Exhibit 10.1

Published CUSIP Number: 34988FAA9

Revolving Credit CUSIP Number: 34988FAB7

 

 

$300,000,000

CREDIT AGREEMENT

dated as of December 17, 2010,

by and among

FOSSIL, INC.,

as Borrower,

FOSSIL INTERMEDIATE, INC.,

FOSSIL TRUST,

FOSSIL PARTNERS, L.P.,

ARROW MERCHANDISING, INC.,

FOSSIL STORES I, INC.,

FOSSIL HOLDINGS, LLC

and

FOSSIL INTERNATIONAL HOLDINGS, INC.,

as additional Credit Parties and/or Subsidiary Guarantors,

the Lenders referred to herein,

as Lenders,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent,

Swingline Lender and Issuing Lender

and

WELLS FARGO SECURITIES, LLC,

as Sole Lead Arranger and Sole Book Manager

 

 

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TABLE OF CONTENTS

 

              Page  

ARTICLE I

   DEFINITIONS      1     

SECTION 1.1

   Definitions      1     

SECTION 1.2

   Other Definitions and Provisions      24     

SECTION 1.3

   Accounting Terms      24     

SECTION 1.4

   UCC Terms      25     

SECTION 1.5

   Rounding      25     

SECTION 1.6

   References to Agreement and Laws      25     

SECTION 1.7

   Times of Day      25     

SECTION 1.8

   Letter of Credit Amounts      25   

ARTICLE II

   REVOLVING CREDIT FACILITY      25     

SECTION 2.1

   Revolving Credit Loans      25     

SECTION 2.2

   Swingline Loans      26     

SECTION 2.3

   Procedure for Advances of Revolving Credit Loans and Swingline Loans      27
    

SECTION 2.4

   Repayment and Prepayment of Revolving Credit Loans and Swingline Loans     
28     

SECTION 2.5

   Permanent Reduction of the Revolving Credit Commitment      30     

SECTION 2.6

   Termination of Revolving Credit Facility      30   

ARTICLE III

   LETTER OF CREDIT FACILITY      31     

SECTION 3.1

   L/C Commitment      31     

SECTION 3.2

   Procedure for Issuance of Letters of Credit      32     

SECTION 3.3

   Commissions and Other Charges      32     

SECTION 3.4

   L/C Participations      32     

SECTION 3.5

   Reimbursement Obligation of the Borrower      33     

SECTION 3.6

   Obligations Absolute      34     

SECTION 3.7

   Effect of Letter of Credit Application      34     

SECTION 3.8

   Guaranty by the Borrower of Reimbursement Obligations under Existing Letters
of Credit      34   

ARTICLE IV

   [INTENTIONALLY OMITTED.]      34   

ARTICLE V

   GENERAL LOAN PROVISIONS      34     

SECTION 5.1

   Interest      34     

SECTION 5.2

   Notice and Manner of Conversion or Continuation of Loans      36     

SECTION 5.3

   Fees      36     

SECTION 5.4

   Manner of Payment      37     

SECTION 5.5

   Evidence of Indebtedness      38     

SECTION 5.6

   Adjustments      38     

SECTION 5.7

   Obligations of Lenders      39     

SECTION 5.8

   Changed Circumstances      40     

SECTION 5.9

   Indemnity      40     

SECTION 5.10

   Increased Costs      41     

SECTION 5.11

   Taxes      42     

SECTION 5.12

   Mitigation Obligations; Replacement of Lenders      44   

 

CREDIT AGREEMENT - Page i

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  SECTION 5.13    Security      45     

SECTION 5.14

   Guarantees      45   

ARTICLE VI

   CONDITIONS OF CLOSING AND BORROWING      45     

SECTION 6.1

   Conditions to Closing and Initial Extensions of Credit      45     

SECTION 6.2

   Conditions to All Extensions of Credit      48   

ARTICLE VII

   REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES      49     

SECTION 7.1

   Organization; Power; Qualification      49     

SECTION 7.2

   Subsidiaries and Capitalization; Material Domestic Subsidiaries and Material
First-Tier Foreign Subsidiaries      49     

SECTION 7.3

   Authorization Enforceability      50     

SECTION 7.4

   Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc.      50
    

SECTION 7.5

   Compliance with Law; Governmental Approvals      50     

SECTION 7.6

   Tax Returns and Payments      50     

SECTION 7.7

   Intellectual Property Matters      51     

SECTION 7.8

   Environmental Matters      51     

SECTION 7.9

   Employee Benefit Matters      52     

SECTION 7.10

   Margin Stock      53     

SECTION 7.11

   Government Regulation      53     

SECTION 7.12

   Material Contracts      53     

SECTION 7.13

   Employee Relations      54     

SECTION 7.14

   Burdensome Provisions      54     

SECTION 7.15

   Financial Statements      54     

SECTION 7.16

   No Material Adverse Change      54     

SECTION 7.17

   Solvency      54     

SECTION 7.18

   Titles to Properties      54     

SECTION 7.19

   Insurance      55     

SECTION 7.20

   Liens      55     

SECTION 7.21

   Indebtedness and Guaranty Obligations      55     

SECTION 7.22

   Litigation      55     

SECTION 7.23

   Absence of Defaults      55     

SECTION 7.24

   Senior Indebtedness Status      55     

SECTION 7.25

   OFAC      55     

SECTION 7.26

   Investment Bankers’ and Similar Fees      56     

SECTION 7.27

   Disclosure      56   

ARTICLE VIII

   FINANCIAL INFORMATION AND NOTICES      56     

SECTION 8.1

   Financial Statements and Projections      56     

SECTION 8.2

   Officer’s Compliance Certificate      57     

SECTION 8.3

   [Intentionally omitted.]      57     

SECTION 8.4

   Other Reports      57     

SECTION 8.5

   Notice of Litigation and Other Matters      58     

SECTION 8.6

   Accuracy of Information      59   

ARTICLE IX

   AFFIRMATIVE COVENANTS      60     

SECTION 9.1

   Preservation of Corporate Existence and Related Matters      60   

 

CREDIT AGREEMENT - Page ii

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  SECTION 9.2    Maintenance of Property and Licenses      60     

SECTION 9.3

   Insurance      60     

SECTION 9.4

   Accounting Methods and Financial Records      60     

SECTION 9.5

   Payment of Taxes and Other Obligations      61     

SECTION 9.6

   Compliance With Laws and Approvals      61     

SECTION 9.7

   Environmental Laws      61     

SECTION 9.8

   Compliance with ERISA      61     

SECTION 9.9

   Compliance with Agreements      62     

SECTION 9.10

   Visits and Inspections; Lender Meetings      62     

SECTION 9.11

   Subsidiaries      62     

SECTION 9.12

   [Intentionally omitted.]      63     

SECTION 9.13

   Use of Proceeds      63     

SECTION 9.14

   [Intentionally omitted.]      63     

SECTION 9.15

   Further Assurances      64     

SECTION 9.16

   Non-Consolidation      64   

ARTICLE X

   FINANCIAL COVENANTS      64     

SECTION 10.1

   Consolidated Total Leverage Ratio      64     

SECTION 10.2

   Consolidated Tangible Net Worth      64     

SECTION 10.3

   Consolidated Net Income      64     

SECTION 10.4

   Maximum Capital Expenditures      64   

ARTICLE XI

   NEGATIVE COVENANTS      65     

SECTION 11.1

   Limitations on Indebtedness      65     

SECTION 11.2

   Limitations on Liens      66     

SECTION 11.3

   Limitations on Investments      68     

SECTION 11.4

   Limitations on Fundamental Changes      69     

SECTION 11.5

   Limitations on Asset Dispositions      70     

SECTION 11.6

   Limitations on Restricted Payments      72     

SECTION 11.7

   Transactions with Affiliates      72     

SECTION 11.8

   Certain Accounting Changes; Organizational Documents      73     

SECTION 11.9

   Limitation on Payments and Modifications of Subordinated Indebtedness      73
    

SECTION 11.10

   No Further Negative Pledges; Restrictive Agreements      73     

SECTION 11.11

   Nature of Business      74     

SECTION 11.12

   Amendments of Other Documents      74     

SECTION 11.13

   Sale Leasebacks      74     

SECTION 11.14

   [Intentionally omitted.]      74     

SECTION 11.15

   Domestic Subsidiaries      74   

ARTICLE XII

   DEFAULT AND REMEDIES      75     

SECTION 12.1

   Events of Default      75     

SECTION 12.2

   Remedies      77     

SECTION 12.3

   Rights and Remedies Cumulative; Non-Waiver; etc.      78     

SECTION 12.4

   Crediting of Payments and Proceeds      78     

SECTION 12.5

   Administrative Agent May File Proofs of Claim      78   

ARTICLE XIII

   THE ADMINISTRATIVE AGENT      79   

 

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  SECTION 13.1    Appointment and Authority      79     

SECTION 13.2

   Rights as a Lender      80     

SECTION 13.3

   Exculpatory Provisions      80     

SECTION 13.4

   Reliance by the Administrative Agent      81     

SECTION 13.5

   Delegation of Duties      81     

SECTION 13.6

   Resignation of Administrative Agent      81     

SECTION 13.7

   Non-Reliance on Administrative Agent and Other Lenders      82     

SECTION 13.8

   No Other Duties, etc.      82     

SECTION 13.9

   Collateral and Guaranty Matters      82     

SECTION 13.10

   Release of Liens and Guarantees of Subsidiaries      83     

SECTION 13.11

   Specified Cash Management Arrangements and Specified Hedge Agreements      83
  

ARTICLE XIV

   MISCELLANEOUS      84     

SECTION 14.1

   Notices      84     

SECTION 14.2

   Amendments, Waivers and Consents      85     

SECTION 14.3

   Expenses; Indemnity      87     

SECTION 14.4

   Right of Set Off      88     

SECTION 14.5

   Governing Law; Jurisdiction, Etc.      89     

SECTION 14.6

   Waiver of Jury Trial      89     

SECTION 14.7

   Reversal of Payments      90     

SECTION 14.8

   Injunctive Relief; Punitive Damages      90     

SECTION 14.9

   [Intentionally omitted.]      90     

SECTION 14.10

   Successors and Assigns; Participations      90     

SECTION 14.11

   Confidentiality      93     

SECTION 14.12

   Performance of Duties      94     

SECTION 14.13

   All Powers Coupled with Interest      94     

SECTION 14.14

   Survival      94     

SECTION 14.15

   Titles and Captions      94     

SECTION 14.16

   Severability of Provisions      94     

SECTION 14.17

   Counterparts; Integration; Effectiveness; Electronic Execution      94     

SECTION 14.18

   Term of Agreement      95     

SECTION 14.19

   USA Patriot Act      95     

SECTION 14.20

   [Intentionally omitted.]      95     

SECTION 14.21

   Independent Effect of Covenants      95     

SECTION 14.22

   [Intentionally omitted.]      95     

SECTION 14.23

   Inconsistencies with Other Documents      96   

 

CREDIT AGREEMENT - Page iv

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EXHIBITS      

Exhibit A-1

     -       Form of Revolving Credit Note

Exhibit A-2

     -       Form of Swingline Note

Exhibit B

     -       Form of Notice of Borrowing

Exhibit C

     -       Form of Notice of Account Designation

Exhibit D

     -       Form of Notice of Prepayment

Exhibit E

     -       Form of Notice of Conversion/Continuation

Exhibit F

     -       Form of Officer’s Compliance Certificate

Exhibit G

     -       Form of Assignment and Assumption

Exhibit H

     -       Form of Subsidiary Guaranty Agreement

Exhibit I

     -       Form of Pledge Agreement

Exhibit J

     -       Form of Joinder Agreement SCHEDULES      

Schedule 1.1A

     -       Existing Letters of Credit

Schedule 1.1B

     -       Equity Investors

Schedule 7.1

     -       Jurisdictions of Organization and Qualification

Schedule 7.2A

     -       Subsidiaries and Capitalization

Schedule 7.2B

     -       Material Domestic Subsidiaries and Material First-Tier Foreign
Subsidiaries

Schedule 7.9

     -       ERISA Plans

Schedule 7.12

     -       Material Contracts

Schedule 7.13

     -       Labor and Collective Bargaining Agreements

Schedule 7.14

     -       Certain Restrictive Agreements

Schedule 7.18

     -       Real Property

Schedule 7.21

     -       Indebtedness and Guaranty Obligations

Schedule 7.22

     -       Litigation

Schedule 8.1

     -       Foreign Subsidiaries excluded from Audit

Schedule 11.2

     -       Existing Liens

Schedule 11.3

     -       Existing Loans, Advances and Investments

Schedule 11.7

     -       Transactions with Affiliates

 

CREDIT AGREEMENT - Page v

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CREDIT AGREEMENT, dated as of December 17, 2010, by and among FOSSIL, INC., a
Delaware corporation (the “Borrower”), FOSSIL INTERMEDIATE, INC., a Delaware
corporation (“Fossil Intermediate”), FOSSIL TRUST, a business trust formed under
the Delaware Business Trust Act (and now existing as a statutory trust under the
Delaware Statutory Trust Act), FOSSIL PARTNERS, L.P., a Texas limited
partnership (“Fossil Partners”), ARROW MERCHANDISING, INC., a Texas corporation
(“Arrow”), FOSSIL STORES I, INC., a Delaware corporation (“Fossil Stores”),
FOSSIL HOLDINGS, LLC, a Delaware limited liability company (“Fossil Holdings”),
FOSSIL INTERNATIONAL HOLDINGS, INC., a Delaware corporation (“Fossil
International”), the additional Material Domestic Subsidiaries who may become a
party to this Agreement pursuant to the terms hereof, the lenders who are party
to this Agreement and the lenders who may become a party to this Agreement
pursuant to the terms hereof (collectively with the lenders party hereto, the
“Lenders”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking
association, as the Administrative Agent for the Lenders.

STATEMENT OF PURPOSE

The Borrower has requested, and, subject to the terms and conditions hereof, the
Administrative Agent and the Lenders have agreed, to extend certain credit
facilities to the Borrower on the terms and conditions of this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by the parties hereto, such parties hereby
agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Definitions. The following terms when used in this Agreement shall
have the meanings assigned to them below:

“Act” means the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law
October 26, 2001)), as amended.

“Administrative Agent” means Wells Fargo, in its capacity as Administrative
Agent hereunder, and any successor thereto appointed pursuant to Section 13.6.

“Administrative Agent’s Office” means the office of the Administrative Agent
specified in or determined in accordance with the provisions of Section 14.1(c).

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

“Affiliate” means, with respect to any Person, any other Person (other than a
Subsidiary of the Borrower) which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such first Person or any of its Subsidiaries. The term “control” means (a) the
power to vote ten percent (10%) or more of the securities or other equity
interests of a Person having ordinary voting power, or (b) the possession,
directly or indirectly, of any other power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise. The terms “controlling” and “controlled”
have meanings correlative thereto.

 

CREDIT AGREEMENT - Page 1

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“Agreement” means this Credit Agreement, as amended, restated, supplemented or
otherwise modified from time to time.

“Applicable Law” means all applicable provisions of constitutions, laws,
statutes, ordinances, rules, regulations, permits, licenses and orders of courts
or Governmental Authorities and all orders and decrees of all courts and
arbitrators.

“Applicable Margin” means the corresponding percentages per annum as set forth
below based on the Consolidated Total Leverage Ratio, provided, however, that,
for purposes of this definition only, the amount of Indebtedness (for purposes
of calculating the Consolidated Total Leverage Ratio) shall be determined by
excluding the undrawn amounts of letters of credit:

 

Pricing

Level

  

Consolidated Total Leverage Ratio

   Commitment
Fee     LIBOR +     Base Rate +   I    Less than 1.00 to 1.00      0.20 %     
1.25 %      0.25 %  II    Greater than or equal to 1.00 to 1.00, but less than
1.50 to 1.00      0.25 %      1.50 %      0.50 %  III    Greater than or equal
to 1.50 to 1.00, but less than 2.00 to 1.00      0.30 %      1.75 %      0.75 % 
IV    Greater than or equal to 2.00 to 1.00      0.35 %      2.00 %      1.00 % 

The Applicable Margin shall be determined and adjusted quarterly on the date
(each a “Calculation Date”) ten (10) Business Days after the day by which the
Borrower is required to provide an Officer’s Compliance Certificate pursuant to
Section 8.2 for the most recently ended Fiscal Quarter of the Borrower; provided
that (a) the Applicable Margin shall be based on Pricing Level I until the first
Calculation Date occurring after March 31, 2011 and, thereafter the Pricing
Level shall be determined by reference to the Consolidated Total Leverage Ratio
as of the last day of the most recently ended Fiscal Quarter of the Borrower
preceding the applicable Calculation Date, and (b) if the Borrower fails to
provide the Officer’s Compliance Certificate as required by Section 8.2 for the
most recently ended Fiscal Quarter of the Borrower preceding the applicable
Calculation Date, the Applicable Margin from such Calculation Date shall be
based on Pricing Level IV until such time as an appropriate Officer’s Compliance
Certificate is provided, at which time the Pricing Level shall be determined by
reference to the Consolidated Total Leverage Ratio as of the last day of the
most recently ended Fiscal Quarter of the Borrower preceding such Calculation
Date. The Applicable Margin shall be effective from one Calculation Date until
the next Calculation Date. Any adjustment in the Applicable Margin shall be
applicable to all Extensions of Credit then existing or subsequently made or
issued.

Notwithstanding the foregoing, in the event that any financial statement or
Officer’s Compliance Certificate delivered pursuant to Section 8.1 or 8.2 is
shown to be inaccurate (regardless of whether (i) this Agreement is in effect,
(ii) the Revolving Credit Commitment is in effect, or (iii) any Extension of
Credit is outstanding when such inaccuracy is discovered or such financial
statement or Officer’s Compliance Certificate was delivered), and such
inaccuracy, if corrected, would have led to the application of a higher
Applicable Margin for any period (an “Applicable Period”) than the Applicable
Margin applied for such Applicable Period, then (x) the Borrower shall
immediately deliver to the Agent a corrected Officer’s Compliance Certificate
for such Applicable Period, (y) the Applicable Margin for such Applicable Period
shall be determined as if the Consolidated Total Leverage Ratio in the corrected
Officer’s Compliance Certificate were applicable for such Applicable Period, and
(z) the Borrower shall immediately and retroactively be obligated to pay to the
Administrative Agent the accrued additional interest and fees owing as a result
of such increased Applicable Margin for such Applicable Period, which payment
shall be promptly applied by the Administrative Agent in accordance with
Section 5.4. Nothing in this paragraph shall limit the rights of the
Administrative Agent and Lenders with respect to Section 5.1(c) or Section 12.2
or any of their other rights under this Agreement. The Borrower’s obligations
under this paragraph shall survive the termination of the Revolving Credit
Commitment and the repayment of all other Obligations hereunder.

 

CREDIT AGREEMENT - Page 2

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“Approved Fund” means any Fund that is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that
administers or manages a Lender.

“Arranger” means Wells Fargo Securities, LLC, in its capacity as sole lead
arranger and sole book manager, and its successors.

“Asset Disposition” means the disposition (including any series of related
dispositions) of any assets (including, without limitation, any Capital Stock
owned) of any Credit Party or any Subsidiary thereof, whether by sale, lease,
transfer or otherwise, having a fair market value (including an aggregate fair
market value) of $250,000 or more. The term “Asset Disposition” shall not
include any Equity Issuance.

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 14.10), and accepted by the Administrative Agent, in substantially
the form attached as Exhibit G or any other form approved by the Administrative
Agent.

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

“Base Rate” means, at any time, the higher of (a) the Prime Rate, (b) the
Federal Funds Rate plus 1.50% and (c) except during any period of time during
which a notice delivered to the Borrower under Section 5.8 shall remain in
effect, LIBOR plus 1.50%; each change in the Base Rate shall take effect
simultaneously with the corresponding change or changes in the Prime Rate, the
Federal Funds Rate or LIBOR.

“Base Rate Loan” means any Loan bearing interest at a rate based upon the Base
Rate as provided in Section 5.1(a).

“Borrower” has the meaning assigned thereto in the introductory paragraph
hereto.

“Borrower Materials” has the meaning assigned thereto in Section 8.5.

“Business Day” means (a) for all purposes other than as set forth in clause (b)
below, any day other than a Saturday, Sunday or legal holiday on which banks in
Dallas, Texas, Charlotte, North Carolina or New York, New York, are open for the
conduct of their commercial banking business, and (b) with respect to all
notices and determinations in connection with, and payments of principal and
interest on, any LIBOR Rate Loan, or any Base Rate Loan as to which the interest
rate is determined by reference to LIBOR, any day that is a Business Day
described in clause (a) above and that is also a day for trading by and between
banks in Dollar deposits in the London interbank market.

 

CREDIT AGREEMENT - Page 3

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“Calculation Date” has the meaning assigned thereto in the definition of
Applicable Margin.

“Capital Asset” means, with respect to the Borrower and its Subsidiaries, any
asset that should, in accordance with GAAP, be classified and accounted for as a
capital asset on a Consolidated balance sheet of the Borrower and its
Subsidiaries.

“Capital Expenditures” means, with respect to the Borrower and its Subsidiaries
for any period, the aggregate cost of all Capital Assets acquired by the
Borrower and its Subsidiaries during such period, as determined in accordance
with GAAP.

“Capital Lease” means any lease of any property by the Borrower or any of its
Subsidiaries, as lessee, that should, in accordance with GAAP, be classified and
accounted for as a capital lease on a Consolidated balance sheet of the Borrower
and its Subsidiaries.

“Capital Stock” means (a) in the case of a corporation, capital stock, (b) in
the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of capital
stock, (c) in the case of a partnership, partnership interests (whether general
or limited), (d) in the case of a limited liability company, membership
interests, (e) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person and (f) any and all warrants, rights or options to
purchase any of the foregoing.

“Cash Equivalents” means, collectively, (a) marketable direct obligations issued
or unconditionally guaranteed by the United States or any agency thereof
maturing within one year from the date of acquisition thereof, (b) commercial
paper maturing no more than 270 days from the date of creation thereof and
currently having one of the three highest ratings obtainable from either
Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies,
Inc. (or any successor thereto), or Moody’s Investors Service, Inc. (or any
successor thereto), (c) certificates of deposit maturing no more than one year
from the date of creation thereof issued by commercial banks incorporated under
the laws of the United States or any State thereof, each having combined
capital, surplus and undivided profits of not less than $500,000,000 and having
a rating of “A” or better by a nationally recognized rating agency; (d) time
deposits maturing no more than thirty (30) days from the date of creation
thereof with commercial banks or savings banks or savings and loan associations
each having membership either in the FDIC or the deposits of which are insured
by the FDIC and in amounts not exceeding the maximum amounts of insurance
thereunder, (e) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria of clause (c) above,
(f) investments in “money market funds” within the meaning of Rule 2a-7 of the
Investment Company Act of 1940, as amended, substantially all of whose assets
are invested in investments of the type described in clauses (a) through
(d) above, and (g) other short-term investments utilized by Foreign Subsidiaries
in accordance with normal investment practices for cash management in
investments of a type analogous to the foregoing.

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

(a)(i) any “person” or “group” (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended, but excluding any
employee benefit plan of such person or its Subsidiaries, and any person or
entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) other than the Equity Investors becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, as amended, except that a “person” or “group” shall be
deemed to have “beneficial ownership” of all securities that such “person” or
“group” has the right to acquire, whether such right is exercisable immediately
or only after the passage of time (such right, an “option right”)), directly or
indirectly, of more than twenty-five percent (25%) of the equity securities of
the Borrower entitled to vote in the election of members of the board of
directors (or equivalent governing body) of Borrower or (ii) a majority of the
board of directors (or equivalent governing body) of the Borrower shall not be
Continuing Directors;

 

CREDIT AGREEMENT - Page 4

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(b) there shall have occurred under any indenture or other instrument evidencing
any Indebtedness or Capital Stock in excess of $25,000,000 any “change in
control” or similar provision (as set forth in the indenture, agreement or other
evidence of such Indebtedness) obligating the Borrower to repurchase, redeem or
repay all or any part of the Indebtedness or Capital Stock provided for therein;
or

(c) the Borrower shall fail to own, directly or indirectly, one hundred percent
(100%) of the Capital Stock of each of the Subsidiary Guarantors.

“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, guideline or directive
(whether or not having the force of law) by any Governmental Authority.

“Class” means, when used in reference to any Loan, whether such Loan is a
Revolving Credit Loan or a Swingline Loan.

“Closing Date” means the date of this Agreement or such later Business Day upon
which each condition described in Section 6.1 shall be satisfied or waived in
all respects in a manner acceptable to the Administrative Agent, in its sole
discretion.

“Code” means the Internal Revenue Code of 1986, and the rules and regulations
thereunder, each as amended or modified from time to time.

“Collateral” means the collateral security for the Obligations pledged or
granted pursuant to the Security Documents.

“Commercial Letter of Credit Facility” means the uncommitted letter of credit
facility among Fossil Partners, Fossil Group Europe GmbH, Fossil Asia Pacific
Ltd. and The HongKong and Shanghai Banking Corporation Limited (“HSBC”)
evidenced by the letter agreement dated as of January 15, 2010, as the same may
be amended, modified, supplemented, renewed, extended or replaced from time to
time (including, without limitation, any participation agreement existing from
time to time between HSBC and Wells Fargo relating thereto and any replacement
thereto provided from time to time by Wells Fargo).

“Commitment Fee” has the meaning assigned thereto in Section 5.3(a).

“Commitments” means the Revolving Credit Commitment and the L/C Commitment.

“Consolidated” means, when used with reference to financial statements or
financial statement items of any Person, such statements or items on a
consolidated basis in accordance with applicable principles of consolidation
under GAAP.

 

CREDIT AGREEMENT - Page 5

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“Consolidated EBITDA” means, for any period, the sum of the following determined
on a Consolidated basis, without duplication, for the Borrower and its
Subsidiaries in accordance with GAAP: (a) Consolidated Net Income for such
period, plus (b) the sum of the following, without duplication, to the extent
deducted in determining Consolidated Net Income: (i) income and franchise taxes
during such period, (ii) Consolidated Interest Expense, (iii) amortization,
depreciation and other non-cash charges for such period (except to the extent
that such non-cash charges are reserved for cash charges to be taken in the
future), (iv) extraordinary losses (excluding extraordinary losses from
discontinued operations), (v) the amount of premium payments paid by the
Borrower or its Subsidiaries, and charges in respect of unamortized fees and
expenses, in each case associated with the repayment of Indebtedness, (vi) the
remainder of the amount of post-retirement health benefits accrued during such
period less the amount of post-retirement health benefits paid during such
period, in an amount not to exceed $5,000,000, (vii) the first $20,000,000 of
non-recurring cash charges for severance payments and plant closings incurred or
taken on or after the Closing Date and through the Fiscal Year ending on or
about December 31, 2011, and (viii) expenses relating to stock-based
compensation plans resulting from the application of Financial Accounting
Standards Board Statement No. 123R, minus (c) interest income and extraordinary
gains.

“Consolidated Interest Expense” means, for any period, the sum of the following
determined on a Consolidated basis, without duplication, for the Borrower and
its Subsidiaries in accordance with GAAP, interest expense (including, without
limitation, interest expense attributable to Capital Leases and all net payment
obligations pursuant to Hedge Agreements) for such period. For purposes hereof,
“interest” shall include interest imputed on the Attributable Indebtedness in
respect of any Capital Lease or Synthetic Lease.

“Consolidated Net Income” means, for any period, the net income (or loss) of the
Borrower and its Subsidiaries for such period, determined on a Consolidated
basis, without duplication, in accordance with GAAP; provided, in calculating
Consolidated Net Income of the Borrower and its Subsidiaries for any period,
there shall be excluded (a) the net income (or loss) of any Person (other than a
Subsidiary which shall be subject to clause (c) below), in which the Borrower or
any of its Subsidiaries has a joint interest with a third party, except to the
extent such net income is actually paid in cash to the Borrower or any of its
Subsidiaries by dividend or other distribution during such period, (b) the net
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
of the Borrower or any of its Subsidiaries or is merged into or consolidated
with the Borrower or any of its Subsidiaries or that Person’s assets are
acquired by the Borrower or any of its Subsidiaries except to the extent
included pursuant to the foregoing clause (a), and (c) the net income (if
positive), of any Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary to the Borrower or any of
its Subsidiaries of such net income (i) is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Subsidiary or (ii) would be subject to any taxes payable on such dividends or
distributions.

“Consolidated Tangible Net Worth” means, as of any date of determination with
respect to the Borrower and its Subsidiaries on a Consolidated basis without
duplication, the remainder of consolidated tangible assets minus consolidated
total liabilities.

“Consolidated Total Indebtedness” means, as of any date of determination with
respect to the Borrower and its Subsidiaries on a Consolidated basis without
duplication, the sum of all Indebtedness of the Borrower and its Subsidiaries.

“Consolidated Total Leverage Ratio” means, as of any date of determination, the
ratio of (a) Consolidated Total Indebtedness on such date to (b) Consolidated
EBITDA for the period of four (4) consecutive Fiscal Quarters ending on or
immediately prior to such date.

 

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“Continuing Directors” means the directors of the Borrower on the Closing Date
and each other director of the Borrower, if, in each case, such other director’s
nomination for election to the board of directors (or equivalent governing body)
of the Borrower is recommended by at least 51% of the then Continuing Directors.

“Credit Facility” means, collectively, the Revolving Credit Facility, the
Swingline Facility and the L/C Facility.

“Credit Parties” means, collectively, the Borrower, the Subsidiary Guarantors
and the other Domestic Subsidiaries of the Borrower as of the Closing Date which
are parties to this Agreement.

“Debt Issuance” shall mean the issuance of any Indebtedness for borrowed money
by any Credit Party or any of its Subsidiaries.

“Default” means any of the events specified in Section 12.1 which, with the
passage of time, the giving of notice or any other condition, would constitute
an Event of Default.

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of
the Loans, participations in L/C Obligations or participations in Swingline
Loans required to be funded by it hereunder within one Business Day of the date
required to be funded by it hereunder, (b) has otherwise failed to pay over to
the Administrative Agent or any other Lender any other amount required to be
paid by it hereunder within one Business Day of the date when due, unless such
amount is the subject of a good faith dispute, (c) has notified the Borrower,
the Administrative Agent or any other Lender in writing that it does not intend
to comply with any of its funding obligations under this Agreement or has made a
public statement to the effect that it does not intend to comply or has failed
to comply with its funding obligations under this Agreement or under other
agreements in which it commits or is obligated to extend credit, or (d) has, or
has a direct or indirect parent company that has, become or is insolvent or has
become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment.

“Disputes” means any dispute, claim or controversy arising out of, connected
with or relating to this Agreement or any other Loan Document, between or among
parties hereto and to the other Loan Documents.

“Disqualified Capital Stock” means any Capital Stock that, by its terms (or by
the terms of any security or other Capital Stock into which it is convertible or
for which it is exchangeable) or upon the happening of any event or condition,
(a) matures or is mandatorily redeemable (other than solely for Qualified
Capital Stock), pursuant to a sinking fund obligation or otherwise (except as a
result of a change of control or asset sale so long as any rights of the holders
thereof upon the occurrence of a change of control or asset sale event shall be
subject to the prior repayment in full of the Loans and all other Obligations
that are accrued and payable and the termination of the Revolving Credit
Commitment), (b) is redeemable at the option of the holder thereof (other than
solely for Qualified Capital Stock) (except as a result of a change of control
or asset sale so long as any rights of the holders thereof upon the occurrence
of a change of control or asset sale event shall be subject to the prior
repayment in full of the Loans and all other Obligations that are accrued and
payable and the termination of the Revolving Credit Commitment), in whole or in
part, (c) provides for the scheduled payment of dividends in cash or (d) is or
becomes convertible into or exchangeable for Indebtedness or any other Capital
Stock that would constitute Disqualified Capital Stock, in each case, prior to
the date that is 91 days after the Maturity Date; provided, that if such Capital
Stock is issued pursuant to a plan for the benefit of the Borrower or its
Subsidiaries or by any such plan to such employees, such Capital Stock shall not
constitute Disqualified Capital Stock solely because it may be required to be
repurchased by the Borrower or its Subsidiaries in order to satisfy applicable
statutory or regulatory obligations.

 

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“Dollars” or “$” means, unless otherwise qualified, dollars in lawful currency
of the United States.

“Domestic Subsidiary” means any Subsidiary organized under the laws of any
political subdivision of the United States.

“Employee Benefit Plan” means (a) any employee benefit plan within the meaning
of Section 3(3) of ERISA that is maintained for employees of any Credit Party or
any ERISA Affiliate or (b) any Pension Plan or Multiemployer Plan that has at
any time within the preceding six (6) years been maintained for the employees of
any Credit Party or any current or former ERISA Affiliate.

“Environmental Claims” means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, accusations,
allegations, notices of noncompliance or violation, investigations (other than
internal reports prepared by any Person in the ordinary course of business and
not in response to any third party action or request of any kind) or proceedings
relating in any way to any actual or alleged violation of or liability under any
Environmental Law or relating to any permit issued, or any approval given, under
any such Environmental Law brought by any Person, including, without limitation,
any and all claims by Governmental Authorities for cleanup, removal, response or
remedial actions or damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials or arising
from alleged injury or threat of injury to human health or the environment from
Hazardous Materials.

“Environmental Laws” means any and all federal, foreign, state, provincial and
local laws, statutes, ordinances, codes, rules, standards and regulations,
permits, licenses, approvals and orders of courts or Governmental Authorities,
relating to the protection of public health or the environment, including, but
not limited to, requirements pertaining to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, handling,
reporting, licensing, permitting, investigation or remediation of any hazardous
waste (as defined by 42 U.S.C. §6903(5)), hazardous substance (as defined by 42
U.S.C. §9601(14)), hazardous material (as defined by 49 U.S.C. §5102(2)), toxic
pollutant (as listed pursuant to 33 U.S.C. §1317), or pollutant or contaminant
(as pollutant or contaminant is defined in 33 U.S.C. §9601(33)).

“Equity Investors” means, collectively, the Persons listed on Schedule 1.1B
attached hereto who constitute senior management of the Borrower on the Closing
Date and who own Capital Stock of the Borrower on the Closing Date.

“Equity Issuance” means (a) any issuance by any Credit Party or any Subsidiary
thereof to any Person that is not a Credit Party of (i) shares of its Capital
Stock, (ii) any shares of its Capital Stock pursuant to the exercise of options
or warrants or (iii) any shares of its Capital Stock pursuant to the conversion
of any debt securities to equity and (b) any capital contribution from any
Person that is not a Credit Party into any Credit Party or any Subsidiary
thereof. The term “Equity Issuance” shall not include (A) any Asset Disposition
or (B) any Debt Issuance.

