Agent
shall designate from time to time as contemplated by Section 4.15(h) or as
otherwise agreed to from time to time by Agent. Notwithstanding the foregoing,
to the extent any Borrower directly receives any remittances upon Receivables,
such Borrower will, at such Borrower’s sole cost and expense, but on Agent’s
behalf and for Agent’s account, collect as Agent’s property and in trust for
Agent all amounts received on Receivables, and shall not commingle such
collections with any Borrower’s funds or use the same except to pay Obligations.
Each Borrower shall deposit in the Blocked Account or, upon request by Agent,
deliver to Agent, in original form and on the date of receipt thereof, all
checks, drafts, notes, money orders, acceptances, cash and other evidences of
Indebtedness. The Borrowers shall use commercially reasonable efforts to cause
the ACH or wire transfer of all payments due from credit card processors
(whether or not there are then any outstanding Obligations) to be made to a
Blocked Account with such frequency as is consistent with the Borrowers’ current
business practices as in effect on the Closing Date.
               (ii) Borrowers shall deliver to the Agent copies of notifications
(each, a “Credit Card Notification”) substantially in the form attached hereto
as Exhibit 4.15(d)(ii) which have been executed on behalf of such Borrower and
which shall, upon satisfaction of the covenant set forth in Section 6.11, be
delivered to such Borrower’s credit card clearinghouses and processors listed on
Schedule 5.28.
          (e) Notification of Assignment of Receivables. At any time, Agent
shall have the right to send notice of the assignment of, and Agent’s security
interest in and Lien on, the Receivables to any and all Customers or any third
party holding or otherwise concerned with any of the Collateral. Thereafter,
Agent shall have the sole right to collect the Receivables, take possession of
the Collateral, or both. Agent’s actual collection expenses, including, but not
limited to, stationery and postage, telephone and telegraph, secretarial and
clerical expenses and the salaries of any collection personnel used for
collection, may be charged to Borrowers’ Account and added to the Obligations.
          (f) Power of Agent to Act on Borrowers’ Behalf. Agent shall have the
right to receive, endorse, assign and/or deliver in the name of Agent or any
Borrower any and all checks, drafts and other instruments for the payment of
money relating to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Each
Borrower hereby constitutes Agent or Agent’s designee as such Borrower’s
attorney with power (i) at any time: (A) to endorse such Borrower’s name upon
any notes, acceptances, checks, drafts, money orders or other evidences of
payment or Collateral; (B) to sign such Borrower’s name on any invoice or bill
of lading relating to any of the Receivables, drafts against Customers,
assignments and verifications of Receivables; (C) to send verifications of
Receivables to any Customer; (D) to sign such Borrower’s name on all financing
statements or any other documents or instruments deemed necessary or appropriate
by Agent to preserve, protect, or perfect Agent’s interest in the Collateral and
to file same; and (ii) at any time

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following the occurrence of a Default or Event of Default: (A) to demand payment
of the Receivables; (B) to enforce payment of the Receivables by legal
proceedings or otherwise; (C) to exercise all of such Borrower’s rights and
remedies with respect to the collection of the Receivables and any other
Collateral; (D) to settle, adjust, compromise, extend or renew the Receivables;
(E) to settle, adjust or compromise any legal proceedings brought to collect
Receivables; (F) to prepare, file and sign such Borrower’s name on a proof of
claim in bankruptcy or similar document against any Customer; (G) to prepare,
file and sign such Borrower’s name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Receivables; and
(H) to do all other acts and things necessary to carry out this Agreement. All
acts of said attorney or designee are hereby ratified and approved, and said
attorney or designee shall not be liable for any acts of omission or commission
nor for any error of judgment or mistake of fact or of law, unless done
maliciously or with gross (not mere) negligence (as determined by a court of
competent jurisdiction in a final non-appealable judgment); this power being
coupled with an interest is irrevocable while any of the Obligations remain
unpaid. Agent shall have the right at any time following the occurrence of an
Event of Default or Default, to change the address for delivery of mail
addressed to any Borrower to such address as Agent may designate and to receive,
open and dispose of all mail addressed to any Borrower.
          (g) No Liability. Neither Agent nor any Lender shall, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables or any instrument received in payment thereof, or for
any damage resulting therefrom. Following the occurrence of an Event of Default
or Default Agent may, without notice or consent from any Borrower, sue upon or
otherwise collect, extend the time of payment of, compromise or settle for cash,
credit or upon any terms any of the Receivables or any other securities,
instruments or insurance applicable thereto and/or release any obligor thereof.
Agent is authorized and empowered to accept following the occurrence of an Event
of Default or Default the return of the goods represented by any of the
Receivables, without notice to or consent by any Borrower, all without
discharging or in any way affecting any Borrower’s liability hereunder.
          (h) Establishment of a Lockbox Account, Dominion Account. All proceeds
of Collateral shall be deposited by Borrowers into either (i) a lockbox account,
dominion account or such other “blocked account” (“Blocked Accounts”)
established at a bank or banks (each such bank, a “Blocked Account Bank”)
pursuant to an arrangement with such Blocked Account Bank as may be selected by
Borrowing Agent and be acceptable to Agent or (ii) depository accounts
(“Depository Accounts”) established at the Agent for the deposit of such
proceeds. Each applicable Borrower, Agent and each Blocked Account Bank shall
enter into a deposit account control agreement in form and substance
satisfactory to Agent directing such Blocked Account Bank to transfer such funds
so deposited to Agent, either to any account maintained by Agent at said Blocked
Account Bank or by wire transfer to appropriate account(s) of Agent. All funds
deposited in such Blocked Accounts shall immediately become the property of
Agent and Borrowing Agent shall obtain the agreement by such Blocked Account
Bank to waive any offset rights against the funds so deposited. Neither Agent
nor any Lender assumes any responsibility for such blocked account arrangement,
including any claim of accord and satisfaction or release with respect to
deposits accepted by any Blocked Account Bank thereunder. All deposit

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accounts and investment accounts of each Borrower and its Subsidiaries are set
forth on Schedule 4.15(h).
               (i) Adjustments. No Borrower will, without Agent’s consent,
compromise or adjust any material amount of the Receivables (or extend the time
for payment thereof) or accept any material returns of merchandise or grant any
additional discounts, allowances or credits thereon except for those
compromises, adjustments, returns, discounts, credits and allowances as have
been heretofore customary in the business of such Borrower.
     4.16. Inventory. To the extent Inventory held for sale or lease has been
produced by any Borrower, it has been and will be produced by such Borrower in
accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders thereunder.
     4.17. Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved. No
Borrower shall use or operate the Equipment in violation of any law, statute,
ordinance, code, rule or regulation. Each Borrower shall have the right to sell
Equipment to the extent set forth in Section 4.3 hereof.
     4.18. Exculpation of Liability. Nothing herein contained shall be construed
to constitute Agent or any Lender as any Borrower’s agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof. Neither
Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of any Borrower’s obligations under any contract or
agreement assigned to Agent or such Lender, and neither Agent nor any Lender
shall be responsible in any way for the performance by any Borrower of any of
the terms and conditions thereof.
     4.19. Environmental Matters.
          (a) Borrowers shall ensure that the Real Property and all operations
and businesses conducted thereon remains in compliance with all Environmental
Laws and they shall not place or permit to be placed any Hazardous Substances on
any Real Property except as permitted by Applicable Law or appropriate
governmental authorities.
          (b) Borrowers shall establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws which system
shall include periodic reviews of such compliance.
          (c) Borrowers shall (i) employ in connection with the use of the Real
Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall use their best efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrowers in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.

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          (d) In the event any Borrower obtains, gives or receives notice of any
Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a “Hazardous Discharge”) or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or any
Borrower’s interest therein (any of the foregoing is referred to herein as an
“Environmental Complaint”) from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the “Authority”), then Borrowing
Agent shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which any Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Agent to protect its security interest in and Lien on the Real
Property and the Collateral and is not intended to create nor shall it create
any obligation upon Agent or any Lender with respect thereto.
          (e) Borrowing Agent shall promptly forward to Agent copies of any
request for information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated or used by any
Borrower to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between any Borrower and the Authority regarding such claims
to Agent until the claim is settled. Borrowing Agent shall promptly forward to
Agent copies of all documents and reports concerning a Hazardous Discharge at
the Real Property that any Borrower is required to file under any Environmental
Laws. Such information is to be provided solely to allow Agent to protect
Agent’s security interest in and Lien on the Real Property and the Collateral.
          (f) Borrowers shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or Real Property to
any Lien. If any Borrower shall fail to respond promptly to any Hazardous
Discharge or Environmental Complaint or any Borrower shall fail to comply with
any of the requirements of any Environmental Laws, Agent on behalf of Lenders
may, but without the obligation to do so, for the sole purpose of protecting
Agent’s interest in the Collateral: (i) give such notices or (ii) enter onto the
Real Property (or authorize third parties to enter onto the Real Property) and
take such actions as Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans constituting Revolving Advances shall
be paid upon demand by Borrowers, and until paid shall be added to and become a
part of the Obligations secured by the Liens created by the terms of this
Agreement or any other agreement between Agent, any Lender and any Borrower.

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          (g) Promptly upon the written request of Agent from time to time,
Borrowers shall provide Agent, at Borrowers’ expense, with an environmental site
assessment or environmental audit report prepared by an environmental
engineering firm acceptable in the reasonable opinion of Agent, to assess with a
reasonable degree of certainty the existence of a Hazardous Discharge and the
potential costs in connection with abatement, cleanup and removal of any
Hazardous Substances found on, under, at or within the Real Property. Any report
or investigation of such Hazardous Discharge proposed and acceptable to an
appropriate Authority that is charged to oversee the clean-up of such Hazardous
Discharge shall be acceptable to Agent. If such estimates, individually or in
the aggregate, exceed $100,000, Agent shall have the right to require Borrowers
to post a bond, letter of credit or other security reasonably satisfactory to
Agent to secure payment of these costs and expenses.
          (h) Borrowers shall defend and indemnify Agent and Lenders and hold
Agent, Lenders and their respective employees, agents, directors and officers
harmless from and against all loss, liability, damage and expense, claims,
costs, fines and penalties, including attorney’s fees, suffered or incurred by
Agent or Lenders under or on account of any Environmental Laws, including the
assertion of any Lien thereunder, with respect to any Hazardous Discharge, the
presence of any Hazardous Substances affecting the Real Property, whether or not
the same originates or emerges from the Real Property or any contiguous real
estate, including any loss of value of the Real Property as a result of the
foregoing except to the extent such loss, liability, damage and expense is
attributable to any Hazardous Discharge resulting from actions on the part of
Agent or any Lender. Borrowers’ obligations under this Section 4.19 shall arise
upon the discovery of the presence of any Hazardous Substances at the Real
Property, whether or not any federal, state, or local environmental agency has
taken or threatened any action in connection with the presence of any Hazardous
Substances. Borrowers’ obligation and the indemnifications hereunder shall
survive the termination of this Agreement.
          (i) For purposes of Section 4.19 and 5.7, all references to Real
Property shall be deemed to include all of each Borrower’s right, title and
interest in and to its owned and leased premises.
     4.20. Financing Statements. Except as respects the financing statements
filed by Agent and the financing statements described on Schedule 1.2, no
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
     Each Borrower represents and warrants as follows:
     5.1. Authority. Each Borrower has full power, authority and legal right to
enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. This Agreement and the Other
Documents have been duly executed and delivered by each Borrower, and this
Agreement and the Other Documents constitute the legal, valid and binding
obligation of such Borrower enforceable in accordance with their terms, except
as such enforceability may be limited by any applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors’ rights generally. The execution,
delivery and performance of this Agreement and of the Other Documents (a) are
within such Borrower’s corporate powers,

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have been duly authorized by all necessary corporate action, are not in
contravention of law or the terms of such Borrower’s by-laws, certificate of
incorporation or other applicable documents relating to such Borrower’s
formation or to the conduct of such Borrower’s business or of any material
agreement or undertaking to which such Borrower is a party or by which such
Borrower is bound, (b) will not conflict with or violate any law or regulation,
or any judgment, order or decree of any Governmental Body, (c) will not require
the Consent of any Governmental Body or any other Person, except those Consents
set forth on Schedule 5.1 hereto, all of which will have been duly obtained,
made or compiled prior to the Closing Date and which are in full force and
effect and (d) will not conflict with, nor result in any breach in any of the
provisions of or constitute a default under or result in the creation of any
Lien except Permitted Encumbrances upon any asset of such Borrower under the
provisions of any agreement, charter document, instrument, by-law or other
instrument to which such Borrower is a party or by which it or its property is a
party or by which it may be bound.
     5.2. Formation and Qualification.
          (a) Each Borrower is duly incorporated and in good standing under the
laws of the state listed on Schedule 5.2(a) and is qualified to do business and
is in good standing in the states listed on Schedule 5.2(a) which constitute all
states in which qualification and good standing are necessary for such Borrower
to conduct its business and own its property and where the failure to so qualify
could reasonably be expected to have a Material Adverse Effect on such Borrower.
Each Borrower has delivered to Agent true and complete copies of its certificate
of incorporation and by-laws and will promptly notify Agent of any amendment or
changes thereto.
          (b) The only Subsidiaries of each Borrower are listed on
Schedule 5.2(b).
     5.3. Survival of Representations and Warranties. All representations and
warranties of such Borrower contained in this Agreement and the Other Documents
shall be true at the time of such Borrower’s execution of this Agreement and the
Other Documents, and shall survive the execution, delivery and acceptance
thereof by the parties thereto and the closing of the transactions described
therein or related thereto.
     5.4. Tax Returns. Each Borrower’s federal tax identification number is set
forth on Schedule 5.4. Each Borrower has filed all federal, state and local tax
returns and other reports each is required by law to file and has paid all
taxes, assessments, fees and other governmental charges that are due and
payable. Federal, state and local income tax returns of each Borrower have been
examined and reported upon by the appropriate taxing authority or closed by
applicable statute and satisfied for all fiscal years prior to and including the
fiscal year ending February 4, 2006. The provision for taxes on the books of
each Borrower is adequate for all years not closed by applicable statutes, and
for its current fiscal year, and no Borrower has any knowledge of any deficiency
or additional assessment in connection therewith not provided for on its books.
     5.5. Financial Statements.
          (a) The pro forma balance sheet of Borrowers on a Consolidated Basis
(the “Pro Forma Balance Sheet”) dated October 31, 2009 is accurate, complete and
correct and fairly

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reflects the financial condition of Borrowers on a Consolidated Basis as of
October 31, 2009, and has been prepared in accordance with GAAP, consistently
applied. The Pro Forma Balance Sheet has been certified as accurate, complete
and correct in all material respects by the President and Chief Financial
Officer of Borrowing Agent. All financial statements referred to in this
subsection 5.5(a), including the related schedules and notes thereto, have been
prepared, in accordance with GAAP, except as may be disclosed in such financial
statements.
          (b) The twelve-month cash flow projections of Borrowers on a
Consolidated Basis and their projected balance sheets as of the Closing Date
delivered to Agent (the “Projections”) were prepared by the Chief Financial
Officer of ValueVision, are based on underlying assumptions which provide a
reasonable basis for the projections contained therein and reflect Borrowers’
judgment based on present circumstances of the most likely set of conditions and
course of action for the projected period. The cash flow Projections together
with the Pro Forma Balance Sheet, are referred to as the “Pro Forma Financial
Statements”.
          (c) The consolidated and consolidating balance sheets of Borrowers,
their Subsidiaries and such other Persons described therein (including the
accounts of all Subsidiaries for the respective periods during which a
subsidiary relationship existed) as of January 31, 2009, and the related
statements of income, changes in stockholder’s equity, and changes in cash flow
for the period ended on such date, all accompanied by reports thereon containing
opinions without qualification by independent certified public accountants,
copies of which have been delivered to Agent, have been prepared in accordance
with GAAP, consistently applied (except for changes in application in which such
accountants concur and present fairly the financial position of Borrowers and
their Subsidiaries at such date and the results of their operations for such
period. Since January 31, 2009 there has been no change in the condition,
financial or otherwise, of Borrowers or their Subsidiaries as shown on the
consolidated balance sheet as of such date and no change in the aggregate value
of machinery, equipment and Real Property owned by Borrowers and their
respective Subsidiaries, except changes in the Ordinary Course of Business, none
of which individually or in the aggregate has been materially adverse.
     5.6. Entity Names. No Borrower has been known by any other corporate name
in the past five years and does not sell Inventory under any other name except
as set forth on Schedule 5.6, nor has any Borrower been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person during the preceding five (5) years.
     5.7. OSHA and Environmental Compliance.
          (a) Each Borrower has duly complied with, and its facilities,
business, assets, property, leaseholds, Real Property and Equipment are in
compliance in all material respects with, the provisions of the Federal
Occupational Safety and Health Act, the Environmental Protection Act, RCRA and
all other Environmental Laws; there have been no outstanding citations, notices
or orders of non-compliance issued to any Borrower or relating to its business,
assets, property, leaseholds or Equipment under any such laws, rules or
regulations.
          (b) Each Borrower has been issued all required federal, state and
local licenses, certificates or permits relating to all applicable Environmental
Laws.

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          (c) (i) There are no visible signs of releases, spills, discharges,
leaks or disposal (collectively referred to as “Releases”) of Hazardous
Substances at, upon, under or within any Real Property including any premises
leased by any Borrower; (ii) there are no underground storage tanks or
polychlorinated biphenyls on the Real Property including any premises leased by
any Borrower; (iii) the Real Property including any premises leased by any
Borrower has never been used as a treatment, storage or disposal facility of
Hazardous Waste; and (iv) no Hazardous Substances are present on the Real
Property including any premises leased by any Borrower, excepting such
quantities as are handled in accordance with all applicable manufacturer’s
instructions and governmental regulations and in proper storage containers and
as are necessary for the operation of the commercial business of any Borrower or
of its tenants.
     5.8. Solvency; No Litigation, Violation, Indebtedness or Default; ERISA
Compliance.
          (a) Each Borrower is solvent, able to pay its debts as they mature,
will have capital sufficient to carry on its business and all businesses in
which it is about to engage, and (i) as of the Closing Date, the fair present
saleable value of its assets, calculated on a going concern basis, is in excess
of the amount of its liabilities and (ii) subsequent to the Closing Date, the
fair saleable value of its assets (calculated on a going concern basis) will be
in excess of the amount of its liabilities.
          (b) Except as disclosed in Schedule 5.8(b), no Borrower has (i) any
pending or threatened litigation, arbitration, actions or proceedings which
involve the possibility of having a Material Adverse Effect, and (ii) any
liabilities or indebtedness for borrowed money other than the Obligations.
          (c) No Borrower is in violation of any applicable statute, law, rule,
regulation or ordinance in any respect which could reasonably be expected to
have a Material Adverse Effect, nor is any Borrower in violation of any order of
any court, Governmental Body or arbitration board or tribunal.
          (d) No Borrower nor any member of the Controlled Group maintains or is
required to contribute to any Plan other than those listed on Schedule 5.8(d)
hereto. (i) No Plan has incurred any “accumulated funding deficiency,” as
defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or
not waived, each Borrower and each member of the Controlled Group has met all
applicable minimum funding requirements under Section 302 of ERISA and
Section 412 of the Code in respect of each Plan, and each Plan is in compliance
with Sections 412, 430 and 436 of the Code and Sections 206(g), 302 and 303 of
ERISA, without regard to waivers and variances; (ii) each Plan which is intended
to be a qualified plan under Section 401(a) of the Code as currently in effect
has been determined by the Internal Revenue Service to be qualified under
Section 401(a) of the Code and the trust related thereto is exempt from federal
income tax under Section 501(a) of the Code; (iii) neither any Borrower nor any
member of the Controlled Group has incurred any liability to the PBGC other than
for the payment of premiums, and there are no premium payments which have become
due which are unpaid; (iv) no Plan has been terminated by the plan administrator
thereof nor by the PBGC, and there is no occurrence which would cause the PBGC
to institute proceedings under Title IV of ERISA to terminate any Plan; (v) at
this time, the current value of the assets of each Plan exceeds the present
value of the accrued benefits and other liabilities of such Plan and neither

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any Borrower nor any member of the Controlled Group knows of any facts or
circumstances which would materially change the value of such assets and accrued
benefits and other liabilities; (vi) neither any Borrower nor any member of the
Controlled Group has breached any of the responsibilities, obligations or duties
imposed on it by ERISA with respect to any Plan; (vii) neither any Borrower nor
any member of a Controlled Group has incurred any liability for any excise tax
arising under Section 4971, 4972 or 4980B of the Code, and no fact exists which
could give rise to any such liability; (viii) neither any Borrower nor any
member of the Controlled Group nor any fiduciary of, nor any trustee to, any
Plan, has engaged in a “prohibited transaction” described in Section 406 of the
ERISA or Section 4975 of the Code nor taken any action which would constitute or
result in a Termination Event with respect to any such Plan which is subject to
ERISA; (ix) each Borrower and each member of the Controlled Group has made all
contributions due and payable with respect to each Plan; (x) there exists no
event described in Section 4043(b) of ERISA, for which the thirty (30) day
notice period has not been waived; (xi) neither any Borrower nor any member of
the Controlled Group has any fiduciary responsibility for investments with
respect to any plan existing for the benefit of persons other than employees or
former employees of any Borrower or any member of the Controlled Group;
(xii) neither any Borrower nor any member of the Controlled Group maintains or
is required to contribute to any Plan which provides health, accident or life
insurance benefits to former employees, their spouses or dependents, other than
in accordance with Section 4980B of the Code; (xiii) neither any Borrower nor
any member of the Controlled Group has withdrawn, completely or partially,
within the meaning of Section 4203 or 4205 of ERISA, from any Multiemployer Plan
so as to incur liability under the Multiemployer Pension Plan Amendments Act of
1980 and there exists no fact which would reasonably be expected to result in
any such liability; and (xiv) no Plan fiduciary (as defined in Section 3(21) of
ERISA) has any liability for breach of fiduciary duty or for any failure in
connection with the administration or investment of the assets of a Plan.
     5.9. Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by any Borrower are
set forth on Schedule 5.9, are valid and have been duly registered or filed with
all appropriate Governmental Bodies and constitute all of the intellectual
property rights which are necessary for the operation of its business; there is
no objection to or pending challenge to the validity of any such patent,
trademark, copyright, design rights, tradename, trade secret or license and no
Borrower is aware of any grounds for any challenge, except as set forth in
Schedule 5.9 hereto. Each patent, patent application, patent license, trademark,
trademark application, trademark license, service mark, service mark
application, service mark license, design rights, copyright, copyright
application and copyright license owned or held by any Borrower and all trade
secrets used by any Borrower consist of original material or property developed
by such Borrower or was lawfully acquired by such Borrower from the proper and
lawful owner thereof. Each of such items has been maintained so as to preserve
the value thereof from the date of creation or acquisition thereof.
     5.10. Licenses and Permits. Except as set forth in Schedule 5.10, each
Borrower (a) is in compliance with and (b) has procured and is now in possession
of, all material licenses or permits required by any applicable federal, state
or local law, rule or regulation for the operation

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of its business in each jurisdiction wherein it is now conducting or proposes to
conduct business and where the failure to procure such licenses or permits could
have a Material Adverse Effect.
     5.11. Default of Indebtedness. No Borrower is in default in the payment of
the principal of or interest on any Indebtedness or under any instrument or
agreement under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or agreement
which with or without the lapse of time or the giving of notice, or both,
constitutes or would constitute an event of default thereunder.
     5.12. No Default. No Borrower is in default in the payment or performance
of any of its contractual obligations and no Default has occurred.
     5.13. No Burdensome Restrictions. No Borrower is party to any contract or
agreement the performance of which could have a Material Adverse Effect. Each
Borrower has heretofore delivered to Agent true and complete copies of all
material contracts to which it is a party or to which it or any of its
properties is subject. No Borrower has agreed or consented to cause or permit in
the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien which
is not a Permitted Encumbrance.
     5.14. No Labor Disputes. No Borrower is involved in any labor dispute;
there are no strikes or walkouts or union organization of any Borrower’s
employees threatened or in existence and no labor contract is scheduled to
expire during the Term other than as set forth on Schedule 5.14 hereto.
     5.15. Margin Regulations. No Borrower is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of “purchasing” or “carrying” any “margin stock” within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of any Advance will be used for
“purchasing” or “carrying” “margin stock” as defined in Regulation U of such
Board of Governors.
     5.16. Investment Company Act. No Borrower is an “investment company”
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
     5.17. Disclosure. No representation or warranty made by any Borrower in
this Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith or therewith contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. There is no fact known to
any Borrower or which reasonably should be known to such Borrower which such
Borrower has not disclosed to Agent in writing with respect to the transactions
contemplated by this Agreement which could reasonably be expected to have a
Material Adverse Effect.
     5.18. Intentionally Omitted.