“ERISA” means the Employee Retirement Income Security Act of 1974, and the rules
and regulations thereunder, each as amended or modified from time to time.

 

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“ERISA Affiliate” means any Person who together with any Credit Party or any of
its Subsidiaries is treated as a single employer within the meaning of
Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.

“Eurodollar Reserve Percentage” means, for any day, the percentage (expressed as
a decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%)
which is in effect for such day as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any basic, supplemental or emergency
reserves) in respect of eurocurrency liabilities or any similar category of
liabilities for a member bank of the Federal Reserve System in New York City.

“Event of Default” means any of the events specified in Section 12.1; provided
that any requirement for passage of time, giving of notice, or any other
condition, has been satisfied.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
the Issuing Lender or any other recipient of any payment to be made by or on
account of any obligation of the Borrower hereunder, (a) taxes imposed on or
measured by its overall net income (however denominated), and franchise taxes
imposed on it (in lieu of net income taxes), by the jurisdiction (or any
political subdivision thereof) under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable Lending Office is located, (b) any branch
profits taxes imposed by the United States or any similar tax imposed by any
other jurisdiction in which the Borrower is located and (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 5.12(b)), any withholding tax that is imposed on amounts payable
to such Foreign Lender at the time such Foreign Lender becomes a party hereto
(or designates a new Lending Office) or is attributable to such Foreign Lender’s
failure or inability (other than as a result of a Change in Law) to comply with
Section 5.11(e), except to the extent that such Foreign Lender (or its assignor,
if any) was entitled, at the time of designation of a new Lending Office (or
assignment), to receive additional amounts from the Borrower with respect to
such withholding tax pursuant to Section 5.11(a).

“Existing Credit Agreement” means that certain Loan Agreement, dated as of
September 23, 2004, among Wells Fargo, Fossil Partners (as borrower), the
Borrower, Fossil Intermediate, Fossil Trust, Fossil Stores, Intermediate
Leasing, Inc., Arrow, Fossil Holdings and FMW Acquisition, Inc., as amended.

“Existing Letters of Credit” means those letters of credit existing on the
Closing Date and identified on Schedule 1.1A.

“Extensions of Credit” means, as to any Lender at any time, (a) an amount equal
to the sum of (i) the aggregate principal amount of all Revolving Credit Loans
made by such Lender then outstanding, (ii) such Lender’s Revolving Credit
Commitment Percentage of the L/C Obligations then outstanding, and (iii) such
Lender’s Revolving Credit Commitment Percentage of the Swingline Loans then
outstanding, or (b) the making of any Loan or participation in any Letter of
Credit by such Lender, as the context requires.

“FDIC” means the Federal Deposit Insurance Corporation, or any successor
thereto.

“Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers on such
day (or, if such day is not a Business Day, for the immediately preceding
Business Day), as published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day, provided that, if such rate is not so
published for any day which is a Business Day, “Federal Funds Rate” means the
average of the quotation for such day on such transactions received by the
Administrative Agent from three Federal Funds brokers of recognized standing
selected by the Administrative Agent.

 

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“Fee Letter” means the separate fee letter agreement dated October 26, 2010
among the Borrower, the Administrative Agent and the Arranger.

“Fiscal Quarter” means one of the four (4) periods falling in each Fiscal Year,
each such period being thirteen (13) weeks in duration, with the first such
period in any Fiscal Year beginning on the first day of such Fiscal Year and the
last such period in any Fiscal Year ending on the last Saturday closest to
December 31.

“Fiscal Year” means the fifty–two (52) or fifty-three (53) week period beginning
on the date which is one day after the end of the similar preceding period and
ending on the Saturday closest to December 31st.

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

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“Foreign Subsidiary Pledge Agreements” means pledge and security agreements or
other agreements valid and enforceable under the laws of the foreign
jurisdictions in which the Material First-Tier Foreign Subsidiaries are
organized and in form and substance reasonably satisfactory to the
Administrative Agent pursuant to which the Administrative Agent, for the benefit
of the Secured Parties and as security for the Obligations, is granted a
security interest (or the equivalent under the applicable foreign laws) in
sixty-five percent (65%) of the total outstanding voting Capital Stock (and one
hundred percent (100%) of the non-voting Capital Stock) of each Material
First-Tier Foreign Subsidiary (except as otherwise permitted by Section 9.11(b)
with respect to the Capital Stock of Fossil Gibraltar).

“Fossil East” means Fossil (East) Limited (Hong Kong).

“Fossil Gibraltar” means Fossil Holdings (Gibraltar) Ltd.

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

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

“Governmental Approvals” means all authorizations, consents, approvals, permits,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.

 

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

“Guaranty Obligation” means, with respect to the Borrower and its Subsidiaries,
without duplication, any obligation, contingent or otherwise, of any such Person
pursuant to which such Person has directly or indirectly guaranteed any
Indebtedness or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of any such Person (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or other obligation (whether
arising by virtue of partnership arrangements, by agreement to keep well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement condition or otherwise) or (b) entered into for the purpose
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, that the term Guaranty
Obligation shall not include endorsements for collection or deposit in the
ordinary course of business.

“Hazardous Materials” means any substances or materials (a) which are or become
defined as hazardous wastes, hazardous substances, hazardous materials, solid
waste, special waste, extremely hazardous waste, hazardous constitutent,
restricted hazardous waste, pollutants, contaminants, chemical substances or
mixtures or toxic substances under any Environmental Law, (b) which are listed,
defined, designated or classified as, or otherwise determined by any
Environmental Law to be hazardous, ignitable, dangerous, toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or
otherwise harmful to human health or the environment, or (c) which contain,
without limitation, asbestos in friable form, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum or petroleum
derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic
gas.

“Hedge Agreement” means any agreement with respect to any Interest Rate
Contract, forward rate agreement, commodity swap, forward foreign exchange
agreement, currency swap agreement, cross-currency rate swap agreement, currency
option agreement or other agreement or arrangement designed to alter the risks
of any Person arising from fluctuations in interest rates, currency values or
commodity prices, all as amended, restated, supplemented or otherwise modified
from time to time.

“Indebtedness” means, with respect to any Person at any date and without
duplication, the sum of the following calculated in accordance with GAAP:

(a) all liabilities, obligations and indebtedness for borrowed money including,
but not limited to, obligations evidenced by bonds, debentures, notes or other
similar instruments of any such Person;

(b) all obligations to pay the deferred purchase price of property or services
of any such Person (including, without limitation, all obligations under
non-competition, earn-out or similar agreements), except (i) trade payables
arising in the ordinary course of business not more than ninety (90) days past
due, or (ii) that are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided for on the books of such Person;

(c) the Attributable Indebtedness of such Person with respect to such Person’s
obligations in respect of Capital Leases and Synthetic Leases (regardless of
whether accounted for as indebtedness under GAAP);

 

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(d) all obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person to the extent
of the value of such property (other than customary reservations or retentions
of title under agreements with suppliers entered into in the ordinary course of
business);

(e) all Indebtedness of any other Person secured by a Lien on any asset owned or
being purchased by such Person (including indebtedness arising under conditional
sales or other title retention agreements except trade payable arising in the
ordinary course of business), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse;

(f) all obligations, contingent or otherwise, of any such Person relative to the
face amount of letters of credit, whether or not drawn, including, without
limitation, any Reimbursement Obligation, and banker’s acceptances issued for
the account of any such Person;

(g) all obligations of any such Person in respect of Disqualified Capital Stock;

(h) all Net Hedging Obligations of any such Person in excess of $10,000,000 in
the aggregate for all Credit Parties; and

(i) all Guaranty Obligations of any such Person with respect to any of the
foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person.

“Indemnified Taxes” means Taxes and Other Taxes other than Excluded Taxes.

“Insurance and Condemnation Event” means the receipt by any Credit Party or any
of its Subsidiaries of any cash insurance proceeds or condemnation award payable
by reason of theft, loss, physical destruction or damage, taking or similar
event with respect to any of their respective Property.

“Interest Period” has the meaning assigned thereto in Section 5.1(b).

“Interest Rate Contract” means any interest rate swap agreement, interest rate
cap agreement, interest rate floor agreement, interest rate collar agreement,
interest rate option or any other agreement regarding the hedging of interest
rate risk exposure executed in connection with hedging the interest rate
exposure of any Person and any confirming letter executed pursuant to such
agreement, all as amended, restated, supplemented or otherwise modified from
time to time.

“ISP98” means the International Standby Practices (1998 Revision, effective
January 1, 1999), International Chamber of Commerce Publication No. 590.

“Issuing Lender” means (a) with respect to Letters of Credit issued hereunder on
or after the Closing Date, Wells Fargo, in its capacity as issuer thereof, or
any successor thereto and (b) with respect to the Existing Letters of Credit,
Wells Fargo, in its capacity as issuer thereof.

“Joinder Agreement” means an agreement substantially in the form attached as
Exhibit J or in such other form as may be acceptable to the Administrative Agent
pursuant to which a Material Domestic Subsidiary becomes a party to this
Agreement and the Subsidiary Guaranty Agreement.

 

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“L/C Commitment” means the lesser of (a) Fifty Million Dollars ($50,000,000) and
(b) the Revolving Credit Commitment.

“L/C Facility” means the letter of credit facility established pursuant to
Article III.

“L/C Obligations” means at any time, an amount equal to the sum of (a) the
aggregate undrawn and unexpired amount of the then outstanding Letters of Credit
and (b) the aggregate amount of drawings under Letters of Credit which have not
then been reimbursed pursuant to Section 3.5.

“L/C Participants” means the collective reference to all the Lenders other than
the Issuing Lender.

“Lender” has the meaning assigned thereto in the introductory paragraph hereof
(and, unless the context otherwise provides, includes the Issuing Lender and the
Swingline Lender).

“Lending Office” means, with respect to any Lender, the office of such Lender
maintaining such Lender’s Extensions of Credit.

“Letter of Credit Application” means an application, in the form specified by
the Issuing Lender from time to time, requesting the Issuing Lender to issue a
Letter of Credit.

“Letters of Credit” means the collective reference to letters of credit issued
pursuant to Section 3.1 and the Existing Letters of Credit.

“LIBOR” means,

(a) for any interest rate calculation with respect to a LIBOR Rate Loan, the
rate of interest per annum determined on the basis of the rate for deposits in
Dollars for a period equal to the applicable Interest Period which appears on
Reuters Screen LIBOR01 Page (or any successor page) at approximately 11:00 a.m.
(London time) two (2) Business Days prior to the first day of the applicable
Interest Period (rounded upward, if necessary, to the nearest 1/100th of 1%).
If, for any reason, such rate does not appear on Reuters Screen LIBOR01 Page (or
any successor page), then “LIBOR” shall be determined by the Administrative
Agent to be the arithmetic average of the rate per annum at which deposits in
Dollars in minimum amounts of at least $5,000,000 would be offered by first
class banks in the London interbank market to the Administrative Agent at
approximately 11:00 a.m. (London time) two (2) Business Days prior to the first
day of the applicable Interest Period for a period equal to such Interest
Period; and

(b) for any interest rate calculation with respect to a Base Rate Loan, the rate
of interest per annum determined on the basis of the rate for deposits in
Dollars in minimum amounts of at least $5,000,000 for a period equal to one
month (commencing on the date of determination of such interest rate) which
appears on the Reuters Screen LIBOR01 Page (or any successor page) at
approximately 11:00 a.m. (London time) on such date of determination, or, if
such date is not a Business Day, then the immediately preceding Business Day
(rounded upward, if necessary, to the nearest 1/100th of 1%). If, for any
reason, such rate does not appear on Reuters Screen LIBOR01 Page (or any
successor page), then “LIBOR” for such Base Rate Loan shall be determined by the
Administrative Agent to be the arithmetic average of the rate per annum at which
deposits in Dollars in minimum amounts of at least $5,000,000 would be offered
by first class banks in the London interbank market to the Administrative Agent
at approximately 11:00 a.m. (London time) on such date of determination for a
period equal to one month commencing on such date of determination.

Each calculation by the Administrative Agent of LIBOR shall be conclusive and
binding for all purposes, absent manifest error.

 

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“LIBOR Rate” means a rate per annum (rounded upwards, if necessary, to the next
higher 1/100th of 1%) determined by the Administrative Agent pursuant to the
following formula:

 

LIBOR Rate =  

LIBOR

     1.00 minus the Eurodollar Reserve Percentage   

“LIBOR Rate Loan” means any Loan bearing interest at a rate based upon the LIBOR
Rate as provided in Section 5.1(a).

“Lien” means, with respect to any asset, any mortgage, leasehold mortgage, lien,
pledge, charge, security interest, hypothecation or encumbrance of any kind in
respect of such asset. For the purposes of this Agreement, a Person shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
Capital Lease or other title retention agreement relating to such asset.

“Loan Documents” means, collectively, this Agreement, each Note, the Letter of
Credit Applications, the Security Documents, the Fee Letter and each other
document, instrument, certificate and agreement required to be executed and
delivered by any Credit Party or any of its Subsidiaries in favor of or provided
to the Administrative Agent or any Secured Party in connection with this
Agreement or otherwise referred to herein or contemplated hereby (excluding any
Specified Hedge Agreement and any Specified Cash Management Arrangement), all as
may be amended, restated, supplemented or otherwise modified from time to time.

“Loans” means the collective reference to the Revolving Credit Loans and the
Swingline Loans, and “Loan” means any of such Loans.

“Material Adverse Effect” means a material adverse effect on (a) the properties,
business, operations or financial condition of the Borrower, of the Credit
Parties taken as a whole or of the Borrower and its Subsidiaries taken as a
whole, or (b) the ability of any such Person or Persons referred to in clause
(a) preceding (either individually or taken as a whole as provided therein) to
perform its or their obligations under the Loan Documents to which it is or they
are (as applicable) a party.

“Material Contract” means (a) any contract or other agreement, written or oral,
of any Credit Party or any of its Subsidiaries involving monetary liability of
or to any such Person in an amount in excess of $20,000,000 per annum or (b) any
other contract or agreement, written or oral, of any Credit Party or any of its
Subsidiaries, the failure to comply with which could reasonably be expected to
have a Material Adverse Effect.

“Material Domestic Subsidiary” means Fossil Intermediate, Fossil Trust, Fossil
Stores and Fossil International and each other now existing or hereafter
acquired or created or existing Domestic Subsidiary of the Borrower which, at
any time on or after the Closing Date, has tangible assets having an aggregate
book value (determined in accordance with GAAP) of greater than $50,000,000 as
determined in accordance with Section 8.1(d). For avoidance of doubt, once it
has been so determined that any Domestic Subsidiary has tangible assets which
meet such fair market value threshold, then such Domestic Subsidiary shall
thereupon and at all times thereafter be deemed to be a “Material Domestic
Subsidiary” for purposes of this Agreement, irrespective of any subsequent
change in its tangible assets.

“Material First-Tier Foreign Subsidiary” means Fossil Europe B.V., Fossil
Holdings (Gibraltar) Ltd. and Swiss Technology Holding GmbH and each other now
existing or hereafter acquired or created or existing Foreign Subsidiary of the
Borrower which is owned directly by the Borrower and/or one or more Domestic
Subsidiaries and which, at any time on or after the Closing Date, has tangible
assets having an aggregate book value (determined in accordance with GAAP) of
greater than $50,000,000 as determined in accordance with Section 8.1(d). For
avoidance of doubt, once it has been so determined that any such Foreign
Subsidiary has tangible assets which meet such fair market value threshold, then
such Foreign Subsidiary shall thereupon and at all times thereafter be deemed to
be a “Material First-Tier Foreign Subsidiary” for purposes of this Agreement,
irrespective of any subsequent change in its tangible assets.

 

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“Maturity Date” means the earliest to occur of (a) December 17, 2013, (b) the
date of termination of the entire Revolving Credit Commitment by the Borrower
pursuant to Section 2.5, or (c) the date of termination of the Revolving Credit
Commitment pursuant to Section 12.2(a).

“Maximum Swingline Amount” means the lesser of (a) Twenty Million Dollars
($20,000,000) and (b) the Revolving Credit Commitment.

“Multiemployer Plan” means a “multiemployer plan” as defined in
Section 4001(a)(3) of ERISA to which any Credit Party or any ERISA Affiliate is
making, or is accruing an obligation to make, or has accrued an obligation to
make contributions within the preceding six (6) years.

“Net Cash Proceeds” means, as applicable, (a) with respect to any Asset
Disposition, the gross cash proceeds received by any Credit Party or any of its
Subsidiaries therefrom less the sum of (i) all income taxes and other taxes
assessed by a Governmental Authority as a result of such disposition and any
other fees and expenses incurred in connection with such disposition and
(ii) the principal amount of, premium, if any, and interest on any Indebtedness
secured by a Lien on the asset (or a portion thereof) disposed of, which
Indebtedness is required to be repaid in connection with such disposition,
(b) with respect to any Equity Issuance or Debt Issuance, the gross cash
proceeds received by any Credit Party or any of its Subsidiaries therefrom less
all legal, underwriting and other fees and expenses incurred in connection
therewith and (c) with respect to any Insurance and Condemnation Event, the
gross cash proceeds received by any Credit Party or any of its Subsidiaries
therefrom less the sum of (i) all fees and expenses in connection therewith and
(ii) the principal amount of, premium, if any, and interest on any Indebtedness
secured by a Lien on the asset (or a portion thereof) subject to such Insurance
and Condemnation Event, which Indebtedness is required to be repaid in
connection therewith.

“Net Hedging Obligations” means, as of any date, the Termination Value of any
Hedge Agreement on such date.

“Non-Consenting Lender” means any Lender that has not consented to any proposed
amendment, modification, waiver or termination of any Loan Document which,
pursuant to Section 14.2, requires the consent of all Lenders or all affected
Lenders and with respect to which the Required Lenders shall have granted their
consent.

“Non-Guarantor Subsidiary” means any Subsidiary of the Borrower that is not a
Subsidiary Guarantor.

“Non-Material Foreign Subsidiary” means a Foreign Subsidiary which, at any date
of determination, has tangible assets having an aggregate book value (determined
in accordance with GAAP) of $20,000,000 or less.

“Notes” means the collective reference to the Revolving Credit Notes and the
Swingline Note.

“Notice of Account Designation” has the meaning assigned thereto in
Section 2.3(b).

 

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“Notice of Borrowing” has the meaning assigned thereto in Section 2.3(a).

“Notice of Conversion/Continuation” has the meaning assigned thereto in
Section 5.2.

“Notice of Prepayment” has the meaning assigned thereto in Section 2.4(c).

“Obligations” means, in each case, whether now in existence or hereafter
arising: (a) the principal of and interest on (including interest accruing after
the filing of any bankruptcy or similar petition) the Loans, (b) the L/C
Obligations, (c) all Specified Obligations and (d) all other fees and
commissions (including attorneys’ fees), charges, indebtedness, loans,
liabilities, financial accommodations, obligations, covenants and duties owing
by any one or more of the Credit Parties to any one or more of the Secured
Parties or the Administrative Agent, in each case under any Loan Document or
otherwise, with respect to any Loan or Letter of Credit of every kind, nature
and description, direct or indirect, absolute or contingent, due or to become
due, contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note; provided that (i) the Specified Obligations shall be
secured and guaranteed pursuant to the Security Documents only to the extent
that, and for so long as, the other Obligations are so secured and guaranteed
and (ii) any release of Collateral or Guarantors effected in the manner
permitted by this Agreement shall not require the consent of holders of the
Specified Obligations.

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

“Officer’s Compliance Certificate” means a certificate of the chief financial
officer or the treasurer of the Borrower substantially in the form attached as
Exhibit F.

“Operating Lease” means, as to any Person as determined in accordance with GAAP,
any lease of Property (whether real, personal or mixed) by such Person as lessee
which is not a Capital Lease.

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

“Participant” has the meaning assigned thereto in Section 14.10(d).

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

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan,
which is subject to the provisions of Title IV of ERISA or Section 412 or
Section 430 of the Code and which (a) is maintained for the employees of any
Credit Party or any ERISA Affiliate or (b) has at any time within the preceding
six (6) years been maintained for the employees of any Credit Party or any
current or former ERISA Affiliates.

“Permitted Acquisition” means any acquisition by the Borrower or any Subsidiary
Guarantor in the form of acquisitions of all or substantially all of the
business or a line of business (whether by the acquisition of Capital Stock,
assets or any combination thereof) of any other Person if each such acquisition
meets all of the following requirements:

(a) no less than fifteen (15) Business Days prior to the proposed closing date
of such acquisition, the Borrower shall have delivered written notice of such
acquisition to the Administrative Agent and the Lenders, which notice shall
include the proposed closing date of such acquisition;

 

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(b) the Borrower shall have certified on or before the closing date of such
acquisition, in writing and in a form reasonably acceptable to the
Administrative Agent, that such acquisition has been approved by the board of
directors (or equivalent governing body) of the Person to be acquired;

(c) the Person or business to be acquired shall be in a substantially similar
line of business as the Borrower and its Subsidiaries pursuant to Section 11.11;

(d) if such transaction is a merger or consolidation, the Borrower or a
Subsidiary Guarantor shall be the surviving Person and no Change in Control
shall have been effected thereby;

(e) the Borrower shall have delivered to the Administrative Agent such documents
reasonably requested by the Administrative Agent or the Required Lenders
(through the Administrative Agent) pursuant to Section 9.11 to be delivered at
the time required pursuant to Section 9.11;

(f) no later than five (5) Business Days prior to the proposed closing date of
such acquisition, the Borrower shall have delivered to the Administrative Agent
and the Lenders an Officer’s Compliance Certificate for the most recent Fiscal
Quarter end preceding such acquisition for which financial statements are
available demonstrating, in form and substance reasonably satisfactory thereto,
(A) compliance (as of the date of the acquisition and after giving effect
thereto and any Indebtedness incurred in connection therewith) with each
covenant contained in Article X and (B) that the Consolidated Total Leverage
Ratio (as of the proposed closing date of the acquisition and after giving
effect thereto and any Indebtedness incurred in connection therewith) is in
compliance with the applicable ratio set forth in Section 10.1 (which compliance
under clause (A) preceding and calculation of the Consolidated Total Leverage
Ratio under clause (B) preceding shall be on a Pro Forma Basis);

(g) no later than five (5) Business Days prior to the proposed closing date of
such acquisition, the Borrower, to the extent requested by the Administrative
Agent, (i) shall have delivered to the Administrative Agent promptly upon the
finalization thereof copies of substantially final Permitted Acquisition
Documents, which shall be in form and substance reasonably satisfactory to the
Administrative Agent, and (ii) shall have delivered to (including via
arrangement for the Administrative Agent to have access to virtual data-rooms,
if applicable), or made available for inspection by, the Administrative Agent
substantially complete Permitted Acquisition Diligence Information, which shall
be in form and substance reasonably satisfactory to the Administrative Agent;

(h) no Event of Default shall have occurred and be continuing both before and
after giving effect to such acquisition and any Indebtedness incurred in
connection therewith;

(i) the Borrower shall have obtained the prior written consent of the
Administrative Agent and the Required Lenders prior to the consummation of such
acquisition if the Permitted Acquisition Consideration for any such acquisition
(or series of related acquisitions), together with all other acquisitions
consummated during the twelve (12) month period immediately preceding such
acquisition, exceeds $100,000,000;

(j) the Borrower shall demonstrate, in form and substance reasonably
satisfactory to the Administrative Agent, that the entity to be acquired had
Consolidated EBITDA for the four (4) Fiscal Quarter period ended immediately
prior to the proposed closing date of such acquisition that either (i) was
positive or (ii) was negative in an amount not to exceed $10,000,000;

(k) after giving effect to the acquisition, at least $50,000,000 in availability
shall exist under the Revolving Credit Facility; and

 

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(l) the Borrower shall provide such other documents and other information as may
be reasonably requested by the Administrative Agent or the Required Lenders
(through the Administrative Agent) in connection with the acquisition.

“Permitted Acquisition Consideration” means the aggregate amount of the purchase
price, including, but not limited to, any assumed debt, deferred payments or
Capital Stock of the Borrower, net of the applicable acquired company’s cash and
Cash Equivalents balance (as shown on its most recent financial statements
delivered in connection with the applicable Permitted Acquisition), to be paid
in connection with any applicable Permitted Acquisition as set forth in the
applicable Permitted Acquisition Documents executed by the Borrower or any of
its Subsidiaries in order to consummate the applicable Permitted Acquisition.

“Permitted Acquisition Diligence Information” means, with respect to any
acquisition proposed by the Borrower or any Subsidiary Guarantor, to the extent
applicable, all material financial information, all material contracts, all
material customer lists, all material supply agreements and all other material
information, in each case, reasonably requested to be delivered to the
Administrative Agent in connection with such acquisition (except to the extent
that any such information is (a) subject to any confidentiality agreement,
unless mutually agreeable arrangements can be made to preserve such information
as confidential, (b) classified or (c) subject to any attorney-client
privilege).

“Permitted Acquisition Documents” means, with respect to any acquisition
proposed by the Borrower or any Subsidiary Guarantor, final copies or
substantially final drafts if not executed at the required time of delivery of
the purchase agreement, sale agreement, merger agreement or other agreement
evidencing such acquisition, including, without limitation, all legal opinions
and each other document of a material nature executed or delivered in connection
therewith and any amendment, modification or supplement to any of the foregoing.

“Permitted Liens” means the Liens permitted pursuant to Section 11.2.

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

“Platform” has the meaning assigned thereto in Section 8.5.

“Pledge Agreement” means the Pledge and Security Agreement of even date herewith
executed by each Credit Party that is the direct parent of a Material First-Tier
Foreign Subsidiary (other than Fossil Gibraltar, if and to the extent that the
Capital Stock of Fossil Gibraltar is permitted by Section 9.11(b) to be excluded
from the Pledge Agreement) in favor of the Administrative Agent, for the ratable
benefit of the Secured Parties, substantially in the form of Exhibit I, as
amended, restated, supplemented or otherwise modified from time to time,
pursuant to which the Administrative Agent, for the benefit of the Secured
Parties and as security for the Obligations, is granted a security interest in
sixty-five percent (65%) of the total outstanding voting Capital Stock (and one
hundred percent (100%) of the non-voting Capital Stock) of each Material
First-Tier Foreign Subsidiary.

“Prime Rate” means, at any time, the rate of interest per annum publicly
announced from time to time by Wells Fargo as its prime rate. Each change in the
Prime Rate shall be effective as of the opening of business on the day such
change in such prime rate occurs. The parties hereto acknowledge that the rate
announced publicly by Wells Fargo as its prime rate is an index or base rate and
shall not necessarily be its lowest or best rate charged to its customers or
other banks.

 

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“Pro Forma Basis” means, subject to the proviso below and for purposes of
calculating certain definitions and compliance with any test or financial
covenant under this Agreement for any period, that such Specified Transaction
(and all other Specified Transactions that have been consummated during the
applicable period) and the following transactions in connection therewith shall
be deemed to have occurred as of the first day of the applicable period of
measurement in such test or covenant: (a) income statement items (whether
positive or negative) attributable to the Property or Person subject to such
Specified Transaction, (i) in the case of a disposition of all or substantially
all of the Capital Stock of a Subsidiary or any division, business unit, product
line or line of business, shall be excluded and (ii) in the case of a Permitted
Acquisition, shall be included, (b) any retirement of Indebtedness and (c) any
Indebtedness incurred or assumed by the Borrower or any of its Subsidiaries in
connection therewith, which Indebtedness, if such Indebtedness has a floating or
formula rate, shall have an implied rate of interest for the applicable period
for purposes of this definition determined by utilizing the rate that is or
would be in effect with respect to such Indebtedness as at the relevant date of
determination; provided, that (A) the foregoing pro forma adjustments may be
applied to any such definition, test or financial covenant solely to the extent
that such adjustments (1) are reasonably expected to be realized within twelve
(12) months of such Specified Transaction as set forth in reasonable detail on a
certificate of a Responsible Officer of the Borrower delivered to the
Administrative Agent and (2) are calculated on a basis consistent with GAAP and
Regulation S-X of the Securities Exchange Act of 1934, as amended, or as
approved by the Administrative Agent, and (B) the foregoing pro forma
adjustments which would increase net income (or reduce net loss) and which are
not based upon actual, historical numbers may be applied to any such definition,
test or financial covenant solely if, based upon good faith negotiations between
the Borrower and the Administrative Agent, the Borrower and the Administrative
Agent have agreed to such pro forma adjustments for such specific purpose.

“Property” means any right or interest in or to property of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible, including,
without limitation, Capital Stock.

“Public Lenders” has the meaning assigned thereto in Section 8.5.

“Qualified Capital Stock” means any Capital Stock that is not Disqualified
Capital Stock.

“Register” has the meaning assigned thereto in Section 14.10(c).

“Reimbursement Obligation” means the obligation of the Borrower (and, in the
case of the Existing Letters of Credit, Fossil Partners) to reimburse the
Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of
Credit.

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

“Required Lenders” means, at any date and subject to the proviso below, any
Lender or combination of Lenders holding more than fifty percent (50%) of the
aggregate amount of the Revolving Credit Commitment or, if the Revolving Credit
Commitment has been terminated, any Lender or combination of Lenders holding
more than fifty percent (50%) of the aggregate Extensions of Credit; provided
that (a) if and so long as there are only two Lenders, “Required Lenders” means
both of such Lenders and (b) the Revolving Credit Commitment of, and the portion
of the Extensions of Credit, as applicable, held or deemed held by, any
Defaulting Lender shall be excluded for purposes of making a determination of
the “Required Lenders”.

“Responsible Officer” means, as to any Person, the chief executive officer,
president, chief financial officer, controller, treasurer or assistant treasurer
of such Person or any other officer of such Person reasonably acceptable to the
Administrative Agent. Any document delivered hereunder or under any other Loan
Document that is signed by a Responsible Officer of a Person shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such Person and such Responsible
Officer shall be conclusively presumed to have acted on behalf of such Person.

 

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“Revolving Credit Commitment” means (a) as to any Lender, the obligation of such
Lender to make Revolving Credit Loans for the account of the Borrower hereunder
in an aggregate principal amount at any time outstanding not to exceed the
amount set forth opposite such Lender’s name on the Register, as such amount may
be modified at any time or from time to time pursuant to the terms hereof and
(b) as to all Lenders, the aggregate commitment of all Lenders to make Revolving
Credit Loans, as such amount may be modified at any time or from time to time
pursuant to the terms hereof. The Revolving Credit Commitment of all Lenders on
the Closing Date shall be $300,000,000.

“Revolving Credit Commitment Percentage” means, as to any Lender at any time,
the ratio of (a) the amount of the Revolving Credit Commitment of such Lender to
(b) the Revolving Credit Commitment of all the Lenders.

“Revolving Credit Facility” means the revolving credit facility established
pursuant to Article II.

“Revolving Credit Loan” means any revolving loan made to the Borrower pursuant
to Section 2.1, and all such revolving loans collectively as the context
requires.

“Revolving Credit Note” means a promissory note made by the Borrower in favor of
a Lender evidencing the Revolving Credit Loans made by such Lender,
substantially in the form attached as Exhibit A-1, and any amendments,
supplements and modifications thereto, any substitutes therefor, and any
replacements, restatements, renewals or extension thereof, in whole or in part.

“Revolving Credit Outstandings” means the sum of (a) with respect to Revolving
Credit Loans and Swingline Loans on any date, the aggregate outstanding
principal amount thereof after giving effect to any borrowings and prepayments
or repayments of Revolving Credit Loans and Swingline Loans, as the case may be,
occurring on such date; plus (b) with respect to any L/C Obligations on any
date, the aggregate outstanding amount thereof on such date after giving effect
to any Extensions of Credit occurring on such date and any other changes in the
aggregate amount of the L/C Obligations as of such date, including as a result
of any reimbursements of outstanding unpaid drawings under any Letters of Credit
or any reductions in the maximum amount available for drawing under Letters of
Credit taking effect on such date.

“Sanctioned Entity” shall mean (a) an agency of the government of, (b) an
organization directly or indirectly controlled by, or (c) a person resident in,
a country that is subject to a sanctions program identified on the list
maintained by OFAC and available at
http://www.treas.gov/offices/enforcement/ofac/programs, or as otherwise
published from time to time as such program may be applicable to such agency,
organization or person.

“Sanctioned Person” shall mean a person named on the list of Specially
Designated Nationals or Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise
published from time to time.

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

 

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“Secured Parties” mean collectively, the Lenders, the Administrative Agent, the
Swingline Lender, any Issuing Lender, any counterparty to a Specified Hedge
Agreement, any counterparty to a Specified Cash Management Arrangement, any
other holder from time to time of any of the Obligations and, in each case,
their respective successors and permitted assigns.

“Security Documents” means the collective reference to the Pledge Agreement, the
Foreign Subsidiary Pledge Agreements, the Subsidiary Guaranty Agreement, each
Joinder Agreement and each other agreement or writing pursuant to which any
Credit Party purports to pledge or grant a security interest in or other Lien on
any Property or assets securing the Obligations (or any party thereof) or any
such Person purports to guaranty the payment and/or performance of the
Obligations (or any part thereof), in each case, as amended, restated,
supplemented or otherwise modified from time to time.

“Solvent” and “Solvency” mean, with respect to any Person on any date of
determination, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including contingent
liabilities, of such Person, (b) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person’s ability to pay such debts and
liabilities as they mature, (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person’s property would constitute an unreasonably small capital, and
(e) such Person is able to pay its debts and liabilities, contingent obligations
and other commitments as they mature in the ordinary course of business. The
amount of contingent liabilities at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.

“Specified Cash Management Arrangement” means any cash management arrangement
(a) entered into by (i) the Borrower or any of its Subsidiaries and (ii) any
Lender or any Affiliate thereof at the time such cash management arrangement was
entered into, as counterparty and (b) which has been designated by such Lender
or such Affiliate, by written notice to the Administrative Agent not later than
thirty (30) days after the execution and delivery by the Borrower or such
Subsidiary thereof, as a Specified Cash Management Arrangement. No Lender or
Affiliate thereof that is a party to a Specified Cash Management Arrangement
shall have any rights in connection with the management or release of any
Collateral or of the Obligations of any Credit Party under any Loan
Document. For the avoidance of doubt, (A) all cash management arrangements
provided by the Administrative Agent or any of its Affiliates and (B) all cash
management arrangements in existence on the Closing Date between the Borrower or
any of its Subsidiaries and any Lender or an Affiliate thereof, shall constitute
Specified Cash Management Arrangements.

“Specified Cash Management Obligations” means all existing or future payment and
other obligations owing by the Borrower or any of its Subsidiaries under any
Specified Cash Management Arrangement.