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     5.19. Swaps. No Borrower is a party to, nor will it be a party to, any swap
agreement whereby such Borrower has agreed or will agree to swap interest rates
or currencies unless same provides that damages upon termination following an
event of default thereunder are payable on an unlimited “two-way basis” without
regard to fault on the part of either party.
     5.20. Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on any Borrower or
affecting the Collateral conflicts with, or requires any Consent which has not
already been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.
     5.21. Application of Certain Laws and Regulations. Neither any Borrower nor
any Affiliate of any Borrower is subject to any law, statute, rule or regulation
which regulates the incurrence of any Indebtedness, including laws, statutes,
rules or regulations relative to common or interstate carriers or to the sale of
electricity, gas, steam, water, telephone, telegraph or other public utility
services.
     5.22. Business and Property of Borrowers. Upon and after the Closing Date,
Borrowers do not propose to engage in any business other than the sales,
marketing and distribution of consumer products through television programming
and other electronic media and activities necessary to conduct the foregoing. On
the Closing Date, each Borrower will own all the property and possess all of the
rights and Consents necessary for the conduct of the business of such Borrower.
     5.23. Section 20 Subsidiaries. Borrowers do not intend to use and shall not
use any portion of the proceeds of the Advances, directly or indirectly, to
purchase during the underwriting period, or for 30 days thereafter, Ineligible
Securities being underwritten by a Section 20 Subsidiary.
     5.24. Anti-Terrorism Laws.
          (a) Neither any Borrower nor any Affiliate of any Borrower is in
violation of any Anti-Terrorism Law or engages in or conspires to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in any Anti-Terrorism
Law.
          (b) Neither any Borrower nor any Affiliate of any Borrower or their
respective agents acting or benefiting in any capacity in connection with the
Advances or other transactions hereunder, is any of the following (each a
“Blocked Person”):
               (i) a Person that is listed in the annex to, or is otherwise
subject to the provisions of, the Executive Order No. 13224;
               (ii) a Person owned or controlled by, or acting for or on behalf
of, any Person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order No. 13224;

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               (iii) a Person or entity with which any Lender is prohibited from
dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;
               (iv) a Person or entity that commits, threatens or conspires to
commit or supports “terrorism” as defined in the Executive Order No. 13224;
               (v) a Person or entity that is named as a “specially designated
national” on the most current list published by the U.S. Treasury Department
Office of Foreign Asset Control at its official website or any replacement
website or other replacement official publication of such list, or
               (vi) a Person or entity who is affiliated or associated with a
Person or entity listed above.
     Neither any Borrower nor to the knowledge of any Borrower, any of its
agents acting in any capacity in connection with the Advances or other
transactions hereunder (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person, or (ii) deals in, or otherwise engages in any transaction
relating to, any property or interests in property blocked pursuant to the
Executive Order No. 13224.
     5.25. Trading with the Enemy. No Borrower has engaged, nor does it intend
to engage, in any business or activity prohibited by the Trading with the Enemy
Act.
     5.26. Federal Securities Laws. Neither any Borrower (other than
ValueVision) nor any of its Subsidiaries (i) is required to file periodic
reports under the Exchange Act, (ii) has any securities registered under the
Exchange Act or (iii) has filed a registration statement that has not yet become
effective under the Securities Act.
     5.27. Equity Interests. The authorized and outstanding Equity Interests of
each Borrower is as shown on Schedule 5.27 hereto. All of the Equity Interests
of each Borrower (other than ValueVision) has been duly and validly authorized
and issued and is fully paid and non-assessable and has been sold and delivered
to the holders hereof in compliance with, or under valid exemption from, all
federal and state laws and the rules and regulations of each Governmental Body
governing the sale and delivery of securities. Except for the rights and
obligations shown on Schedule 5.27, there are no subscriptions, warrants,
options, calls, commitments, rights or agreement by which any Borrower or any of
the shareholders of any Borrower is bound relating to the issuance, transfer,
voting or redemption of shares of its Equity Interests or any pre-emptive rights
held by any Person with respect to the Equity Interests of Borrowers. Except as
shown on Schedule 5.27, Borrowers have not issued any securities convertible
into or exchangeable for shares of its Equity Interests or any options, warrants
or other rights to acquire such shares or securities convertible into or
exchangeable for such shares.
     5.28. Credit Card Arrangements. Attached hereto as Schedule 5.28 is a list
describing all arrangements as of the Closing Date to which any Borrower is a
party with respect to the processing and/or payment to such Borrower of the
proceeds of any Credit Card Receivables (including credit card charges and debit
card charges) for sales made by such Borrower.

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     5.29. Inactive Subsidiaries. Each of Iosota, Fanbuzz and Fanbuzz Retail are
inactive Subsidiaries of Borrowers and do not conduct any business or maintain
any material asserts.
VI. AFFIRMATIVE COVENANTS.
     Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
     6.1. Payment of Fees. Pay to Agent on demand all usual and customary fees
and expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h). Agent may, without
making demand, charge Borrowers’ Account for all such fees and expenses.
     6.2. Conduct of Business and Maintenance of Existence and Assets.
(a) Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including all licenses, patents, copyrights, design rights,
tradenames, trade secrets and trademarks and take all actions necessary to
enforce and protect the validity of any intellectual property right or other
right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect; and (c) make all such
reports and pay all such franchise and other taxes and license fees and do all
such other acts and things as may be lawfully required to maintain its rights,
licenses, leases, powers and franchises under the laws of the United States or
any political subdivision thereof where the failure to do so could reasonably be
expected to have a Material Adverse Effect.
     6.3. Violations. Promptly notify Agent in writing of any violation of any
law, statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to any Borrower which could reasonably be expected to have a
Material Adverse Effect.
     6.4. Government Receivables. Take all steps necessary to protect Agent’s
interest in the Collateral under the Federal Assignment of Claims Act, the
Uniform Commercial Code and all other applicable state or local statutes or
ordinances and deliver to Agent appropriately endorsed, any instrument or
chattel paper connected with any Receivable arising out of contracts between any
Borrower and the United States, any state or any department, agency or
instrumentality of any of them.
     6.5. Financial Covenants.
          (a) Fixed Charge Coverage Ratio. On or before March 31, 2010,
Borrowers and Agent shall enter into an amendment to this Agreement setting
Fixed Charge Coverage Ratio covenants reasonably acceptable to Borrowing Agent
and Agent, such covenants to commence with the fiscal quarter ending
[October 31, 2010] and continuing at the end of each fiscal quarter thereafter,
measured on a rolling four (4) quarter basis. In the event that Borrowing Agent
and Agent do not have an amendment executed in accordance with this
Section 6.5(a) and if at any

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time during any fiscal quarter commencing with the quarter ending [October 31,
2010] or any quarter thereafter, Borrowers have more than $8,000,000 of
outstanding Revolving Advances or if Undrawn Availability (Modified) is less
than $10,000,000, Borrowers shall cause to be maintained as of the end of such
fiscal quarter, a Fixed Charge Coverage Ratio of not less than 1.0 to 1.0,
measured on a trailing four (4) quarter basis.
          (b) Minimum EBITDA. If at any time during any fiscal quarter through
fiscal quarter ending July 31, 2010, Borrowers have more than $8,000,000 of
outstanding Revolving Advances or if Undrawn Availability (Modified) is less
than $10,000,000, cause to be achieved a minimum EBITDA of not less than the
following amounts for the end of such quarter (i) ($12,000,000) for the nine (9)
month period ending January 30, 2010, (ii) ($12,000,000) for the twelve
(12) month period ending May 1, 2010 and (iv) ($4,000,000) for the twelve
(12) month period ending July 31, 2010.
          (c) Tangible Net Worth. If at any time during any fiscal quarter
through fiscal quarter ending July 31, 2010, Borrowers have more than $8,000,000
of outstanding Revolving Advances or if Undrawn Availability (Modified) falls
below $10,000,000, cause to be achieved a Tangible Net Worth of $20,000,000.
          (d) Average FICO Score. Cause at all times the Average FICO Score of
all Customers participating in the Value Pay Plan to exceed 620 to be tested on
a rolling six month basis.
          (e) At no time shall Borrowers permit the Average FICO Score to be
less than 600 in any two (2) consecutive months.
     6.6. Execution of Supplemental Instruments. Execute and deliver to Agent
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
     6.7. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and each Borrower shall have provided for such reserves as Agent may
reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of Lenders.
     6.8. Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, and 9.13 as to which
GAAP is applicable to be complete and correct in all material respects (subject,
in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).

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     6.9. Federal Securities Laws. Promptly notify Agent in writing if any
Borrower (other than ValueVision) or any of its Subsidiaries (i) is required to
file periodic reports under the Exchange Act, (ii) registers any securities
under the Exchange Act or (iii) files a registration statement under the
Securities Act.
     6.10. Post Closing Matters.
          (a) On or before December 31, 2009, cause all of Borrowers’ collection
accounts to be established with Agent and Borrowers hereby agree and acknowledge
that until such accounts have been established with Agent, any obligation of
Agent to make any Revolving Advance or issue any Letter of Credit hereunder is
discretionary.
          (b) Within sixty (60) days of the Closing Date, cause to be delivered
to Agent a Securities Account Control Agreement among Agent, Borrowers and Wells
Fargo relating to Borrowers’ investment account #2164267 or at Borrowers’ option
close such account and open similar investment account(s) with Agent or Agent’s
Affiliates. Borrowers hereby agree and acknowledge that until the conditions in
the foregoing sentence have been satisfied, any obligation of Agent to make any
Revolving Advance or issue any Letter of Credit hereunder is discretionary.
          (c) Within sixty (60) days of the Closing Date, cause to be delivered
to Agent a Deposit Account Control Agreement Agent, Borrowers and Wells Fargo
relating to Borrowers’ concentration account #1068699 such agreements to be in
form and substance satisfactory to Agent in its reasonable discretion unless
Agent and Borrowers determine that all collections on account of Borrowers’
Receivables are being paid to any collection maintained with Agent and the
account at Wells Fargo is closed. Borrowers hereby agree and acknowledge that
until the conditions in the foregoing sentence have been satisfied, any
obligation of Agent to make any Revolving Advance or issue any Letter of Credit
hereunder is discretionary.
          (d) Promptly following the Closing Date, deliver to Agent evidence
that the Direct TV Mortgages have been delivered to the applicable Governmental
Body for recording in the proper real estate records office and upon receipt of
recorded copies, deliver to Agent a copy of the recorded Direct TV Mortgages.
VII. NEGATIVE COVENANTS.
     No Borrower shall, until satisfaction in full of the Obligations and
termination of this Agreement:
     7.1. Merger, Consolidation, Acquisition and Sale of Assets.
          (a) Other than transactions among Borrowers or a Permitted
Acquisition, enter into any merger, consolidation or other reorganization with
or into any other Person or acquire all or a substantial portion of the assets
or Equity Interests of any Person or permit any other Person to consolidate with
or merge with it.
          (b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except (i) dispositions of Inventory and Equipment to the
extent expressly permitted by Section

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4.3, (ii) the sale, lease or transfer from one Borrower to another Borrower, or
(iii) any other sales or dispositions expressly permitted by this Agreement.
     7.2. Creation of Liens. Create or suffer to exist any Lien or transfer upon
or against any of its property or assets now owned or hereafter acquired, except
Permitted Encumbrances.
     7.3. Guarantees. Become liable upon the obligations or liabilities of any
Person by assumption, endorsement or guaranty thereof or otherwise (other than
to Lenders) except (a) as disclosed on Schedule 7.3, (b) the endorsement of
checks in the Ordinary Course of Business and (c) the guarantee by one Borrower
of Indebtedness of another Borrower permitted to be incurred hereunder.
     7.4. Investments. Purchase or acquire obligations or Equity Interests of,
or any other interest in, any Person, except (a) obligations issued or
guaranteed by the United States of America or any agency thereof, (b) commercial
paper with maturities of not more than 180 days and a published rating of not
less than A-1 or P-1 (or the equivalent rating), (c) certificates of time
deposit and bankers’ acceptances having maturities of not more than 180 days and
repurchase agreements backed by United States government securities of a
commercial bank if (i) such bank has a combined capital and surplus of at least
$500,000,000, or (ii) its debt obligations, or those of a holding company of
which it is a Subsidiary, are rated not less than A (or the equivalent rating)
by a nationally recognized investment rating agency, and (d) U.S. money market
funds that invest solely in obligations issued or guaranteed by the United
States of America or an agency thereof.
     7.5. Loans. Make advances, loans or extensions of credit to any Person,
including any Parent, Subsidiary or Affiliate except with respect to (a) the
extension of commercial trade credit in connection with the sale of Inventory in
the Ordinary Course of Business and (b) advances, loans or extensions of credit
from one Borrower to another Borrower.
     7.6. Capital Expenditures. Contract for, purchase or make any expenditure
or commitments for Capital Expenditures in any fiscal year in an aggregate
amount for all Borrowers in excess of $10,000,000.
     7.7. Dividends. Declare, pay or make any dividend or distribution on any
Equity Interests of any Borrower (other than dividends or distributions payable
in its stock, or split-ups or reclassifications of its stock) or apply any of
its funds, property or assets to the purchase, redemption or other retirement of
any Equity Interest, or of any options to purchase or acquire any Equity
Interest of any Borrower; provided however, that (a) a Borrower may make
dividends or distributions from one Borrower to another Borrower; and (b) so
long as either (i) (x) no Event of Default pursuant to Sections 10.1, 10.4, 10.5
(but only to the extent such Event of Default is the result of Borrowers’
failure to observe the covenants set forth in Section 6.5 hereof), 10.7, 10.8,
10.11, 10.13 or 10.16 hereof is continuing or would exist after giving effect to
such payment and (y) Borrowers demonstrate to Agent pursuant to a certificate
reasonably acceptable to Agent that at the time of and after giving effect to
the making of such payment, Borrowers have and will have Undrawn Availability
and Thirty (30) Day Average Undrawn Availability of not less than Five Million
Dollars ($5,000,000), or (ii) at the time of and after

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giving effect to the making of such payment no Default or Event of Default
exists or would exist, ValueVision may make Permitted Redemption Payments.
     7.8. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt or trade debt evidenced under the Direct
TV Agreement) except in respect of (a) Indebtedness to Lenders; (b) Indebtedness
incurred for Capital Expenditures permitted under Section 7.6 hereof;
(c) Indebtedness permitted under Section 7.5(b) hereof; (d) Indebtedness
disclosed in the financial statements delivered to the Agent pursuant to
Section 5.5 hereof; and (e) Indebtedness subject to a Permitted Encumbrance as
set forth in Schedule 1.2 attached hereto.
     7.9. Nature of Business. Substantially change the nature of the business in
which it is presently engaged, nor except as specifically permitted hereby
purchase or invest, directly or indirectly, in any assets or property other than
in the Ordinary Course of Business for assets or property which are useful in,
necessary for and are to be used in its business as presently conducted.
     7.10. Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise enter into any transaction or deal with, any Affiliate, except
transactions disclosed to the Agent, which are in the Ordinary Course of
Business, on an arm’s-length basis on terms and conditions no less favorable
than terms and conditions which would have been obtainable from a Person other
than an Affiliate as determined by a committee of disinterested board of
directors.
     7.11. Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $4,700,000 in any one fiscal year in the aggregate for all
Borrowers.
     7.12. Subsidiaries.
          (a) Form any Subsidiary unless (i) such Subsidiary expressly joins in
this Agreement as a borrower and becomes jointly and severally liable for the
obligations of Borrowers hereunder, under the Notes, and under any other
agreement between any Borrower and Lenders and (ii) Agent shall have received
all documents, including legal opinions, it may reasonably require to establish
compliance with each of the foregoing conditions.
          (b) Enter into any partnership, joint venture or similar arrangement.
     7.13. Fiscal Year and Accounting Changes. Change its fiscal year from
January 31 or make any change (a) in accounting treatment and reporting
practices except as required by GAAP or (b) in tax reporting treatment except as
required by law.
     7.14. Pledge of Credit. Now or hereafter pledge Agent’s or any Lender’s
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than such Borrower’s business as conducted
on the date of this Agreement.
     7.15. Amendment of Articles of Incorporation, By-Laws. Amend, modify or
waive any term or material provision of its articles of incorporation or by-laws
unless required by law or

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upon prior written notice to Agent, in a manner that would not adversely affect
the Lenders or any of their rights hereunder.
     7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
“prohibited transaction”, as that term is defined in Section 406 of ERISA or
Section 4975 of the Code, (iii) incur, or permit any Plan to incur, any
“accumulated funding deficiency”, as that term is defined in Section 302 of
ERISA or Section 412 of the Code, (iv) terminate, or permit any member of the
Controlled Group to terminate, any Plan where such event could result in any
liability of any Borrower or any member of the Controlled Group or the
imposition of a lien on the property of any Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any
Termination Event, (viii) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
Applicable Laws in respect of any Plan, (ix) fail to meet, or permit any member
of the Controlled Group to fail to meet, all minimum funding requirements under
ERISA and the Code, without regard to any waivers or variances, or postpone or
delay or allow any member of the Controlled Group to postpone or delay any
funding requirement with respect of any Plan, or (x) cause, or permit any member
of the Controlled Group to cause, a representation or warranty in Section 5.8(d)
to cease to be true and correct.
     7.17. Prepayment of Indebtedness. At any time, directly or indirectly,
prepay any Indebtedness (other than to Lenders), or repurchase, redeem, retire
or otherwise acquire any Indebtedness of any Borrower.
     7.18. Anti-Terrorism Laws. No Borrower shall, until satisfaction in full of
the Obligations and termination of this Agreement, nor shall it permit any
Affiliate or agent to:
          (a) Conduct any business or engage in any transaction or dealing with
any Blocked Person, including the making or receiving any contribution of funds,
goods or services to or for the benefit of any Blocked Person.
          (b) Deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked pursuant to the Executive Order
No. 13224.
          (c) Engage in or conspire to engage in any transaction that evades or
avoids, or has the purpose of evading or avoiding, or attempts to violate, any
of the prohibitions set forth in the Executive Order No. 13224, the USA PATRIOT
Act or any other Anti-Terrorism Law. Borrower shall deliver to Lenders any
certification or other evidence requested from time to time by any Lender in its
sole discretion, confirming Borrower’s compliance with this Section.

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     7.19. Trading with the Enemy Act. Engage in any business or activity in
violation of the Trading with the Enemy Act.
     7.20. Credit Card Arrangements. Enter into new agreements with credit card
processors other than the ones expressly contemplated herein or in
Section 4.15(d)(ii) hereof unless the Borrowing Agent shall have delivered to
the Agent appropriate Credit Card Notifications consistent with the provisions
of Section 4.15(d)(ii) hereof and otherwise reasonably satisfactory to the
Agent.
     7.21. Inactive Subsidiaries. Permit Iosota, Fanbuzz or Fanbuzz Retail to
acquire any material assets or conduct any business.
     7.22. Direct TV Payment. Make any payment on account of the $18,777,552 due
to Direct TV on March 2012 if after giving proforma effect to the making of such
payment, Borrowers would not have been in compliance with Section 6.5 hereof (as
of the most recent fiscal quarter end and after giving effect to the payment).
VIII. CONDITIONS PRECEDENT.
     8.1. Conditions to Initial Advances. The agreement of Lenders to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Agent, immediately prior to or concurrently with the
making of such Advances, of the following conditions precedent:
          (a) This Agreement, the Note and the Other Documents. Agent shall have
received this Agreement, the Notes and each Other Document duly executed and
delivered by an authorized officer of each Borrower;
          (b) Filings, Registrations and Recordings. Each document (including
any Uniform Commercial Code financing statement) required by this Agreement, any
related agreement or under law or reasonably requested by the Agent to be filed,
registered or recorded in order to create, in favor of Agent, a perfected
security interest in or lien upon the Collateral shall have been properly filed,
registered or recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and Agent shall have received
an acknowledgment copy, or other evidence satisfactory to it, of each such
filing, registration or recordation and satisfactory evidence of the payment of
any necessary fee, tax or expense relating thereto;
          (c) Corporate Proceedings of Borrowers. Agent shall have received a
copy of the resolutions in form and substance reasonably satisfactory to Agent,
of the Board of Directors of each Borrower authorizing (i) the execution,
delivery and performance of this Agreement, the Notes and any related agreements
(collectively the “Documents”) and (ii) the granting by each Borrower of the
security interests in and liens upon the Collateral in each case certified by
the Secretary, or an Assistant Secretary, of each Borrower as of the Closing
Date; and, such certificate shall state that the resolutions thereby certified
have not been amended, modified, revoked or rescinded as of the date of such
certificate;

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          (d) Incumbency Certificates of Borrowers. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of each Borrower, dated
the Closing Date, as to the incumbency and signature of the officers of each
Borrower executing this Agreement, the Other Documents, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
          (e) Certificates. Agent shall have received a copy of the Articles or
Certificate of Incorporation of each Borrower, and all amendments thereto,
certified by the Secretary of State or other appropriate official of its
jurisdiction of incorporation together with copies of the by-laws of each
Borrower and all agreements of each Borrower’s shareholders certified as
accurate and complete by the Secretary of each Borrower;
          (f) Good Standing Certificates. Agent shall have received good
standing certificates for each Borrower dated not more than 20 days prior to the
Closing Date, issued by the Secretary of State or other appropriate official of
each Borrower’s jurisdiction of incorporation and each jurisdiction where the
conduct of each Borrower’s business activities or the ownership of its
properties necessitates qualification;
          (g) Legal Opinion. Agent shall have received the executed legal
opinion of Maslon, Edelman, Borman & Brand LLP in form and substance
satisfactory to Agent which shall cover such matters incident to the
transactions contemplated by this Agreement, the Notes, the Other Documents and
related agreements as Agent may reasonably require and each Borrower hereby
authorizes and directs such counsel to deliver such opinions to Agent and
Lenders;
          (h) No Litigation. (i) No litigation, investigation or proceeding
before or by any arbitrator or Governmental Body shall be continuing or
threatened against any Borrower or against the officers or directors of any
Borrower (A) in connection with this Agreement, the Other Documents or any of
the transactions contemplated thereby and which, in the reasonable opinion of
Agent, is deemed material or (B) which could, in the reasonable opinion of
Agent, have a Material Adverse Effect; and (ii) no injunction, writ, restraining
order or other order of any nature materially adverse to any Borrower or the
conduct of its business or shall have been issued by any Governmental Body;
          (i) Financial Condition Certificates. Agent shall have received an
executed Financial Condition Certificate in the form of Exhibit 8.1(i).
          (j) Collateral Examination. Agent shall have completed Collateral
examinations and received appraisals, the results of which shall be satisfactory
in form and substance to Lenders, of the Receivables, Inventory, General
Intangibles and Equipment of each Borrower and all books and records in
connection therewith;
          (k) Fees. Agent shall have received all fees payable to Agent and
Lenders on or prior to the Closing Date hereunder, including pursuant to
Article III hereof;
          (l) Pro Forma Financial Statements. Agent shall have received a copy
of the Pro Forma Financial Statements which shall be satisfactory in all
respects to Lenders;

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          (m) Insurance. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrowers’ casualty insurance
policies, together with loss payable endorsements on Agent’s standard form of
loss payee endorsement naming Agent as loss payee, and certified copies of
Borrowers’ liability insurance policies, together with endorsements naming Agent
as a co-insured;
          (n) Payment Instructions. Agent shall have received written
instructions from Borrowing Agent directing the application of proceeds of the
initial Advances made pursuant to this Agreement;
          (o) Blocked Accounts. Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral;
          (p) Consents. Agent shall have received any and all Consents necessary
to permit the effectuation of the transactions contemplated by this Agreement
and the Other Documents; and, Agent shall have received such Consents and
waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary;
          (q) No Adverse Material Change. (i) since January 31, 2009, there
shall not have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent or Lenders shall have been
proven to be inaccurate or misleading in any material respect;
          (r) Leasehold Agreements. Agent shall have received landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrowers at which Inventory and books and records are
located;
          (s) Contract Review. Agent shall have reviewed all material contracts
of Borrowers including leases, union contracts, labor contracts, vendor supply
contracts, license agreements and distributorship agreements and such contracts
and agreements shall be satisfactory in all respects to Agent;
          (t) Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of each Borrower dated as of
the date hereof, stating that (i) all representations and warranties set forth
in this Agreement and the Other Documents are true and correct on and as of such
date, (ii) Borrowers are on such date in compliance with all the terms and
provisions set forth in this Agreement and the Other Documents and (iii) on such
date no Default or Event of Default has occurred or is continuing;
          (u) Borrowing Base. Agent shall have received evidence from Borrowers
that the aggregate amount of Eligible Receivables and Eligible Inventory is
sufficient in value and amount to support Advances in the amount requested by
Borrowers on the Closing Date;
          (v) Undrawn Availability. After giving effect to the initial Advances
hereunder, Borrowers shall have Undrawn Availability of at least $13,000,000;

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          (w) Cash on Hand. Agent shall have received evidence that Borrowers
have available cash on hand of not less than $20,000,000;
          (x) Compliance with Laws. Agent shall be reasonably satisfied that
each Borrower is in compliance with all pertinent federal, state, local or
territorial regulations, including those with respect to the Federal
Occupational Safety and Health Act, the Environmental Protection Act, ERISA and
the Trading with the Enemy Act;
          (y) Direct TV. Agent shall have received the Direct TV Agreement, the
Direct TV Security Documents and evidence that Borrowers have made payment under
the Direct TV Agreement of at least $5,885,393.64 on or before the Closing Date
as required by the amendment to the Direct TV Agreement dated October 22, 2009;
and
          (z) Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with this Agreement shall be
satisfactory in form and substance to Agent and its counsel.
     8.2. Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including the initial Advance), is
subject to the satisfaction of the following conditions precedent as of the date
such Advance is made:
          (a) Representations and Warranties. Each of the representations and
warranties made by any Borrower in or pursuant to this Agreement, the Other
Documents and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement, the Other Documents or any related agreement shall be true and
correct in all material respects on and as of such date as if made on and as of
such date;
          (b) No Default. No Event of Default or Default shall have occurred and
be continuing on such date, or would exist after giving effect to the Advances
requested to be made, on such date; provided, however that Agent, in its sole
discretion, may continue to make Advances notwithstanding the existence of an
Event of Default or Default and that any Advances so made shall not be deemed a
waiver of any such Event of Default or Default; and
          (c) Maximum Advances. In the case of any type of Advance requested to
be made, after giving effect thereto, the aggregate amount of such type of
Advance shall not exceed the maximum amount of such type of Advance permitted
under this Agreement.
     Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWERS.
     Each Borrower shall, or (except with respect to Section 9.11) shall cause
Borrowing Agent on its behalf to, until satisfaction in full of the Obligations
and the termination of this Agreement:

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     9.1. Disclosure of Material Matters. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral, including any Borrower’s
reclamation or repossession of, or the return to any Borrower of, a material
amount of goods or claims or disputes asserted by any Customer or other obligor.
     9.2. Schedules. Deliver to Agent on or before (a) the fifteenth (15th) day
of each month as and for the prior month (i) accounts receivable ageings
inclusive of reconciliations to the general ledger, (ii) accounts payable
schedules inclusive of reconciliations to the general ledger, (iii) Inventory
reports and (iv) if no Advances are outstanding in any month, a Borrowing Base
Certificate in form and substance satisfactory to Agent (which shall be
calculated as of the last day of the prior month and which shall not be binding
upon Agent or restrictive of Agent’s rights under this Agreement) and (b) upon
the request of any Advance and at least once each week if there are Advances
outstanding under this Agreement, Tuesday of each week as and for the prior
week, a Borrowing Base Certificate in form and substance satisfactory to Agent
(which shall be calculated as of the last day of the prior week and which shall
not be binding upon Agent or restrictive of Agent’s rights under this
Agreement). In addition, each Borrower will deliver to Agent at such intervals
as Agent may require: (1) confirmatory assignment schedules, (2) copies of
Customer’s invoices, (3) evidence of shipment or delivery, and (4) such further
schedules, documents and/or information regarding the Collateral as Agent may
require including trial balances and test verifications. Agent shall have the
right to confirm and verify all Receivables by any manner and through any medium
it considers advisable and do whatever it may deem reasonably necessary to
protect its interests hereunder. The items to be provided under this Section are
to be in form satisfactory to Agent and executed by each Borrower and delivered
to Agent from time to time solely for Agent’s convenience in maintaining records
of the Collateral, and any Borrower’s failure to deliver any of such items to
Agent shall not affect, terminate, modify or otherwise limit Agent’s Lien with
respect to the Collateral.
     9.3. Environmental Reports. Furnish Agent, concurrently with the delivery
of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the President of Borrowing Agent stating, to the best of
his knowledge, that each Borrower is in compliance in all material respects with
all federal, state and local Environmental Laws. To the extent any Borrower is
not in compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action such Borrower
will implement in order to achieve full compliance.
     9.4. Litigation. Promptly notify Agent in writing of any claim, litigation,
suit or administrative proceeding affecting any Borrower or any Guarantor,
whether or not the claim is covered by insurance, and of any litigation, suit or
administrative proceeding, which in any such case affects the Collateral or
which could reasonably be expected to have a Material Adverse Effect.
     9.5. Material Occurrences. Promptly notify Agent in writing upon the
occurrence of: (a) any Event of Default or Default; (b) any event, development
or circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any
Borrower as of the date of such statements; (c) any accumulated retirement plan
funding