“Specified Hedge Agreement” means any Hedge Agreement (a) entered into by
(i) the Borrower or any of its Subsidiaries and (ii) any Lender or any Affiliate
thereof at the time such Hedge Agreement was entered into, as counterparty and
(b) that has been designated by such Lender or such Affiliate, by written notice
to the Administrative Agent not later than thirty (30) days after the execution
and delivery by the Borrower or such Subsidiary thereof, as a Specified Hedge
Agreement. No Lender or Affiliate thereof that is a party to a Specified Hedge
Agreement shall have any rights in connection with the management or release of
any Collateral or of the Obligations of any Credit Party under any Loan
Document. For the avoidance of doubt, (A) all Hedge Agreements provided by the
Administrative Agent or any of its Affiliates and (B) all Hedge Agreements in
existence on the Closing Date between the Borrower or any of its Subsidiaries
and any Lender, shall constitute Specified Hedge Agreements.

 

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“Specified Hedge Obligations” means all existing or future payment and other
obligations owing by the Borrower or any of its Subsidiaries under any Specified
Hedge Agreement.

“Specified Obligations” means, collectively, (a) all Specified Hedge Obligations
and (b) all Specified Cash Management Obligations.

“Specified Transactions” means (a) any disposition of all or substantially all
of the assets or Capital Stock of any Subsidiary of the Borrower or any
division, business unit, product line or line of business, (b) any Permitted
Acquisition, (c) any incurrence of Indebtedness, (d) the classification of any
asset, business unit, division or line of business as a discontinued operation
and (e) the Transactions.

“Subordinated Indebtedness” means the collective reference to any Indebtedness
of any Credit Party or any Subsidiary thereof subordinated in right and time of
payment to the Obligations and containing such other terms and conditions, in
each case as are satisfactory to the Administrative Agent.

“Subsidiary” means, as to any Person, any corporation, partnership, limited
liability company or other entity of which more than fifty percent (50%) of the
outstanding Capital Stock having ordinary voting power to elect a majority of
the board of directors or other managers of such corporation, partnership,
limited liability company or other entity is at the time owned by (directly or
indirectly) or the management is otherwise controlled by (directly or
indirectly) such Person (irrespective of whether, at the time, Capital Stock of
any other class or classes of such corporation, partnership, limited liability
company or other entity shall have or might have voting power by reason of the
happening of any contingency). Unless otherwise qualified, references to
“Subsidiary” or “Subsidiaries” herein shall refer to those of the Borrower.

“Subsidiary Guarantors” means, collectively, all direct and indirect Material
Domestic Subsidiaries of the Borrower in existence on the Closing Date or which
are or hereafter become a party to the Subsidiary Guaranty Agreement pursuant to
Section 9.11.

“Subsidiary Guaranty Agreement” means the unconditional guaranty agreement of
even date herewith executed by the Subsidiary Guarantors in favor of the
Administrative Agent, for the ratable benefit and the Secured Parties,
substantially in the form attached as Exhibit H, as amended, restated,
supplemented or otherwise modified from time to time.

“Swingline Facility” means the uncommitted swingline facility established
pursuant to Section 2.2.

“Swingline Lender” means Wells Fargo in its capacity as swingline lender
hereunder or any successor thereto.

“Swingline Loan” means any swingline loan made by the Swingline Lender to the
Borrower pursuant to Section 2.2, and all such swingline loans collectively as
the context requires.

“Swingline Note” means a promissory note made by the Borrower in favor of the
Swingline Lender evidencing the Swingline Loans made by the Swingline Lender,
substantially in the form attached as Exhibit A-2, and any amendments,
supplements and modifications thereto, any substitutes therefor, and any
replacements, restatements, renewals or extension thereof, in whole or in part.

 

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“Synthetic Lease” means any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product where such
transaction is considered borrowed money indebtedness for tax purposes but is
classified as an Operating Lease in accordance with GAAP.

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

“Termination Event” means, except for any such event or condition that could not
reasonably be expected to have a Material Adverse Effect: (a) a “Reportable
Event” described in Section 4043 of ERISA for which the notice requirement has
not been waived by the PBGC, or (b) the withdrawal of any Credit Party or any
ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a
plan year in which it was a “substantial employer” as defined in
Section 4001(a)(2) of ERISA, or (c) the termination of a Pension Plan, the
filing of a notice of intent to terminate a Pension Plan or the treatment of a
Pension Plan amendment as a termination, under Section 4041 of ERISA, if the
plan assets are not sufficient to pay all plan liabilities, or (d) the
institution of proceedings to terminate, or the appointment of a trustee with
respect to, any Pension Plan by the PBGC, or (e) any other event or condition
which would constitute grounds under Section 4042(a) of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan,
or (f) the imposition of a Lien pursuant to Section 412 or Section 430(k) of the
Code or Section 302 or Section 303(k) of ERISA, or (g) the partial or complete
withdrawal of any Credit Party or any ERISA Affiliate from a Multiemployer Plan
if withdrawal liability is asserted by such plan, or (h) any event or condition
which results in the reorganization or insolvency of a Multiemployer Plan under
Sections 4241 or 4245 of ERISA, or (i) any event or condition which results in
the termination of a Multiemployer Plan under Section 4041A of ERISA or the
institution by PBGC of proceedings to terminate a Pension Plan under
Section 4042 of ERISA.

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

“Threshold Amount” means $10,000,000.

“Transaction Costs” means all transaction fees, charges and other amounts
related to this Credit Facility and any Permitted Acquisitions (including,
without limitation, any financing fees, merger and acquisition fees, legal fees
and expenses, due diligence fees or any other fees and expenses in connection
therewith), such transaction fees approved by the Administrative Agent.

“Transactions” means, collectively, (a) the repayment in full of all
Indebtedness under the Existing Credit Agreement, (b) the initial Extensions of
Credit, and (c) the payment of the Transaction Costs in connection with items
(a) through (b) above.

“UCC” means the Uniform Commercial Code as in effect in the State of New York,
as amended or modified from time to time.

“Uniform Customs” means the Uniform Customs and Practice for Documentary Credits
(1993 Revision), effective January, 1994 International Chamber of Commerce
Publication No. 600.

 

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“United States” means the United States of America.

“Wells Fargo” means Wells Fargo Bank, National Association, a national banking
association, and its successors.

“Wholly-Owned” means, with respect to a Subsidiary, that all of the shares of
Capital Stock of such Subsidiary are, directly or indirectly, owned or
controlled by the Borrower and/or one or more of its Wholly-Owned Subsidiaries
(except for directors’ qualifying shares or other shares required by Applicable
Law to be owned by a Person other than the Borrower and/or one or more of its
Wholly-Owned Subsidiaries).

SECTION 1.2 Other Definitions and Provisions. With reference to this Agreement
and each other Loan Document, unless otherwise specified herein or in such other
Loan Document: (a) the definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined, (b) whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms, (c) the words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”, (d) the word “will”
shall be construed to have the same meaning and effect as the word “shall”,
(e) any reference herein to any Person shall be construed to include such
Person’s successors and assigns, (f) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (g) 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, (h) the words “asset” and “property” shall be construed to have
the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract rights,
(i) the term “documents” includes any and all instruments, documents,
agreements, certificates, notices, reports, financial statements and other
writings, however evidenced, whether in physical or electronic form, (j) in the
computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including;” the words “to” and “until” each mean
“to but excluding;” and the word “through” means “to and including” and
(k) Section headings herein and in the other Loan Documents are included for
convenience of reference only and shall not affect the interpretation of this
Agreement or any other Loan Document.

SECTION 1.3 Accounting Terms.

(a) All accounting terms not specifically or completely defined herein shall be
construed, and all financial data (including financial ratios and other
financial calculations) required to be submitted pursuant to this Agreement
shall be prepared, in conformity with GAAP, applied on a consistent basis, as in
effect from time to time and in a manner consistent with that used in preparing
the audited financial statements required by Section 8.1(b), except as otherwise
specifically prescribed herein. Notwithstanding the foregoing, all financial
statements delivered hereunder shall be prepared, and all financial covenants
contained herein shall be calculated, without giving effect to any election
under the Statement of Financial Accounting Standards No. 159 (or any similar
accounting principle) permitting a Person to value its financial liabilities or
Indebtedness at the fair value thereof.

(b) Notwithstanding anything to the contrary in this Agreement, for purposes of
determining compliance with any test or financial covenant contained in this
Agreement (including for purposes of determining the Applicable Margin) with
respect to any period during which any Specified Transaction occurs, such test
or financial covenant shall be calculated with respect to such period and such
Specified Transaction (and all other Specified Transactions that have been
consummated during such period) on a Pro Forma Basis.

 

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

SECTION 1.4 UCC Terms. Terms defined in the UCC in effect on the Closing Date
and not otherwise defined herein shall, unless the context otherwise indicates,
have the meanings provided by those definitions. Subject to the foregoing, the
term “UCC” refers, as of any date of determination, to the UCC then in effect.

SECTION 1.5 Rounding. Any financial ratios required to be maintained by the
Borrower pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio or percentage is expressed
herein and rounding the result up or down to the nearest number (with a
rounding-up if there is no nearest number).

SECTION 1.6 References to Agreement and Laws. Unless otherwise expressly
provided herein, (a) references to formation documents, governing documents,
agreements (including the Loan Documents) and other contractual instruments
shall be deemed to include all subsequent amendments, restatements, extensions,
supplements and other modifications thereto, but only to the extent that such
amendments, restatements, extensions, supplements and other modifications are
not prohibited by any Loan Document; and (b) references to any Applicable Law
shall include all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting such Applicable Law.

SECTION 1.7 Times of Day. Unless otherwise specified, all references herein to
times of day shall be references to Central time (daylight or standard, as
applicable).

SECTION 1.8 Letter of Credit Amounts. Unless otherwise specified, all references
herein to the amount of a Letter of Credit at any time shall be deemed to mean
the maximum face amount of such Letter of Credit after giving effect to all
increases thereof contemplated by such Letter of Credit or the Letter of Credit
Application therefor (at the time specified therefor in such applicable Letter
of Credit or Letter of Credit Application and as such amount may be reduced by
(a) any permanent reduction of such Letter of Credit or (b) any amount which is
drawn, reimbursed and no longer available under such Letter of Credit).

ARTICLE II

REVOLVING CREDIT FACILITY

SECTION 2.1 Revolving Credit Loans. Subject to the terms and conditions of this
Agreement and the other Loan Documents, and in reliance upon the representations
and warranties set forth herein, each Lender severally agrees to make Revolving
Credit Loans to the Borrower from time to time from the Closing Date through,
but not including, the Maturity Date as requested by the Borrower in accordance
with the terms of Section 2.3; provided, that (a) the Revolving Credit
Outstandings shall not exceed the Revolving Credit Commitment and (b) the
principal amount of outstanding Revolving Credit Loans from any Lender plus such
Lender’s Revolving Credit Commitment Percentage of outstanding L/C Obligations
and outstanding Swingline Loans shall not at any time exceed such Lender’s
Revolving Credit Commitment. Each Revolving Credit Loan by a Lender shall be in
a principal amount equal to such Lender’s Revolving Credit Commitment Percentage
of the aggregate principal amount of Revolving Credit Loans requested on such
occasion. Subject to the terms and conditions hereof, the Borrower may borrow,
repay and reborrow Revolving Credit Loans hereunder until the Maturity Date.

 

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SECTION 2.2 Swingline Loans.

(a) Availability. Subject to the terms and conditions of this Agreement, the
Swingline Lender may (or may not) in its discretion from time to time make
Swingline Loans to the Borrower from time to time from the Closing Date through,
but not including, the Maturity Date; provided, that (a) after giving effect to
any amount requested, the Revolving Credit Outstandings shall not exceed the
Revolving Credit Commitment and (b) the aggregate principal amount of all
outstanding Swingline Loans (after giving effect to any amount requested) shall
not exceed the lesser of (i) the Revolving Credit Commitment less the sum of all
outstanding Revolving Credit Loans and the L/C Obligations and (ii) the Maximum
Swingline Amount.

(b) Refunding.

(i) Swingline Loans shall be refunded by the Lenders on demand by the Swingline
Lender. Such refundings shall be made by the Lenders in accordance with their
respective Revolving Credit Commitment Percentages and shall thereafter be
reflected as Revolving Credit Loans of the Lenders on the books and records of
the Administrative Agent. Each Lender shall fund its respective Revolving Credit
Commitment Percentage of Revolving Credit Loans as required to repay Swingline
Loans outstanding to the Swingline Lender upon demand by the Swingline Lender
but in no event later than 1:00 p.m. on the next succeeding Business Day after
such demand is made. No Lender’s obligation to fund its respective Revolving
Credit Commitment Percentage of a Swingline Loan shall be affected by any other
Lender’s failure to fund its Revolving Credit Commitment Percentage of a
Swingline Loan, nor shall any Lender’s Revolving Credit Commitment Percentage be
increased as a result of any such failure of any other Lender to fund its
Revolving Credit Commitment Percentage of a Swingline Loan.

(ii) The Borrower shall pay to the Swingline Lender on demand the amount of such
Swingline Loans to the extent amounts received from the Lenders are not
sufficient to repay in full the outstanding Swingline Loans requested or
required to be refunded. In addition, the Borrower hereby authorizes the
Administrative Agent to charge any account maintained by the Borrower with the
Swingline Lender (up to the amount available therein) in order to immediately
pay the Swingline Lender the amount of such Swingline Loans to the extent
amounts received from the Lenders are not sufficient to repay in full the
outstanding Swingline Loans requested or required to be refunded. If any portion
of any such amount paid to the Swingline Lender shall be recovered by or on
behalf of the Borrower from the Swingline Lender in bankruptcy or otherwise, the
loss of the amount so recovered shall be ratably shared among all the Lenders in
accordance with their respective Revolving Credit Commitment Percentages (unless
the amounts so recovered by or on behalf of the Borrower pertain to a Swingline
Loan extended after the occurrence and during the continuance of an Event of
Default of which the Administrative Agent has received notice in the manner
required pursuant to Section 13.3 and which such Event of Default has not been
waived by the Required Lenders or the Lenders, as applicable).

 

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(iii) Each Lender acknowledges and agrees that its obligation to refund
Swingline Loans in accordance with the terms of this Section is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, non-satisfaction of the conditions set forth in
Article VI. Further, each Lender agrees and acknowledges that if, prior to the
refunding of any outstanding Swingline Loans pursuant to this Section, one of
the events described in Section 12.1(i) or (j) shall have occurred, each Lender
will, on the date the applicable Revolving Credit Loan would have been made,
purchase an undivided participating interest in the Swingline Loan to be
refunded in an amount equal to its Revolving Credit Commitment Percentage of the
aggregate amount of such Swingline Loan. Each Lender will immediately transfer
to the Swingline Lender, in immediately available funds, the amount of its
participation, and upon receipt thereof the Swingline Lender will deliver to
such Lender a certificate evidencing such participation dated the date of
receipt of such funds and for such amount. Whenever, at any time after the
Swingline Lender has received from any Lender such Lender’s participating
interest in a Swingline Loan, the Swingline Lender receives any payment on
account thereof, the Swingline Lender will distribute to such Lender its
participating interest in such amount (appropriately adjusted, in the case of
interest payments, to reflect the period of time during which such Lender’s
participating interest was outstanding and funded).

(c) Defaulting Lenders. Notwithstanding anything to the contrary contained in
this Section 2.2, the Swingline Lender shall not be obligated to make any
Swingline Loans at a time when any other Lender is a Defaulting Lender, unless
the Swingline Lender has entered into arrangements satisfactory to it to
eliminate the Swingline Lender’s risk with respect to any such Defaulting
Lender’s funding obligations hereunder, including by cash collateralizing such
Defaulting Lender’s Revolving Credit Commitment Percentage of the applicable
outstanding Swingline Loans. On demand by the Swingline Lender or the
Administrative Agent from time to time, the Borrower shall cash collateralize
each Defaulting Lender’s Revolving Credit Commitment Percentage of the
outstanding Swingline Loans on terms reasonably satisfactory to the
Administrative Agent and the Swingline Lender. Any such cash collateral shall be
deposited in a separate account with the Administrative Agent, subject to the
exclusive dominion and control of the Administrative Agent, as collateral
(solely for the benefit of the Swingline Lender) for the payment and performance
of each Defaulting Lender’s Revolving Credit Commitment Percentage of
outstanding Swingline Loans. Moneys in such account shall be applied by the
Administrative Agent to reimburse the Swingline Lender immediately for each
Defaulting Lender’s Revolving Credit Commitment Percentage of any Swingline
Loans which have not otherwise been refunded by the Borrower or such Defaulting
Lender pursuant to the terms of this Section 2.2.

SECTION 2.3 Procedure for Advances of Revolving Credit Loans and Swingline
Loans.

(a) Requests for Borrowing. The Borrower shall give the Administrative Agent
irrevocable prior written notice substantially in the form of Exhibit B (a
“Notice of Borrowing”) not later than 12:00 noon (i) on the same Business Day as
each Base Rate Loan and each Swingline Loan and (ii) at least three (3) Business
Days before each LIBOR Rate Loan, of its intention to borrow, specifying (A) the
date of such borrowing, which shall be a Business Day, (B) the amount of such
borrowing, which shall be (x) with respect to Base Rate Loans (other than
Swingline Loans), in an aggregate principal amount of $2,000,000 or a whole
multiple of $1,000,000 in excess thereof, provided that any borrowing of Base
Rate Loans may be in an aggregate amount that is equal to the entire unused
balance of the Revolving Credit Commitment or that is required to finance the
amount of a Reimbursement Obligation under a Letter of Credit, (y) with respect
to LIBOR Rate Loans, in an aggregate principal amount of $5,000,000 or a whole
multiple of $1,000,000 in excess thereof and (z) with respect to Swingline
Loans, in an aggregate principal amount of $250,000 or a whole multiple of
$100,000 in excess thereof, (C) whether such Loan is to be a Revolving Credit
Loan or Swingline Loan, (D) in the case of a Revolving Credit Loan, whether such
Loan is to be a LIBOR Rate Loan or a Base Rate Loan, and (E) in the case of a
LIBOR Rate Loan, the duration of the Interest Period applicable thereto. A
Notice of Borrowing received after 12:00 noon shall be deemed received on the
next Business Day. The Administrative Agent shall promptly notify the Lenders of
each Notice of Borrowing.

 

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(b) Disbursement of Revolving Credit and Swingline Loans. Not later than 1:00
p.m. on the proposed borrowing date, (i) each Lender will make available to the
Administrative Agent, for the account of the Borrower, at the office of the
Administrative Agent in funds immediately available to the Administrative Agent,
such Lender’s Revolving Credit Commitment Percentage of the Revolving Credit
Loans to be made on such borrowing date and (ii) the Swingline Lender will make
available to the Administrative Agent, for the account of the Borrower, at the
office of the Administrative Agent in funds immediately available to the
Administrative Agent, the Swingline Loans to be made on such borrowing date. The
Borrower hereby irrevocably authorizes the Administrative Agent to disburse the
proceeds of each borrowing requested pursuant to this Section in immediately
available funds by crediting or wiring such proceeds to the deposit account of
the Borrower identified in the most recent notice substantially in the form
attached as Exhibit C (a “Notice of Account Designation”) delivered by the
Borrower to the Administrative Agent or as may be otherwise agreed upon by the
Borrower and the Administrative Agent from time to time. Subject to Section 5.7
hereof, the Administrative Agent shall not be obligated to disburse the portion
of the proceeds of any Revolving Credit Loan requested pursuant to this Section
to the extent that any Lender has not made available to the Administrative Agent
its Revolving Credit Commitment Percentage of such Loan. Revolving Credit Loans
to be made for the purpose of refunding Swingline Loans shall be made by the
Lenders as provided in Section 2.2(b).

SECTION 2.4 Repayment and Prepayment of Revolving Credit Loans and Swingline
Loans.

(a) Repayment on Termination Date. The Borrower hereby agrees to repay the
outstanding principal amount of (i) all Revolving Credit Loans in full on the
Maturity Date, and (ii) all Swingline Loans in accordance with Section 2.2(b)
(but, in any event, no later than the Maturity Date), together, in each case,
with all accrued but unpaid interest thereon.

(b) Mandatory Prepayments due to Overadvances. If at any time the Revolving
Credit Outstandings exceed the Revolving Credit Commitment, the Borrower agrees
to repay, immediately upon notice from the Administrative Agent and by payment
to the Administrative Agent for the account of the Lenders, Extensions of Credit
in an amount equal to such excess, with each such repayment applied first, to
the principal amount of outstanding Swingline Loans, second to the principal
amount of outstanding Revolving Credit Loans and third, with respect to any
Letters of Credit then outstanding, a payment of cash collateral into a cash
collateral account opened by the Administrative Agent, for the benefit of the
Lenders, in an amount equal to the aggregate L/C Obligations then outstanding
(such cash collateral to be applied in accordance with Section 12.2(b)).

(c) Optional Prepayments. The Borrower may at any time and from time to time
prepay Revolving Credit Loans and Swingline Loans, in whole or in part, with
irrevocable prior written notice to the Administrative Agent substantially in
the form attached as Exhibit D (a “Notice of Prepayment”) given not later than
12:00 noon (i) on the same Business Day as each date of prepayment of a Base
Rate Loan or Swingline Loan and (ii) at least three (3) Business Days before
each date of prepayment of a LIBOR Rate Loan, specifying the date and amount of
prepayment and whether the prepayment is of LIBOR Rate Loans, Base Rate Loans,
Swingline Loans or a combination thereof, and, if of a combination thereof, the
amount allocable to each. Upon receipt of such notice, the Administrative Agent
shall promptly notify each Lender. If any such notice is given, the amount
specified in such notice shall be due and payable on the date set forth in such
notice. Partial prepayments shall be, except for mandatory prepayments required
under Section 2.4(b) or Section 2.4(d), in an aggregate amount of $2,000,000 or
a whole multiple of $1,000,000 in excess thereof with respect to Base Rate Loans
(other than Swingline Loans), $5,000,000 or a whole multiple of $1,000,000 in
excess thereof with respect to LIBOR Rate Loans and $100,000 or a whole multiple
of $100,000 in excess thereof with respect to Swingline Loans. A Notice of
Prepayment received after 12:00 noon shall be deemed received on the next
Business Day. Each such repayment shall be accompanied by any amount required to
be paid pursuant to Section 5.9 hereof.

 

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(d) Other Mandatory Prepayments.

(i) [Intentionally omitted.]

(ii) [Intentionally omitted.]

(iii) Asset Dispositions. The Borrower shall make mandatory principal
prepayments of the Loans and/or cash collateralize the L/C Obligations in the
manner set forth in clause (vi) below in amounts equal to one hundred percent
(100%) of the aggregate Net Cash Proceeds from any Asset Disposition by any
Credit Party or any of its Subsidiaries. Such prepayments shall be made within
five (5) Business Days after the date of receipt of the Net Cash Proceeds of any
such Asset Disposition by such Credit Party or any of its Subsidiaries, provided
that, so long as no Default or Event of Default has occurred and is continuing,
no prepayments shall be required hereunder (A) in connection with up to
$20,000,000 of aggregate Net Cash Proceeds from Asset Dispositions by any Credit
Party or any of its Subsidiaries which are reinvested in similar replacement
assets within one hundred eighty (180) days after receipt of such Net Cash
Proceeds by such Credit Party or such Subsidiary, provided, that any portion of
the Net Cash Proceeds not actually reinvested within such one hundred eighty
(180) day period shall be prepaid in accordance with this Section, or (B) in
connection with any Asset Disposition permitted pursuant to Section 11.5 other
than Asset Dispositions permitted under Section 11.5(k) or Section 11.5(l).

(iv) Insurance and Condemnation Events. The Borrower shall make mandatory
principal prepayments of the Loans and/or cash collateralize the L/C Obligations
in the manner set forth in clause (vi) below in an amount equal to one hundred
and five percent (105%) of the aggregate Net Cash Proceeds from any Insurance
and Condemnation Event by any Credit Party or any of its Subsidiaries. Such
prepayments shall be made within five (5) Business Days after the date of
receipt of Net Cash Proceeds of any such Insurance and Condemnation Event by
such Credit Party or such Subsidiary; provided that, so long as no Default or
Event of Default has occurred and is continuing, no prepayments shall be
required hereunder in connection with Net Cash Proceeds from Insurance and
Condemnation Events by any Credit Party or any of its Subsidiaries which are
reinvested in assets within one hundred eighty (180) days after receipt of such
Net Cash Proceeds by such Credit Party or such Subsidiary; provided, that any
portion of the Net Cash Proceeds not actually reinvested within such one hundred
eighty (180) day period shall be prepaid in accordance with this Section, unless
the insurance proceeds are being used to rebuild or repair the affected property
and the rebuilding or repairs have commenced and are proceeding in a
commercially reasonable manner.

(v) [Intentionally omitted.]

(vi) Notice; Manner of Payment. Upon the occurrence of any event triggering the
prepayment requirement under clauses (i) through and including (iv) above, the
Borrower shall promptly deliver a Notice of Prepayment to the Administrative
Agent and, upon receipt of such notice, the Administrative Agent shall promptly
so notify the Lenders. Each prepayment of the Loans under this Section shall be
applied in the same manner as provided in Section 2.4(b) for mandatory
prepayments due to overadvances.

 

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(e) Limitation on Prepayment of LIBOR Rate Loans. The Borrower may not prepay
any LIBOR Rate Loan on any day other than on the last day of the Interest Period
applicable thereto unless such prepayment is accompanied by any amount required
to be paid pursuant to Section 5.9 hereof.

(f) Hedge Agreements. No repayment or prepayment pursuant to this Section shall
affect any of the Borrower’s obligations under any Hedge Agreement.

SECTION 2.5 Permanent Reduction of the Revolving Credit Commitment.

(a) Voluntary Reduction. The Borrower shall have the right at any time and from
time to time, upon at least five (5) Business Days prior written notice to the
Administrative Agent, to permanently reduce, without premium or penalty, (i) the
entire Revolving Credit Commitment at any time or (ii) portions of the Revolving
Credit Commitment, from time to time, in an aggregate principal amount not less
than $3,000,000 or any whole multiple of $1,000,000 in excess thereof. Any
reduction of the Revolving Credit Commitment shall be applied to the Revolving
Credit Commitment of each Lender according to its Revolving Credit Commitment
Percentage. All commitment fees accrued until the effective date of any
termination of the Revolving Credit Commitment shall be paid on the effective
date of such termination. Each notice of reduction of the entire Revolving
Credit Commitment delivered by the Borrower may state that such notice is
conditioned upon the effectiveness of other credit facilities, in which case
such notice may be revoked by the Borrower, by notice to the Administrative
Agent received on or prior to the specified effective date of such reduction, if
such condition is not satisfied.

(b) [Intentionally omitted.]

(c) [Intentionally omitted.]

(d) Corresponding Payment. Each permanent reduction permitted pursuant to this
Section shall be accompanied by a payment of principal sufficient to reduce the
aggregate outstanding Revolving Credit Loans, Swingline Loans and L/C
Obligations, as applicable, after such reduction to the Revolving Credit
Commitment as so reduced and, if the Revolving Credit Commitment as so reduced
is less than the aggregate amount of all outstanding Letters of Credit, the
Borrower shall be required to deposit cash collateral in a cash collateral
account opened by the Administrative Agent in an amount equal to the aggregate
L/C Obligations then outstanding. Such cash collateral shall be applied in
accordance with Section 12.2(b). Any reduction of the Revolving Credit
Commitment to zero shall be accompanied by payment of all outstanding Revolving
Credit Loans and Swingline Loans (and furnishing of cash collateral satisfactory
to the Administrative Agent for all L/C Obligations) and shall result in the
termination of the Revolving Credit Commitment and the L/C Commitment and the
Revolving Credit Facility. If the reduction of the Revolving Credit Commitment
requires the repayment of any LIBOR Rate Loan, such repayment shall be
accompanied by any amount required to be paid pursuant to Section 5.9 hereof.

SECTION 2.6 Termination of Revolving Credit Facility. The Revolving Credit
Facility and the Revolving Credit Commitment, as well as the L/C Commitment,
shall terminate on the Maturity Date.

 

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ARTICLE III

LETTER OF CREDIT FACILITY

SECTION 3.1 L/C Commitment.

(a) Availability. Subject to the terms and conditions hereof, the Issuing
Lender, in reliance on the agreements of the other Lenders set forth in
Section 3.4(a), agrees to issue standby or commercial letters of credit (the
“Letters of Credit”) for the account of the Borrower (or, in the case of the
Existing Letters of Credit, for the account of Fossil Partners) on any Business
Day from the Closing Date through but not including the fifth (5th) Business Day
prior to the Maturity Date in such form as may be approved from time to time by
the Issuing Lender; provided, that the Issuing Lender shall have no obligation
to issue any Letter of Credit if, after giving effect to such issuance, (a) the
L/C Obligations would exceed the L/C Commitment or (b) the Revolving Credit
Outstandings would exceed the Revolving Credit Commitment. Each Letter of Credit
shall (i) be denominated in Dollars in a minimum amount of $50,000 (or such
lesser amount as agreed to by the Issuing Lender), (ii) be a letter of credit
issued to support obligations of the Borrower or any of its Subsidiaries,
contingent or otherwise, incurred in the ordinary course of business,
(iii) expire on a date no more than twelve (12) months after the date of
issuance or last renewal of such Letter of Credit (subject to automatic renewal
for additional one (1) year periods pursuant to the terms of the Letter of
Credit Application or other documentation acceptable to the Issuing Lender),
which date shall be no later than the fifth (5th) Business Day prior to the
Maturity Date and (iv) be subject to the Uniform Customs and/or ISP98, as set
forth in the Letter of Credit Application or as determined by the Issuing Lender
and, to the extent not inconsistent therewith, the laws of the State of New
York. The Issuing Lender shall not at any time be obligated to issue any Letter
of Credit hereunder if such issuance would conflict with, or cause the Issuing
Lender or any L/C Participant to exceed any limits imposed by, any Applicable
Law. References herein to “issue” and derivations thereof with respect to
Letters of Credit shall also include extensions or modifications of any
outstanding Letters of Credit, unless the context otherwise requires. As of the
Closing Date, each of the Existing Letters of Credit shall constitute, for all
purposes of this Agreement and the other Loan Documents, a Letter of Credit
issued and outstanding hereunder. The L/C Commitment shall automatically
terminate concurrently with the termination of the Revolving Credit Commitment.

(b) Defaulting Lenders. Notwithstanding anything to the contrary contained in
this Section 2.3, the Issuing Lender shall not be obligated to issue any Letter
of Credit at a time when any other Lender is a Defaulting Lender, unless the
Issuing Lender has entered into arrangements satisfactory to it to eliminate the
Issuing Lender’s risk with respect to any such Defaulting Lender’s reimbursement
obligations hereunder, including by cash collateralizing such Defaulting
Lender’s Revolving Credit Commitment Percentage of the liability with respect to
such Letter of Credit. On demand by the Issuing Lender or the Administrative
Agent from time to time, the Borrower shall cash collateralize each Defaulting
Lender’s Revolving Credit Commitment Percentage of the outstanding L/C
Obligations on terms reasonably satisfactory to the Administrative Agent and the
Issuing Lender. Any such cash collateral shall be deposited in a separate
account with the Administrative Agent, subject to the exclusive dominion and
control of the Administrative Agent, as collateral (solely for the benefit of
the Issuing Lender) for the payment and performance of each Defaulting Lender’s
Revolving Credit Commitment Percentage of outstanding L/C Obligations. Moneys in
such account shall be applied by the Administrative Agent to reimburse the
Issuing Lender immediately for each Defaulting Lender’s Revolving Credit
Commitment Percentage of any drawing under any Letter of Credit which has not
otherwise been reimbursed by the Borrower or such Defaulting Lender pursuant to
the terms of this Section 3.1.

 

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SECTION 3.2 Procedure for Issuance of Letters of Credit. The Borrower may from
time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender at the Administrative Agent’s Office a Letter
of Credit Application therefor, completed to the satisfaction of the Issuing
Lender, and such other certificates, documents and other papers and information
as the Issuing Lender may request. Upon receipt of any Letter of Credit
Application, the Issuing Lender shall process such Letter of Credit Application
and the certificates, documents and other papers and information delivered to it
in connection therewith in accordance with its customary procedures and shall,
subject to Section 3.1 and Article VI, promptly issue the Letter of Credit
requested thereby (but in no event shall the Issuing Lender be required to issue
any Letter of Credit earlier than three (3) Business Days after its receipt of
the Letter of Credit Application therefor and all such other certificates,
documents and other papers and information relating thereto) by issuing the
original of such Letter of Credit to the beneficiary thereof or as otherwise may
be agreed by the Issuing Lender and the Borrower. The Issuing Lender shall
promptly furnish to the Borrower a copy of such Letter of Credit and promptly
notify each Lender of such issuance and, upon request by any Lender, furnish to
such Lender a copy of such Letter of Credit and the amount of such Lender’s
participation therein.

SECTION 3.3 Commissions and Other Charges.

(a) Letter of Credit Commissions. The Borrower shall pay to the Administrative
Agent, for the account of the Issuing Lender and the L/C Participants, a letter
of credit commission with respect to each Letter of Credit in the amount equal
to the face amount of such Letter of Credit multiplied by the Applicable Margin
with respect to Revolving Credit Loans that are LIBOR Rate Loans (determined on
a per annum basis). Such commission shall be payable quarterly in arrears on the
last Business Day of each calendar quarter, on the Maturity Date and thereafter
on demand of the Administrative Agent. The Administrative Agent shall, promptly
following its receipt thereof, distribute to the Issuing Lender and the L/C
Participants all commissions received pursuant to this Section in accordance
with their respective Revolving Credit Commitment Percentages.

(b) Fronting Fee. In addition to the foregoing commission, the Borrower shall
pay to the Administrative Agent, for the account of the Issuing Lender, a
fronting fee with respect to each Letter of Credit as set forth in the
applicable Letter of Credit Application or as otherwise separately agreed by the
Borrower and the Issuing Lender. Such issuance fee shall be payable quarterly in
arrears on the last Business Day of each calendar quarter commencing with the
first such date to occur after the issuance of such Letter of Credit, on the
Maturity Date and thereafter on demand of the Administrative Agent.

(c) Other Costs. In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Lender for such normal and customary costs
and expenses as are incurred or charged by the Issuing Lender in issuing,
effecting payment under, amending or otherwise administering any Letter of
Credit.

SECTION 3.4 L/C Participations.