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deficiency which, if such deficiency continued for two plan years and was not
corrected as provided in Section 4971 of the Code, could subject any Borrower to
a tax imposed by Section 4971 of the Code; (d) each and every default by any
Borrower which might result in the acceleration of the maturity of any
Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness; and (e) any other development in the business or affairs of any
Borrower or any Guarantor, which could reasonably be expected to have a Material
Adverse Effect; in each case describing the nature thereof and the action
Borrowers propose to take with respect thereto.
     9.6. Government Receivables. Notify Agent immediately if any of its
Receivables arise out of contracts between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.
     9.7. Annual Financial Statements. Furnish Agent and Lenders within one
hundred twenty (120) days after the end of each fiscal year of Borrowers,
financial statements of Borrowers on a consolidating and consolidated basis
including, but not limited to, statements of income and stockholders’ equity and
cash flow from the beginning of the current fiscal year to the end of such
fiscal year and the balance sheet as at the end of such fiscal year, all
prepared in accordance with GAAP applied on a basis consistent with prior
practices, and in reasonable detail and reported upon without qualification by
an independent certified public accounting firm selected by Borrowers and
satisfactory to Agent (the “Accountants”). The report of the Accountants shall
be accompanied by a statement of the Accountants certifying that (i) they have
caused this Agreement to be reviewed, (ii) in making the examination upon which
such report was based either no information came to their attention which to
their knowledge constituted an Event of Default or a Default under this
Agreement or any related agreement or, if such information came to their
attention, specifying any such Default or Event of Default, its nature, when it
occurred and whether it is continuing, and such report shall contain or have
appended thereto calculations which set forth Borrowers’ compliance with the
requirements or restrictions imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8
and 7.11 hereof. In addition, the reports shall be accompanied by a Compliance
Certificate.
     9.8. Quarterly Financial Statements. Furnish Agent and Lenders within
45 days after the end of each fiscal quarter, an unaudited balance sheet of
Borrowers on a consolidated and consolidating basis and unaudited statements of
income and stockholders’ equity and cash flow of Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such quarter and for such quarter, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to Borrowers’ business. The reports shall
be accompanied by a Compliance Certificate.
     9.9. Monthly Financial Statements. Furnish Agent and Lenders within thirty
(30) days after the end of each month an unaudited balance sheet of Borrowers on
a consolidated and consolidating basis and unaudited statements of income and
stockholders’ equity and cash flow of Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to

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normal and recurring year end adjustments that individually and in the aggregate
are not material to Borrowers’ business.
     9.10. Other Reports. Furnish Agent as soon as available, but in any event
within ten (10) days after the issuance thereof, with copies of such financial
statements, reports and returns as each Borrower shall send to its stockholders.
     9.11. Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Notes have been complied with by Borrowers including, without
the necessity of any request by Agent, (a) copies of all environmental audits
and reviews, (b) at least thirty (30) days prior thereto, notice of any
Borrower’s opening of any new office or place of business or any Borrower’s
closing of any existing office or place of business, and (c) promptly upon any
Borrower’s learning thereof, notice of any labor dispute to which any Borrower
may become a party, any strikes or walkouts relating to any of its plants or
other facilities, and the expiration of any labor contract to which any Borrower
is a party or by which any Borrower is bound.
     9.12. Projected Operating Budget. Furnish Agent and Lenders, no later than
thirty (30) days after the beginning of each Borrower’s fiscal years commencing
with fiscal year 2010, a month by month projected operating budget and cash flow
of Borrowers on a consolidated and consolidating basis for such fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), such projections to be accompanied by
a certificate signed by the President or Chief Financial Officer of each
Borrower to the effect that such projections have been prepared on the basis of
sound financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
     9.13. Variances From Operating Budget. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Section 9.7 and each monthly
report, a written report summarizing all material variances from budgets
submitted by Borrowers pursuant to Section 9.12 and a discussion and analysis by
management with respect to such variances.
     9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt written
notice of (i) any lapse or other termination of any Consent issued to any
Borrower by any Governmental Body or any other Person that is material to the
operation of any Borrower’s business, (ii) any refusal by any Governmental Body
or any other Person to renew or extend any such Consent; and (iii) copies of any
periodic or special reports filed by any Borrower or any Guarantor with any
Governmental Body or Person, if such reports indicate any material change in the
business, operations, affairs or condition of any Borrower or any Guarantor, or
if copies thereof are requested by Lender, and (iv) copies of any material
notices and other communications from any Governmental Body or Person which
specifically relate to any Borrower or any Guarantor.
     9.15. ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) any Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such

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Termination Event and the action, if any, which such Borrower or any member of
the Controlled Group has taken, is taking, or proposes to take with respect
thereto and, when known, any action taken or threatened by the Internal Revenue
Service, Department of Labor or PBGC with respect thereto, (ii) any Borrower or
any member of the Controlled Group knows or has reason to know that a prohibited
transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has
occurred together with a written statement describing such transaction and the
action which such Borrower or any member of the Controlled Group has taken, is
taking or proposes to take with respect thereto, (iii) a funding waiver request
has been filed with respect to any Plan together with all communications
received by any Borrower or any member of the Controlled Group with respect to
such request, (iv) any increase in the benefits of any existing Plan or the
establishment of any new Plan or the commencement of contributions to any Plan
to which any Borrower or any member of the Controlled Group was not previously
contributing shall occur, (v) any Borrower or any member of the Controlled Group
shall receive from the PBGC a notice of intention to terminate a Plan or to have
a trustee appointed to administer a Plan, together with copies of each such
notice, (vi) any Borrower or any member of the Controlled Group shall receive
any favorable or unfavorable determination letter from the Internal Revenue
Service regarding the qualification of a Plan under Section 401(a) of the Code,
together with copies of each such letter; (vii) any Borrower or any member of
the Controlled Group shall receive a notice regarding the imposition of
withdrawal liability, together with copies of each such notice; (viii) any
Borrower or any member of the Controlled Group shall fail to make a required
installment or any other required payment under Section 412 of the Code on or
before the due date for such installment or payment; or (ix) any Borrower or any
member of the Controlled Group knows that (a) a Multiemployer Plan has been
terminated, (b) the administrator or plan sponsor of a Multiemployer Plan
intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or
will institute proceedings under Section 4042 of ERISA to terminate a
Multiemployer Plan.
     9.16. Additional Documents. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
X. EVENTS OF DEFAULT.
     The occurrence of any one or more of the following events shall constitute
an “Event of Default”:
     10.1. Nonpayment. Failure by any Borrower to pay any principal or interest
on the Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this Agreement or by notice of intention to prepay, or
by required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any Other Document;
     10.2. Breach of Representation. Any representation or warranty made or
deemed made by any Borrower or any Guarantor in this Agreement, any Other
Document or any related agreement or in any certificate, document or financial
or other statement furnished at any time in connection herewith or therewith
shall prove to have been misleading in any material respect on the date when
made or deemed to have been made;

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     10.3. Financial Information. Failure by any Borrower to (i) furnish
financial information when due or when requested, or (ii) permit the inspection
of its books or records;
     10.4. Judicial Actions. Issuance of a notice of Lien, levy, assessment,
injunction or attachment against any Borrower’s Inventory or Receivables or
against a material portion of any Borrower’s other property;
     10.5. Noncompliance. Except as otherwise provided for in Sections 10.1,
10.3 and 10.5(ii), (i) failure or neglect of any Borrower or any Guarantor or
any Person to perform, keep or observe any term, provision, condition, covenant
herein contained, or contained in any Other Document or any other agreement or
arrangement, now or hereafter entered into between any Borrower or any Guarantor
or such Person, and Agent or any Lender, or (ii) failure or neglect of any
Borrower to perform, keep or observe any term, provision, condition or covenant,
contained in Sections 4.6, 4.7, 4.9, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is
not cured within ten (10) days from the occurrence of such failure or neglect;
     10.6. Judgments. Any judgment or judgments are rendered against any
Borrower or any Guarantor for an aggregate amount in excess of $75,000 or
against all Borrowers or Guarantors for an aggregate amount in excess of $75,000
and (i) enforcement proceedings shall have been commenced by a creditor upon
such judgment, (ii) there shall be any period of forty (40) consecutive days
during which a stay of enforcement of such judgment, by reason of a pending
appeal or otherwise, shall not be in effect, or (iii) any such judgment results
in the creation of a Lien upon any of the Collateral (other than a Permitted
Encumbrance);
     10.7. Bankruptcy. Any Borrower or any Guarantor shall (i) apply for,
consent to or suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of itself or of
all or a substantial part of its property, (ii) make a general assignment for
the benefit of creditors, (iii) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a
bankrupt or insolvent, (v) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vi) acquiesce to, or fail to
have dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;
     10.8. Inability to Pay. Any Borrower or any Guarantor shall admit in
writing its inability, or be generally unable, to pay its debts as they become
due or cease operations of its present business;
     10.9. Affiliate Bankruptcy. Any Affiliate or any Subsidiary of any
Borrower, or any Guarantor, shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) admit in writing its inability, or be generally unable, to pay
its debts as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vii) acquiesce to, or fail to have dismissed, within thirty (30) days, any
petition filed against it in any involuntary

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case under such bankruptcy laws, or (viii) take any action for the purpose of
effecting any of the foregoing;
     10.10. Material Adverse Effect. The occurrence of any Material Adverse
Effect;
     10.11. Lien Priority. Any Lien created hereunder or provided for hereby or
under any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest;
     10.12. Intentionally Omitted.
     10.13. Cross Default. A default of the obligations of any Borrower under
any other agreement to which it is a party shall occur which causes a Material
Adverse Effect which default is not cured within any applicable grace period;
     10.14. Breach of Guaranty or Pledge Agreement. Termination or breach of any
Guaranty, Guaranty Security Agreement, Pledge Agreement or similar agreement
executed and delivered to Agent in connection with the Obligations of any
Borrower, or if any Guarantor attempts to terminate, challenges the validity of,
or its liability under, any such Guaranty, Guaranty Security Agreement, Pledge
Agreement or similar agreement;
     10.15. Change of Ownership. Any Change of Ownership shall occur;
     10.16. Invalidity. Any material provision of this Agreement or any Other
Document shall, for any reason, cease to be valid and binding on any Borrower or
any Guarantor, or any Borrower or any Guarantor shall so claim in writing to
Agent or any Lender;
     10.17. Licenses. (i) Any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent trademark or tradename
of any Borrower or any Guarantor, the continuation of which is material to the
continuation of any Borrower’s or Guarantor’s business, or (B) commence
proceedings to suspend, revoke, terminate or adversely modify any such license,
permit, trademark, tradename or patent and such proceedings shall not be
dismissed or discharged within sixty (60) days, or (c) schedule or conduct a
hearing on the renewal of any license, permit, trademark, tradename or patent
necessary for the continuation of any Borrower’s or any Guarantor’s business and
the staff of such Governmental Body issues a report recommending the
termination, revocation, suspension or material, adverse modification of such
license, permit, trademark, tradename or patent; (ii) any agreement which is
necessary or material to the operation of any Borrower’s or any Guarantor’s
business shall be revoked or terminated and not replaced by a substitute
acceptable to Agent within thirty (30) days after the date of such revocation or
termination, and such revocation or termination and non-replacement would
reasonably be expected to have a Material Adverse Effect;
     10.18. Seizures. Any portion of the Collateral shall be seized or taken by
a Governmental Body, or any Borrower or any Guarantor or the title and rights of
any Borrower, any Guarantor or any Original Owner which is the owner of any
material portion of the Collateral shall have become the subject matter of
claim, litigation, suit or other proceeding which might, in the opinion of
Agent, upon final determination, result in impairment or loss of the security
provided by this Agreement or the Other Documents;