(a) The Issuing Lender irrevocably agrees to grant, and hereby grants, to each
L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit
hereunder, each L/C Participant irrevocably agrees to accept and purchase and
hereby accepts and purchases from the Issuing Lender, on the terms and
conditions hereinafter stated and for such L/C Participant’s own account and
risk, an undivided interest equal to such L/C Participant’s Revolving Credit
Commitment Percentage in the Issuing Lender’s obligations and rights under and
in respect of each Letter of Credit issued hereunder and the amount of each
draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower through a Revolving Credit Loan or otherwise
in accordance with the terms of this Agreement, such L/C Participant shall pay
to the Issuing Lender, upon demand at the Issuing Lender’s address for notices
specified herein, an amount equal to such L/C Participant’s Revolving Credit
Commitment Percentage of the amount of such draft, or any part thereof, which is
not so reimbursed.

 

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(b) Upon becoming aware of any amount required to be paid by any L/C Participant
to the Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Lender under any Letter of Credit,
the Issuing Lender shall notify each L/C Participant of the amount and due date
of such required payment and such L/C Participant shall pay to the Issuing
Lender the amount specified on the applicable due date. If any such amount is
paid to the Issuing Lender after the date such payment is due, such L/C
Participant shall pay to the Issuing Lender on demand, in addition to such
amount, the product of (i) such amount, times (ii) the daily average Federal
Funds Rate as determined by the Administrative Agent during the period from and
including the date such payment is due to the date on which such payment is
immediately available to the Issuing Lender, times (iii) a fraction the
numerator of which is the number of days that elapse during such period and the
denominator of which is 360. A certificate of the Issuing Lender with respect to
any amounts owing under this Section shall be conclusive in the absence of
manifest error. With respect to payment to the Issuing Lender of the
unreimbursed amounts described in this Section, if the L/C Participants receive
notice that any such payment is due (A) prior to 1:00 p.m. on any Business Day,
such payment shall be due that Business Day, and (B) after 1:00 p.m. on any
Business Day, such payment shall be due on the following Business Day.

(c) Whenever, at any time after the Issuing Lender has made payment under any
Letter of Credit and has received from any L/C Participant its Revolving Credit
Commitment Percentage of such payment in accordance with this Section, the
Issuing Lender receives any payment related to such Letter of Credit (whether
directly from the Borrower or otherwise), or any payment of interest on account
thereof, the Issuing Lender will distribute to such L/C Participant its pro rata
share thereof; provided, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.

SECTION 3.5 Reimbursement Obligation of the Borrower. In the event of any
drawing under any Letter of Credit, the Borrower agrees (and, in the case of the
Existing Letters of Credit, Fossil Partners also agrees) to reimburse (either
with the proceeds of a Revolving Credit Loan as provided for in this Section or
with funds from other sources), in same day funds, the Issuing Lender on each
date on which the Issuing Lender notifies the Borrower of the date and amount of
a draft paid under any Letter of Credit for the amount of (a) such draft so paid
and (b) any amounts referred to in Section 3.3(c) incurred by the Issuing Lender
in connection with such payment. Unless the Borrower shall immediately notify
the Issuing Lender that the Borrower intends to reimburse the Issuing Lender for
such drawing from other sources or funds, the Borrower shall be deemed to have
timely given a Notice of Borrowing to the Administrative Agent requesting that
the Lenders make a Revolving Credit Loan bearing interest at the Base Rate on
such date in the amount of (a) such draft so paid and (b) any amounts referred
to in Section 3.3(c) incurred by the Issuing Lender in connection with such
payment, and the Lenders shall make a Revolving Credit Loan bearing interest at
the Base Rate in such amount, the proceeds of which shall be applied to
reimburse the Issuing Lender for the amount of the related drawing and costs and
expenses. Each Lender acknowledges and agrees that its obligation to fund a
Revolving Credit Loan in accordance with this Section to reimburse the Issuing
Lender for any draft paid under a Letter of Credit is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including, without
limitation, non-satisfaction of the conditions set forth in Section 2.3(a) or
Article VI. If the Borrower has elected to pay the amount of such drawing with
funds from other sources and shall fail to reimburse the Issuing Lender as
provided above, the unreimbursed amount of such drawing shall bear interest at
the rate which would be payable on any outstanding Base Rate Loans which were
then overdue from the date such amounts become payable (whether at stated
maturity, by acceleration or otherwise) until payment in full.

 

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SECTION 3.6 Obligations Absolute. The Borrower’s obligations under this
Article III (including, without limitation, the Reimbursement Obligations) shall
be absolute and unconditional under any and all circumstances and irrespective
of any set off, counterclaim or defense to payment which the Borrower may have
or have had against the Issuing Lender or any beneficiary of a Letter of Credit
or any other Person. The Borrower also agrees that the Issuing Lender and the
L/C Participants shall not be responsible for, and the Borrower’s Reimbursement
Obligations under Section 3.5 shall not be affected by, among other things, the
validity or genuineness of documents or of any endorsements thereon, even though
such documents shall in fact prove to be invalid, fraudulent or forged, or any
dispute between or among the Borrower and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
any claims whatsoever of the Borrower against any beneficiary of such Letter of
Credit or any such transferee. The Issuing Lender shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit, except for errors or omissions caused by the Issuing Lender’s gross
negligence or willful misconduct, as determined by a court of competent
jurisdiction by final nonappealable judgment. The Borrower agrees that any
action taken or omitted by the Issuing Lender under or in connection with any
Letter of Credit or the related drafts or documents, if done in the absence of
gross negligence or willful misconduct, shall be binding on the Borrower and
shall not result in any liability of the Issuing Lender or any L/C Participant
to the Borrower. The responsibility of the Issuing Lender to the Borrower in
connection with any draft presented for payment under any Letter of Credit
shall, in addition to any payment obligation expressly provided for in such
Letter of Credit, be limited to determining that the documents (including each
draft) delivered under such Letter of Credit in connection with such presentment
are in conformity with such Letter of Credit.

SECTION 3.7 Effect of Letter of Credit Application. To the extent that any
provision of any Letter of Credit Application related to any Letter of Credit is
inconsistent with the provisions of this Article III, the provisions of this
Article III shall apply.

SECTION 3.8 Guaranty by the Borrower of Reimbursement Obligations under Existing
Letters of Credit. The Borrower hereby guarantees the payment, promptly when
due, of all Reimbursement Obligations of Fossil Partners with respect to the
Existing Letters of Credit.

ARTICLE IV

[INTENTIONALLY OMITTED.]

ARTICLE V

GENERAL LOAN PROVISIONS

SECTION 5.1 Interest.

(a) Interest Rate Options. Subject to the provisions of this Section, at the
election of the Borrower, (i) the Revolving Credit Loans shall bear interest at
(A) the Base Rate plus the Applicable Margin or (B) the LIBOR Rate plus the
Applicable Margin (provided that the LIBOR Rate shall not be available until
three (3) Business Days after the Closing Date unless the Borrower has delivered
to the Administrative Agent a letter in form and substance reasonably
satisfactory to the Administrative Agent indemnifying the Lenders in the manner
set forth in Section 5.9 of this Agreement) and (ii) any Swingline Loan shall
bear interest at the Base Rate plus the Applicable Margin. The Borrower shall
select the rate of interest and Interest Period, if any, applicable to any Loan
at the time a Notice of Borrowing is given or at the time a Notice of
Conversion/Continuation is given pursuant to Section 5.2. Any Loan or any
portion thereof as to which the Borrower has not duly specified an interest rate
as provided herein shall be deemed a Base Rate Loan.

 

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(b) Interest Periods. In connection with each LIBOR Rate Loan, the Borrower, by
giving notice at the times described in Section 2.3 or 5.2, as applicable, shall
elect an interest period (each, an “Interest Period”) to be applicable to such
Loan, which Interest Period shall be a period of one (1), three (3) or six
(6) months; provided that:

(i) the Interest Period shall commence on the date of advance of or conversion
to any LIBOR Rate Loan and, in the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the date on which the
immediately preceding Interest Period expires;

(ii) if any Interest Period would otherwise expire on a day that is not a
Business Day, such Interest Period shall expire on the next succeeding Business
Day; provided that, if any Interest Period with respect to a LIBOR Rate Loan
would otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such Interest
Period shall expire on the immediately preceding Business Day;

(iii) any Interest Period with respect to a LIBOR Rate Loan that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the relevant calendar month at the
end of such Interest Period;

(iv) no Interest Period shall extend beyond the Maturity Date; and

(v) there shall be no more than ten (10) Interest Periods in effect at any time.

(c) Default Rate. Subject to Section 12.3, (i) immediately upon the occurrence
and during the continuance of an Event of Default under Section 12.1(a), (b),
(i) or (j), or (ii) at the election of the Required Lenders, upon the occurrence
and during the continuance of any other Event of Default, (A) the Borrower shall
no longer have the option to request LIBOR Rate Loans, Swingline Loans or
Letters of Credit, (B) all outstanding LIBOR Rate Loans shall bear interest at a
rate per annum of four percent (4%) in excess of the rate (including the
Applicable Margin) then applicable to LIBOR Rate Loans until the end of the
applicable Interest Period and thereafter at a rate equal to four percent
(4%) in excess of the rate (including the Applicable Margin) then applicable to
Base Rate Loans, and (C) all outstanding Base Rate Loans and other Obligations
arising hereunder or under any other Loan Document shall bear interest at a rate
per annum equal to four percent (4%) in excess of the rate (including the
Applicable Margin) then applicable to Base Rate Loans or such other Obligations
arising hereunder or under any other Loan Document. Interest shall continue to
accrue on the Obligations after the filing by or against the Borrower of any
petition seeking any relief in bankruptcy or under any act or law pertaining to
insolvency or debtor relief, whether state, federal or foreign.

(d) Interest Payment and Computation. Interest on each Base Rate Loan shall be
due and payable in arrears on the last Business Day of each calendar quarter
commencing December 31, 2010; and interest on each LIBOR Rate Loan shall be due
and payable on the last day of each Interest Period applicable thereto, and if
such Interest Period extends over three (3) months, at the end of each three
(3) month interval during such Interest Period. All computations of interest for
Base Rate Loans when the Base Rate is determined by the Prime Rate shall be made
on the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed. All other computations of fees and interest provided hereunder shall be
made on the basis of a 360-day year and actual days elapsed (which results in
more fees or interest, as applicable, being paid than if computed on the basis
of a 365/366-day year).

 

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(e) Maximum Rate. In no contingency or event whatsoever shall the aggregate of
all amounts deemed interest under this Agreement charged or collected pursuant
to the terms of this Agreement exceed the highest rate permissible under any
Applicable Law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court determines
that the Lenders have charged or received interest hereunder in excess of the
highest applicable rate, the rate in effect hereunder shall automatically be
reduced to the maximum rate permitted by Applicable Law and the Lenders shall at
the Administrative Agent’s option (i) promptly refund to the Borrower any
interest received by the Lenders in excess of the maximum lawful rate or
(ii) apply such excess to the principal balance of the Obligations on a pro rata
basis. It is the intent hereof that the Borrower not pay or contract to pay, and
that neither the Administrative Agent nor any Lender receive or contract to
receive, directly or indirectly in any manner whatsoever, interest in excess of
that which may be paid by the Borrower under Applicable Law.

SECTION 5.2 Notice and Manner of Conversion or Continuation of Loans. Provided
that no Default or Event of Default has occurred and is then continuing, the
Borrower shall have the option to (a) convert at any time following the third
Business Day after the Closing Date all or any portion of any outstanding Base
Rate Loans (other than Swingline Loans) in a principal amount equal to
$5,000,000 or any whole multiple of $1,000,000 in excess thereof into one or
more LIBOR Rate Loans and (b) upon the expiration of any Interest Period,
(i) convert all or any part of its outstanding LIBOR Rate Loans in a principal
amount equal to $3,000,000 or a whole multiple of $1,000,000 in excess thereof
into Base Rate Loans (other than Swingline Loans) or (ii) continue such LIBOR
Rate Loans as LIBOR Rate Loans. Whenever the Borrower desires to convert or
continue Loans as provided above, the Borrower shall give the Administrative
Agent irrevocable prior written notice in the form attached as Exhibit E (a
“Notice of Conversion/Continuation”) not later than 12:00 noon three
(3) Business Days before the day on which a proposed conversion or continuation
of such Loan is to be effective specifying (A) the Loans to be converted or
continued, and, in the case of any LIBOR Rate Loan to be converted or continued,
the last day of the Interest Period therefor, (B) the effective date of such
conversion or continuation (which shall be a Business Day), (C) the principal
amount of such Loans to be converted or continued, and (D) the Interest Period
to be applicable to such converted or continued LIBOR Rate Loan. The
Administrative Agent shall promptly notify the affected Lenders of such Notice
of Conversion/Continuation.

SECTION 5.3 Fees.

(a) Commitment Fee. Commencing on the Closing Date, the Borrower shall pay to
the Administrative Agent, for the account of the Lenders (other than any
Defaulting Lender), a non-refundable commitment fee (the “Commitment Fee”) at a
rate per annum equal to the Applicable Margin on the average daily unused
portion of the Revolving Credit Commitment of the Lenders (other than the
Defaulting Lenders, if any); provided, that (i) the amount of outstanding
Swingline Loans shall not be considered usage, and (ii) the amount of issued and
outstanding undrawn Letters of Credit shall be considered usage, in each case of
the Revolving Credit Commitment for the purpose of calculating the Commitment
Fee. The Commitment Fee shall be payable in arrears on the last Business Day of
each calendar quarter during the term of this Agreement commencing December 31,
2010, and ending on the Maturity Date. Such commitment fee shall be distributed
by the Administrative Agent to the Lenders (other than any Defaulting Lender)
pro rata in accordance with such Lenders’ respective Revolving Credit Commitment
Percentages.

(b) [Intentionally omitted.]

 

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(c) Other Fees. The Borrower shall pay to the Arranger and the Administrative
Agent for their own respective accounts fees in the amounts and at the times
specified in the Fee Letter. The Borrower shall pay to the applicable Lender(s)
such fees as shall have been separately agreed upon (pursuant to the Fee Letter
or otherwise) in writing in the amounts and at the times so specified.

SECTION 5.4 Manner of Payment.

(a) Sharing of Payments. Each payment by the Borrower on account of the
principal of or interest on the Loans or of any fee, commission or other amounts
(including the Reimbursement Obligation) payable to the Lenders under this
Agreement (or any of them) shall be made not later than 1:00 p.m. on the date
specified for payment under this Agreement to the Administrative Agent at the
Administrative Agent’s Office for the account of the Lenders entitled to such
payment in Dollars, in immediately available funds, and shall be made without
any set off, counterclaim or deduction whatsoever. Any payment received after
such time but before 2:00 p.m. on such day shall be deemed a payment on such
date for the purposes of Section 12.1, but for all other purposes shall be
deemed to have been made on the next succeeding Business Day. Any payment
received after 2:00 p.m. shall be deemed to have been made on the next
succeeding Business Day for all purposes. Upon receipt by the Administrative
Agent of each such payment, the Administrative Agent shall distribute to each
such Lender at its address for notices set forth herein its pro rata share of
such payment in accordance with the amounts then due and payable to such Lenders
(except as specified below) and shall wire advice of the amount of such credit
to each Lender. Each payment to the Administrative Agent on account of the
principal of or interest on the Swingline Loans or of any fee, commission or
other amounts payable to the Swingline Lender shall be made in like manner, but
for the account of the Swingline Lender. Each payment to the Administrative
Agent of the Issuing Lender’s fees or L/C Participants’ commissions shall be
made in like manner, but for the account of the Issuing Lender or the L/C
Participants, as the case may be. Each payment to the Administrative Agent of
the Administrative Agent’s fees or expenses shall be made for the account of the
Administrative Agent, and any amount payable to any Lender under Sections 5.9,
5.10, 5.11 or 14.3 shall be paid to the Administrative Agent for the account of
the applicable Lender. Subject to Section 5.1(b)(ii), if any payment under this
Agreement shall be specified to be made upon a day which is not a Business Day,
it shall be made on the next succeeding day which is a Business Day and such
extension of time shall in such case be included in computing any interest if
payable along with such payment.

(b) Defaulting Lenders. Notwithstanding Section 5.4(a), if any Defaulting Lender
shall have failed to fund all or any portion of any Revolving Credit Loan (each
such Revolving Credit Loan, an “Affected Loan”), each payment by the Borrower
hereunder shall be applied first to such Affected Loan and the principal amount
and interest with respect to such payment shall be distributed (i) to each
Lender that is not a Defaulting Lender (each, a “Non-Defaulting Lender”) pro
rata based on the outstanding principal amount of Affected Loans owing to all
Non-Defaulting Lenders, until the principal amount of all Affected Loans has
been repaid in full and (ii) to the extent of any remaining amount of such
payment, to each Lender as set forth in Section 5.4(a). Each payment made by the
Borrower on account of the interest on any Affected Loans shall be distributed
to each Non-Defaulting Lender pro rata based on the outstanding principal amount
of Affected Loans owing to all Non-Defaulting Lenders. For the avoidance of
doubt, if any Lender shall fail to make any payment required to be made by it
under this Agreement, then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for the account of such Lender in any
manner necessary to satisfy such Lender’s obligations hereunder until all such
unsatisfied obligations are fully paid.

 

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(c) Authorization regarding Certain Payments. To facilitate the payment of
certain amounts payable under this Agreement and the other Loan Documents, the
Borrower (i) shall maintain at least one of its principal deposit accounts with
Wells Fargo (or any successor Administrative Agent) and (ii) authorizes the
Administrative Agent to charge such deposit account and/or any other deposit
account maintained by the Borrower with Wells Fargo (or any successor
Administrative Agent), up to the amount available therein, in order to pay any
principal (including unreimbursed amounts drawn under Letters of Credit),
interest or fees then due by the Borrower under this Agreement, any Note or the
Fee Letter (but excluding costs and expenses or indemnification obligations
payable under Section 14.3). The Borrower acknowledges and agrees that (A) the
Administrative Agent shall not be obligated to effectuate any such charge
referred to in this Section 5.4(c), (B) if and to the extent that the
Administrative Agent does effectuate any such charge, the same may cause an
overdraft which may result in the depository bank’s refusal to honor other items
drawn on such account until adequate deposits are made to such account, and
(C) if and to the extent that such a charge is not made, the Borrower is
nonetheless obligated to pay all such amounts when due in accordance with this
Agreement, the Notes and/or the Fee Letter (as applicable).

SECTION 5.5 Evidence of Indebtedness.

(a) Extensions of Credit. The Extensions of Credit made by each Lender shall be
evidenced by one or more accounts or records maintained by such Lender and by
the Administrative Agent in the ordinary course of business. The accounts or
records maintained by the Administrative Agent and each Lender shall be
conclusive absent manifest error of the amount of the Extensions of Credit made
by the Lenders to the Borrower and the interest and payments thereon. Any
failure to so record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrower hereunder to pay any amount
owing with respect to the Obligations. In the event of any conflict between the
accounts and records maintained by any Lender and the accounts and records of
the Administrative Agent in respect of such matters, the accounts and records of
the Administrative Agent shall control in the absence of manifest error. Upon
the request of any Lender made through the Administrative Agent, the Borrower
shall execute and deliver to such Lender (through the Administrative Agent) a
Revolving Credit Note and/or a Swingline Note, as applicable, which shall
evidence such Lender’s Revolving Credit Loans and/or Swingline Loans, as
applicable, in addition to such accounts or records. Each Lender may attach
schedules to its Notes and endorse thereon the date, amount and maturity of its
Loans and payments with respect thereto.

(b) Participations. In addition to the accounts and records referred to in
Section 5.5(a), each Lender and the Administrative Agent shall maintain in
accordance with its usual practice accounts or records evidencing the purchases
and sales by such Lender of participations in Letters of Credit and Swingline
Loans. In the event of any conflict between the accounts and records maintained
by the Administrative Agent and the accounts and records of any Lender in
respect of such matters, the accounts and records of the Administrative Agent
shall control in the absence of manifest error.

SECTION 5.6 Adjustments. If any Lender shall, by exercising any right of setoff
or counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans or other Obligations hereunder resulting in such
Lender’s receiving payment of a proportion of the aggregate amount of its Loans
and accrued interest thereon or other such Obligations (other than pursuant to
Sections 5.9, 5.10, 5.11 or 14.3) greater than its pro rata share thereof as
provided herein, then the Lender receiving such greater proportion shall
(a) notify the Administrative Agent of such fact, and (b) purchase (for cash at
face value) participations in the Loans and such other Obligations of the other
Lenders, or make such other adjustments as shall be equitable, so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans and other Obligations owing them; provided that

 

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

(ii) the provisions of this Section shall not be construed to apply to (A) any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or (B) any payment obtained by a Lender as consideration
for the assignment of or sale of a participation in any of its Loans or
participations in Swingline Loans and Letters of Credit to any assignee or
participant, other than to the Borrower or any Subsidiary thereof (as to which
the provisions of this Section shall apply).

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

SECTION 5.7 Obligations of Lenders.

(a) Funding by Lenders; Presumption by Administrative Agent. Unless the
Administrative Agent shall have received notice from a Lender prior to the
proposed date of any borrowing that such Lender will not make available to the
Administrative Agent such Lender’s share of such borrowing, the Administrative
Agent may assume that such Lender has made such share available on such date in
accordance with Section 2.3(b) and may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. In such event, if a Lender has
not in fact made its share of the applicable borrowing available to the
Administrative Agent, then the applicable Lender and the Borrower severally
agree to pay to the Administrative Agent forthwith on demand such corresponding
amount with interest thereon, for each day from and including the date such
amount is made available to the Borrower to but excluding the date of payment to
the Administrative Agent, at (i) in the case of a payment to be made by such
Lender, the greater of the daily average Federal Funds Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation and (ii) in the case of a payment to be made by the
Borrower, the interest rate applicable to Base Rate Loans. If the Borrower and
such Lender shall pay such interest to the Administrative Agent for the same or
an overlapping period, the Administrative Agent shall promptly remit to the
Borrower the amount of such interest paid by the Borrower for such period. If
such Lender pays its share of the applicable borrowing to the Administrative
Agent, then the amount so paid shall constitute such Lender’s Loan included in
such borrowing. Any payment by the Borrower shall be without prejudice to any
claim the Borrower may have against a Lender that shall have failed to make such
payment to the Administrative Agent.

(b) Nature of Obligations of Lenders Regarding Extensions of Credit. The
obligations of the Lenders under this Agreement to make the Loans and issue or
participate in Letters of Credit are several and are not joint or joint and
several. The failure of any Lender to make available its Revolving Credit
Commitment Percentage of any Revolving Credit Loan requested by the Borrower
shall not relieve it or any other Lender of its obligation, if any, hereunder to
make its Revolving Credit Commitment Percentage of such Revolving Credit Loan
available on the borrowing date, but no Lender shall be responsible for the
failure of any other Lender to make its Revolving Credit Commitment Percentage
of such Revolving Credit Loan available on the borrowing date.

 

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SECTION 5.8 Changed Circumstances.

(a) Circumstances Affecting LIBOR Rate Availability. In connection with any
request for a LIBOR Rate Loan or a Base Rate Loan as to which the interest rate
is determined with reference to LIBOR or a conversion to or continuation
thereof, if for any reason (i) the Administrative Agent shall determine (which
determination shall be conclusive and binding absent manifest error) that Dollar
deposits are not being offered to banks in the London interbank Eurodollar
market for the applicable amount and Interest Period of such Loan, (ii) the
Administrative Agent shall determine (which determination shall be conclusive
and binding absent manifest error) that reasonable and adequate means do not
exist for the ascertaining the LIBOR Rate for such Interest Period with respect
to a proposed LIBOR Rate Loan or any Base Rate Loan as to which the interest
rate is determined with reference to LIBOR or (iii) the Required Lenders shall
determine (which determination shall be conclusive and binding absent manifest
error) that the LIBOR Rate does not adequately and fairly reflect the cost to
such Lenders of making or maintaining such Loans during such Interest Period,
then the Administrative Agent shall promptly give notice thereof to the
Borrower. Thereafter, until the Administrative Agent notifies the Borrower that
such circumstances no longer exist, the obligation of the Lenders to make LIBOR
Rate Loans or Base Rate Loan as to which the interest rate is determined with
reference to LIBOR and the right of the Borrower to convert any Loan to or
continue any Loan as a LIBOR Rate Loan or a Base Rate Loan as to which the
interest rate is determined with reference to LIBOR shall be suspended, and
(i) in the case of LIBOR Rate Loans, the Borrower shall either (A) repay in full
(or cause to be repaid in full) the then outstanding principal amount of each
such LIBOR Rate Loan together with accrued interest thereon (subject to
Section 5.1(d)), on the last day of the then current Interest Period applicable
to such LIBOR Rate Loan; or (B) convert the then outstanding principal amount of
each such LIBOR Rate Loan to a Base Rate Loan as to which the interest rate is
not determined by reference to LIBOR as of the last day of such Interest Period;
or (ii) in the case of Base Rate Loans as to which the interest rate is
determined by reference to LIBOR, the Borrower shall convert the then
outstanding principal amount of each such Loan to a Base Rate Loan as to which
the interest rate is not determined by reference to LIBOR as of the last day of
such Interest Period.

(b) Laws Affecting LIBOR Rate Availability. If, after the date hereof, the
introduction of, or any change in, any Applicable Law or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any of the Lenders (or any of their respective Lending
Offices) with any request or directive (whether or not having the force of law)
of any such Governmental Authority, central bank or comparable agency, shall
make it unlawful or impossible for any of the Lenders (or any of their
respective Lending Offices) to honor its obligations hereunder to make or
maintain any LIBOR Rate Loan or any Base Rate Loan as to which the interest rate
is determined by reference to LIBOR, such Lender shall promptly give notice
thereof to the Administrative Agent and the Administrative Agent shall promptly
give notice to the Borrower and the other Lenders. Thereafter, until the
Administrative Agent notifies the Borrower that such circumstances no longer
exist, (i) the obligations of the Lenders to make LIBOR Rate Loans or Base Rate
Loans as to which the interest rate is determined by reference to LIBOR, and the
right of the Borrower to convert any Loan or continue any Loan as a LIBOR Rate
Loan or a Base Rate Loan as to which the interest rate is determined by
reference to LIBOR shall be suspended and thereafter the Borrower may select
only Base Rate Loans as to which the interest rate is not determined by
reference to LIBOR hereunder, (ii) all Base Rate Loans shall cease to be
determined by reference to LIBOR and (iii) if any of the Lenders may not
lawfully continue to maintain a LIBOR Rate Loan to the end of the then current
Interest Period applicable thereto, the applicable Loan shall immediately be
converted to a Base Rate Loan as to which the interest rate is not determined by
reference to LIBOR for the remainder of such Interest Period.

SECTION 5.9 Indemnity. The Borrower hereby indemnifies each of the Lenders
against any loss or expense which may arise or be attributable to each Lender’s
obtaining, liquidating or employing deposits or other funds acquired to effect,
fund or maintain any Loan (a) as a consequence of any failure by the Borrower to
make any payment when due of any amount due hereunder in connection with a LIBOR
Rate Loan, (b) due to any failure of the Borrower to borrow, continue or convert
on a date specified therefor in a Notice of Borrowing or Notice of
Conversion/Continuation or (c) due to any payment, prepayment or conversion of
any LIBOR Rate Loan on a date other than the last day of the Interest Period
therefor. The amount of such loss or expense shall be determined based upon the
assumption that such Lender funded its Revolving Credit Commitment Percentage of
the LIBOR Rate Loans in the London interbank market and using any reasonable
attribution or averaging methods which such Lender deems appropriate and
practical. A certificate of such Lender setting forth in reasonable detail the
factual basis for, and calculations used in, determining such amount or amounts
necessary to compensate such Lender shall be forwarded to the Borrower through
the Administrative Agent and shall be conclusively presumed to be correct save
for manifest error.

 

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SECTION 5.10 Increased Costs.

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

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

(ii) subject any Lender or the Issuing Lender to any tax of any kind whatsoever
with respect to this Agreement, any Letter of Credit, any participation in a
Letter of Credit or any LIBOR Rate Loan made by it, or change the basis of
taxation of payments to such Lender or the Issuing Lender in respect thereof
(except for Indemnified Taxes or Other Taxes covered by Section 5.11 and the
imposition of, or any change in the rate of, any Excluded Tax payable by such
Lender or the Issuing Lender); or

(iii) impose on any Lender or the Issuing Lender or the London interbank market
any other condition, cost or expense affecting this Agreement or LIBOR Rate
Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making, converting into or maintaining any LIBOR Rate Loan (or of
maintaining its obligation to make any such Loan), or to increase the cost to
such Lender or the Issuing Lender of participating in, issuing or maintaining
any Letter of Credit (or of maintaining its obligation to participate in or to
issue any Letter of Credit), or to reduce the amount of any sum received or
receivable by such Lender or the Issuing Lender hereunder (whether of principal,
interest or any other amount) then, upon written request of such Lender or the
Issuing Lender, the Borrower shall promptly pay to any such Lender or the
Issuing Lender, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Lender, as the case may be, for such
additional costs incurred or reduction suffered.

(b) Capital Requirements. If any Lender or the Issuing Lender determines that
any Change in Law affecting such Lender or the Issuing Lender or any lending
office of such Lender or such Lender’s or the Issuing Lender’s holding company,
if any, regarding capital requirements has or would have the effect of reducing
the rate of return on such Lender’s or the Issuing Lender’s capital or on the
capital of such Lender’s or the Issuing Lender’s holding company, if any, as a
consequence of this Agreement, the Revolving Credit Commitment of such Lender or
the Loans made by, or participations in Letters of Credit held by, such Lender,
or the Letters of Credit issued by the Issuing Lender, to a level below that
which such Lender or the Issuing Lender or such Lender’s or the Issuing Lender’s
holding company could have achieved but for such Change in Law (taking into
consideration such Lender’s or the Issuing Lender’s policies and the policies of
such Lender’s or the Issuing Lender’s holding company with respect to capital
adequacy), then from time to time upon written request of such Lender or such
Issuing Lender the Borrower shall promptly pay to such Lender or the Issuing
Lender, as the case may be, such additional amount or amounts as will compensate
such Lender or the Issuing Lender or such Lender’s or the Issuing Lender’s
holding company for any such reduction suffered.

 

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(c) Certificates for Reimbursement. A certificate of a Lender or the Issuing
Lender setting forth in reasonable detail the factual basis for, and
calculations used in, determining such amount or amounts necessary to compensate
such Lender or the Issuing Lender or its holding company, as the case may be, as
specified in Section 5.10(a) or 5.10(b) and delivered to the Borrower shall be
conclusive absent manifest error. The Borrower shall pay such Lender or the
Issuing Lender, as the case may be, the amount shown as due on any such
certificate within ten (10) days after receipt thereof.

(d) Delay in Requests. Failure or delay on the part of any Lender or the Issuing
Lender to demand compensation pursuant to this Section shall not constitute a
waiver of such Lender’s or the Issuing Lender’s right to demand such
compensation; provided that the Borrower shall not be required to compensate a
Lender or the Issuing Lender pursuant to this Section for any increased costs
incurred or reductions suffered more than six (6) months prior to the date that
such Lender or the Issuing Lender, as the case may be, notifies the Borrower of
the Change in Law giving rise to such increased costs or reductions and of such
Lender’s or the Issuing Lender’s intention to claim compensation therefor
(except that if the Change in Law giving rise to such increased costs or
reductions is retroactive, then the six-month period referred to above shall be
extended to include the period of retroactive effect thereof).

SECTION 5.11 Taxes.

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

(b) Payment of Other Taxes by the Borrower. Without limiting the provisions of
Section 5.11(a) above, the Borrower shall timely pay any Other Taxes to the
relevant Governmental Authority in accordance with Applicable Law.

(c) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent, each Lender and the Issuing Lender, within ten (10) days
after demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) paid by the Administrative
Agent, such Lender or the Issuing Lender, as the case may be, and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority; provided that the
Borrower shall not be obligated to indemnify the Administrative Agent, any
Lender or the Issuing Lender for any amount in respect of any such penalties,
interest or reasonable expenses if written demand therefor was not made by the
Administrative Agent, such Lender or the Issuing Lender within 180 days from the
date on which such party makes payment for such penalties, interest or expenses;
provided further that the foregoing limitation shall not apply to any such
penalties, interest or reasonable expenses arising out of the retroactive
application of any such Indemnified Tax or Other Tax. A certificate as to the
amount of such payment or liability delivered to the Borrower by a Lender or the
Issuing Lender (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Lender, shall be conclusive absent manifest error.

 

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

(e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from
or reduction of withholding tax under the law of the jurisdiction in which the
Borrower is resident for tax purposes, or any treaty to which such jurisdiction
is a party, with respect to payments hereunder or under any other Loan Document
shall deliver to the Borrower (with a copy to the Administrative Agent), at the
time or times prescribed by Applicable Law or reasonably requested by the
Borrower or the Administrative Agent, such properly completed and executed
documentation prescribed by Applicable Law as will permit such payments to be
made without withholding or at a reduced rate of withholding. In addition, any
Lender, if requested by the Borrower or the Administrative Agent, shall deliver
such other documentation prescribed by Applicable Law or reasonably requested by
the Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements. Without limiting the
generality of the foregoing, in the event that the Borrower is a resident for
tax purposes in the United States, any Foreign Lender shall deliver to the
Borrower and the Administrative Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
request of the Borrower or the Administrative Agent, but only if such Foreign
Lender is legally entitled to do so), whichever of the following is applicable:

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

(ii) duly completed copies of Internal Revenue Service Form W-8ECI,

(iii) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Code, (x) a certificate to the
effect that such Foreign Lender is not (A) a “bank” within the meaning of
section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower
within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled
foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly
completed copies of Internal Revenue Service Form W-8BEN, or

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

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

 

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(g) Survival. Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section shall survive the payment in full of the Obligations and the
termination of the Commitments.

SECTION 5.12 Mitigation Obligations; Replacement of Lenders.

(a) Designation of a Different Lending Office. If any Lender requests
compensation under Section 5.10, or requires the Borrower to pay any additional
amount to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 5.11, then such Lender shall use reasonable efforts to
designate a different lending office for funding or booking its Loans hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to
Section 5.10 or Section 5.11, as the case may be, in the future and (ii) would
not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.

(b) Replacement of Lenders. If any Lender requests compensation under
Section 5.10, or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 5.11, or if any Lender is a Defaulting Lender hereunder or becomes a
Non-consenting Lender, then the Borrower may, at its sole expense and effort,
upon notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in, and consents required by, Section 14.10), all of its
interests, rights and obligations under this Agreement and the related Loan
Documents to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that:

(i) the Borrower shall have paid to the Administrative Agent the assignment fee
specified in Section 14.10;

(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in Letters of Credit,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder and under the other Loan Documents (including any amounts under
Section 5.9) from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts);

(iii) in the case of any such assignment resulting from a claim for compensation
under Section 5.10 or payments required to be made pursuant to Section 5.11,
such assignment will result in a reduction in such compensation or payments
thereafter; and

 

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(iv) such assignment does not conflict with Applicable Law.