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     10.19. Pension Plans. An event or condition specified in Sections 7.16 or
9.15 hereof shall occur or exist with respect to any Plan and, as a result of
such event or condition, together with all other such events or conditions, any
Borrower or any member of the Controlled Group shall incur, or in the opinion of
Agent be reasonably likely to incur, a liability to a Plan or the PBGC (or both)
which, in the reasonable judgment of Agent, would have a Material Adverse
Effect; or
     10.20. Direct TV. The occurrence of a default or event of default under any
Direct TV Security Document or the Direct TV Agreement.
XI. LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.
     11.1. Rights and Remedies.
          (a) Upon the occurrence of (i) an Event of Default pursuant to
Section 10.7 all Obligations shall be immediately due and payable and this
Agreement and the obligation of Lenders to make Advances shall be deemed
terminated; and, (ii) any of the other Events of Default and at any time
thereafter, at the option of Required Lenders all Obligations shall be
immediately due and payable and Lenders shall have the right to terminate this
Agreement and to terminate the obligation of Lenders to make Advances and
(iii) a filing of a petition against any Borrower in any involuntary case under
any state or federal bankruptcy laws, all Obligations shall be immediately due
and payable and the obligation of Lenders to make Advances hereunder shall be
terminated other than as may be required by an appropriate order of the
bankruptcy court having jurisdiction over such Borrower. Upon the occurrence of
any Event of Default, Agent shall have the right to exercise any and all rights
and remedies provided for herein, under the Other Documents, under the Uniform
Commercial Code and at law or equity generally, including the right to foreclose
the security interests granted herein and to realize upon any Collateral by any
available judicial procedure and/or to take possession of and sell any or all of
the Collateral with or without judicial process. Agent may enter any of any
Borrower’s premises or other premises without legal process and without
incurring liability to any Borrower therefor, and Agent may thereupon, or at any
time thereafter, in its discretion without notice or demand, take the Collateral
and remove the same to such place as Agent may deem advisable and Agent may
require Borrowers to make the Collateral available to Agent at a convenient
place. With or without having the Collateral at the time or place of sale, Agent
may sell the Collateral, or any part thereof, at public or private sale, at any
time or place, in one or more sales, at such price or prices, and upon such
terms, either for cash, credit or future delivery, as Agent may elect. Except as
to that part of the Collateral which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, Agent
shall give Borrowers reasonable notification of such sale or sales, it being
agreed that in all events written notice mailed to Borrowing Agent at least ten
(10) days prior to such sale or sales is reasonable notification. At any public
sale Agent or any Lender may bid for and become the purchaser, and Agent, any
Lender or any other purchaser at any such sale thereafter shall hold the
Collateral sold absolutely free from any claim or right of whatsoever kind,
including any equity of redemption and all such claims, rights and equities are
hereby expressly waived and released by each Borrower. In connection with the
exercise of the foregoing remedies, including the sale of Inventory, Agent is
granted a perpetual nonrevocable, royalty free, nonexclusive license and Agent
is granted permission to use all of each Borrower’s (a) trademarks, trade
styles, trade

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names, patents, patent applications, copyrights, service marks, licenses,
franchises and other proprietary rights which are used or useful in connection
with Inventory for the purpose of marketing, advertising for sale and selling or
otherwise disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The cash proceeds realized from
the sale of any Collateral shall be applied to the Obligations in the order set
forth in Section 11.5 hereof. Noncash proceeds will only be applied to the
Obligations as they are converted into cash. If any deficiency shall arise,
Borrowers shall remain liable to Agent and Lenders therefor.
          (b) To the extent that Applicable Law imposes duties on the Agent to
exercise remedies in a commercially reasonable manner, each Borrower
acknowledges and agrees that it is not commercially unreasonable for the Agent
(i) to fail to incur expenses reasonably deemed significant by the Agent to
prepare Collateral for disposition or otherwise to complete raw material or work
in process into finished goods or other finished products for disposition,
(ii) to fail to obtain third party consents for access to Collateral to be
disposed of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against Customers or other Persons obligated on Collateral or to remove
Liens on or any adverse claims against Collateral, (iv) to exercise collection
remedies against Customers and other Persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other Persons, whether or not in the same business as any Borrower, for
expressions of interest in acquiring all or any portion of such Collateral,
(vii) to hire one or more professional auctioneers to assist in the disposition
of Collateral, whether or not the Collateral is of a specialized nature,
(viii) to dispose of Collateral by utilizing internet sites that provide for the
auction of assets of the types included in the Collateral or that have the
reasonable capacity of doing so, or that match buyers and sellers of assets,
(ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, such as title, possession or quiet enjoyment,
(xi) to purchase insurance or credit enhancements to insure the Agent against
risks of loss, collection or disposition of Collateral or to provide to the
Agent a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by the Agent, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the Agent in the collection or disposition of any of the Collateral. Each
Borrower acknowledges that the purpose of this Section 11.1(b) is to provide
non-exhaustive indications of what actions or omissions by the Agent would not
be commercially unreasonable in the Agent’s exercise of remedies against the
Collateral and that other actions or omissions by the Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section 11.1(b). Without limitation upon the foregoing, nothing contained in
this Section 11.1(b) shall be construed to grant any rights to any Borrower or
to impose any duties on Agent that would not have been granted or imposed by
this Agreement or by Applicable Law in the absence of this Section 11.1(b).
     11.2. Agent’s Discretion. Agent shall have the right in its sole discretion
to determine which rights, Liens, security interests or remedies Agent may at
any time pursue, relinquish, subordinate, or modify or to take any other action
with respect thereto and such determination will not in any way modify or affect
any of Agent’s or Lenders’ rights hereunder.

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     11.3. Setoff. Subject to Section 14.12, in addition to any other rights
which Agent or any Lender may have under Applicable Law, upon the occurrence of
an Event of Default hereunder, Agent and such Lender shall have a right,
immediately and without notice of any kind, to apply any Borrower’s property
held by Agent and such Lender to reduce the Obligations.
     11.4. Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
rights or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
     11.5. Allocation of Payments After Event of Default. Notwithstanding any
other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Agent on account of the Obligations or any other amounts outstanding
under any of the Other Documents or in respect of the Collateral may, at Agent’s
discretion, be paid over or delivered as follows:
     FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of the Agent in connection with enforcing
its rights and the rights of the Lenders under this Agreement and the Other
Documents and any protective advances made by the Agent with respect to the
Collateral under or pursuant to the terms of this Agreement;
     SECOND, to payment of any fees owed to the Agent;
     THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of each of the Lenders to the extent
owing to such Lender pursuant to the terms of this Agreement;
     FOURTH, to the payment of all of the Obligations consisting of accrued fees
and interest;
     FIFTH, to the payment of the outstanding principal amount of the
Obligations (including the payment or cash collateralization of any outstanding
Letters of Credit);
     SIXTH, to all other Obligations and other obligations which shall have
become due and payable under the Other Documents or otherwise and not repaid
pursuant to clauses “FIRST” through “FIFTH” above; and
     SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.
     In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses “FOURTH”, “FIFTH” and “SIXTH” above; and (iii) to the extent that any
amounts available for distribution pursuant to clause “FIFTH” above are
attributable to the issued but undrawn amount

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of outstanding Letters of Credit, such amounts shall be held by the Agent in a
cash collateral account and applied (A) first, to reimburse the Issuer from time
to time for any drawings under such Letters of Credit and (B) then, following
the expiration of all Letters of Credit, to all other obligations of the types
described in clauses “FIFTH” and “SIXTH” above in the manner provided in this
Section 11.5.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
     12.1. Waiver of Notice. Each Borrower hereby waives notice of non-payment
of any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made, credit extended, Collateral received or delivered, or any
other action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.
     12.2. Delay. No delay or omission on Agent’s or any Lender’s part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any Default or Event of Default.
     12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
(A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
     13.1. Term. This Agreement, which shall inure to the benefit of and shall
be binding upon the respective successors and permitted assigns of each
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until November 24 2012 (the “Term”)
unless sooner terminated as herein provided. Borrowers may terminate this
Agreement at any time upon ninety (90) days’ prior written notice upon payment
in full of the Obligations. In the event the Obligations are prepaid in full
prior to the last day of the Term (the date of such prepayment hereinafter
referred to as the “Early Termination Date”), Borrowers shall pay to Agent for
the benefit of Lenders an early termination fee in an amount equal to (x) 2.00%
of the Maximum Revolving Advance Amount if the Early Termination Date occurs on
or after the Closing Date to and including the date immediately preceding the
first

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anniversary of the Closing Date, (y) 1.00% of the Maximum Revolving Advance
Amount if the Early Termination Date occurs on or after the first anniversary of
the Closing Date to and including the date immediately preceding the second
anniversary of the Closing Date, and (z) .5% of the Maximum Revolving Advance
Amount if the Early Termination Date occurs on or after the second anniversary
of the Closing Date to and including the date immediately preceding the
expiration of the Term.
     13.2. Termination. The termination of the Agreement shall not affect any
Borrower’s, Agent’s or any Lender’s rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully and
indefeasibly paid, disposed of, concluded or liquidated. The security interests,
Liens and rights granted to Agent and Lenders hereunder and the financing
statements filed hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement or the fact that Borrowers’
Account may from time to time be temporarily in a zero or credit position, until
all of the Obligations of each Borrower have been indefeasibly paid and
performed in full after the termination of this Agreement or each Borrower has
furnished Agent and Lenders with an indemnification satisfactory to Agent and
Lenders with respect thereto. Accordingly, each Borrower waives any rights which
it may have under the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and Agent shall not be
required to send such termination statements to each Borrower, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations have been
indefeasibly paid in full in immediately available funds. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until all Obligations are indefeasibly paid and performed in
full.
XIV. REGARDING AGENT.
     14.1. Appointment. Each Lender hereby designates PNC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in
Sections 3.3(a) and 3.4), charges and collections (without giving effect to any
collection days) received pursuant to this Agreement, for the ratable benefit of
Lenders. Agent may perform any of its duties hereunder by or through its agents
or employees. As to any matters not expressly provided for by this Agreement
(including collection of the Note) Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding; provided, however, that Agent shall not be required to take any action
which exposes Agent to liability or which is contrary to this Agreement or the
Other Documents or Applicable Law unless Agent is furnished with an
indemnification reasonably satisfactory to Agent with respect thereto.

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     14.2. Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final non-appealable judgment), or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by any Borrower or any
officer thereof contained in this Agreement, or in any of the Other Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by Agent under or in connection with, this Agreement or any
of the Other Documents or for the value, validity, effectiveness, genuineness,
due execution, enforceability or sufficiency of this Agreement, or any of the
Other Documents or for any failure of any Borrower to perform its obligations
hereunder. Agent shall not be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any of the Other Documents, or
to inspect the properties, books or records of any Borrower. The duties of Agent
as respects the Advances to Borrowers shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon Agent any
obligations in respect of this Agreement except as expressly set forth herein.
     14.3. Lack of Reliance on Agent and Resignation. Independently and without
reliance upon Agent or any other Lender, each Lender has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of each Borrower and each Guarantor in connection with the making and
the continuance of the Advances hereunder and the taking or not taking of any
action in connection herewith, and (ii) its own appraisal of the
creditworthiness of each Borrower and each Guarantor. Agent shall have no duty
or responsibility, either initially or on a continuing basis, to provide any
Lender with any credit or other information with respect thereto, whether coming
into its possession before making of the Advances or at any time or times
thereafter except as shall be provided by any Borrower pursuant to the terms
hereof. Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial condition of any Borrower or any Guarantor, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, the Note, the Other Documents or the
financial condition of any Borrower, or the existence of any Event of Default or
any Default.
     Agent may resign on sixty (60) days’ written notice to each of Lenders and
Borrowing Agent and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrowers.
     Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term “Agent” shall mean such successor agent effective upon its
appointment, and the former Agent’s rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent’s resignation as Agent, the provisions

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of this Article XIV shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement.
     14.4. Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
     14.5. Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
     14.6. Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or Borrowing
Agent referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a “notice of
default”. In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided, that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.
     14.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent’s gross
(not mere) negligence or willful misconduct (as determined by a court of
competent jurisdiction in a final non-appealable judgment).
     14.8. Agent in its Individual Capacity. With respect to the obligation of
Agent to lend under this Agreement, the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term “Lender” or any similar term
shall, unless the context clearly otherwise indicates, include

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Agent in its individual capacity as a Lender. Agent may engage in business with
any Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
     14.9. Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 or Borrowing
Base Certificates from any Borrower pursuant to the terms of this Agreement
which any Borrower is not obligated to deliver to each Lender, Agent will
promptly furnish such documents and information to Lenders.
     14.10. Borrowers’ Undertaking to Agent. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Borrower’s obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
     14.11. No Reliance on Agent’s Customer Identification Program. Each Lender
acknowledges and agrees that neither such Lender, nor any of its Affiliates,
participants or assignees, may rely on the Agent to carry out such Lender’s,
Affiliate’s, participant’s or assignee’s customer identification program, or
other obligations required or imposed under or pursuant to the USA PATRIOT Act
or the regulations thereunder, including the regulations contained in 31 CFR
103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any other
Anti-Terrorism Law, including any programs involving any of the following items
relating to or in connection with any Borrower, its Affiliates or its agents,
this Agreement, the Other Documents or the transactions hereunder or
contemplated hereby: (1) any identity verification procedures, (2) any
record-keeping, (3) comparisons with government lists, (4) customer notices or
(5) other procedures required under the CIP Regulations or such other laws.
     14.12. Other Agreements. Each of the Lenders agrees that it shall not,
without the express consent of Agent, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of Agent, set off against the
Obligations, any amounts owing by such Lender to any Borrower or any deposit
accounts of any Borrower now or hereafter maintained with such Lender. Anything
in this Agreement to the contrary notwithstanding, each of the Lenders further
agrees that it shall not, unless specifically requested to do so by Agent, take
any action to protect or enforce its rights arising out of this Agreement or the
Other Documents, it being the intent of Lenders that any such action to protect
or enforce rights under this Agreement and the Other Documents shall be taken in
concert and at the direction or with the consent of Agent or Required Lenders.
XV. BORROWING AGENCY.
     15.1. Borrowing Agency Provisions.
          (a) Each Borrower hereby irrevocably designates Borrowing Agent to be
its attorney and agent and in such capacity to borrow, sign and endorse notes,
and execute and