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

SECTION 5.13 Security. The Obligations shall be secured by the Capital Stock of
the Material First-Tier Foreign Subsidiaries as provided in the Security
Documents and in Section 9.11(b).

SECTION 5.14 Guarantees. Payment of the Obligations shall be guaranteed by the
Subsidiary Guarantors as provided in the Subsidiary Guaranty Agreement and in
Section 9.11(a).

ARTICLE VI

CONDITIONS OF CLOSING AND BORROWING

SECTION 6.1 Conditions to Closing and Initial Extensions of Credit. The
obligation of the Lenders to close this Agreement and to make the initial Loan
or issue or participate in the initial Letter of Credit, if any, is subject to
the satisfaction of each of the following conditions precedent:

(a) Executed Loan Documents. This Agreement, a Revolving Credit Note in favor of
each Lender requesting a Revolving Credit Note, a Swingline Note in favor of the
Swingline Lender (if requested by the Swingline Lender) and the Security
Documents, together with any other applicable Loan Documents, shall have been
duly authorized, executed and delivered to the Administrative Agent by the
parties thereto, shall be in full force and effect and no Default or Event of
Default shall exist hereunder or thereunder.

(b) Closing Certificates; Etc. The Administrative Agent shall have received each
of the following in form and substance reasonably satisfactory to the
Administrative Agent:

(i) Officer’s Certificate. A certificate from a Responsible Officer of the
Borrower to the effect that all representations and warranties of such Person
contained in this Agreement and the other Loan Documents are true, correct and
complete; that none of the Credit Parties is in violation of any of the
covenants contained in this Agreement and the other Loan Documents; that, after
giving effect to the transactions contemplated by this Agreement, no Default or
Event of Default has occurred and is continuing; and that each of the Credit
Parties, as applicable, has satisfied each of the conditions set forth in
Section 6.1 and Section 6.2.

(ii) Certificate of Secretary of each Credit Party. A certificate of a
Responsible Officer of each Credit Party and Material First-Tier Foreign
Subsidiary certifying as to the incumbency and genuineness of the signature of
each officer of such Credit Party executing Loan Documents to which it is a
party and certifying that attached thereto is a true, correct and complete copy
of (A) the articles or certificate of incorporation or formation, partnership
agreement, trust agreement or other applicable governing document of such Credit
Party or Material First-Tier Foreign Subsidiary and all amendments thereto,
certified as of a recent date by the appropriate Governmental Authority in its
jurisdiction of incorporation or formation, (B) the bylaws or other governing
document of such Credit Party or Material First-Tier Foreign Subsidiary as in
effect on the Closing Date, (C) resolutions duly adopted by the board of
directors (or other governing body) of such Credit Party or (if and to the
extent required in connection with the Foreign Subsidiary Pledge Agreements)
Material First-Tier Foreign Subsidiary authorizing the transactions contemplated
hereunder and the execution, delivery and performance of this Agreement and the
other Loan Documents to which it is a party, and (D) each certificate required
to be delivered pursuant to Section 6.1(b)(iii).

 

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(iii) Certificates of Existence and Good Standing. Certificates as of a recent
date of the legal existence and good standing of each Credit Party and each
Material First-Tier Foreign Subsidiary under the laws of its jurisdiction of
organization and, to the extent requested by the Administrative Agent, each
other jurisdiction where such Credit Party or Material First-Tier Foreign
Subsidiary is qualified to do business and, to the extent available, a
certificate of the relevant taxing authorities of such jurisdictions certifying
that such Credit Party or Material First-Tier Foreign Subsidiary has filed
required tax returns and owes no delinquent taxes.

(iv) Opinions of Counsel. Favorable opinions of counsel to the Credit Parties
and the Material First-Tier Foreign Subsidiaries addressed to the Administrative
Agent and the Lenders with respect to the Credit Parties, the Material
First-Tier Foreign Subsidiaries, the Loan Documents and such other matters as
the Lenders shall request.

(v) Tax Forms. Copies of the United States Internal Revenue Service forms
required by Section 5.11(e).

(c) Personal Property Collateral.

(i) Filings and Recordings. The Administrative Agent shall have received all
filings and recordations that are necessary to perfect the security interests of
the Administrative Agent, on behalf of the Secured Parties, in the Collateral
and all proceeds thereof and the Administrative Agent shall have received
evidence reasonably satisfactory to the Administrative Agent that upon such
filings and recordations such security interests constitute valid and perfected
first priority Liens thereon.

(ii) Pledged Collateral. The Administrative Agent shall have received
(A) original stock certificates or other certificates evidencing the Capital
Stock pledged pursuant to the Security Documents, together with an undated stock
power for each such certificate duly executed in blank by the registered owner
thereof and (B) each other agreement, document or instrument necessary or
appropriate to ensure the validity and enforceability of the Foreign Subsidiary
Pledge Agreements and the ability of the Administrative Agent to exercise its
rights and remedies thereunder.

(iii) Lien Search. The Administrative Agent shall have received the results of a
Lien search (including a search as to judgments, pending litigation, tax and
intellectual property matters), in form and substance reasonably satisfactory
thereto, made against the (A) Credit Parties under the Uniform Commercial Code
(or applicable judicial docket) as in effect in each jurisdiction in which
filings or recordations under the Uniform Commercial Code should be made to
evidence or perfect security interests in all assets of such Credit Party,
indicating among other things that the assets of each such Credit Party are free
and clear of any Lien (except for Permitted Liens) and (B) the Material
First-Tier Foreign Subsidiaries as in effect in each jurisdiction in which
filings and recordations should be made to evidence or perfect Liens in all
assets of such Material First-Tier Foreign Subsidiaries, indicating among other
things that the assets of each such Material First-Tier Foreign Subsidiary are
free and clear of any Lien (except for Permitted Liens).

(iv) Hazard and Liability Insurance. The Administrative Agent shall have
received certificates of property hazard, business interruption and liability
insurance, evidence of payment of all insurance premiums for the current policy
year of each (naming the Administrative Agent as additional insured on all
certificates for liability insurance), and, if requested by the Administrative
Agent, copies (certified by a Responsible Officer of the Borrower) of insurance
policies in form and substance reasonably satisfactory to the Administrative
Agent.

 

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(d) [Intentionally omitted.]

(e) Consents; Defaults.

(i) Governmental and Third Party Approvals. The Credit Parties and the Material
First-Tier Foreign Subsidiaries shall have received all material governmental,
shareholder and third party consents and approvals necessary (or any other
material consents as determined in the reasonable discretion of the
Administrative Agent) in connection with the transactions contemplated by this
Agreement and the other Loan Documents and the other transactions contemplated
hereby and all applicable waiting periods shall have expired without any action
being taken by any Person that could reasonably be expected to restrain, prevent
or impose any material adverse conditions on any of the Credit Parties or any of
the Material First-Tier Foreign Subsidiaries or such other transactions or that
could seek or threaten any of the foregoing, and no law or regulation shall be
applicable which in the reasonable judgment of the Administrative Agent could
reasonably be expected to have such effect.

(ii) No Injunction, Etc. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any
Governmental Authority to enjoin, restrain or prohibit, or to obtain substantial
damages in respect of, or which is related to or arises out of this Agreement or
the other Loan Documents or the consummation of the transactions contemplated
hereby or thereby, or which, in the Administrative Agent’s sole discretion,
would make it inadvisable to consummate the transactions contemplated by this
Agreement or the other Loan Documents or the consummation of the transactions
contemplated hereby or thereby.

(f) Financial Matters.

(i) Financial Statements. The Administrative Agent shall have received the
unaudited Consolidated balance sheet of the Borrower and its Subsidiaries as of
September 30, 2010 and related unaudited interim statements of income and
retained earnings.

(ii) [Intentionally omitted.]

(iii) [Intentionally omitted.]

(iv) [Intentionally omitted.]

(v) [Intentionally omitted.]

(vi) Payment at Closing. The Borrower shall have paid (A) to the Administrative
Agent, the Arranger and the Lenders the fees set forth or referenced in
Section 5.3 and any other accrued and unpaid fees or commissions due hereunder,
(B) all fees, charges and disbursements of counsel to the Administrative Agent
(directly to such counsel if requested by the Administrative Agent) to the
extent accrued and unpaid prior to or on the Closing Date, plus (unless not
required by the Administrative Agent) such additional amounts of such fees,
charges and disbursements as shall constitute its reasonable estimate of such
fees, charges and disbursements incurred or to be incurred by it through the
closing proceedings (provided that such estimate shall not thereafter preclude a
final settling of accounts between the Borrower and the Administrative Agent)
and (C) to any other Person such amount as may be due thereto in connection with
the transactions contemplated hereby, including all taxes, fees and other
charges in connection with the execution, delivery, recording, filing and
registration of any of the Loan Documents.

 

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(g) [Intentionally omitted.]

(h) Miscellaneous.

(i) Notice of Borrowing. The Administrative Agent shall have received a Notice
of Borrowing from the Borrower in accordance with Section 2.3(a), and a Notice
of Account Designation specifying the account or accounts to which the proceeds
of any Loans made on or after the Closing Date are to be disbursed.

(ii) [Intentionally omitted.]

(iii) Existing Indebtedness. The Administrative Agent shall have received a
pay-off letter in form and substance satisfactory to it evidencing repayment of
all Indebtedness of the Borrower and its Subsidiaries under the Existing Credit
Agreement (other than the Existing Letters of Credit which shall continue as
Letters of Credit issued hereunder) and termination and release of all
collateral security under the Existing Credit Agreement, which repayment and
termination and release shall occur on the Closing Date and concurrently with
the initial advance of Loans hereunder.

(iv) [Intentionally omitted.]

(v) Patriot Act. The Borrower and each of the Subsidiary Guarantors shall have
provided to the Administrative Agent and the Lenders the documentation and other
information requested by the Administrative Agent in order to comply with
requirements of the Act.

(vi) Other Documents. All opinions, certificates and other instruments and all
proceedings in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to the Administrative Agent. The
Administrative Agent shall have received copies of all other documents,
certificates and instruments reasonably requested thereby, with respect to the
transactions contemplated by this Agreement.

SECTION 6.2 Conditions to All Extensions of Credit. The obligations of the
Lenders to make or participate in any Extensions of Credit (including the
initial Extension of Credit) and/or to convert or continue any Loans and/or the
obligation of the Issuing Lender to issue or extend any Letter of Credit are
subject to the satisfaction of the following conditions precedent on the
relevant borrowing, continuation, conversion, issuance or extension date:

(a) Continuation of Representations and Warranties. The representations and
warranties contained in Article VII shall be true and correct in all material
respects on and as of such borrowing, continuation, conversion, issuance or
extension date with the same effect as if made on and as of such date, except
for any representation and warranty expressly made only as of an earlier date,
which representation and warranty shall remain true and correct as of such
earlier date, provided that any representation or warranty that is qualified as
to “materiality”, “Material Adverse Effect” or similar language shall be true
and correct in all respects on and as of such respective dates.

 

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(b) No Existing Default. No Default or Event of Default shall have occurred and
be continuing (i) on the borrowing, continuation or conversion date with respect
to such Loan or after giving effect to the Loans to be made, continued or
converted on such date or (ii) on the issuance or extension date with respect to
such Letter of Credit or after giving effect to the issuance or extension of
such Letter of Credit on such date.

(c) Notices. The Administrative Agent shall have received a Notice of Borrowing
or Notice of Conversion/Continuation, as applicable, from the Borrower in
accordance with Section 2.3(a) or Section 5.2, as applicable.

(d) No Material Adverse Effect. No event shall have occurred or circumstance
shall exist that (either alone or in combination with other events or
circumstances) has had, or could reasonably be expected to have, a Material
Adverse Effect.

(e) Additional Documents. The Administrative Agent shall have received each
additional document, instrument, legal opinion or other item reasonably
requested by it.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES

To induce the Administrative Agent and the Lenders to enter into this Agreement
and to induce the Lenders to make Extensions of Credit, each of the Credit
Parties hereby jointly and severally represents and warrants to the
Administrative Agent and the Lenders, both before and after giving effect to the
transactions contemplated hereunder, which representations and warranties shall
be deemed made on the Closing Date and on and as of each borrowing,
continuation, conversion, issuance or extension date as set forth in
Section 6.2(a), that:

SECTION 7.1 Organization; Power; Qualification. Each Credit Party and each
Subsidiary thereof is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation, has the
power and authority to own its Properties and to carry on its business as now
being and hereafter proposed to be conducted and is duly qualified and
authorized to do business in each jurisdiction in which the character of its
Properties or the nature of its business requires such qualification and
authorization, except in jurisdictions where the failure to be so qualified and
authorized to do business could not reasonably be expected to result in a
Material Adverse Effect. The jurisdictions in which each Credit Party and each
Subsidiary thereof are organized and qualified to do business as of the Closing
Date are described on Schedule 7.1.

SECTION 7.2 Subsidiaries and Capitalization; Material Domestic Subsidiaries and
Material First-Tier Foreign Subsidiaries. Each Subsidiary of each Credit Party
as of the Closing Date is listed on Schedule 7.2A. All outstanding shares have
been duly authorized and validly issued and are fully paid and nonassessable,
with no personal liability attaching to the ownership thereof, and not subject
to any preemptive or similar rights, except as described in Schedule 7.2A. The
shareholders or other owners, as applicable, of each Credit Party (other than
Borrower) and its Subsidiaries and the number of shares owned by each as of the
Closing Date are described on Schedule 7.2A. As of the Closing Date, there are
no outstanding stock purchase warrants, subscriptions, options, securities,
instruments or other rights of any type or nature whatsoever, which are
convertible into, exchangeable for or otherwise provide for or permit the
issuance of Capital Stock of any Credit Party (other than Borrower) or any
Subsidiary thereof, except as described on Schedule 7.2A. Each Material Domestic
Subsidiary of the Borrower as of the Closing Date, and each Material First-Tier
Foreign Subsidiary of the Borrower as of the Closing Date, is listed on Schedule
7.2B.

 

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SECTION 7.3 Authorization Enforceability. Each Credit Party and each Subsidiary
thereof has the right, power and authority and has taken all necessary corporate
and other action to authorize the execution, delivery and performance of this
Agreement and each of the other Loan Documents to which it is a party in
accordance with their respective terms. This Agreement and each of the other
Loan Documents have been duly executed and delivered by the duly authorized
officers of each Credit Party and each Subsidiary thereof that is a party
thereto, and each such document constitutes the legal, valid and binding
obligation of each Credit Party and each Subsidiary thereof that is a party
thereto, enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
state or federal debtor relief laws from time to time in effect which affect the
enforcement of creditors’ rights in general and the availability of equitable
remedies.

SECTION 7.4 Compliance of Agreement, Loan Documents and Borrowing with Laws,
Etc. The execution, delivery and performance by each Credit Party and each
Subsidiary thereof of the Loan Documents to which each such Person is a party,
in accordance with their respective terms, the Extensions of Credit hereunder
and the transactions contemplated hereby do not and will not, by the passage of
time, the giving of notice or otherwise, (a) require any Governmental Approval
or violate any Applicable Law relating to any Credit Party or any Subsidiary
thereof, (b) conflict with, result in a breach of or constitute a default under
the articles of incorporation, bylaws or other organizational documents of any
Credit Party or any Subsidiary thereof, (c) conflict with, result in a breach of
or constitute a default under any indenture, agreement or other instrument to
which such Person is a party or by which any of its properties may be bound or
any Governmental Approval relating to such Person except to the extent that any
such conflict, breach or default could not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect, (d) result in or
require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by such Person other than Liens arising
under the Loan Documents or (e) require any consent or authorization of, filing
with (other than filings required to be made with the SEC), or other act in
respect of, an arbitrator or Governmental Authority, and no consent or approval
of any other Person is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement other than consents or
approvals that have been obtained and that are still in force and effect.

SECTION 7.5 Compliance with Law; Governmental Approvals. Each Credit Party and
each Subsidiary thereof (a) has all Governmental Approvals required by any
Applicable Law for it to conduct its business, each of which is in full force
and effect, is final and not subject to review on appeal and is not the subject
of any pending or, to the best of its knowledge, threatened attack by direct or
collateral proceeding, (b) is in compliance with each Governmental Approval
applicable to it and in compliance with all other Applicable Laws relating to it
or any of its respective properties except to the extent that any such
non-compliance could not individually or in the aggregate reasonably be expected
to have a Material Adverse Effect and (c) has timely filed all material reports,
documents and other materials required to be filed by it under all Applicable
Laws, with any Governmental Authority and has retained all material records and
documents required to be retained by it under Applicable Law, except in each
case where the failure to have, comply or file could not reasonably be expected
to have a Material Adverse Effect.

SECTION 7.6 Tax Returns and Payments. Each Credit Party and each Subsidiary
thereof has duly filed or caused to be filed all federal, state, local and other
tax returns required by Applicable Law to be filed, and has paid, or made
adequate provision for the payment of, all federal, state, local and other
taxes, assessments and governmental charges or levies upon it and its property,
income, profits and assets which are due and payable (other than any amount the
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided for on the books of the relevant Credit Party). Such returns accurately
reflect in all material respects all liability for taxes of any Credit Party or
any Subsidiary thereof for the periods covered thereby. There is no ongoing
audit or examination or, to the knowledge of the Borrower, other investigation
by any Governmental Authority of the tax liability of any Credit Party or any
Subsidiary thereof, in each case that could reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect. No Governmental
Authority has asserted any Lien or other claim against any Credit Party or any
Subsidiary thereof with respect to unpaid taxes which has not been discharged or
resolved (other than (a) any amount the validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided for on the books of the
relevant Credit Party and (b) Permitted Liens). The charges, accruals and
reserves on the books of each Credit Party and each Subsidiary thereof in
respect of federal, state, local and other taxes for all Fiscal Years and
portions thereof since the organization of any Credit Party or any Subsidiary
thereof are in the judgment of the Borrower adequate, and the Borrower does not
anticipate any additional taxes or assessments of a material amount for any of
such years.

 

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SECTION 7.7 Intellectual Property Matters. Each Credit Party and each Subsidiary
thereof owns or possesses rights to use all material franchises, licenses,
copyrights, copyright applications, patents, patent rights or licenses, patent
applications, trademarks, trademark rights, service mark, service mark rights,
trade names, trade name rights, copyrights and other rights with respect to the
foregoing which are reasonably necessary to conduct its business. No event has
occurred which permits, or after notice or lapse of time or both would permit,
the revocation or termination of any such rights, and no Credit Party nor any
Subsidiary thereof is liable to any Person for infringement under Applicable Law
with respect to any such rights as a result of its business operations, except
as could not reasonably be expected to have a Material Adverse Effect.

SECTION 7.8 Environmental Matters.

(a) The properties currently owned, leased or operated by each Credit Party and
each Subsidiary thereof do not contain, and to their knowledge have not
previously contained, any Hazardous Materials in amounts or concentrations which
(i) constitute or constituted a violation of applicable Environmental Laws or
require remediation or removal thereunder, (ii) could reasonably be expected to
give rise to an Environmental Claim, or (iii) could reasonably be expected to
materially interfere with the continued operation of such properties or, to the
knowledge of each Credit Party and each Subsidiary thereof, materially impair
the fair saleable value thereof;

(b) [Intentionally omitted]

(c)(i) The operations of each Credit Party and its Subsidiaries are in
compliance, and, to the knowledge of each Credit Party and each Subsidiary
thereof, except for matters which have been resolved, have been in compliance,
in all material respects with applicable Environmental Laws; (ii) except as
could not reasonably be expected to have a Material Adverse Effect, each Credit
Party and its Subsidiaries has all Governmental Approvals required by any
Environmental Law for it to conduct its business, each of which is in full force
and effect, is final and not subject to review on appeal and is not the subject
of any pending or, to the best of its knowledge, threatened attack by direct or
collateral proceeding and is in compliance with such Governmental Approvals.

(d) Except for matters which have been fully resolved, neither any Credit Party
nor any Subsidiary thereof has received any written notice of violation, alleged
violation, non-compliance, liability or potential liability regarding compliance
with Environmental Laws or the release, disposal, remediation or removal of any
Hazardous Materials and, to the knowledge of each Credit Party and its
Subsidiaries as of the Closing Date, no such notice is being threatened by any
Person;

 

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(e) To the knowledge of each Credit Party and its Subsidiaries, Hazardous
Materials have not been shipped off-site by any Credit Party or its Subsidiaries
in material violation of any Environmental Laws or in a manner that could
reasonably be expected to result in any material Environmental Claim against any
Credit Party or any of its Subsidiaries;

(f) No judicial proceedings or governmental or administrative action is pending,
or, to the knowledge of the Borrower and its Subsidiaries, threatened, under any
Environmental Law to which any Credit Party or any Subsidiary thereof is or will
be named as a potentially responsible party with respect to such properties or
operations conducted in connection therewith, nor are there any consent decrees
or other decrees, consent orders, administrative orders or other orders, or
other administrative or judicial requirements, outstanding under any
Environmental Law with respect to the operations of or real property currently
owned, leased or used by any Credit Party or any Subsidiary thereof that could
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect;

(g) There has been no release, or to the knowledge of any Credit Party or its
Subsidiaries, threat of release, of Hazardous Materials at or from properties
currently owned, leased or operated by any Credit Party or any Subsidiary, now
or in the past, or at or from any properties formerly owned, leased or operated
by any Credit Party or any Subsidiary during the time of such ownership, lease
or operation, in violation of or in amounts or in a manner that could reasonably
be expected to result in an Environmental Claim that could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
and

(h) The representations and warranties made pursuant to this Section 7.8 are the
exclusive representations and warranties contained in this Agreement regarding
(i) compliance with or liability under Environmental Laws, (ii) Environmental
Claims, or (iii) Hazardous Materials.

SECTION 7.9 Employee Benefit Matters.

(a) As of the Closing Date, neither any Credit Party nor any of its Domestic
Subsidiaries maintains or contributes to, or has any obligation under, any
Employee Benefit Plan and no ERISA Affiliate maintains or contributes to, or has
any obligation under, any Pension Plan or Multiemployer Plan, in each case other
than those identified on Schedule 7.9.

(b) Each Credit Party and each ERISA Affiliate is in compliance with all
applicable provisions of ERISA and the regulations and published interpretations
thereunder with respect to all Employee Benefit Plans except for any required
amendments for which the remedial amendment period as defined in Section 401(b)
of the Code has not yet expired and except where a failure to so comply could
not reasonably be expected to have a Material Adverse Effect. Each Employee
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
has been determined by the Internal Revenue Service to be so qualified, and each
trust related to such plan has been determined to be exempt under Section 501(a)
of the Code except for such plans that have not yet received determination
letters but for which the remedial amendment period for submitting a
determination letter has not yet expired. No liability has been incurred by any
Credit Party or any ERISA Affiliate which remains unsatisfied for any taxes or
penalties with respect to any Employee Benefit Plan or any Multiemployer Plan
except for a liability that could not reasonably be expected to have a Material
Adverse Effect.

(c) As of the Closing Date, no Pension Plan has been terminated, nor has any
accumulated funding deficiency (as defined in Section 412 of the Code) been
incurred (without regard to any waiver granted under Section 412 of the Code),
nor has any funding waiver from the Internal Revenue Service been received or
requested with respect to any Pension Plan, nor has any Credit Party or any
ERISA Affiliate failed to make any contributions or to pay any amounts due and
owing as required by Section 412 of the Code, Section 302 of ERISA or the terms
of any Pension Plan prior to the due dates of such contributions under
Section 412 of the Code or Section 302 of ERISA, nor has there been any event
requiring any disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with
respect to any Pension Plan.

 

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(d) Except where the failure of any of the following representations to be
correct could not reasonably be expected to have a Material Adverse Effect,
neither any Credit Party nor any ERISA Affiliate has: (i) engaged in a nonexempt
prohibited transaction described in Section 406 of the ERISA or Section 4975 of
the Code, (ii) incurred any liability to the PBGC which remains outstanding
other than the payment of premiums, and there are no premium payments which are
due and unpaid, (iii) failed to make a required contribution or payment to a
Multiemployer Plan, or (iv) failed to make a required installment or other
required payment under Section 412 or Section 430 of the Code.

(e) No Termination Event has occurred or is reasonably expected to occur.

(f) Except where the failure of any of the following representations to be
correct in all material respects could not reasonably be expected to have a
Material Adverse Effect, no proceeding, claim (other than a benefits claim in
the ordinary course of business), lawsuit and/or investigation is existing or,
to the knowledge of the Borrower and its Subsidiaries after due inquiry,
threatened concerning or involving any (i) employee welfare benefit plan (as
defined in Section 3(1) of ERISA) currently maintained or contributed to by any
Credit Party or any ERISA Affiliate, (ii) Pension Plan or (iii) Multiemployer
Plan.

(g) Neither any Credit Party nor any Subsidiary thereof is a party to any
contract, agreement or arrangement that could, solely as a result of the
delivery of this Agreement or the consummation of transactions contemplated
hereby, result in the payment of any “excess parachute payment” within the
meaning of Section 280G of the Code.

SECTION 7.10 Margin Stock. Neither any Credit Party nor any Subsidiary thereof
is engaged principally or as one of its activities in the business of extending
credit for the purpose of “purchasing” or “carrying” any “margin stock” (as each
such term is defined or used, directly or indirectly, in Regulation U of the
Board of Governors of the Federal Reserve System). No part of the proceeds of
any of the Loans or Letters of Credit will be used for purchasing or carrying
margin stock or for any purpose which violates, or which would be inconsistent
with, the provisions of Regulation T, U or X of such Board of Governors. If
requested by any Lender (through the Administrative Agent) or the Administrative
Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-3 or FR Form U 1 referred to in Regulation U.

SECTION 7.11 Government Regulation. Neither any Credit Party nor any Subsidiary
thereof is an “investment company” or a company “controlled” by an “investment
company” (as each such term is defined or used in the Investment Company Act of
1940, as amended), and neither any Credit Party nor any Subsidiary thereof is,
or after giving effect to any Extension of Credit will be, subject to regulation
under the Interstate Commerce Act, as amended, or any other Applicable Law which
limits its ability to incur or consummate the transactions contemplated hereby.

SECTION 7.12 Material Contracts. Schedule 7.12 sets forth a complete and
accurate list of all Material Contracts of each Credit Party and each Subsidiary
thereof in effect as of the Closing Date. Other than as set forth in Schedule
7.12, each such Material Contract is, and after giving effect to the
consummation of the transactions contemplated by the Loan Documents will be, in
full force and effect in accordance with the terms thereof. If and to the extent
requested by the Administrative Agent, each Credit Party and each Subsidiary
thereof has delivered to the Administrative Agent a true and complete copy of
each Material Contract required to be listed on Schedule 7.12 or any other
Schedule hereto. Neither any Credit Party nor any Subsidiary thereof is in
breach of or in default under any Material Contract in any material respect.

 

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SECTION 7.13 Employee Relations. Neither any Credit Party nor any Domestic
Subsidiary thereof is party to any collective bargaining agreement nor has any
labor union been recognized as the representative of its employees except as set
forth on Schedule 7.13. Neither any Credit Party nor any Subsidiary thereof
knows of any pending, threatened or contemplated strikes, work stoppage or other
collective labor disputes involving its employees or those of its Subsidiaries
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

SECTION 7.14 Burdensome Provisions. Neither any Credit Party nor any Subsidiary
thereof is a party to any indenture, agreement, lease or other instrument, or
subject to any corporate, partnership or other entity restriction, Governmental
Approval or Applicable Law which is so unusual or burdensome as in the
foreseeable future could be reasonably expected to have a Material Adverse
Effect. The Credit Parties and their respective Subsidiaries do not presently
anticipate that future expenditures needed to meet the provisions of any
statutes, orders, rules or regulations of a Governmental Authority will be so
burdensome as to have a Material Adverse Effect. Except as set forth on Schedule
7.14, no Subsidiary is party to any agreement or instrument or otherwise subject
to any restriction or encumbrance that restricts or limits its ability to make
dividend payments or other distributions in respect of its Capital Stock to the
Borrower or any Subsidiary or to transfer any of its assets or properties to the
Borrower or any other Subsidiary, in each case other than existing under or by
reason of the Loan Documents or Applicable Law.

SECTION 7.15 Financial Statements. The audited and unaudited financial
statements delivered pursuant to Section 6.1(f)(i) are complete and correct and
fairly present on a Consolidated basis the assets, liabilities and financial
position of the Borrower and its Subsidiaries as at such dates, and the results
of the operations and changes of financial position for the periods then ended
(other than customary year-end adjustments for unaudited financial statements).
All such financial statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP. Such financial statements
show all material indebtedness and other material liabilities, direct or
contingent, of the Borrower and its Subsidiaries as of the date thereof,
including material liabilities for taxes, material commitments, and
Indebtedness, in each case, to the extent required to be disclosed under GAAP.

SECTION 7.16 No Material Adverse Change. Since December 31, 2009, there has been
no material adverse change in the properties, business, operations, prospects,
or condition (financial or otherwise) of the Borrower, of the Credit Parties
taken as a whole or of the Borrower and its Subsidiaries taken as a whole, and
no event has occurred or condition arisen, either individually or in the
aggregate, that could reasonably be expected to have a Material Adverse Effect.

SECTION 7.17 Solvency. As of the Closing Date and after giving effect to the
Transactions, and on and as of each borrowing, continuation, conversion or
extension date as set forth in Section 6.2(a), (a) each Credit Party, both
individually and on a Consolidated basis, is and will be Solvent, and (b) the
Borrower and its Subsidiaries, on a Consolidated Basis, are and will be Solvent.

SECTION 7.18 Titles to Properties. As of the Closing Date, the real property
listed on Schedule 7.18 constitutes all of the real property of a material
nature that is owned, leased, subleased or used by any Credit Party or any of
its Subsidiaries. Each Credit Party and each Subsidiary thereof has such title
to the real property owned or leased by it as is necessary or desirable to the
conduct of its business and valid and legal title to all of its personal
property and assets, except those which have been disposed of by the Credit
Parties and their Subsidiaries subsequent to such date, which dispositions have
been in the ordinary course of business or as otherwise expressly permitted
hereunder.

 

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SECTION 7.19 Insurance. The properties of each Credit Party and each Subsidiary
thereof are insured with financially sound and reputable insurance companies not
Affiliates of the Credit Parties and their Subsidiaries, in such amounts, with
such deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in locations where
the Credit Parties and their Subsidiaries operate, except, in the case of such
Subsidiaries, where the failure to do so could not reasonably be expected to
have a Material Adverse Effect.

SECTION 7.20 Liens. None of the properties or assets of any Credit Party or any
Subsidiary thereof is subject to any Lien, except Permitted Liens. No Credit
Party or any Subsidiary thereof has signed any financing statement or any
security agreement authorizing any secured party thereunder to file any
financing statement, except to perfect those Permitted Liens.

SECTION 7.21 Indebtedness and Guaranty Obligations. Schedule 7.21 contains a
complete and correct listing of all Indebtedness and Guaranty Obligations of the
Credit Parties and their respective Subsidiaries as of the Closing Date in
excess of $5,000,000. The Credit Parties and their respective Subsidiaries have
performed and are in compliance with all of the material terms of such
Indebtedness and Guaranty Obligations and all instruments and agreements
relating thereto, and no default or event of default, or event or condition
which with notice or lapse of time or both would constitute such a default or
event of default, on the part of any of the Credit Parties or any of their
respective Subsidiaries exists with respect to any such Indebtedness or Guaranty
Obligation.

SECTION 7.22 Litigation. There are no actions, suits or proceedings pending or,
to the knowledge of the Borrower and its Subsidiaries, threatened against or in
any other way relating adversely to or affecting any Credit Party or any
Subsidiary thereof or any of their respective properties in any court or before
any arbitrator of any kind or before or by any Governmental Authority that
(a) has or could reasonably be expected to have a Material Adverse Effect, or
(b) materially and adversely affects any transaction contemplated hereby.

SECTION 7.23 Absence of Defaults. No event has occurred or is continuing
(a) which constitutes a Default or an Event of Default, or (b) which
constitutes, or which with the passage of time or giving of notice or both would
constitute, a default or event of default by any Credit Party or any Subsidiary
thereof under any Material Contract or judgment, decree or order to which any
Credit Party or any Subsidiary thereof is a party or by which any Credit Party
or any Subsidiary thereof or any of their respective properties may be bound or
which would require any Credit Party or any Subsidiary thereof to make any
payment thereunder prior to the scheduled maturity date therefore that, in any
case under this clause (b), could, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

SECTION 7.24 Senior Indebtedness Status. The Obligations of each Credit Party
and each Subsidiary thereof under this Agreement and each of the other Loan
Documents (a) ranks and shall continue to rank at least senior in priority of
payment to all Subordinated Indebtedness and at least equal in priority to all
senior secured or unsecured Indebtedness of each such Person and (b) is
designated as “Senior Indebtedness” under all instruments and documents, now or
in the future, relating to all Subordinated Indebtedness.

SECTION 7.25 OFAC. Neither the Borrower, any Subsidiary of the Borrower nor any
Affiliate of the Borrower or any Guarantor: (a) is a Sanctioned Person, (b) has
more than ten percent (10%) of its assets in Sanctioned Entities, or (c) derives
more than ten percent (10%) of its operating income from investments in, or
transactions with, Sanctioned Persons or Sanctioned Entities. None of the
proceeds of any Loan will be used, and none of such proceeds have been used, to
fund any operations in, finance any investments or activities in, or make any
payments to, a Sanctioned Person or a Sanctioned Entity.

 

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SECTION 7.26 Investment Bankers’ and Similar Fees. Neither any Credit Party nor
any Subsidiary thereof has any obligation to any Person in respect of any
finders’, brokers’, investment banking or other similar fee in connection with
any of the Transactions.

SECTION 7.27 Disclosure. The Borrower and/or its Subsidiaries have disclosed to
the Administrative Agent and the Lenders all agreements, instruments and
corporate or other restrictions to which any Credit Party and any Subsidiary
thereof are subject, and all other matters known to them, that, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Effect. No financial statement, material report, material certificate or other
material information furnished (whether in writing or orally) by or on behalf of
any Credit Party or any Subsidiary thereof to the Administrative Agent or any
Lender in connection with the transactions contemplated hereby and the
negotiation of this Agreement or delivered hereunder (as modified or
supplemented by other information so furnished), taken together as a whole,
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with respect to
projected financial information, pro forma financial information, estimated
financial information and other projected or estimated information, such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.

ARTICLE VIII

FINANCIAL INFORMATION AND NOTICES

Until all the Obligations (other than (a) contingent indemnification obligations
not then due and (b) the Specified Obligations) have been paid and satisfied in
full in cash and the Revolving Credit Commitment has been terminated, unless
consent has been obtained in the manner set forth in Section 14.2, the Credit
Parties will furnish or cause to be furnished to the Administrative Agent at the
Administrative Agent’s Office at the address set forth in Section 14.1 and to
the Lenders at their respective addresses as set forth on the Register, or such
other office as may be designated by the Administrative Agent and Lenders from
time to time:

SECTION 8.1 Financial Statements and Projections.

(a) Quarterly Financial Statements. As soon as practicable and in any event
within forty-five (45) days (or, if earlier, five (5) Business Days after the
date of any required public filing thereof) after the end of the first three
Fiscal Quarters of each Fiscal Year (commencing with the Fiscal Quarter ended
March 31, 2011), an unaudited Consolidated balance sheet of the Borrower and its
Subsidiaries as of the close of such Fiscal Quarter and unaudited Consolidated
statements of income, retained earnings and cash flows and a report containing
management’s discussion and analysis of such financial statements for the Fiscal
Quarter then ended and that portion of the Fiscal Year then ended, including the
notes thereto, all in reasonable detail setting forth in comparative form the
corresponding figures as of the end of and for the corresponding period in the
preceding Fiscal Year and prepared by the Borrower in accordance with GAAP and,
if applicable, containing disclosure of the effect on the financial position or
results of operations of any change in the application of accounting principles
and practices during the period, and certified by the chief financial officer of
the Borrower to present fairly in all material respects the financial condition
of the Borrower and its Subsidiaries on a Consolidated basis as of their
respective dates and the results of operations of the Borrower and its
Subsidiaries for the respective periods then ended, subject to normal year end
adjustments and the absence of footnotes.

 

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(b) Annual Financial Statements. As soon as practicable and in any event within
seventy-five (75) days (or, if earlier, five (5) Business Days after the date of
any required public filing thereof) after the end of each Fiscal Year
(commencing with the Fiscal Year ended December 31, 2010), an audited
Consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as of the close of such Fiscal Year and audited Consolidated and
consolidating statements of income, retained earnings and cash flows and a
report containing management’s discussion and analysis of such financial
statements for the Fiscal Year then ended, including the notes thereto, all in
reasonable detail setting forth in comparative form the corresponding figures as
of the end of and for the preceding Fiscal Year and prepared in accordance with
GAAP and, if applicable, containing disclosure of the effect on the financial
position or results of operations of any change in the application of accounting
principles and practices during the year; provided, however, that the Foreign
Subsidiaries identified on Schedule 8.1 may be excluded from such audit. Such
annual financial statements shall be audited by an independent certified public
accounting firm of recognized national standing acceptable to the Administrative
Agent, and shall be accompanied by a report thereon by such certified public
accountants that is not qualified with respect to scope limitations imposed by
the Borrower or any of its Subsidiaries or with respect to accounting principles
followed by the Borrower or any of its Subsidiaries not in accordance with GAAP.

(c) [Intentionally omitted.]

(d) Material Domestic Subsidiaries and Material First-Tier Foreign Subsidiaries.
At each time financial statements are delivered pursuant to Section 8.1(a) or
Section 8.1(b), information in reasonable form and detail which certifies as to
the Material Domestic Subsidiaries and Material First-Tier Foreign Subsidiaries
then in existence, and, if and to the extent so requested by the Administrative
Agent, calculations of the then current book value (determined in accordance
with GAAP) of the tangible assets of any Domestic Subsidiary or Foreign
Subsidiary directly owned by the Borrower and/or any Domestic Subsidiary(ies).
Promptly upon the dissolution of Fossil Gibraltar and/or the transfer of any
material portion of its assets to the Borrower, information in reasonable form
and detail regarding such dissolution and/or transfer.

SECTION 8.2 Officer’s Compliance Certificate. At each time financial statements
are delivered pursuant to Section 8.1(a) or 8.1(b) and at such other times as
the Administrative Agent shall reasonably request, an Officer’s Compliance
Certificate.

SECTION 8.3 [Intentionally omitted.]

SECTION 8.4 Other Reports.

(a) Promptly upon receipt thereof, copies of all reports, if any, submitted to
any Credit Party, any Domestic Subsidiary thereof or any Foreign Subsidiary
thereof that is the subject of a going concern disclosure or has received a
qualified adverse audit report or any of their respective boards of directors or
other applicable governing body by their respective independent public
accountants in connection with their auditing function, including, without
limitation, any management report and any management responses thereto;

(b) Promptly upon the request thereof, such other information and documentation
required by bank regulatory authorities under applicable “know your customer”
and Anti-Money Laundering rules and regulations (including, without limitation,
the Act), as from time to time reasonably requested by the Administrative Agent
or any Lender; and

 

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(c) Such other information regarding the operations, business affairs and
financial condition of any Credit Party or any Subsidiary thereof as the
Administrative Agent or any Lender may reasonably request.

SECTION 8.5 Notice of Litigation and Other Matters. Prompt (but in no event
later than ten (10) days after any Responsible Officer of any Credit Party
obtains knowledge thereof) telephonic and written notice of:

(a) the commencement of all proceedings and investigations by or before any
Governmental Authority and all actions and proceedings in any court or before
any arbitrator against or involving any Credit Party or any Subsidiary thereof
or any of their respective properties, assets or businesses that, if adversely
determined, could reasonably be expected to result in material liability to the
Credit Parties and their respective Subsidiaries;

(b) any notice of any violation received by any Credit Party or any Subsidiary
thereof from any Governmental Authority including, without limitation, any
notice of violation of Environmental Laws which in any such case could
reasonably be expected to have a Material Adverse Effect;

(c) any labor controversy that has resulted in, or threatens to result in, a
strike or other work action against any Credit Party or any Subsidiary thereof
and that could reasonably be expected to have a Material Adverse Effect;

(d) any attachment, judgment, lien, levy or order exceeding the Threshold Amount
that may be assessed against or threatened against any Credit Party or any
Subsidiary thereof;

(e) (i) any Default or Event of Default or (ii) any event or circumstance which
constitutes or which with the passage of time or giving of notice or both would
constitute a default or event of default under any Material Contract to which
the Borrower or any of its Subsidiaries is a party or by which the Borrower or
any Subsidiary thereof or any of their respective properties may be bound which
could reasonably be expected to have a Material Adverse Effect;

(f) (i) any unfavorable determination letter from the Internal Revenue Service
regarding the qualification of an Employee Benefit Plan under Section 401(a) of
the Code (along with a copy thereof), (ii) all notices received by any Credit
Party or any ERISA Affiliate of the PBGC’s intent to terminate any Pension Plan
or to have a trustee appointed to administer any Pension Plan, (iii) all notices
received by any Credit Party or any ERISA Affiliate from a Multiemployer Plan
sponsor concerning the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA and (iv) the Borrower obtaining knowledge or reason to
know that any Credit Party or any ERISA Affiliate has filed or intends to file a
notice of intent to terminate any Pension Plan under a distress termination
within the meaning of Section 4041(c) of ERISA;

(g) any event or circumstance which makes any of the representations set forth
in Article VII that is subject to materiality or Material Adverse Effect
qualifications inaccurate in any respect or any event or circumstance which
makes any of the representations set forth in Article VII that is not subject to
materiality or Material Adverse Effect qualifications inaccurate in any material
respect; and

(h) promptly after the same are available, copies of each annual report, proxy
or financial statement or other report or communication sent to the stockholders
of the Borrower, and copies of all annual, regular, periodic and special reports
and registration statements which the Borrower may file or be required to file
with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934,
and not otherwise required to be delivered to the Administrative Agent pursuant
hereto.

 

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Documents required to be delivered pursuant to this Article may be delivered
electronically and, if so delivered, shall be deemed to have been delivered on
the date (i) on which the Borrower posts such documents, or provides a link
thereto on the Borrower’s website on the Internet at the website address listed
in Section 14.1; or (ii) on which such documents are posted on the Borrower’s
behalf on an Internet or intranet website, if any, to which each Lender and the
Administrative Agent have access (whether a commercial, third-party website or
whether sponsored by the Administrative Agent); provided that: (A) the Borrower
shall deliver paper copies of such documents to the Administrative Agent or any
Lender that requests the Borrower to deliver such paper copies until a written
request to cease delivering paper copies is given by the Administrative Agent or
such Lender and (B) the Borrower shall notify the Administrative Agent and each
Lender (by telecopier or electronic mail) of the posting of any such documents.
Notwithstanding anything contained herein, in every instance the Borrower shall
be required to provide paper copies of the Officer’s Compliance Certificates
required by Section 8.2 to the Administrative Agent. Except for such Officer’s
Compliance Certificates, the Administrative Agent shall have no obligation to
request the delivery or to maintain copies of the documents referred to above,
and in any event shall have no responsibility to monitor compliance by the
Borrower with any such request for delivery, and each Lender shall be solely
responsible for requesting delivery to it or maintaining its copies of such
documents.

The Borrower hereby acknowledges that (a) the Administrative Agent and/or the
Arranger will make available to the Lenders and the Issuing Lender materials
and/or information provided by or on behalf of the Borrower hereunder
(collectively, “Borrower Materials”) by posting the Borrower Materials on
SyndTrak Online or another similar electronic system (the “Platform”) and
(b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do
not wish to receive material non-public information with respect to the Borrower
or its securities) (each, a “Public Lender”). The Borrower hereby agrees that,
so long as the Borrower is the issuer of any outstanding debt or equity
securities that are registered under the Securities Act of 1934, as amended,
registered under the Securities Act of 1933, as amended, or issued pursuant to a
private offering or is actively contemplating issuing any such securities, it
will use commercially reasonable efforts to identify that portion of the
Borrower Materials that may be distributed to the Public Lenders and that
(w) all such Borrower Materials shall be clearly and conspicuously marked
“PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear
prominently on the first page thereof; (x) by marking Borrower Materials
“PUBLIC,” the Borrower shall be deemed to have authorized the Administrative
Agent, the Arranger, the Issuing Lender and the Lenders to treat such Borrower
Materials as not containing any material non-public information (although it may
be sensitive and proprietary) with respect to the Borrower or its securities for
purposes of United States Federal and state securities laws (provided, however,
that to the extent such Borrower Materials constitute Information, they shall be
treated as set forth in Section 14.11); (y) all Borrower Materials marked
“PUBLIC” are permitted to be made available through a portion of the Platform
designated “Public Investor;” and (z) the Administrative Agent and the Arranger
shall be entitled to treat any Borrower Materials that are not marked “PUBLIC”
as being suitable only for posting on a portion of the Platform not designated
“Public Investor.” Notwithstanding the foregoing, the Borrower shall be under no
obligation to mark any Borrower Materials “PUBLIC”.

SECTION 8.6 Accuracy of Information. All written information, reports,
statements and other papers and data furnished by or on behalf of any Credit
Party or any Subsidiary thereof to the Administrative Agent or any Lender
whether pursuant to this Article VIII or any other provision of this Agreement,
or any of the Security Documents, shall, at the time the same is so furnished,
comply with the representations and warranties set forth in Section 7.27.

 

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ARTICLE IX

AFFIRMATIVE COVENANTS

Until all of the Obligations (other than (a) contingent indemnification
obligations not then due and (b) the Specified Obligations) have been paid and
satisfied in full in cash and the Revolving Credit Commitment has been
terminated, each Credit Party will, and will cause each of its Subsidiaries to:

SECTION 9.1 Preservation of Corporate Existence and Related Matters. Except as
permitted by Section 11.4, preserve and maintain its separate corporate or other
entity existence and all rights, franchises, licenses and privileges necessary
to the conduct of its business, and qualify and remain qualified as a foreign
corporation or other entity and authorized to do business in each jurisdiction
where the nature and scope of its activities require it to so qualify under
Applicable Law; provided, however, that Fossil Gibraltar may be dissolved in
accordance with Applicable Law so long as (a) substantially concurrently with
such dissolution, the assets of Fossil Gibraltar are transferred to the Borrower
and (b) the Administrative Agent receives a pledge of the Capital Stock of
Fossil East as required by Section 9.11(b).

SECTION 9.2 Maintenance of Property and Licenses.

(a) In addition to the requirements of any of the Security Documents, protect
and preserve all Properties necessary in and material to its business, including
copyrights, patents, trade names, service marks and trademarks; maintain in good
working order and condition, ordinary wear and tear excepted, all buildings,
equipment and other tangible real and personal property; and from time to time
make or cause to be made all repairs, renewals and replacements thereof and
additions to such Property necessary for the conduct of its business, so that
the business carried on in connection therewith may be conducted in a
commercially reasonable manner.

(b) Maintain, in full force and effect in all material respects, each and every
material license, permit, certification, qualification, approval or franchise
issued by any Governmental Authority (each a “License”) required for each of
them to conduct their respective businesses as presently conducted.

SECTION 9.3 Insurance. Maintain insurance with financially sound and reputable
insurance companies against at least such risks and in at least such amounts as
are customarily maintained by similar businesses and as may be required by
Applicable Law (including, without limitation, hazard and business interruption
insurance). All such insurance shall (a) provide that no cancellation or
material modification thereof shall be effective until at least 30 days after
receipt by the Administrative Agent of written notice thereof, and (b) with
respect to liability insurance, name the Administrative Agent as an additional
insured party thereunder. On the Closing Date and from time to time thereafter,
deliver to the Administrative Agent upon its request information in reasonable
detail as to the insurance then in effect, stating the names of the insurance
companies, the amounts and rates of the insurance, the dates of the expiration
thereof and the properties and risks covered thereby. Notwithstanding the
foregoing sentences of this Section 9.3, any Credit Party or any Foreign
Subsidiary may self-insure against such risks and in such amounts as are
customary in the Borrower’s industry.

SECTION 9.4 Accounting Methods and Financial Records. Maintain a system of
accounting, and keep proper books, records and accounts (which shall be true and
complete in all material respects) as may be required or as may be necessary to
permit the preparation of financial statements in accordance with GAAP and in
compliance with the regulations of any Governmental Authority having
jurisdiction over it or any of its properties.

 

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SECTION 9.5 Payment of Taxes and Other Obligations. Pay and perform (a) all
taxes, assessments and other governmental charges that may be levied or assessed
upon it or any of its Property and (b) all other indebtedness, obligations and
liabilities in accordance with customary trade practices; provided, that the
Borrower or such Subsidiary may contest any item described in this Section in
good faith so long as adequate reserves are maintained with respect thereto in
accordance with GAAP.

SECTION 9.6 Compliance With Laws and Approvals. Observe and remain in compliance
in all material respects with all Applicable Laws and maintain in full force and
effect all Governmental Approvals of a material nature, in each case applicable
to the conduct of its business.

SECTION 9.7 Environmental Laws. In addition to and without limiting the
generality of Section 9.6, (a) comply in all material respects with, and use
reasonable efforts to require such compliance by all tenants and subtenants
with, applicable Environmental Laws and obtain and comply with and maintain, and
use reasonable efforts to require that all tenants and subtenants, if any,
obtain and comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws, (b) promptly comply in all material respects with
all lawful orders and directives of any Governmental Authority regarding
Environmental Laws and satisfy all successful, final, non-appealable
Environmental Claims brought by any Person, including without limitation the
investigation, sampling, remediation, removal and monitoring of Hazardous
Materials, and (c) defend, indemnify and hold harmless the Administrative Agent
and the Lenders, and their respective parents, Subsidiaries, Affiliates,
employees, agents, officers and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature known or unknown, contingent or otherwise, arising out
of, or in any way relating to the presence of Hazardous Materials, or the
violation of, noncompliance with or liability under any Environmental Laws
applicable to the operations of the Borrower or any such Subsidiary, or any
orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorney’s and consultant’s fees,
investigation and laboratory fees, response costs, court costs and litigation
expenses, except (i) to the extent that any of the foregoing directly result
from the gross negligence or willful misconduct of the party seeking
indemnification therefor, as determined by a court of competent jurisdiction by
final nonappealable judgment or (ii) to the extent that any of the foregoing
relate solely to conditions which first occur or come into existence after the
consummation of a foreclosure or a deed in lieu of foreclosure with respect to
the real Property involved as to which neither any Credit Party nor any of its
Subsidiaries has any control and either (A) such conditions result from the
negligence or willful misconduct of the party seeking indemnification therefor,
as determined by a court of competent jurisdiction by a final nonappealable
judgment, or (B) such conditions first occur or come into existence more than
two years after the consummation of such foreclosure or deed in lieu of
foreclosure.

SECTION 9.8 Compliance with ERISA. In addition to and without limiting the
generality of Section 9.6, (a) except where the failure to so comply could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (i) comply with all applicable provisions of ERISA and the
regulations and published interpretations thereunder with respect to all
Employee Benefit Plans, (ii) not take any action or fail to take action the
result of which could reasonably be expected to result in a liability to the
PBGC or to a Multiemployer Plan, (iii) not participate in any prohibited
transaction that could result in any civil penalty under ERISA or tax under the
Code and (iv) operate each Employee Benefit Plan in such a manner that will not
incur any tax liability under Section 4980B of the Code or any liability to any
qualified beneficiary as defined in Section 4980B of the Code and (b) furnish to
the Administrative Agent upon the Administrative Agent’s request such additional
information about any Employee Benefit Plan as may be reasonably requested by
the Administrative Agent.

 

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SECTION 9.9 Compliance with Agreements. Comply in all respects with each term,
condition and provision of all leases, agreements and other instruments entered
into in the conduct of its business including, without limitation, any Material
Contract except to the extent that any non-compliance could not reasonably be
expected to have a Material Adverse Effect; provided, that the Borrower or any
such Subsidiary may contest any such lease, agreement or other instrument in
good faith through applicable proceedings so long as adequate reserves are
maintained in accordance with GAAP.

SECTION 9.10 Visits and Inspections; Lender Meetings. Permit representatives of
the Administrative Agent or any Lender, from time to time upon prior reasonable
notice and at such times during normal business hours, at the Borrower’s
expense, to visit and inspect its properties; inspect, audit and make extracts
from its books, records and files, including, but not limited to, management
letters prepared by independent accountants; and discuss with its principal
officers, and its independent accountants, its business, assets, liabilities,
financial condition, results of operations and business prospects, provided that
so long as no Event of Default has occurred and is continuing, the Borrower
shall be entitled to advance notice of, and an opportunity to be present and
participate in, any discussions with its independent accountants. Upon the
occurrence and during the continuance of an Event of Default, the Administrative
Agent or any Lender may do any of the foregoing at any time without advance
notice.

Upon the request of the Administrative Agent or the Required Lenders,
participate in a meeting of the Administrative Agent and Lenders once during
each Fiscal Year, which meeting will be held at the Borrower’s corporate offices
(or such other location as may be agreed to by the Borrower and the
Administrative Agent) at such time as may be agreed by the Borrower and the
Administrative Agent.

SECTION 9.11 Subsidiaries.

(a) Domestic Subsidiaries. Notify the Administrative Agent of the creation or
acquisition of any Domestic Subsidiary (including, without limitation, any
Material Domestic Subsidiary) and of any Domestic Subsidiary becoming a Material
Domestic Subsidiary and, with respect to any Material Domestic Subsidiary so
created or acquired or becoming such, promptly thereafter (and in any event
within thirty (30) days after such creation or acquisition or occurrence), cause
such Person to (i) become a party to this Agreement and a Subsidiary Guarantor
by delivering to the Administrative Agent a duly executed Joinder Agreement or
such other document as the Administrative Agent shall deem appropriate for such
purpose, (ii) deliver to the Administrative Agent such documents and
certificates referred to in Section 6.1 as may be reasonably requested by the
Administrative Agent, (iii) deliver to the Administrative Agent such updated
Schedules to the Loan Documents as requested by the Administrative Agent with
respect to such Person, and (iv) deliver to the Administrative Agent such other
documents as may be reasonably requested by the Administrative Agent, all in
form, content and scope reasonably satisfactory to the Administrative Agent.

(b) Foreign Subsidiaries. Notify the Administrative Agent of the creation or
acquisition of any Foreign Subsidiary (including, without limitation, any
Material First-Tier Foreign Subsidiary) and of any Foreign Subsidiary becoming a
Material First-Tier Foreign Subsidiary and, with respect to any Material
First-Tier Foreign Subsidiary existing as of the Closing Date or so created or
acquired or becoming such, (i) subject to the proviso in clause (1) below, as of
the Closing Date (as to each Material First-Tier Foreign Subsidiary then in
existence) or (ii) promptly thereafter (and in any event within ninety (90) days
after such creation or acquisition or occurrence, as to each Material First-Tier
Foreign Subsidiary so created or acquired or becoming such after the Closing
Date), cause (A) the Borrower and/or the applicable Domestic Subsidiary(ies) to
deliver to the Administrative Agent Security Documents pledging sixty-five
percent (65%) of the total outstanding voting Capital Stock (and one hundred
percent (100%) of the non-voting Capital Stock) of any such Material First-Tier
Foreign Subsidiary as security for the Obligations and a consent thereto
executed by such Material First-Tier Foreign Subsidiary (including, without
limitation, if applicable, original stock certificates (or the equivalent
thereof pursuant to the Applicable Laws and practices of any relevant foreign
jurisdiction) evidencing the Capital Stock of such Material First-Tier Foreign
Subsidiary, together with an appropriate undated stock power for each
certificate duly executed in blank by the registered owner thereof), (B) such
Person to deliver to the Administrative Agent such documents and certificates
referred to in Section 6.1 as may be reasonably requested by the Administrative
Agent, (C) such Person to deliver to the Administrative Agent such updated
Schedules to the Loan Documents as requested by the Administrative Agent with
regard to such Person and (D) such Person to deliver to the Administrative Agent
a legal opinion of counsel to the Borrower and/or such Domestic Subsidiary(ies),
as applicable, and such Material First-Tier Foreign Subsidiary and such other
documents as may be reasonably requested by the Administrative Agent, all in
form, content and scope reasonably satisfactory to the Administrative Agent;
provided that (1) except for the Borrower’s execution of the Pledge Agreement,
the Borrower, Fossil Europe B.V. and Swiss Technology Holding GmBH shall not be
obligated to comply with the requirements of this Section 9.11(b) above as they
relate to the Capital Stock of such Material First-Tier Foreign Subsidiaries
prior to January 31, 2011, and (2) the Borrower and Fossil Gibraltar shall not
be obligated to comply with the requirements of this Section 9.11(b) above as
they relate to the Capital Stock of Fossil Gibraltar prior to June 30, 2011
(and, for the avoidance of doubt, if Fossil Gibraltar has been dissolved as
permitted by Section 9.1 as of such date, the Borrower and Fossil Gibraltar
shall not be obligated to comply with such requirements as they relate to the
Capital Stock of Fossil Gibraltar on or after such date but the Borrower and
Fossil East shall be obligated to comply with such requirements as they relate
to the Capital Stock of Fossil East).

 

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(c) [Intentionally omitted.]

(d) Notwithstanding the foregoing, to the extent any new Subsidiary is created
solely for the purpose of consummating a merger transaction pursuant to a
Permitted Acquisition, and such new Subsidiary at no time holds any assets or
liabilities other than any merger consideration contributed to it
contemporaneously with the closing of such merger transaction, such new
Subsidiary shall not be required to take the actions set forth in
Section 9.11(a) or (b), as applicable, until the consummation of such Permitted
Acquisition (at which time, the surviving entity of the respective merger
transaction shall be required to so comply with Section 9.11(a) or (b), as
applicable, within ten (10) Business Days of the consummation of such Permitted
Acquisition).

(e) Notwithstanding the foregoing, the provisions of this Section 9.11 shall not
apply to assets as to which the Administrative Agent and the Borrower shall
reasonably determine that the costs and burdens of obtaining a security interest
therein or perfection thereof outweigh the value of the security afforded
thereby.

SECTION 9.12 [Intentionally omitted.]

SECTION 9.13 Use of Proceeds. The Borrower shall use the proceeds of the
Extensions of Credit (a) to pay in full all Indebtedness outstanding under the
Existing Credit Agreement (other than the Existing Letters of Credit), (b) to
finance the acquisition of Capital Assets, and (c) for working capital and
general corporate purposes of the Borrower and its Subsidiaries, including the
payment of certain fees and expenses incurred in connection with the
Transactions and this Agreement and the repurchase of the Borrower’s Capital
Stock as and to the extent permitted by Section 11.6(d).

SECTION 9.14 [Intentionally omitted.]

 

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SECTION 9.15 Further Assurances. Maintain the security interest created by the
Security Documents as a perfected, first priority security interest; and make,
execute and deliver all such additional and further acts, things, deeds,
instruments and documents as the Administrative Agent or the Required Lenders
(through the Administrative Agent) may reasonably require for the purposes of
implementing or effectuating the provisions of this Agreement and the other Loan
Documents, or of renewing the rights of the Secured Parties with respect to the
Collateral as to which the Administrative Agent, for the ratable benefit of the
Secured Parties, has a perfected security interest pursuant hereto or thereto,
including, without limitation, filing any financing or continuation statements
under the UCC (or other similar laws) in effect in any jurisdiction with respect
to the security interests created hereby or by the other Loan Documents.

SECTION 9.16 Non-Consolidation. Maintain (a) entity records and books of account
separate from those of any other entity which is an Affiliate of such entity,
(b) not commingle its funds or assets with those of any other entity which is an
Affiliate of such entity (except pursuant to cash management systems reasonably
acceptable to the Administrative Agent) and (c) provide that its board of
directors (or equivalent governing body) will hold all appropriate meetings to
authorize and approve such entity’s actions, which meetings will be separate
from those of other entities (except to the extent that joint meetings are held
generally consistent with the practices of the Borrower and its Subsidiaries as
in effect on the Closing Date).

ARTICLE X

FINANCIAL COVENANTS

Until all of the Obligations (other than (a) contingent indemnification
obligations not then due and (b) the Specified Obligations) have been paid and
satisfied in full in cash and the Revolving Credit Commitment has been
terminated, the Borrower and its Subsidiaries on a Consolidated basis will not:

SECTION 10.1 Consolidated Total Leverage Ratio. As of any Fiscal Quarter, permit
the Consolidated Total Leverage Ratio to be greater than 2.50 to 1.00.

SECTION 10.2 Consolidated Tangible Net Worth. As of any Fiscal Quarter end,
permit Consolidated Tangible Net Worth to be less than the sum of
(a) $600,000,000 plus (b) twenty-five percent (25%) of positive Consolidated Net
Income, determined quarterly for each Fiscal Quarter ending after the Closing
Date and on a cumulative basis as of each date of determination based upon only
those Fiscal Quarters during which Consolidated Net Income is positive.

SECTION 10.3 Consolidated Net Income. Permit Consolidated Net Income for any two
consecutive Fiscal Quarters ending after the Closing Date to be negative.

SECTION 10.4 Maximum Capital Expenditures. Permit the aggregate amount of all
Capital Expenditures in any Fiscal Year to exceed $125,000,000. Notwithstanding
the foregoing, the maximum amount of Capital Expenditures permitted by this
Section 10.4 in any Fiscal Year shall be increased by the amount of Capital
Expenditures that were permitted to be made under this Section 10.4 in the
immediately preceding Fiscal Year (without giving effect to any carryover amount
from prior Fiscal Years) over the amount of Capital Expenditures actually made
during such preceding Fiscal Year; provided, that Capital Expenditures in such
Fiscal Year shall be counted last against any amount so carried forward.

 

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ARTICLE XI

NEGATIVE COVENANTS

Until all of the Obligations (other than (a) contingent indemnification
obligations not then due and (b) the Specified Obligations) have been paid and
satisfied in full in cash and the Revolving Credit Commitment terminated, the
Credit Parties will not, and will not permit any of their respective
Subsidiaries to:

SECTION 11.1 Limitations on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness except:

(a) the Obligations (excluding Indebtedness and obligations owing under Hedge
Agreements permitted pursuant to Section 11.1(b));

(b) Indebtedness and obligations owing under Hedge Agreements entered into in
order to manage existing or anticipated interest rate, exchange rate or
commodity price risks and not for speculative purposes;

(c) Indebtedness existing on the Closing Date and not otherwise permitted under
this Section and listed on Schedule 7.21, and any refinancings, refundings,
renewals or extensions thereof; provided that (i) the principal amount of such
Indebtedness is not increased at the time of such refinancing, refunding,
renewal or extension except by an amount equal to a reasonable premium or other
reasonable amount paid, and fees and expenses reasonably incurred, in connection
with such refinancing and by an amount equal to any existing commitments
unutilized thereunder, (ii) the final maturity date and weighted average life of
such refinancing, refunding, renewal or extension shall not be prior to or
shorter than that applicable to the Indebtedness prior to such refinancing,
refunding, renewal or extension and (iii) any refinancing, refunding, renewal or
extension of any Subordinated Indebtedness shall be (A) on subordination terms
at least as favorable to the Lenders, (B) no more restrictive on the Borrower
and its Subsidiaries than the Subordinated Indebtedness being refinanced,
refunded, renewed or extended and (C) in an amount not less than the amount
outstanding at the time of such refinancing, refunding, renewal or extension;

(d) Indebtedness incurred in connection with Capital Leases and purchase money
Indebtedness in an aggregate amount not to exceed $25,000,000 at any time
outstanding;

(e) Indebtedness of a Person existing at the time such Person became a
Subsidiary or assets were acquired from such Person in connection with an
Investment permitted pursuant to Section 11.3, to the extent that (i) such
Indebtedness was not incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary or the acquisition of such assets, (ii) neither the
Borrower nor any Subsidiary thereof (other than such Person or any other Person
that such Person merges with or that acquires the assets of such Person) shall
have any liability or other obligation with respect to such Indebtedness and
(iii) the aggregate outstanding principal amount of such Indebtedness does not
exceed $30,000,000 at any time outstanding;

(f) Indebtedness of Foreign Subsidiaries in an aggregate principal amount not to
exceed $75,000,000 at any time outstanding;

(g) Guaranty Obligations with respect to Indebtedness permitted pursuant to
subsections (a) through (f) of this Section;

 

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(h) unsecured intercompany Indebtedness (i) owed by any Credit Party to another
Credit Party, (ii) owed by any Foreign Subsidiary to another Foreign Subsidiary,
(iii) owed by any Foreign Subsidiary to any Credit Party in an aggregate
principal amount not to exceed $75,000,000 at any time outstanding (provided
that any Indebtedness owed by such Foreign Subsidiary to any Credit Party
pursuant to this clause (iii) shall be evidenced by a demand note in form and
substance reasonably satisfactory to the Administrative Agent) and (iv) owed by
any Credit Party to any Foreign Subsidiary (provided, that such Indebtedness
shall be subordinated to the Obligations in a manner reasonably satisfactory to
the Administrative Agent);

(i) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or other similar instrument drawn against
insufficient funds in the ordinary course of business;

(j) Subordinated Indebtedness of the Borrower and its Subsidiaries; provided,
that in the case of each incurrence of such Subordinated Indebtedness, (i) no
Default or Event of Default shall have occurred and be continuing or would be
caused by the incurrence of such Subordinated Indebtedness, and (ii) the
Administrative Agent shall have received satisfactory written evidence that the
Borrower would be in compliance with all covenants contained in this Agreement
on a Pro Forma Basis after giving effect to the issuance of any such
Subordinated Indebtedness;

(k) Indebtedness under performance bonds, surety bonds, release, appeal and
similar bonds, statutory obligations or with respect to workers’ compensation
claims, in each case incurred in the ordinary course of business, and
reimbursement obligations in respect of any of the foregoing;

(l) Indebtedness consisting of promissory notes issued to current or former
officers, directors and employees (or their respective family members, estates
or trusts or other entities for the benefit of any of the foregoing) of the
Borrower or its Subsidiaries to purchase or redeem Capital Stock or options of
the Borrower permitted pursuant to Section 11.6(d)(ii); provided that the
aggregate principal amount of all such Indebtedness shall not exceed $1,000,000
at any time outstanding;

(m) Indebtedness of Fossil Partners, Fossil Group Europe GmbH, Fossil Asia
Pacific Ltd. and/or any other Foreign Subsidiary under the Commercial Letter of
Credit Facility not to exceed $100,000,000 in aggregate principal amount at any
time outstanding, and Guaranty Obligations of the Borrower or any Subsidiary
Guarantor with respect to such Indebtedness;

(n) additional unsecured Indebtedness not otherwise permitted pursuant to this
Section in an aggregate principal amount not to exceed $5,000,000 at any time
outstanding; and

(o) unsecured Guaranty Obligations arising with respect to customary
indemnification obligations owed to purchasers in connection with Asset
Dispositions permitted by Section 11.5.