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deliver all instruments, documents, writings and further assurances now or
hereafter required hereunder, on behalf of such Borrower or Borrowers, and
hereby authorizes Agent to pay over or credit all loan proceeds hereunder in
accordance with the request of Borrowing Agent.
          (b) The handling of this credit facility as a co-borrowing facility
with a borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Borrowers and at their request. Neither Agent nor any Lender
shall incur liability to Borrowers as a result thereof. To induce Agent and
Lenders to do so and in consideration thereof, each Borrower hereby indemnifies
Agent and each Lender and holds Agent and each Lender harmless from and against
any and all liabilities, expenses, losses, damages and claims of damage or
injury asserted against Agent or any Lender by any Person arising from or
incurred by reason of the handling of the financing arrangements of Borrowers as
provided herein, reliance by Agent or any Lender on any request or instruction
from Borrowing Agent or any other action taken by Agent or any Lender with
respect to this Section 15.1 except due to willful misconduct or gross (not
mere) negligence by the indemnified party (as determined by a court of competent
jurisdiction in a final and non-appealable judgment).
          (c) All Obligations shall be joint and several, and each Borrower
shall make payment upon the maturity of the Obligations by acceleration or
otherwise, and such obligation and liability on the part of each Borrower shall
in no way be affected by any extensions, renewals and forbearance granted to
Agent or any Lender to any Borrower, failure of Agent or any Lender to give any
Borrower notice of borrowing or any other notice, any failure of Agent or any
Lender to pursue or preserve its rights against any Borrower, the release by
Agent or any Lender of any Collateral now or thereafter acquired from any
Borrower, and such agreement by each Borrower to pay upon any notice issued
pursuant thereto is unconditional and unaffected by prior recourse by Agent or
any Lender to the other Borrowers or any Collateral for such Borrower’s
Obligations or the lack thereof. Each Borrower waives all suretyship defenses.
     15.2. Waiver of Subrogation. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Borrowers’ property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the Obligations.
XVI. MISCELLANEOUS.
     16.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois applied to contracts to be
performed wholly within the State of Illinois. Any judicial proceeding brought
by or against any Borrower with respect to any of the Obligations, this
Agreement, the Other Documents or any related agreement may be brought in any
court of competent jurisdiction in the State of Illinois, United States of
America, and, by execution and delivery of this Agreement, each Borrower accepts
for itself and in connection with its properties, generally and unconditionally,
the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees
to be bound by any judgment rendered thereby in connection with this Agreement.
Each Borrower hereby waives personal service of any and all

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process upon it and consents that all such service of process may be made by
registered mail (return receipt requested) directed to Borrowing Agent at its
address set forth in Section 16.6 and service so made shall be deemed completed
five (5) days after the same shall have been so deposited in the mails of the
United States of America, or, at the Agent’s option, by service upon Borrowing
Agent which each Borrower irrevocably appoints as such Borrower’s Agent for the
purpose of accepting service within the State of Illinois. Nothing herein shall
affect the right to serve process in any manner permitted by law or shall limit
the right of Agent or any Lender to bring proceedings against any Borrower in
the courts of any other jurisdiction. Each Borrower waives any objection to
jurisdiction and venue of any action instituted hereunder and shall not assert
any defense based on lack of jurisdiction or venue or based upon forum non
conveniens. Each Borrower waives the right to remove any judicial proceeding
brought against such Borrower in any state court to any federal court. Any
judicial proceeding by any Borrower against Agent or any Lender involving,
directly or indirectly, any matter or claim in any way arising out of, related
to or connected with this Agreement or any related agreement, shall be brought
only in a federal or state court located in the County of Cook, State of
Illinois.
     16.2. Entire Understanding.
          (a) This Agreement and the documents executed concurrently herewith
contain the entire understanding between each Borrower, Agent and each Lender
and supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. Any promises, representations, warranties or guarantees
not herein contained and hereinafter made shall have no force and effect unless
in writing, signed by each Borrower’s, Agent’s and each Lender’s respective
officers. Neither this Agreement nor any portion or provisions hereof may be
changed, modified, amended, waived, supplemented, discharged, cancelled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged. Each Borrower
acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement.
          (b) The Required Lenders, Agent with the consent in writing of the
Required Lenders, and Borrowers may, subject to the provisions of this
Section 16.2 (b), from time to time enter into written supplemental agreements
to this Agreement or the Other Documents executed by Borrowers, for the purpose
of adding or deleting any provisions or otherwise changing, varying or waiving
in any manner the rights of Lenders, Agent or Borrowers thereunder or the
conditions, provisions or terms thereof or waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all Lenders:
               (i) increase the Commitment Percentage, the maximum dollar
commitment of any Lender or the Maximum Revolving Advance Amount;
               (ii) extend the maturity of any Note or the due date for any
amount payable hereunder, or decrease the rate of interest or reduce any fee
payable by Borrowers to Lenders pursuant to this Agreement;

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               (iii) alter the definition of the term Required Lenders or alter,
amend or modify this Section 16.2(b);
               (iv) release any Collateral during any calendar year (other than
in accordance with the provisions of this Agreement) having an aggregate value
in excess of $1,000,000;
               (v) change the rights and duties of Agent;
               (vi) permit any Revolving Advance to be made if after giving
effect thereto the total of Revolving Advances outstanding hereunder would
exceed the Formula Amount for more than sixty (60) consecutive Business Days or
exceed one hundred and ten percent (110%) of the Formula Amount;
               (vii) increase the Advance Rates above the Advance Rates in
effect on the Closing Date; or
               (viii) release any Guarantor.
     Any such supplemental agreement shall apply equally to each Lender and
shall be binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
     In the event that Agent requests the consent of a Lender pursuant to this
Section 16.2 and such Lender shall not respond or reply to Agent in writing
within five (5) days of delivery of such request, such Lender shall be deemed to
have consented to the matter that was the subject of the request. In the event
that Agent requests the consent of a Lender pursuant to this Section 16.2 and
such consent is denied, then PNC may, at its option, require such Lender to
assign its interest in the Advances to PNC or to another Lender or to any other
Person designated by the Agent (the “Designated Lender”), for a price equal to
(i) the then outstanding principal amount thereof plus (ii) accrued and unpaid
interest and fees due such Lender, which interest and fees shall be paid when
collected from Borrowers. In the event PNC elects to require any Lender to
assign its interest to PNC or to the Designated Lender, PNC will so notify such
Lender in writing within forty five (45) days following such Lender’s denial,
and such Lender will assign its interest to PNC or the Designated Lender no
later than five (5) days following receipt of such notice pursuant to a
Commitment Transfer Supplement executed by such Lender, PNC or the Designated
Lender, as appropriate, and Agent.
     Notwithstanding (a) the existence of a Default or an Event of Default,
(b) that any of the other applicable conditions precedent set forth in
Section 8.2 hereof have not been satisfied or (c) any other provision of this
Agreement, Agent may at its discretion and without the consent of the Required
Lenders, voluntarily permit the outstanding Revolving Advances at any time to
exceed the Formula Amount by up to ten percent (10%) of the Formula Amount for
up to sixty (60) consecutive Business Days (the “Out-of-Formula Loans”). If
Agent is willing in its sole and

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absolute discretion to make such Out-of-Formula Loans, such Out-of-Formula Loans
shall be payable on demand and shall bear interest at the Default Rate for
Revolving Advances consisting of Domestic Rate Loans; provided that, if Lenders
do make Out-of-Formula Loans, neither Agent nor Lenders shall be deemed thereby
to have changed the limits of Section 2.1(a). For purposes of this paragraph,
the discretion granted to Agent hereunder shall not preclude involuntary
overadvances that may result from time to time due to the fact that the Formula
Amount was unintentionally exceeded for any reason, including, but not limited
to, Collateral previously deemed to be either “Eligible Consumer Receivables”,
“Eligible Credit Card Receivables”, or “Eligible Inventory”, as applicable,
becomes ineligible, collections of Receivables applied to reduce outstanding
Revolving Advances are thereafter returned for insufficient funds or
overadvances are made to protect or preserve the Collateral. In the event Agent
involuntarily permits the outstanding Revolving Advances to exceed the Formula
Amount by more than ten percent (10%), Agent shall use its efforts to have
Borrowers decrease such excess in as expeditious a manner as is practicable
under the circumstances and not inconsistent with the reason for such excess.
Revolving Advances made after Agent has determined the existence of involuntary
overadvances shall be deemed to be involuntary overadvances and shall be
decreased in accordance with the preceding sentence.
     In addition to (and not in substitution of) the discretionary Revolving
Advances permitted above in this Section 16.2, the Agent is hereby authorized by
Borrowers and the Lenders, from time to time in the Agent’s sole discretion,
(A) after the occurrence and during the continuation of a Default or an Event of
Default, or (B) at any time that any of the other applicable conditions
precedent set forth in Section 8.2 hereof have not been satisfied, to make
Revolving Advances to Borrowers on behalf of the Lenders which the Agent, in its
reasonable business judgment, deems necessary or desirable (a) to preserve or
protect the Collateral, or any portion thereof, (b) to enhance the likelihood
of, or maximize the amount of, repayment of the Advances and other Obligations,
or (c) to pay any other amount chargeable to Borrowers pursuant to the terms of
this Agreement; provided, that at any time after giving effect to any such
Revolving Advances the outstanding Revolving Advances do not exceed one hundred
and ten percent (110%) of the Formula Amount.
     16.3. Successors and Assigns; Participations; New Lenders.
          (a) This Agreement shall be binding upon and inure to the benefit of
Borrowers, Agent, each Lender, all future holders of the Obligations and their
respective successors and assigns, except that no Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.
          (b) Each Borrower acknowledges that in the regular course of
commercial banking business one or more Lenders may at any time and from time to
time sell participating interests in the Advances to other financial
institutions (each such transferee or purchaser of a participating interest, a
“Participant”). Each Participant may exercise all rights of payment (including
rights of set-off) with respect to the portion of such Advances held by it or
other Obligations payable hereunder as fully as if such Participant were the
direct holder thereof provided that Borrowers shall not be required to pay to
any Participant more than the amount which it would have been required to pay to
Lender which granted an interest in its Advances or other Obligations payable
hereunder to such Participant had such Lender retained such interest in

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the Advances hereunder or other Obligations payable hereunder and in no event
shall Borrowers be required to pay any such amount arising from the same
circumstances and with respect to the same Advances or other Obligations payable
hereunder to both such Lender and such Participant. Each Borrower hereby grants
to any Participant a continuing security interest in any deposits, moneys or
other property actually or constructively held by such Participant as security
for the Participant’s interest in the Advances.
          (c) Any Lender, with the consent of Agent which shall not be
unreasonably withheld or delayed, may sell, assign or transfer all or any part
of its rights and obligations under or relating to Revolving Advances under this
Agreement and the Other Documents to one or more additional banks or financial
institutions and one or more additional banks or financial institutions may
commit to make Advances hereunder (each a “Purchasing Lender”), in minimum
amounts of not less than $5,000,000, pursuant to a Commitment Transfer
Supplement, executed by a Purchasing Lender, the transferor Lender, and Agent
and delivered to Agent for recording. Upon such execution, delivery, acceptance
and recording, from and after the transfer effective date determined pursuant to
such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a
party hereto and, to the extent provided in such Commitment Transfer Supplement,
have the rights and obligations of a Lender thereunder with a Commitment
Percentage as set forth therein, and (ii) the transferor Lender thereunder
shall, to the extent provided in such Commitment Transfer Supplement, be
released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose. Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Each Borrower
hereby consents to the addition of such Purchasing Lender and the resulting
adjustment of the Commitment Percentages arising from the purchase by such
Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Borrowers shall
execute and deliver such further documents and do such further acts and things
in order to effectuate the foregoing.
          (d) Any Lender, with the consent of Agent which shall not be
unreasonably withheld or delayed, may directly or indirectly sell, assign or
transfer all or any portion of its rights and obligations under or relating to
Revolving Advances under this Agreement and the Other Documents to an entity,
whether a corporation, partnership, trust, limited liability company or other
entity that (i) is engaged in making, purchasing, holding or otherwise investing
in bank loans and similar extensions of credit in the ordinary course of its
business and (ii) is administered, serviced or managed by the assigning Lender
or an Affiliate of such Lender (a “Purchasing CLO” and together with each
Participant and Purchasing Lender, each a “Transferee” and collectively the
“Transferees”), pursuant to a Commitment Transfer Supplement modified as
appropriate to reflect the interest being assigned (“Modified Commitment
Transfer Supplement”), executed by any intermediate purchaser, the Purchasing
CLO, the transferor Lender, and Agent as appropriate and delivered to Agent for
recording. Upon such execution and delivery, from and after the transfer
effective date determined pursuant to such Modified Commitment Transfer
Supplement, (i) Purchasing CLO thereunder shall be a party hereto and, to the
extent provided in such Modified Commitment Transfer Supplement,