SECTION 11.2 Limitations on Liens. Create, incur, assume or suffer to exist any
Lien on or with respect to any of its Property, whether now owned or hereafter
acquired, except:

(a) Liens created pursuant to the Loan Documents;

(b) Liens in existence on the Closing Date and described on Schedule 11.2,
including Liens incurred in connection with any refinancing, refunding, renewal
or extension of Indebtedness pursuant to Section 11.1(c) (solely to the extent
that such Liens were in existence on the Closing Date and described on Schedule
11.2); provided that the scope of any such Lien shall not be increased, or
otherwise expanded, to cover any additional property or type of asset, as
applicable, beyond that in existence on the Closing Date;

 

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(c) Liens for taxes, assessments and other governmental charges or levies
(excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental Laws) (i) not yet due or as to which the period of grace, if any,
related thereto has not expired or, with respect to an aggregate amount of such
taxes, assessments or other governmental charges or levies owed by Foreign
Subsidiaries not in excess of $1,000,000, not delinquent for more than 30 days
or (ii) which are being contested in good faith and by appropriate proceedings
if adequate reserves are maintained to the extent required by GAAP, provided, in
each case, that no notice of such a Lien has been filed or recorded under the
Code or other Applicable Law;

(d) (i) the claims of materialmen, mechanics, carriers, warehousemen, processors
or landlords for labor, materials, supplies or rentals incurred in the ordinary
course of business, (A) which are not overdue for a period of more than thirty
(30) days or (B) which are being contested in good faith and by appropriate
proceedings if adequate reserves are maintained to the extent required by GAAP
and (ii) do not, individually or in the aggregate, materially impair the use
thereof in the operation of the business of the Borrower or any of its
Subsidiaries;

(e) Liens consisting of deposits or pledges made in the ordinary course of
business in connection with, or to secure payment of, obligations under workers’
compensation, unemployment insurance and other types of social security or
similar legislation, or to secure the performance of bids, trade contracts and
leases (other than Indebtedness), statutory obligations, surety bonds (other
than bonds related to judgments or litigation), performance bonds and other
obligations of a like nature incurred in the ordinary course of business, in
each case, so long as no foreclosure sale or similar proceeding has been
commenced with respect to any portion of the Collateral on account thereof;

(f) Liens constituting encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real property,
which in the aggregate are not substantial in amount and which do not, in any
case, materially detract from the value of such property or impair the use
thereof in the ordinary conduct of business;

(g) purported Liens evidenced by the filing of precautionary UCC financing
statements relating solely to personal property leased pursuant to operating
leases entered into in the ordinary course of business of the Borrower and its
Subsidiaries;

(h) Liens securing Indebtedness permitted under Section 11.1(d); provided that
(i) such Liens shall be created substantially simultaneously with the
acquisition or lease of the related asset, (ii) such Liens do not at any time
encumber any property other than the property financed by such Indebtedness,
(iii) the amount of Indebtedness secured thereby is not increased and (iv) the
principal amount of Indebtedness secured by any such Lien shall at no time
exceed one hundred percent (100%) of the original purchase price or lease
payment amount of such property at the time it was acquired;

(i) Liens securing judgments for the payment of money not constituting an Event
of Default under Section 12.1(m) or securing appeal or other surety bonds
relating to such judgments;

(j) (i) Liens on tangible property or tangible assets (i) of any Subsidiary
which are in existence at the time that such Subsidiary is acquired pursuant to
a Permitted Acquisition and (ii) of the Borrower or any of its Subsidiaries
existing at the time such tangible property or tangible assets are purchased or
otherwise acquired by the Borrower or such Subsidiary thereof pursuant to a
transaction permitted pursuant to this Agreement; provided that, with respect to
each of the foregoing clauses (i) and (ii), (A) such Liens (1) are not incurred
in connection with, or in anticipation of, such Permitted Acquisition, purchase
or other acquisition, (2) are applicable only to specific tangible property or
tangible assets, (3) are not “blanket” or all asset Liens and (4) do not attach
to any other property or assets of the Borrower or any of its Subsidiaries and
(B) the Indebtedness secured by such Liens is permitted under Section 11.1(e) of
this Agreement);

 

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(k) [Intentionally omitted];

(l) (i) Liens of a collecting bank arising in the ordinary course of business
under Section 4-210 of the Uniform Commercial Code in effect in the relevant
jurisdiction and (ii) Liens of any depositary bank in connection with statutory,
common law and contractual rights of set-off and recoupment with respect to any
deposit account of any Borrower or any Subsidiary thereof;

(m) (i) contractual or statutory Liens of landlords to the extent relating to
the property and assets relating to any lease agreements with such landlord, and
(ii) contractual Liens of suppliers (including sellers of goods) or customers to
the extent limited to the property or assets relating to such contract;

(n) any interest or title of a licensor, sublicensor, lessor or sublessor with
respect to any assets under any license or lease agreement entered into in the
ordinary course of business; provided that the same do not interfere in any
material respect with the business of the Borrower or its Subsidiaries or
materially detract from the value of the relevant assets of the Borrower or its
Subsidiaries;

(o) Liens affecting the assets of the Foreign Subsidiaries which are the
obligors with respect to the Indebtedness permitted under Section 11.1(f) and
which secure only such Indebtedness permitted under Section 11.1(f);

(p) non-consensual Liens in favor of customs or revenue authorities arising
under Applicable Law to secure the payment of custom duties in connection with
the importation of goods purchased in the ordinary course of business, which
Liens are secured only by such goods;

(q) any interest or title of an owner of equipment or inventory on loan or
consignment to the Borrower or any Credit Party, and Liens arising from
precautionary UCC financing statement filings related thereto;

(r) options, put and call arrangements, rights of first refusal and similar
rights relating to Investments in joint ventures, partnerships and other similar
Investments permitted to be made under Section 11.3; and

(s) rights of set-off and similar rights affecting cash deposits securing
Indebtedness under Hedge Agreements permitted under Section 11.1(b).

SECTION 11.3 Limitations on Investments. Purchase, own, invest in or otherwise
acquire, directly or indirectly, any Capital Stock, interests in any partnership
or joint venture (including, without limitation, the creation or capitalization
of any Subsidiary), evidence of Indebtedness or other obligation or security,
substantially all or a portion of the business or assets of any other Person or
any other investment or interest whatsoever in any other Person, or make or
permit to exist, directly or indirectly, any loans, advances or extensions of
credit to, or any investment in cash or by delivery of Property in, any Person
(all the foregoing, “Investments”) except:

(a) (i) equity Investments existing on the Closing Date in Subsidiaries existing
on the Closing Date, (ii) Investments existing on the Closing Date (other than
Investments in Subsidiaries existing on the Closing Date) and described on
Schedule 11.3 and (iii) equity Investments made after the Closing Date in
Subsidiary Guarantors;

 

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(b) Investments in cash and Cash Equivalents;

(c) Investments by the Borrower or any of its Subsidiaries in the form of
Capital Expenditures permitted pursuant to this Agreement;

(d) deposits made in the ordinary course of business to secure the performance
of leases or other obligations as permitted by Section 11.2;

(e) Hedge Agreements permitted pursuant to Section 11.1;

(f) purchases of assets in the ordinary course of business;

(g) Investments by the Borrower or any Subsidiary thereof in the form of
(i) Permitted Acquisitions to the extent that any Person or Property acquired in
such acquisition becomes a part of a Subsidiary Guarantor or becomes (whether or
not such Person is a Wholly-Owned Subsidiary) a Subsidiary Guarantor in the
manner contemplated by Section 8.11 and (ii) Permitted Acquisitions to the
extent that any Person or Property acquired in such acquisition does not become
a Subsidiary Guarantor or a part of a Subsidiary Guarantor in an aggregate
amount not to exceed at any time (A) $25,000,000 less (B) the amount of
Investments made pursuant to Section 10.3(j) during such Fiscal Year;

(h) Investments in the form of loans and advances to employees in the ordinary
course of business, which, in the aggregate, do not exceed at any time
$1,000,000;

(i) Investments in the form of Indebtedness permitted pursuant to
Section 11.1(h);

(j) (i) Investments by a Foreign Subsidiary in another Foreign Subsidiary, and
(ii) Investments by the Borrower or a Domestic Subsidiary in any Foreign
Subsidiary in an aggregate amount not to exceed at any time (i) $50,000,000 less
(ii) the amount of Investments made in the form of Permitted Acquisitions
pursuant to Section 11.3(g)(ii) during such Fiscal Year;

(k) Guaranty Obligations of the Credit Parties and their Subsidiaries permitted
pursuant to Section 11.1;

(l) Investments in joint ventures; provided, that the aggregate amount of all
such Investments shall not at any time exceed $75,000,000;

(m) Investments by the Borrower or a Subsidiary Guarantor in the Borrower or a
Subsidiary Guarantor; and

(n) other additional Investments not otherwise permitted pursuant to this
Section not exceeding $10,000,000 in the aggregate in any Fiscal Year.

For purposes of determining the amount of any Investment outstanding for
purposes of this Section 11.3, such amount shall be deemed to be the amount of
such Investment when made, purchased or acquired less any amount realized in
respect of such Investment upon the sale, collection or return of capital (not
to exceed the original amount invested).

SECTION 11.4 Limitations on Fundamental Changes. Merge, consolidate or enter
into any similar combination with any other Person or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution) except:

(a) (i) any Wholly-Owned Subsidiary of the Borrower may be merged, amalgamated
or consolidated with or into the Borrower (provided that the Borrower shall be
the continuing or surviving entity) or (ii) any Wholly-Owned Subsidiary of the
Borrower may be merged, amalgamated or consolidated with or into any Subsidiary
Guarantor (provided that the Subsidiary Guarantor shall be the continuing or
surviving entity or, simultaneously with such transaction, the continuing or
surviving entity shall become a Subsidiary Guarantor and the Borrower shall
comply with Section 9.11 in connection therewith);

 

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(b) (i) any Non-Guarantor Subsidiary that is a Foreign Subsidiary may be merged,
amalgamated or consolidated with or into, or be liquidated into, any other
Non-Guarantor Subsidiary and (ii) any Non-Guarantor Subsidiary that is a
Domestic Subsidiary may be merged, amalgamated or consolidated with or into, or
be liquidated into, any other Non-Guarantor Subsidiary that is a Domestic
Subsidiary;

(c) any Subsidiary may dispose of all or substantially all of its assets (upon
voluntary liquidation, dissolution, winding up or otherwise) to the Borrower or
any Subsidiary Guarantor; provided that, with respect to any such disposition by
any Non-Guarantor Subsidiary, the consideration for such disposition shall not
exceed the fair value of such assets;

(d) (i) any Non-Guarantor Subsidiary that is a Foreign Subsidiary may dispose of
all or substantially all of its assets (upon voluntary liquidation, dissolution,
winding up or otherwise) to any other Non-Guarantor Subsidiary and (ii) any
Non-Guarantor Subsidiary that is a Domestic Subsidiary may dispose of all or
substantially all of its assets (upon voluntary liquidation, dissolution,
winding up or otherwise) to any other Non-Guarantor Subsidiary that is a
Domestic Subsidiary;

(e) dispositions permitted by Section 11.5;

(f) any Wholly-Owned Subsidiary of the Borrower may merge with or into the
Person such Wholly-Owned Subsidiary was formed to acquire in connection with a
Permitted Acquisition, provided that (i) a Subsidiary Guarantor shall be the
continuing or surviving entity or (ii) simultaneously with such transaction, the
continuing or surviving entity shall become a Subsidiary Guarantor and the
Borrower shall comply with Section 9.11 in connection therewith; and

(g) any Person may merge into the Borrower or any of its Wholly-Owned
Subsidiaries in connection with a Permitted Acquisition; provided that (i) in
the case of a merger involving the Borrower or a Subsidiary Guarantor, the
continuing or surviving Person shall be the Borrower or such Subsidiary
Guarantor and (ii) the continuing or surviving Person shall be the Borrower or a
Wholly-Owned Subsidiary of the Borrower.

SECTION 11.5 Limitations on Asset Dispositions. Make any Asset Disposition
(including, without limitation, the sale of any accounts receivable and
leasehold interests) except:

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

(b) the sale of obsolete, worn-out or surplus assets no longer used or usable in
the business of the Borrower or any of its Subsidiaries and dispositions of
equipment to the extent that such equipment is exchanged for credit against the
purchase price of similar replacement equipment or the proceeds of such
disposition are reasonably promptly applied to the purchase price of such
replacement equipment;

(c) the transfer of assets in connection with any other transaction permitted
pursuant to Section 11.4;

 

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(d) the Borrower or any Subsidiary may write-off, discount, sell or otherwise
dispose of defaulted or past due receivables and similar obligations in the
ordinary course of business and not as part of an accounts receivable financing
transaction or a securitization transaction;

(e) the disposition of any Hedge Agreement;

(f) dispositions of Investments in cash and Cash Equivalents;

(g) (i) any Subsidiary Guarantor may transfer assets to the Borrower or any
other Subsidiary Guarantor, (ii) the Borrower may transfer assets in the
ordinary course of its business to any Subsidiary Guarantor, (iii) any
Non-Guarantor Subsidiary may transfer assets to the Borrower or any Subsidiary
Guarantor (provided that, in connection with any such transfer, the Borrower or
such Subsidiary Guarantor shall not pay more than an amount equal to the fair
market value of such assets as determined at the time of such transfer) and
(iv) any Non-Guarantor Subsidiary may transfer assets to any other Non-Guarantor
Subsidiary;

(h) non-exclusive licenses and sublicenses of intellectual property rights in
the ordinary course of business not interfering, individually or in the
aggregate, in any material respect with the conduct of the business of the
Borrower and its Subsidiaries;

(i) leases, subleases, licenses or sublicenses of real or personal property
granted by any Borrower or any of its Subsidiaries to others in the ordinary
course of business not interfering in any material respect with the business of
the Borrower or any of its Subsidiaries;

(j) dispositions in connection with Insurance and Condemnation Events;

(k) the sale, for fair consideration, of the office buildings and related land
and assets located at the following addresses: 2155 Campbell Creek Road,
Richardson, Texas, 2280 N. Greenville Avenue, Richardson, Texas, and 2323 North
Central Expressway, Richardson, Texas;

(l) dispositions of Property in connection with sale/leaseback transactions
referred to in Section 11.13 involving consideration in an aggregate amount (on
or after the Closing Date) not to exceed $10,000,000;

(m) dispositions of Property of Foreign Subsidiaries located outside of the
United States (and not moved outside of the United States in anticipation of
such disposition) having an aggregate fair market value (on or after the Closing
Date) not to exceed $10,000,000;

(n) dispositions in the ordinary course of business consisting of the
abandonment of intellectual property rights that, in the reasonable good faith
determination of the applicable Credit Party or its Subsidiaries, are not
material to the conduct of its or any of its Subsidiaries’ business;

(o) dispositions in the ordinary course of business of tangible Property as part
of a like kind exchange under Section 1031 of the Code;

(p) dispositions of accounts receivable in connection with collection efforts
relating thereto, in each case in the ordinary course of business and consistent
with past practices; and

(q) additional Asset Dispositions not otherwise permitted pursuant to this
Section in an aggregate amount not to exceed $10,000,000 in any Fiscal Year.

 

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SECTION 11.6 Limitations on Restricted Payments. Declare or pay any dividend on,
or make any payment or other distribution on account of, or purchase, redeem,
retire or otherwise acquire (directly or indirectly), or set apart assets for a
sinking or other analogous fund for the purchase, redemption, retirement or
other acquisition of, any class of Capital Stock of any Credit Party or any
Subsidiary thereof, or make any distribution of cash, property or assets to the
holders of shares of any Capital Stock of any Credit Party or any Subsidiary
thereof (all of the foregoing, the “Restricted Payments”) provided that:

(a) the Borrower or any Subsidiary thereof may pay dividends in shares of its
own Qualified Capital Stock and may make cash payments in lieu of issuance of
fractional shares in connection with the exercise of warrants, options or other
securities convertible into or exchangeable for equity interests of the Borrower
or any of its Subsidiaries;

(b) any Subsidiary of the Borrower may make Restricted Payments to the Borrower
or any Subsidiary Guarantor or ratably to all holders of its outstanding
Qualified Capital Stock;

(c) (i) Non-Guarantor Subsidiaries that are Domestic Subsidiaries may make
Restricted Payments to other Non-Guarantor Subsidiaries that are Domestic
Subsidiaries and (ii) Non-Guarantor Subsidiaries that are Foreign Subsidiaries
may make Restricted Payments to other Non-Guarantor Subsidiaries that are
Foreign Subsidiaries;

(d) so long as no Default or Event of Default has occurred and is continuing or
would result therefrom and the Borrower and its Subsidiaries are in compliance
on a pro forma basis with the covenants contained in Article X after giving
effect to the making of all such Restricted Payments, the Borrower may (i) pay
cash dividends to its shareholders if and to the extent permitted by Applicable
Law, (ii) redeem, retire or otherwise acquire shares of its Capital Stock or
options or other equity or phantom equity in respect of its Capital Stock from
present or former officers, employees, directors or consultants (or their family
members or trusts or other entities for the benefit of any of the foregoing) or
make severance payments to such Persons in connection with the death, disability
or termination of employment or consultancy of any such officer, employee,
director or consultant in an aggregate amount not to exceed $1,000,000 during
any Fiscal Year, and (iii) redeem, retire or otherwise acquire shares of its
Capital Stock or options or other equity or phantom equity in respect of its
Capital Stock pursuant to any stock repurchase program adopted by the board of
directors of the Borrower in an aggregate amount (on or after the Closing Date)
not to exceed $832,000,000.

SECTION 11.7 Transactions with Affiliates. Directly or indirectly enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property, the rendering of any service or the payment of any
management, advisory or similar fees, with (a) any officer, director, holder of
any Capital Stock in, or other Affiliate of, the Borrower or any of its
Subsidiaries, or (b) any Affiliate of any such officer, director or holder,
other than:

(i) transactions permitted by Sections 11.1, 11.3, 11.4, 11.6 and 11.13;

(ii) transactions existing on the Closing Date and described on Schedule 11.7;

(iii) other transactions in the ordinary course of business on terms as
favorable as would be obtained by it on a comparable arm’s-length transaction
with an independent, unrelated third party;

 

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(iv) employment and severance arrangements (including stock option plans and
employee benefit plans and arrangements), and amendments thereto, with their
respective officers and employees in the ordinary course of business; and

(v) payment of customary fees and reasonable out of pocket costs to, and
indemnities for the benefit of, directors, officers and employees of the
Borrower and its Subsidiaries in the ordinary course of business to the extent
attributable to the ownership or operation of the Borrower and its Subsidiaries.

SECTION 11.8 Certain Accounting Changes; Organizational Documents. (a) Change
its Fiscal Year end, or make (without the consent of the Administrative Agent)
any material change in its accounting treatment and reporting practices except
as required by GAAP or (b) amend, modify or change its articles of incorporation
(or corporate charter or other similar organizational documents) or amend,
modify or change its bylaws (or other similar documents) in any manner which
could materially and adversely affect the rights or interests of the
Administrative Agent and/or the Lenders.

SECTION 11.9 Limitation on Payments and Modifications of Subordinated
Indebtedness.

(a) Amend, modify, waive or supplement (or permit the modification, amendment,
waiver or supplement of) any of the terms or provisions of any Subordinated
Indebtedness in any respect which could materially and adversely affect the
rights or interests of the Administrative Agent and/or the Lenders.

(b) Cancel, forgive, make any payment or prepayment on, or redeem or acquire for
value (including, without limitation, (i) by way of depositing with any trustee
with respect thereto money or securities before due for the purpose of paying
when due and (ii) at the maturity thereof) any Subordinated Indebtedness,
except:

(i) refinancings, refundings, renewals, extensions or exchange of any
Subordinated Indebtedness permitted pursuant to Section 11.1(j) or
Section 11.1(n), and by any subordination agreement applicable thereto; and

(ii) the payment of interest, expenses and indemnities in respect of
Subordinated Indebtedness permitted pursuant to Section 11.1(j) or
Section 11.1(n) (other than any such payments prohibited by the subordination
provisions thereof).

SECTION 11.10 No Further Negative Pledges; Restrictive Agreements.

(a) Enter into, assume or be subject to any agreement prohibiting or otherwise
restricting the creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired, or requiring the grant of any
security for such obligation if security is given for some other obligation,
except (i) pursuant to this Agreement and the other Loan Documents,
(ii) pursuant to any document or instrument governing Indebtedness incurred
pursuant to Section 11.1(d); provided, that any such restriction contained
therein relates only to the asset or assets acquired in connection therewith,
(iii) restrictions contained in the organizational documents of any Credit Party
as of the Closing Date and (iv) restrictions in connection with any Permitted
Lien or any document or instrument governing any Permitted Lien (provided, that
any such restriction contained therein relates only to the asset or assets
subject to such Permitted Lien).

 

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(b) Create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction on the ability of any Credit Party or any
Subsidiary thereof to (i) pay dividends or make any other distributions to any
Credit Party or any Subsidiary on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits, (ii) pay any
Indebtedness or other obligation owed to the Borrower or any Subsidiary
Guarantor, (iii) make loans or advances to the Borrower or any Subsidiary
Guarantor, (iv) sell, lease or transfer any of its properties or assets to the
Borrower or any Subsidiary Guarantor or (v) act as a Guarantor pursuant to the
Loan Documents or any renewals, refinancings, exchanges, refundings or extension
thereof, except (in respect of any of the matters referred to in clauses (i)
through (v) above) for such encumbrances or restrictions existing under or by
reason of (A) this Agreement and the other Loan Documents, (B) Applicable Law,
(C) any document or instrument governing Indebtedness incurred pursuant to
Section 11.1(d) (provided, that any such restriction contained therein relates
only to the asset or assets acquired in connection therewith), (D) any Permitted
Lien or any document or instrument governing any Permitted Lien (provided, that
any such restriction contained therein relates only to the asset or assets
subject to such Permitted Lien), (E) obligations that are binding on a
Subsidiary at the time such Subsidiary first becomes a Subsidiary of the
Borrower, so long as such obligations are not entered into in contemplation of
such Person becoming a Subsidiary, (F) customary restrictions contained in an
agreement related to the sale of Property (to the extent such sale is permitted
pursuant to Section 11.5) that limit the transfer of such Property pending the
consummation of such sale, (G) customary restrictions in leases, subleases,
licenses and sublicenses or asset sale agreements otherwise permitted by this
Agreement so long as such restrictions relate only to the assets subject thereto
and (H) customary provisions restricting assignment of any agreement entered
into in the ordinary course of business.

SECTION 11.11 Nature of Business. With respect to the Borrower and its
Subsidiaries, engage in any business other than the business conducted by the
Borrower and its Subsidiaries as of the Closing Date and business activities
reasonably related or ancillary thereto or that are reasonable extensions
thereof.

SECTION 11.12 Amendments of Other Documents. Amend, modify, waive or supplement
(or permit modification, amendment, waiver or supplement of) any of the terms or
provisions of any Material Contract, in any respect which would materially and
adversely affect the rights or interests of the Administrative Agent and the
Lenders hereunder, in each, without the prior written consent of the
Administrative Agent.

SECTION 11.13 Sale Leasebacks. Directly or indirectly become or remain liable as
lessee or as guarantor or other surety with respect to any lease, whether an
operating lease or a Capital Lease, of any Property (whether real, personal or
mixed), whether now owned or hereafter acquired, (a) which any Credit Party or
any Subsidiary thereof has sold or transferred or is to sell or transfer to a
Person which is not another Credit Party or Subsidiary of a Credit Party or
(b) which any Credit Party or any Subsidiary of a Credit Party intends to use
for substantially the same purpose as any other Property that has been sold or
is to be sold or transferred by such Credit Party or such Subsidiary to another
Person which is not another Credit Party or Subsidiary of a Credit Party in
connection with such lease, in each case except as permitted pursuant to
Section 11.5(k) or Section 11.5(l).

SECTION 11.14 [Intentionally omitted.]

SECTION 11.15 Domestic Subsidiaries. Permit any Domestic Subsidiary to be a
non-Wholly-Owned Subsidiary or permit any Material Domestic Subsidiary to be a
Non-Guarantor Subsidiary.

 

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ARTICLE XII

DEFAULT AND REMEDIES

SECTION 12.1 Events of Default. Each of the following shall constitute an Event
of Default, whatever the reason for such event or circumstance and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:

(a) Default in Payment of Principal and Interest of Loans and Reimbursement
Obligations. The Borrower shall default in any payment of principal of or
interest on any Loan or Reimbursement Obligation when and as due (whether at
maturity, by reason of acceleration or otherwise).

(b) Other Payment Default. The Borrower or any other Credit Party shall default
in the payment when and as due (whether at maturity, by reason of acceleration
or otherwise) of any other Obligation (not addressed in clause (a) above), and
such default shall continue for a period of five (5) Business Days.

(c) Misrepresentation. Any representation, warranty, certification or statement
of fact made or deemed made by or on behalf of any Credit Party or any
Subsidiary thereof in this Agreement, in any other Loan Document or in any
document delivered in connection herewith or therewith that is subject to
materiality or Material Adverse Effect qualifications shall be incorrect or
misleading in any respect when made or deemed made, or any representation,
warranty, certification or statement of fact made or deemed made by or on behalf
of any Credit Party or any Subsidiary thereof in this Agreement, any other Loan
Document or in any document delivered in connection herewith or therewith that
is not subject to materiality or Material Adverse Effect qualifications shall be
incorrect or misleading in any material respect when made or deemed made.

(d) Default in Performance of Certain Covenants. Any Credit Party shall default
in the performance or observance of any covenant or agreement contained in
Sections 8.1, 8.2 or 8.5(e)(i) or Articles X or XI.

(e) Default in Performance of Other Covenants and Conditions. Any Credit Party
or any Subsidiary thereof shall default in the performance or observance of any
term, covenant, condition or agreement contained in this Agreement (other than
as specifically provided for in this Section) or any other Loan Document and
such default shall continue for a period of fifteen (15) days after the earlier
of (i) the Administrative Agent’s delivery of written notice thereof to the
Borrower and (ii) a Responsible Officer of the Borrower having obtained
knowledge thereof.

(f) Indebtedness Cross-Default. Any Credit Party or any Subsidiary thereof shall
(i) default in the payment of any Indebtedness (other than the Loans or any
Reimbursement Obligation) the aggregate outstanding amount of which Indebtedness
is in excess of the Threshold Amount beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness was
created, or (ii) default in the observance or performance of any other agreement
or condition relating to any Indebtedness (other than the Loans or any
Reimbursement Obligation) the aggregate outstanding amount of which Indebtedness
is in excess of the Threshold Amount or contained in any instrument or agreement
evidencing, securing or relating thereto or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, with the giving of notice
and/or lapse of time, if required, any such Indebtedness to become due prior to
its stated maturity (any applicable grace period having expired).

 

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(g) Other Cross-Defaults. Any Credit Party shall default in the payment when
due, or in the performance or observance, of any obligation or condition of any
Material Contract and all applicable grace, notice or other cure periods shall
have expired unless, but only as long as, the existence of any such default is
being contested by such Credit Party or any such Subsidiary in good faith by
appropriate proceedings and adequate reserves in respect thereof have been
established on the books of the Borrower or such Credit Party to the extent
required by GAAP.

(h) Change in Control. Any Change in Control shall occur.

(i) Voluntary Bankruptcy Proceeding. Any Credit Party or any Subsidiary (other
than a Non-Material Foreign Subsidiary) thereof shall (i) commence a voluntary
case under the federal bankruptcy laws (as now or hereafter in effect),
(ii) file a petition seeking to take advantage of any other laws, domestic or
foreign, relating to bankruptcy, insolvency, receivership, reorganization,
winding up or composition or adjustment of debts, (iii) consent to or fail to
contest in a timely and appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws, (iv) apply for or
consent to, or fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of a substantial part of its property, domestic or
foreign, (v) admit in writing its inability to pay its debts as they become due,
(vi) make a general assignment for the benefit of creditors, or (vii) take any
corporate or other entity action for the purpose of authorizing any of the
foregoing.

(j) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be
commenced against any Credit Party or any Subsidiary (other than a Non-Material
Foreign Subsidiary) thereof in any court of competent jurisdiction seeking
(i) relief under the federal bankruptcy laws (as now or hereafter in effect) or
under any other laws, domestic or foreign, relating to bankruptcy, insolvency,
receivership, reorganization, winding up or composition or adjustment of debts,
or (ii) the appointment of a trustee, receiver, custodian, liquidator or the
like for any Credit Party or any such Subsidiary thereof or for all or any
substantial part of their respective assets, domestic or foreign, and such case
or proceeding shall continue without dismissal or stay for a period of
sixty (60) consecutive days, or an order granting the relief requested in such
case or proceeding (including, but not limited to, an order for relief under
such federal bankruptcy laws) shall be entered.

(k) Failure of Agreements. Any provision of this Agreement or any provision of
any other Loan Document shall for any reason cease to be valid and binding on
any Credit Party or any such Person shall so state in writing, or any Loan
Document shall for any reason cease to create a valid and perfected first
priority Lien (subject to Permitted Liens) on, or security interest in, any of
the Collateral purported to be covered thereby, in each case other than in
accordance with the express terms hereof or thereof.

(l) Termination Event. The occurrence of any of the following events: (i) any
Credit Party or any ERISA Affiliate fails to make full payment when due of all
amounts which, under the provisions of any Pension Plan or Section 412 or
Section 430 of the Code, any Credit Party or any ERISA Affiliate is required to
pay as contributions thereto, (ii) a funding shortfall as determined under
Section 430 of the Code in excess of the Threshold Amount occurs or exists,
whether or not waived, with respect to any Pension Plan, (iii) a Termination
Event or (iv) any Credit Party or any ERISA Affiliate as employers under one or
more Multiemployer Plans makes a complete or partial withdrawal from any such
Multiemployer Plan and the plan sponsor of such Multiemployer Plans notifies
such withdrawing employer that such employer has incurred a withdrawal liability
requiring payments in an amount exceeding the Threshold Amount.

(m) Judgment. A judgment or order for the payment of money which causes the
aggregate amount of all such judgments or orders (net of any amounts paid or
fully covered by independent third party insurance as to which the relevant
insurance company does not dispute coverage) to exceed the Threshold Amount
shall be entered against any Credit Party or any Subsidiary thereof by any court
and such judgment or order shall continue without having been discharged,
vacated or stayed for a period of thirty (30) consecutive days after the entry
thereof.

 

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SECTION 12.2 Remedies. Upon the occurrence of an Event of Default, with the
consent of the Required Lenders if (but only if) such Event of Default is other
than an Event of Default under Section 12.1(a), 12.1(b), 12.1(i) or 12.1(j), the
Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower:

(a) Acceleration; Termination of Facilities.

(i) Terminate the Revolving Credit Commitment (and thereby the L/C Commitment)
and declare the principal of and interest on the Loans and the Reimbursement
Obligations at the time outstanding, and all other amounts owed to the Lenders
and to the Administrative Agent under this Agreement or any of the other Loan
Documents (including, without limitation, all L/C Obligations, whether or not
the beneficiaries of the then outstanding Letters of Credit shall have presented
or shall be entitled to present the documents required thereunder) and all other
Obligations (other than Specified Obligations), to be forthwith due and payable,
whereupon the same shall immediately become due and payable without presentment,
demand, protest or other notice of any kind, all of which are expressly waived
by each Credit Party, anything in this Agreement or the other Loan Documents to
the contrary notwithstanding, and terminate the Credit Facility and any right of
the Borrower to request borrowings or Letters of Credit thereunder; provided,
that upon the occurrence of an Event of Default specified in Section 12.1(i) or
Section 12.1(j), the Credit Facility shall be automatically terminated and all
Obligations (other than Specified Obligations) shall automatically become due
and payable without presentment, demand, protest or other notice of any kind,
all of which are expressly waived by each Credit Party, anything in this
Agreement or in any other Loan Document to the contrary notwithstanding; and

(ii) exercise on behalf of the Secured Parties all of its other rights and
remedies under this Agreement, the other Loan Documents and Applicable Law, in
order to satisfy all of the Obligations.

(b) Letters of Credit. With respect to all Letters of Credit with respect to
which presentment for honor shall not have occurred at the time of an
acceleration pursuant to Section 12.2(a), the Borrower shall at such time
deposit in a cash collateral account opened by the Administrative Agent an
amount equal to one hundred five percent (105%) of the aggregate then undrawn
and unexpired amount of such Letters of Credit. Amounts held in such cash
collateral account shall be applied by the Administrative Agent to the payment
of drafts drawn under such Letters of Credit, and the unused portion thereof
after all such Letters of Credit shall have expired or been fully drawn upon, if
any, shall be applied to repay the other Obligations on a pro rata basis. After
all such Letters of Credit shall have expired or been fully drawn upon, the
Reimbursement Obligation shall have been satisfied and all other Obligations
shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to the Borrower.

(c) Rights of Collection. Exercise on behalf of the Lenders all of its other
rights and remedies under this Agreement, the other Loan Documents and
Applicable Law, in order to satisfy all of the Borrower’s Obligations.

 

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SECTION 12.3 Rights and Remedies Cumulative; Non-Waiver; etc. The enumeration of
the rights and remedies of the Administrative Agent and the Lenders set forth in
this Agreement is not intended to be exhaustive and the exercise by the
Administrative Agent and/or the Lenders of any right or remedy shall not
preclude the exercise of any other rights or remedies, all of which shall be
cumulative, and shall be in addition to any other right or remedy given
hereunder or under the other Loan Documents or that may now or hereafter exist
at law or in equity or by suit or otherwise. No delay or failure to take action
on the part of the Administrative Agent or any Lender in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
or shall be construed to be a waiver of any Event of Default. No course of
dealing between the Borrower, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default.

SECTION 12.4 Crediting of Payments and Proceeds. In the event that the
Obligations have been accelerated pursuant to Section 12.2 or the Administrative
Agent or any Lender has exercised any right or remedy set forth in this
Agreement or any other Loan Document, all payments received by the Lenders upon
the Obligations and all net proceeds from the enforcement of the Obligations
shall be applied:

First, to payment of that portion of the Obligations constituting fees,
indemnities, expenses and other amounts, including attorney fees, payable to the
Administrative Agent in its capacity as such, the Issuing Lender in its capacity
as such and the Swingline Lender in its capacity as such (ratably among the
Administrative Agent, the Issuing Lender and Swingline Lender in proportion to
the respective amounts described in this clause First payable to them);

Second, to payment of that portion of the Obligations constituting fees,
indemnities and other amounts (other than principal and interest) payable to the
Lenders under the Loan Documents, including attorney fees (ratably among the
Lenders in proportion to the respective amounts described in this clause Second
payable to them);

Third, to payment of that portion of the Obligations constituting accrued and
unpaid interest on the Loans and Reimbursement Obligations (ratably among the
Lenders in proportion to the respective amounts described in this clause Third
payable to them);

Fourth, to payment of that portion of the Obligations constituting unpaid
principal of the Loans, Reimbursement Obligations, Specified Hedge Obligations
(including any termination payments and any accrued and unpaid interest thereon)
and Specified Cash Management Obligations (ratably among the Lenders and the
counterparties to the Specified Hedge Obligations and Specified Cash Management
Obligations, as applicable, in proportion to the respective amounts described in
this clause Fourth held by them);

Fifth, to the Administrative Agent for the account of the Issuing Lender, to
cash collateralize any L/C Obligations then outstanding; and

Last, the balance, if any, after the Revolving Credit Commitment has terminated
and all of the Obligations have been indefeasibly paid in full, to the Borrower
or as otherwise required by Applicable Law.

SECTION 12.5 Administrative Agent May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to any Credit Party, the Administrative Agent (irrespective
of whether the principal of any Loan or L/C Obligation shall then be due and
payable as herein expressed or by declaration or otherwise and irrespective of
whether the Administrative Agent shall have made any demand on the Borrower)
shall be entitled and empowered, by intervention in such proceeding or
otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest
owing and unpaid in respect of the Loans, L/C Obligations and all other
Obligations arising under the Loan Document that are owing and unpaid and to
file such other documents as may be necessary or advisable in order to have the
claims of the Lenders and the Administrative Agent (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Lenders and
the Administrative Agent and their respective agents and counsel and all other
amounts due the Lenders and the Administrative Agent under Sections 3.3, 5.3 and
14.3) allowed in such judicial proceeding; and

 

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

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Sections 3.3, 5.3 and 14.3.

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

ARTICLE XIII

THE ADMINISTRATIVE AGENT

SECTION 13.1 Appointment and Authority. Each of the Lenders and the Issuing
Lender hereby irrevocably designates and appoints Wells Fargo to act on its
behalf as the Administrative Agent hereunder and under the other Loan Documents
and authorizes the Administrative Agent to take such actions on its behalf and
to exercise such powers as are delegated to the Administrative Agent by the
terms hereof or thereof, together with such actions and powers as are reasonably
incidental thereto. The provisions of this Article are solely for the benefit of
the Administrative Agent, the Lenders and the Issuing Lender, and neither the
Borrower nor any Subsidiary thereof shall have rights as a third party
beneficiary of any of such provisions.