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have the rights and obligations of a Lender thereunder and (ii) the transferor
Lender thereunder shall, to the extent provided in such Modified Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Modified Commitment Transfer Supplement creating a novation for that purpose.
Such Modified Commitment Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing CLO. Each Borrower hereby consents to the addition
of such Purchasing CLO. Borrowers shall execute and deliver such further
documents and do such further acts and things in order to effectuate the
foregoing.
          (e) Agent shall maintain at its address a copy of each Commitment
Transfer Supplement and Modified Commitment Transfer Supplement delivered to it
and a register (the “Register”) for the recordation of the names and addresses
of each Lender and the outstanding principal, accrued and unpaid interest and
other fees due hereunder. The entries in the Register shall be conclusive, in
the absence of manifest error, and each Borrower, Agent and Lenders may treat
each Person whose name is recorded in the Register as the owner of the Advance
recorded therein for the purposes of this Agreement. The Register shall be
available for inspection by Borrowing Agent or any Lender at any reasonable time
and from time to time upon reasonable prior notice. Agent shall receive a fee in
the amount of $3,500 payable by the applicable Purchasing Lender and/or
Purchasing CLO upon the effective date of each transfer or assignment (other
than to an intermediate purchaser) to such Purchasing Lender and/or Purchasing
CLO.
          (f) Each Borrower authorizes each Lender to disclose to any Transferee
and any prospective Transferee any and all financial information in such
Lender’s possession concerning such Borrower which has been delivered to such
Lender by or on behalf of such Borrower pursuant to this Agreement or in
connection with such Lender’s credit evaluation of such Borrower.
     16.4. Application of Payments. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for any Borrower’s benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Agent or such Lender.
     16.5. Indemnity. Each Borrower shall indemnify Agent, each Lender and each
of their respective officers, directors, Affiliates, attorneys, employees and
agents from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including fees and disbursements of counsel) which
may be imposed on, incurred by, or asserted against Agent or any Lender in any
claim, litigation, proceeding or investigation instituted or conducted by any
Governmental Body or instrumentality or any other Person with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement or the Other Documents, whether or not Agent or any
Lender is a party thereto, except to the extent that any of the foregoing arises
out of the willful misconduct of the party being indemnified (as

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determined by a court of competent jurisdiction in a final and non-appealable
judgment). Without limiting the generality of the foregoing, this indemnity
shall extend to any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including fees and disbursements of counsel) asserted against
or incurred by any of the indemnitees described above in this Section 16.5 by
any Person under any Environmental Laws or similar laws by reason of any
Borrower’s or any other Person’s failure to comply with laws applicable to solid
or hazardous waste materials, including Hazardous Substances and Hazardous
Waste, or other Toxic Substances. Additionally, if any taxes (excluding taxes
imposed upon or measured solely by the net income of Agent and Lenders, but
including any intangibles taxes, stamp tax, recording tax or franchise tax)
shall be payable by Agent, Lenders or Borrowers on account of the execution or
delivery of this Agreement, or the execution, delivery, issuance or recording of
any of the Other Documents, or the creation or repayment of any of the
Obligations hereunder, by reason of any Applicable Law now or hereafter in
effect, Borrowers will pay (or will promptly reimburse Agent and Lenders for
payment of) all such taxes, including interest and penalties thereon, and will
indemnify and hold the indemnitees described above in this Section 16.5 harmless
from and against all liability in connection therewith.
     16.6. Notice. Any notice or request hereunder may be given to Borrowing
Agent or any Borrower or to Agent or any Lender at their respective addresses
set forth below or at such other address as may hereafter be specified in a
notice designated as a notice of change of address under this Section. Any
notice, request, demand, direction or other communication (for purposes of this
Section 16.6 only, a “Notice”) to be given to or made upon any party hereto
under any provision of this Loan Agreement shall be given or made by telephone
or in writing (which includes by means of electronic transmission (i.e.,
“e-mail”) or facsimile transmission or by setting forth such Notice on a site on
the World Wide Web (a “Website Posting”) if Notice of such Website Posting
(including the information necessary to access such site) has previously been
delivered to the applicable parties hereto by another means set forth in this
Section 16.6) in accordance with this Section 16.6. Any such Notice must be
delivered to the applicable parties hereto at the addresses and numbers set
forth under their respective names on Section 16.6 hereof or in accordance with
any subsequent unrevoked Notice from any such party that is given in accordance
with this Section 16.6. Any Notice shall be effective:
          (a) In the case of hand-delivery, when delivered;
          (b) If given by mail, four days after such Notice is deposited with
the United States Postal Service, with first-class postage prepaid, return
receipt requested;
          (c) In the case of a telephonic Notice, when a party is contacted by
telephone, if delivery of such telephonic Notice is confirmed no later than the
next Business Day by hand delivery, a facsimile or electronic transmission, a
Website Posting or an overnight courier delivery of a confirmatory Notice
(received at or before noon on such next Business Day);
          (d) In the case of a facsimile transmission, when sent to the
applicable party’s facsimile machine’s telephone number, if the party sending
such Notice receives confirmation of the delivery thereof from its own facsimile
machine;

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          (e) In the case of electronic transmission, when actually received;
          (f) In the case of a Website Posting, upon delivery of a Notice of
such posting (including the information necessary to access such site) by
another means set forth in this Section 16.6; and
          (g) If given by any other means (including by overnight courier), when
actually received.
          Any Lender giving a Notice to Borrowing Agent or any Borrower shall
concurrently send a copy thereof to the Agent, and the Agent shall promptly
notify the other Lenders of its receipt of such Notice.

  (A)   If to Agent or PNC at:         PNC Bank, National Association        
200 South Wacker Drive, Suite 600         Chicago, Illinois 60606        
Attention: Portfolio Manager         Telephone: (312) 454-2920        
Facsimile: (312) 454-2919         with a copy to:         Blank Rome LLP        
One Logan Square       130 N. 18th Street         Philadelphia, Pennsylvania
19103         Attention: Lawrence F. Flick, II, Esquire         Telephone:
(215) 569-5556         Facsimile: (215) 832-5556     (B)   If to a Lender other
than Agent, as specified on the signature pages hereof     (C)   If to Borrowing
Agent or any Borrower:         ValueVision Media, Inc.         6740 Shady Oak
Road         Eden Prairie, Minnesota 55344         Attention: Chief Financial
Officer         Telephone: (952) 943-6000         Facsimile: (952) 943-6111    
    with a copy to:         Maslon, Edelman, Borman & Brand LLP         3300
Wells Fargo Center         90 South Seventh Street

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      Minneapolis, Minnesota 55402         Attention: William M. Mower, Esquire
        Telephone: (612) 672-8358         Facsimile: (612) 642-8358

     16.7. Survival. The obligations of Borrowers under Sections 2.2(f), 3.7,
3.8, 3.9, 4.19(h), and 16.5 and the obligations of Lenders under Section 14.7,
shall survive termination of this Agreement and the Other Documents and payment
in full of the Obligations.
     16.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under Applicable Laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
     16.9. Expenses. All costs and expenses including reasonable attorneys’ fees
(including the allocated costs of in house counsel) and disbursements incurred
by Agent on its behalf or on behalf of Lenders (a) in all efforts made to
enforce payment of any Obligation or effect collection of any Collateral, or
(b) in connection with the entering into, modification, amendment,
administration and enforcement of this Agreement or any consents or waivers
hereunder or thereunder and all related agreements, documents and instruments,
or (c) in instituting, maintaining, preserving, enforcing and foreclosing on
Agent’s security interest in or Lien on any of the Collateral, or maintaining,
preserving or enforcing any of Agent’s or any Lender’s rights hereunder and
under all related agreements, documents and instruments, whether through
judicial proceedings or otherwise, or (d) in defending or prosecuting any
actions or proceedings arising out of or relating to Agent’s or any Lender’s
transactions with any Borrower or any Guarantor, or (e) in connection with any
advice given to Agent or any Lender with respect to its rights and obligations
under this Agreement and all related agreements, documents and instruments, may
be charged to Borrowers’ Account and shall be part of the Obligations.
     16.10. Injunctive Relief. Each Borrower recognizes that, in the event any
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, or threatens to fail to perform, observe or
discharge such obligations or liabilities, any remedy at law may prove to be
inadequate relief to Lenders; therefore, Agent, if Agent so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.
     16.11. Consequential Damages. Neither Agent nor any Lender, nor any agent
or attorney for any of them, shall be liable to any Borrower or any Guarantor
(or any Affiliate of any such Person) for indirect, punitive, exemplary or
consequential damages arising from any breach of contract, tort or other wrong
relating to the establishment, administration or collection of the Obligations
or as a result of any transaction contemplated under this Agreement or any Other
Document.
     16.12. Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.

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     16.13. Counterparts; Facsimile Signatures. This Agreement may be executed
in any number of and by different parties hereto on separate counterparts, all
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
     16.14. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
     16.15. Confidentiality; Sharing Information. Agent, each Lender and each
Transferee shall hold all non-public information obtained by Agent, such Lender
or such Transferee pursuant to the requirements of this Agreement in accordance
with Agent’s, such Lender’s and such Transferee’s customary procedures for
handling confidential information of this nature; provided, however, Agent, each
Lender and each Transferee may disclose such confidential information (a) to its
examiners, Affiliates, outside auditors, counsel and other professional
advisors, (b) to Agent, any Lender or to any prospective Transferees, and (c) as
required or requested by any Governmental Body or representative thereof or
pursuant to legal process; provided, further that (i) unless specifically
prohibited by Applicable Law, Agent, each Lender and each Transferee shall use
its reasonable best efforts prior to disclosure thereof, to notify the
applicable Borrower of the applicable request for disclosure of such non-public
information (A) by a Governmental Body or representative thereof (other than any
such request in connection with an examination of the financial condition of a
Lender or a Transferee by such Governmental Body) or (B) pursuant to legal
process and (ii) in no event shall Agent, any Lender or any Transferee be
obligated to return any materials furnished by any Borrower other than those
documents and instruments in possession of Agent or any Lender in order to
perfect its Lien on the Collateral once the Obligations have been paid in full
and this Agreement has been terminated. Each Borrower acknowledges that from
time to time financial advisory, investment banking and other services may be
offered or provided to such Borrower or one or more of its Affiliates (in
connection with this Agreement or otherwise) by any Lender or by one or more
Subsidiaries or Affiliates of such Lender and each Borrower hereby authorizes
each Lender to share any information delivered to such Lender by such Borrower
and its Subsidiaries pursuant to this Agreement, or in connection with the
decision of such Lender to enter into this Agreement, to any such Subsidiary or
Affiliate of such Lender, it being understood that any such Subsidiary or
Affiliate of any Lender receiving such information shall be bound by the
provisions of this Section 16.15 as if it were a Lender hereunder. Such
authorization shall survive the repayment of the other Obligations and the
termination of this Agreement.
     16.16. Publicity. Each Borrower and each Lender hereby authorizes Agent to
make appropriate announcements of the financial arrangement entered into among
Borrowers, Agent and Lenders, including announcements which are commonly known
as tombstones, in such publications and to such selected parties as Agent shall
in its sole and absolute discretion deem appropriate.
     16.17. Certifications From Banks and Participants; USA PATRIOT Act. Each
Lender or assignee or participant of a Lender that is not incorporated under the
Laws of the United States

99

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of America or a state thereof (and is not excepted from the certification
requirement contained in Section 313 of the USA PATRIOT Act and the applicable
regulations because it is both (i) an affiliate of a depository institution or
foreign bank that maintains a physical presence in the United States or foreign
country, and (ii) subject to supervision by a banking authority regulating such
affiliated depository institution or foreign bank) shall deliver to the Agent
the certification, or, if applicable, recertification, certifying that such
Lender is not a “shell” and certifying to other matters as required by
Section 313 of the USA PATRIOT Act and the applicable regulations: (1) within
10 days after the Closing Date, and (2) as such other times as are required
under the USA PATRIOT Act.

100

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     Each of the parties has signed this Agreement as of the day and year first
above written.

            VALUEVISION MEDIA, INC.
      By:   /s/ FRANK ELSENBAST         Name:   Frank Elsenbast         Title:  
Chief Financial Officer        VALUEVISION INTERACTIVE, INC.
      By:   /s/ FRANK ELSENBAST         Name:   Frank Elsenbast         Title:  
Chief Financial Officer        VVI FULFILLMENT CENTER, INC.
      By:   /s/ FRANK ELSENBAST         Name:   Frank Elsenbast         Title:  
Chief Financial Officer        VALUEVISION MEDIA
ACQUISITIONS, INC.
      By:   /s/ FRANK ELSENBAST         Name:   Frank Elsenbast         Title:  
Chief Financial Officer        VALUEVISION RETAIL, INC.
      By:   /s/ FRANK ELSENBAST         Name:   Frank Elsenbast         Title:  
Chief Financial Officer   

 

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            PNC BANK, NATIONAL ASSOCIATION,
As Lender and as Agent
      By:   /s/ BRUCE WEIDNER         Name:   Bruce Weidner         Title:  
Vice President                  200 South Wacker Drive, Suite 600      Chicago,
Illinois 60606

Commitment Percentage: 100%