The Administrative Agent shall also act as the “collateral agent” under the Loan
Documents, and each of the Lenders (including in its capacity as counterparty to
a Specified Hedge Agreement or Specified Cash Management Arrangement, as
applicable) and the Issuing Lender hereby irrevocably appoints and authorizes
the Administrative Agent to act as the agent of such Lender and the Issuing
Lender for purposes of acquiring, holding and enforcing any and all Liens on
Collateral granted by any of the Credit Party to secure any of the Obligations,
together with such powers and discretion as are reasonably incidental thereto.
In this connection, the Administrative Agent, as “collateral agent” and any
co-agents, sub-agents and attorneys-in-fact appointed by the Administrative
Agent pursuant to this Article XIII for purposes of holding or enforcing any
Lien on the Collateral (or any portion thereof) granted under the Security
Documents, or for exercising any rights and remedies thereunder at the direction
of the Administrative Agent, shall be entitled to the benefits of all provisions
of this Articles XIII and XIV (including Section 14.3, as though such co-agents,
sub-agents and attorneys-in-fact were the “collateral agent” under the Loan
Documents) as if set forth in full herein with respect thereto.

 

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SECTION 13.2 Rights as a Lender. The Person serving as the Administrative Agent
hereunder shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though it were not the
Administrative Agent, and the term “Lender” or “Lenders” shall, unless otherwise
expressly indicated or unless the context otherwise requires, include the Person
serving as the Administrative Agent hereunder in its individual capacity. Such
Person and its Affiliates may accept deposits from, lend money to, act as the
financial advisor or in any other advisory capacity for and generally engage in
any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if such Person were not the Administrative Agent hereunder and
without any duty to account therefor to the Lenders. Without limiting the
generality of the foregoing, each Lender acknowledges and agrees that Wells
Fargo may have a participation or other interest in the Commercial Letter of
Credit Facility.

SECTION 13.3 Exculpatory Provisions. The Administrative Agent shall not have any
duties or obligations except those expressly set forth herein and in the other
Loan Documents. Without limiting the generality of the foregoing, the
Administrative Agent:

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

(b) shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative Agent
is required to exercise as directed in writing by the Required Lenders (or such
other number or percentage of the Lenders as shall be expressly provided for
herein or in the other Loan Documents), provided that the Administrative Agent
shall not be required to take any action that, in its opinion or the opinion of
its counsel, may expose the Administrative Agent to liability or that is
contrary to any Loan Document or Applicable Law; and

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

The Administrative Agent shall not be liable for any action taken or not taken
by it (i) with the consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary, or as the
Administrative Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Section 14.2 and Section 12.2) or (ii) in the
absence of its own gross negligence or willful misconduct as determined by a
court of competent jurisdiction by final nonappealable judgment. The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until notice describing such Default is given to the Administrative Agent by
the Borrower, a Lender or the Issuing Lender.

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

 

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SECTION 13.4 Reliance by the Administrative Agent. The Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing (including any electronic message, Internet or intranet website
posting or other distribution) believed by it to be genuine and to have been
signed, sent or otherwise authenticated by the proper Person. The Administrative
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and shall not incur any
liability for relying thereon. In determining compliance with any condition
hereunder to the making of a Loan, or the issuance of a Letter of Credit, that
by its terms must be fulfilled to the satisfaction of a Lender or the Issuing
Lender, the Administrative Agent may presume that such condition is satisfactory
to such Lender or the Issuing Lender unless the Administrative Agent shall have
received notice to the contrary from such Lender or the Issuing Lender prior to
the making of such Loan or the issuance of such Letter of Credit. The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

SECTION 13.5 Delegation of Duties. The Administrative Agent may perform any and
all of its duties and exercise its rights, remedies and powers hereunder or
under any other Loan Document by or through any one or more sub agents appointed
by the Administrative Agent. The Administrative Agent and any such sub agent may
perform any and all of its duties and exercise its rights, remedies and powers
by or through their respective Related Parties. The exculpatory provisions of
this Article shall apply to any such sub agent and to the Related Parties of the
Administrative Agent and any such sub agent, and shall apply to their respective
activities in connection with the syndication of the Credit Facility as well as
activities as Administrative Agent.

SECTION 13.6 Resignation of Administrative Agent.

(a) The Administrative Agent may at any time give notice of its resignation to
the Lenders, the Issuing Lender and the Borrower. Upon receipt of any such
notice of resignation, the Required Lenders shall have the right, in
consultation with the Borrower, to appoint a successor, which shall be a bank
with an office in the United States, or an Affiliate of any such bank with an
office in the United States. If no such successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders and the Issuing
Lender, appoint a successor Administrative Agent meeting the qualifications set
forth above, provided that, if the Administrative Agent shall notify the
Borrower and the Lenders that no qualifying Person has accepted such
appointment, then such resignation shall nonetheless become effective in
accordance with such notice and (i) the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder and under the other Loan
Documents (except that in the case of any collateral security held by the
Administrative Agent on behalf of the Lenders or the Issuing Lender under any of
the Loan Documents, the retiring Administrative Agent shall continue to hold
such collateral security until such time as a successor Administrative Agent is
appointed) and (ii) all payments, communications and determinations provided to
be made by, to or through the Administrative Agent shall instead be made by or
to each Lender and the Issuing Lender directly, until such time as the Required
Lenders appoint a successor Administrative Agent as provided for above in this
Section. Upon the acceptance of a successor’s appointment as Administrative
Agent hereunder, such successor shall succeed to and become vested with all of
the rights, powers, privileges and duties of the retiring (or retired)
Administrative Agent, and the retiring Administrative Agent shall be discharged
from all of its duties and obligations hereunder or under the other Loan
Documents (if not already discharged therefrom as provided above in this
Section). The fees payable by the Borrower to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After the retiring Administrative
Agent’s resignation hereunder and under the other Loan Documents, the provisions
of this Article and Section 14.3 shall continue in effect for the benefit of
such retiring Administrative Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while the retiring Administrative Agent was acting as Administrative Agent.

 

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(b) Any resignation by Wells Fargo as Administrative Agent pursuant to this
Section shall also constitute its resignation as Issuing Lender and Swingline
Lender. Upon the acceptance of a successor’s appointment as Administrative Agent
hereunder, (i) such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring Issuing Lender and
Swingline Lender, (ii) the retiring Issuing Lender and Swingline Lender shall be
discharged from all of their respective duties and obligations hereunder or
under the other Loan Documents, and (iii) the successor Issuing Lender shall
issue letters of credit in substitution for the Letters of Credit, if any,
outstanding at the time of such succession or make other arrangement
satisfactory to the retiring Issuing Lender to effectively assume the
obligations of the retiring Issuing Lender with respect to such Letters of
Credit.

SECTION 13.7 Non-Reliance on Administrative Agent and Other Lenders. Each Lender
and the Issuing Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender or any of their
Related Parties and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender and the Issuing Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other
Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document or any related agreement or any document furnished
hereunder or thereunder.

SECTION 13.8 No Other Duties, etc. Anything herein to the contrary
notwithstanding, none of the syndication agents, documentation agents,
co-agents, book manager, lead manager, arranger, lead arranger or co-arranger
listed on the cover page or signature pages hereof shall have any powers, duties
or responsibilities under this Agreement or any of the other Loan Documents,
except in its capacity, as applicable, as the Administrative Agent, a Lender or
the Issuing Lender hereunder.

SECTION 13.9 Collateral and Guaranty Matters. The Lenders irrevocably authorize
the Administrative Agent, at its option and in its discretion (without notice
to, or vote or consent of, any counterparty to any Specified Hedge Agreement or
Specified Cash Management Arrangement that was a Lender or an Affiliate of any
Lender at the time such agreement was executed),

(a) to release any Lien on any Collateral granted to or held by the
Administrative Agent, for the ratable benefit of the Secured Parties (whether or
not on the date of such release there may be outstanding Specified Obligations
or contingent indemnification obligations not then due), under any Loan Document
(i) upon repayment of all outstanding principal of and all accrued interest on
the Loans and Reimbursement Obligations, payment of all outstanding fees and
expenses hereunder, the termination of all Commitments and the expiration or
termination of all Letters of Credit, (ii) that is sold or to be sold as part of
or in connection with any sale permitted hereunder or under any other Loan
Document, or (iii) subject to Section 14.2, if approved, authorized or ratified
in writing by the Required Lenders;

 

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(b) to subordinate or release any Lien on any Collateral (whether or not on the
date of such subordination or release there may be outstanding Specified
Obligations or contingent indemnification obligations not then due) granted to
or held by the Administrative Agent under any Loan Document to the holder of any
Permitted Lien; and

(c) to release any Subsidiary Guarantor (whether or not on the date of such
release there may be outstanding Specified Obligations or contingent
indemnification obligations not then due) from its obligations under the
Subsidiary Guaranty Agreement and any other Loan Documents if such Person ceases
to be a Subsidiary as a result of a transaction permitted hereunder.

Upon request by the Administrative Agent at any time, the Required Lenders will
confirm in writing the Administrative Agent’s authority to release or
subordinate its interest in particular types or items of property, or to release
any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty
Agreement pursuant to this Section.

SECTION 13.10 Release of Liens and Guarantees of Subsidiaries. If any of the
Collateral shall be sold, transferred or otherwise disposed of by the Borrower
or any other Credit Party in a transaction permitted by this Agreement
(including by way of merger, consolidation or in connection with the sale of a
Subsidiary permitted hereunder), then the Administrative Agent, at the request
and sole expense of the Borrower or such other Credit Party, shall execute and
deliver without recourse, representation or warranty all releases or other
documents necessary or desirable for the release of the Liens created by any of
the Security Documents on such Collateral. In the case of any such sale,
transfer or disposal of any property constituting Collateral in a transaction
constituting an Asset Disposition permitted pursuant to Section 11.5, the Liens
created by any of the Security Documents on such property shall be automatically
released (without need for further action by any person). At the request and
sole expense of the Borrower, a Subsidiary that is a Credit Party shall be
released from all its obligations under this Agreement and under all other Loan
Documents in the event that all of the Capital Stock of such Subsidiary shall be
sold, transferred or otherwise disposed of in a transaction permitted by this
Agreement (including by way of merger or consolidation) and if no Event of
Default exists or would result therefrom, and the Administrative Agent, at the
request and sole expense of the Borrower, shall execute and deliver without
recourse, representation or warranty all releases or other documents necessary
or desirable to evidence or confirm the foregoing.

SECTION 13.11 Specified Cash Management Arrangements and Specified Hedge
Agreements. No Lender or Affiliate thereof party to a Specified Cash Management
Arrangement or Specified Hedge Agreement, as applicable, that obtains the
benefits of Section 12.4 or any Collateral by virtue of the provisions hereof or
of any Security Document shall have any right to notice of any action or to
consent to, direct or object to any action hereunder or under any other Loan
Document or otherwise in respect of the Collateral (including the release or
impairment of any Collateral) other than in its capacity as a Lender and, in
such case, only to the extent expressly provided in the Loan Documents.

 

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ARTICLE XIV

MISCELLANEOUS

SECTION 14.1 Notices.

(a) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in
Section 14.1(b) below), all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopier as follows:

 

If to the Borrower    or another Credit Party:    Fossil, Inc. (if to the
Borrower) or    c/o Fossil, Inc. (if to another Credit Party)    2280 North
Greenville Avenue    Richardson, Texas 75082    Attention of: Randy S. Hyne,
Esq.    Telephone No.: 972-699-2115    Telecopy No.: 972-744-8387    E-mail:
randyh@fossil.com    Webpage: www.fossil.com With copies to:    Haynes and
Boone, LLP    2323 Victory Avenue, Suite 700    Dallas, Texas 75219-7673   
Attention of: Paul H. Amiel, Esq.    Telephone No.: 214-651-5605    Telecopy
No.: 214-200-0555    E-mail: paul.amiel@haynesboone.com If to Wells Fargo as   
  Administrative Agent:    Wells Fargo Bank, National Association    1525 W WT
Harris Boulevard    Charlotte, North Carolina 28262    Attention of:   Lisa G.
Starnes      Loan Administration Manager    Telephone No.: 704-590-2706   
Telecopy No.: 704-590-2790    E-mail: lisag.starnes@wachovia.com With copies to:
   Wells Fargo Bank, National Association    1445 Ross Avenue, 3rd Floor   
Dallas, Texas 75202    Attention of: Thomas J. Krueger    Telephone No.:
214-740-1597    Telecopy No.: 214-871-0365    E-mail:
thomas.j.krueger@wellsfargo.com    and    Hunton & Williams LLP    1445 Ross
Avenue, Suite 3700    Dallas, Texas 75202    Attention of: Ronald D. Rosener,
Esq.    Telephone No.: 214-468-3372    Telecopy No.: 214-740-7164    E-mail:
rrosener@hunton.com If to any Lender:    To the address set forth on the
Register

 

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Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next business day for the
recipient). Notices delivered through electronic communications to the extent
provided in Section 14.1(b) below, shall be effective as provided in said
Section 14.1(b).

(b) Electronic Communications. Notices and other communications to the Lenders
and the Issuing Lender hereunder may be delivered or furnished by electronic
communication (including e-mail and Internet or intranet websites) pursuant to
procedures approved by the Administrative Agent, provided that the foregoing
shall not apply to notices to any Lender or the Issuing Lender pursuant to
Article II if such Lender or the Issuing Bank, as applicable, has notified the
Administrative Agent that is incapable of receiving notices under such Article
by electronic communication. The Administrative Agent or the Borrower may, in
its discretion, agree to accept notices and other communications to it hereunder
by electronic communications pursuant to procedures approved by it, provided
that approval of such procedures may be limited to particular notices or
communications.

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

(c) Administrative Agent’s Office. The Administrative Agent hereby designates
its office located at the address set forth above, or any subsequent office
which shall have been specified for such purpose, by written notice to the
Borrower and the Lenders, as the Administrative Agent’s Office referred to
herein, to which payments due are to be made and at which Loans will be
disbursed and Letters of Credit requested.

(d) Change of Address, Etc. Any party hereto may change its address or
telecopier number for notices and other communications hereunder by notice to
the other parties hereto.

SECTION 14.2 Amendments, Waivers and Consents. Except as set forth below or as
specifically provided in any Loan Document, any term, covenant, agreement or
condition of this Agreement or any of the other Loan Documents may be amended or
waived by the Lenders, and any consent given by the Lenders, if, but only if,
such amendment, waiver or consent is in writing signed by the Required Lenders
(or by the Administrative Agent with the consent of the Required Lenders) and
delivered to the Administrative Agent and, in the case of an amendment, signed
by the Borrower and any other Credit Party which is a party thereto; provided,
that no amendment, waiver or consent shall:

(a) without the prior written consent of the Required Lenders, amend, modify or
waive (i) Section 6.2 or any other provision of this Agreement if the effect of
such amendment, modification or waiver is to require the Lenders (pursuant to,
in the case of any such amendment to a provision hereof other than Section 6.2,
any substantially concurrent request by the Borrower for a borrowing of
Revolving Credit Loans) to make Revolving Credit Loans when the Lenders would
not otherwise be required to do so, (ii) the Maximum Swingline Amount or
(iii) the amount of the L/C Commitment;

(b) increase the Revolving Credit Commitment of any Lender, the Maximum
Swingline Amount of the Swingline Lender or the L/C Commitment of the Issuing
Lender (or reinstate any Revolving Credit Commitment or the L/C Commitment
terminated pursuant to Section 12.2) or the amount of Loans of any Lender, in
any case, without the written consent of such Lender;

 

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(c) postpone any date fixed by this Agreement or any other Loan Document for any
payment (including any mandatory prepayment) of principal, interest, fees or
other amounts due to the Lenders (or any of them) or any scheduled or mandatory
reduction of the Revolving Credit Commitment hereunder or under any other Loan
Document without the written consent of each Lender directly and adversely
affected thereby;

(d) reduce the principal of, or the rate of interest specified herein on, any
Loan or Reimbursement Obligation, or (subject to clause (iv) of the second
proviso to this Section below) any fees or other amounts payable hereunder or
under any other Loan Document without the written consent of each Lender
directly and adversely affected thereby; provided that only the consent of the
Required Lenders shall be necessary (i) to waive any obligation of the Borrower
to pay interest at the rate set forth in Section 5.1(c) during the continuance
of an Event of Default or (ii) to amend any financial covenant hereunder (or any
defined term used therein) even if the effect of such amendment would be to
reduce the rate of interest on any Loan or L/C Obligation or to reduce any fee
payable hereunder;

(e) change Section 5.6 or Section 12.4 in a manner that would alter the pro rata
sharing of payments required thereby without the written consent of each Lender
directly and adversely affected thereby;

(f) [Intentionally omitted];

(g) change any provision of this Section or reduce the percentages specified in
the definition of “Required Lenders,” or any other provision hereof specifying
the number or percentage of Lenders required to amend, waive or otherwise modify
any rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Lender directly affected thereby;

(h) consent to the assignment or transfer by any Credit Party of such Credit
Party’s rights and obligations under any Loan Document to which it is a party
(except as permitted pursuant to Section 11.4), in each case, without the
written consent of each Lender; or

(i) release any Subsidiary Guarantor from its Guaranty Agreement (other than as
authorized in Section 13.9), without the written consent of each Lender;

(j) release any material portion of the Collateral or release any Security
Document (other than as authorized in Section 13.9 or as otherwise specifically
permitted or contemplated in this Agreement or the applicable Security Document)
without the written consent of each Lender;

provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Lender in addition to the Lenders required
above, affect the rights or duties of the Issuing Lender under this Agreement or
any Letter of Credit Application relating to any Letter of Credit issued or to
be issued by it; (ii) no amendment, waiver or consent shall, unless in writing
and signed by the Swingline Lender in addition to the Lenders required above,
affect the rights or duties of the Swingline Lender under this Agreement;
(iii) no amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above, affect the
rights or duties of the Administrative Agent under this Agreement or any other
Loan Document; (iv) the Fee Letter may be amended, or rights or privileges
thereunder waived, in a writing executed only by the parties thereto and (v) any
waiver, amendment or modification of this Agreement that by its terms affects
the rights or duties under this Agreement of Lenders holding Loans of a
particular Class (but not the Lenders holding Loans of any other Class) may be
effected by an agreement or agreements in writing entered into by the Borrower
and the requisite percentage in interest of the affected Class of Lenders that
would be required to consent thereto under this Section if such Class of Lenders
were the only Class of Lenders hereunder at the time. Notwithstanding anything
to the contrary herein, no Defaulting Lender shall have any right to approve or
disapprove any amendment, waiver or consent hereunder, except that the Revolving
Credit Commitment of such Lender may not be increased or extended without the
consent of such Lender.

 

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SECTION 14.3 Expenses; Indemnity.

(a) Costs and Expenses. Each of the Borrower and the other Credit Parties,
jointly and severally, shall pay (i) all reasonable out of pocket expenses
incurred by the Administrative Agent and its Affiliates (including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent), in connection with the syndication of the credit facilities provided for
herein, the preparation, negotiation, execution, delivery and administration of
this Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), (ii) all reasonable out of
pocket expenses incurred by the Issuing Lender in connection with the issuance,
amendment, renewal or extension of any Letter of Credit or any demand for
payment thereunder and (iii) all out of pocket expenses incurred by the
Administrative Agent, any Lender or the Issuing Lender (including the fees,
charges and disbursements of any counsel for the Administrative Agent, any
Lender or the Issuing Lender, provided that, for purposes of this parenthetical,
such counsel shall be limited to one United States counsel and one counsel in
each applicable foreign jurisdiction, in each case as chosen by the
Administrative Agent, except if and to the extent that conflicts of interest
reasonably necessitate otherwise), in connection with the enforcement, exercise
and/or protection of its rights and/or remedies (A) in connection with this
Agreement and the other Loan Documents, including its rights under this Section,
or (B) in connection with the Loans made or Letters of Credit issued hereunder,
including all such out of pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit.

(b) Indemnification by the Borrower. Each of the Borrower and the other Credit
Parties, jointly and severally, shall indemnify the Administrative Agent (and
any sub-agent thereof), each Lender, the Issuing Lender and the Swingline
Lender, and each Related Party of any of the foregoing Persons (each such Person
being called an “Indemnitee”) against, and hold each Indemnitee harmless from,
and shall pay or reimburse any such Indemnitee for, any and all losses, claims
(including, without limitation, any Environmental Claims or civil penalties or
fines assessed by OFAC), damages, liabilities and related expenses (including
the fees, charges and disbursements of any counsel for any Indemnitee, provided
that, for purposes of this parenthetical, such counsel shall be limited to one
United States counsel and one counsel in each applicable foreign jurisdiction,
in each case as chosen by the Administrative Agent, except if and to the extent
that conflicts of interest reasonably necessitate otherwise), incurred by any
Indemnitee or asserted against any Indemnitee by any third party or by the
Borrower or any other Credit Party arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement, any other Loan
Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto of their respective obligations hereunder or
thereunder or the consummation of the transactions contemplated hereby or
thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the
proceeds therefrom (including any refusal by the Issuing Lender to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter
of Credit), (iii) any actual or alleged presence or Release of Hazardous
Materials on or from any property owned or operated by any Credit Party or any
Subsidiary thereof, or any Environmental Claim related in any way to any Credit
Party or any Subsidiary, (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory, whether brought by a third party or by any
Credit Party or any Subsidiary thereof, and regardless of whether any Indemnitee
is a party thereto, or (v) any claim (including, without limitation, any
Environmental Claims or civil penalties or fines assessed by the U.S. Department
of the Treasury’s Office of Foreign Assets Control), investigation, litigation
or other proceeding (whether or not the Administrative Agent or any Lender is a
party thereto) and the prosecution and defense thereof, arising out of or in any
way connected with the Loans, this Agreement, any other Loan Document, or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby, including without limitation, reasonable
attorneys and consultant’s fees, provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses (x) are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee or (y) result from a claim
brought by any Credit Party or any Subsidiary thereof against an Indemnitee for
breach in bad faith of such Indemnitee’s obligations hereunder or under any
other Loan Document, if such Credit Party or such Subsidiary has obtained a
final and nonappealable judgment in its favor on such claim as determined by a
court of competent jurisdiction.

 

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(c) Reimbursement by Lenders. To the extent that the Borrower for any reason
fails to indefeasibly pay any amount required under Section 14.3(a) or
Section 14.3(b) to be paid by it to the Administrative Agent (or any sub-agent
thereof), the Issuing Lender, the Swingline Lender or any Related Party of any
of the foregoing, each Lender severally agrees to pay to the Administrative
Agent (or any such sub-agent), the Issuing Lender, the Swingline Lender or such
Related Party, as the case may be, such Lender’s Revolving Credit Commitment
Percentage (determined as of the time that the applicable unreimbursed expense
or indemnity payment is sought) of such unpaid amount, provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent (or any such sub-agent), the Issuing Lender or the
Swingline Lender in its capacity as such, or against any Related Party of any of
the foregoing acting for the Administrative Agent (or any such sub-agent), the
Issuing Lender or the Swingline Lender in connection with such capacity. The
obligations of the Lenders under this Section 14.3(c) are subject to the
provisions of Section 5.7.

(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
Applicable Law, the Borrower and each other Credit Party shall not assert, and
hereby waives, any claim against any Indemnitee, on any theory of liability, for
special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby, the transactions contemplated hereby or thereby, any Loan or Letter of
Credit or the use of the proceeds thereof. No Indemnitee referred to in
Section 14.3(b) above shall be liable for any damages arising from the use by
unintended recipients of any information or other materials distributed by it
through telecommunications, electronic or other information transmission systems
in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby.

(e) Payments. All amounts due under this Section shall be payable within five
(5) days after demand therefor, which demand shall be accompanied by a statement
from the applicable Person to whom such payment is due setting forth such
amounts in reasonable detail.

SECTION 14.4 Right of Set Off. If an Event of Default shall have occurred and be
continuing, each Lender, the Issuing Lender, the Swingline Lender and each of
their respective Affiliates is hereby authorized at any time and from time to
time, to the fullest extent permitted by Applicable Law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final,
in whatever currency) at any time held and other obligations (in whatever
currency) at any time owing by such Lender, the Issuing Lender, the Swingline
Lender or any such Affiliate to or for the credit or the account of the Borrower
or any other Credit Party against any and all of the obligations of the Borrower
or such Credit Party now or hereafter existing under this Agreement or any other
Loan Document to such Lender, the Issuing Lender or the Swingline Lender,
irrespective of whether or not such Lender, the Issuing Lender or the Swingline
Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations of the Borrower or such Credit Party may
be contingent or unmatured or are owed to a branch or office of such Lender, the
Issuing Lender or the Swingline Lender different from the branch or office
holding such deposit or obligated on such indebtedness. The rights of each
Lender, the Issuing Lender, the Swingline Lender and their respective Affiliates
under this Section are in addition to other rights and remedies (including other
rights of setoff) that such Lender, the Issuing Lender, the Swingline Lender or
their respective Affiliates may have. Each Lender, the Issuing Lender and the
Swingline Lender agrees to notify the Borrower and the Administrative Agent
promptly after any such setoff and application; provided that the failure to
give such notice shall not affect the validity of such setoff and application.

 

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SECTION 14.5 Governing Law; Jurisdiction, Etc.

(a) Governing Law. This Agreement and the other Loan Documents, unless expressly
set forth therein, shall be governed by, and construed and enforced in
accordance with, the law of the State of New York (including Section 5-1401 of
the General Obligations Law of the State of New York), without reference to the
conflicts or choice of law principles thereof that would require application of
another law (but giving effect to federal laws relating to national banks).

(b) Submission to Jurisdiction. Each of the Borrower and the other Credit
Parties irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any court of the State of New York sitting in
New York, New York and of the United States District Court of the Southern
District of New York, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or any other Loan
Document, or for recognition or enforcement of any judgment, and each of the
parties hereto irrevocably and unconditionally agrees that all claims in respect
of any such action or proceeding may be heard and determined in such New York
state court or, to the fullest extent permitted by Applicable Law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or in any other Loan Document shall affect any right
that the Administrative Agent, any Lender or the Issuing Lender may otherwise
have to bring any action or proceeding relating to this Agreement or any other
Loan Document against the Borrower or any other Credit Party or its properties
in the courts of any jurisdiction.

(c) Waiver of Venue. The Borrower and each other Credit Party irrevocably and
unconditionally waives, to the fullest extent permitted by Applicable Law, any
objection that it may now or hereafter have to the laying of venue of any action
or proceeding arising out of or relating to this Agreement or any other Loan
Document in any court referred to Section 14.5(b). Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by Applicable Law,
the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.

(d) Service of Process. Each party hereto irrevocably consents to service of
process in the manner provided for notices in Section 14.1. Nothing in this
Agreement will affect the right of any party hereto to serve process in any
other manner permitted by Applicable Law.

SECTION 14.6 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

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SECTION 14.7 Reversal of Payments. To the extent any Credit Party makes a
payment or payments to the Administrative Agent for the ratable benefit of the
Lenders or the Administrative Agent receives any payment or proceeds of the
Collateral which payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or proceeds had not been received by the Administrative
Agent.

SECTION 14.8 Injunctive Relief; Punitive Damages.

(a) Each of the Borrower and the other Credit Parties recognizes that, in the
event the Borrower or such other Credit Party fails to perform, observe or
discharge any of its obligations or liabilities under this Agreement, any remedy
of law may prove to be inadequate relief to the Lenders. Therefore, each of the
Borrower and the other Credit Parties agrees that the Administrative Agent and
the Lenders, at the their option, shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.

(b) The Administrative Agent, the Lenders, the Borrower and the other Credit
Parties hereby agree that no such Person shall have a remedy of punitive or
exemplary damages against any other party to a Loan Document and each such
Person hereby waives any right or claim to punitive or exemplary damages that
they may now have or may arise in the future in connection with any Dispute,
whether such Dispute is resolved through arbitration or judicially.

SECTION 14.9 [Intentionally omitted.]

SECTION 14.10 Successors and Assigns; Participations.

(a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that neither the Borrower nor
any other Credit Party may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of the Administrative
Agent and each Lender and no Lender may assign or otherwise transfer any of its
rights or obligations hereunder except (i) to an assignee in accordance with the
provisions of Section 14.10(b), (ii) by way of participation in accordance with
the provisions of Section 14.10(d) or (iii) by way of pledge or assignment of a
security interest subject to the restrictions of Section 14.10(f) (and any other
attempted assignment or transfer by any party hereto shall be null and void).
Nothing in this Agreement, expressed or implied, shall be construed to confer
upon any Person (other than the parties hereto, their respective successors and
assigns permitted hereby, Participants to the extent provided in
Section 14.10(d) and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.

 

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

(i) Minimum Amounts.

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

(B) in any case not described in paragraph (i)(A) of this Section 14.10(b), the
aggregate amount of the Revolving Credit Commitment (which for this purpose
includes Loans outstanding thereunder) or, if the applicable Revolving Credit
Commitment is not then in effect, the principal outstanding balance of the Loans
of the assigning Lender subject to each such assignment (determined as of the
date the Assignment and Assumption with respect to such assignment is delivered
to the Administrative Agent or, if “Trade Date” is specified in the Assignment
and Assumption, as of the Trade Date) shall not be less than $5,000,000, unless
each of the Administrative Agent and, so long as no Event of Default has
occurred and is continuing, the Borrower otherwise consents (each such consent
not to be unreasonably withheld or delayed); provided that the Borrower shall be
deemed to have given its consent five (5) Business Days after the date written
notice thereof has been delivered by the assigning Lender (through the
Administrative Agent) unless such consent is expressly refused by the Borrower
prior to such fifth (5th) Business Day;

(ii) Proportionate Amounts. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement with respect to the Loan or the Revolving
Credit Commitment assigned;

(iii) Required Consents. No consent shall be required for any assignment except
to the extent required by paragraph (i)(B) of this Section 14.10(b) and, in
addition:

(A) the consent of the Borrower (such consent not to be unreasonably withheld)
shall be required unless (1) an Event of Default has occurred and is continuing
at the time of such assignment or (2) such assignment is to a Lender, an
Affiliate of a Lender or an Approved Fund; provided, that the Borrower shall be
deemed to have consented to any such assignment unless it shall object thereto
by written notice to the Administrative Agent within five (5) Business Days
after having received notice thereof;

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

(C) the consents of the Issuing Lender and the Swingline Lender (such consents
not to be unreasonably withheld or delayed) shall be required for any assignment
that increases the obligation of the assignee to participate in exposure under
one or more Letters of Credit (whether or not then outstanding) or for any
assignment in respect of the Revolving Credit Facility.

 

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(iv) Assignment and Assumption. The parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Assumption, together with
a processing and recordation fee of $3,500 for each assignment (provided, that
only one such fee will be payable in connection with simultaneous assignments to
two or more Approved Funds by a Lender), and the assignee, if it is not a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire.

(v) No Assignment to Certain Persons. No such assignment shall be made to the
Borrower or any other Credit Party or any of the Borrower’s Affiliates or
Subsidiaries.

(vi) No Assignment to Natural Persons. No such assignment shall be made to a
natural person.

Subject to acceptance and recording thereof by the Administrative Agent pursuant
to Section 14.10(c), from and after the effective date specified in each
Assignment and Assumption, the assignee thereunder shall be a party to this
Agreement and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Assumption, be released from its obligations
under this Agreement (and, in the case of an Assignment and Assumption covering
all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto) but shall continue to be entitled to
the benefits of Sections 5.8, 5.9, 5.10, 5.11 and 14.3 with respect to facts and
circumstances occurring prior to the effective date of such assignment. Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this Section 14.10 shall be treated for purposes of
this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with Section 14.10(d).

(c) Register. The Administrative Agent, acting solely for this purpose as an
agent of the Borrower, shall maintain at one of its offices in the United
States, a copy of each Assignment and Assumption and each Joinder Agreement
delivered to it and a register for the recordation of the names and addresses of
the Lenders, and the Revolving Credit Commitment of, and principal amounts of
the Loans owing to, each Lender pursuant to the terms hereof from time to time
(the “Register”). The entries in the Register shall be conclusive, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower and any
Lender (but only to the extent of entries in the Register that are applicable to
such Lender), at any reasonable time and from time to time upon reasonable prior
notice.

(d) Participations. Any Lender may at any time, without the consent of, or
notice to, the Borrower or the Administrative Agent, sell participations to any
Person (other than a natural person or the Borrower or any of the Borrower’s
Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such
Lender’s rights and/or obligations under this Agreement (including all or a
portion of its Revolving Credit Commitment and/or the Loans owing to it);
provided that (i) such Lender’s obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrower, the
Administrative Agent, the Issuing Lender, the Swingline Lender and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement.

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver or modification described in
Section 14.2 that directly affects such Participant and could not be affected by
a vote of the Required Lenders. Subject to Section 14.10(e), the Borrower agrees
that each Participant shall be entitled to the benefits of Sections 5.8, 5.9,
5.10 and 5.11 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to Section 14.10(b). To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 14.4 as
though it were a Lender, provided such Participant agrees to be subject to
Section 5.6 as though it were a Lender.

 

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(e) Limitations upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Sections 5.10 and 5.11 than the applicable
Lender would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrower’s prior written consent. No Participant
shall be entitled to the benefits of Section 5.11 unless the Borrower is
notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 5.11(e) as
though it were a Lender.

(f) Certain Pledges. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including without limitation any pledge or
assignment to secure obligations to a Federal Reserve Bank; provided that no
such pledge or assignment shall release such Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.

SECTION 14.11 Confidentiality. Each of the Administrative Agent, the Lenders and
the Issuing Lender agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its Affiliates
and to its and its Affiliates’ respective partners, directors, officers,
employees, agents, advisors and other representatives (it being understood that
the Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by, or required to be disclosed to,
any rating agency, or regulatory or similar authority purporting to have
jurisdiction over it (including any self-regulatory authority, such as the
National Association of Insurance Commissioners), (c) to the extent required by
Applicable Laws or regulations or by any subpoena or similar legal process,
(d) to any other party hereto, (e) in connection with the exercise of any
remedies under this Agreement or under any other Loan Document (or any Specified
Hedge Agreement) or any action or proceeding relating to this Agreement or any
other Loan Document (or any Hedge Agreement with a Lender or the Administrative
Agent) or the enforcement of rights hereunder or thereunder, (f) subject to an
agreement containing provisions substantially the same as those of this Section,
to (i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement,
Participant or proposed Participant, or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower and its obligations, (g) with the consent of the Borrower, (h) to
Gold Sheets and other similar bank trade publications, such information to
consist of deal terms and other information customarily found in such
publications, (i) to the extent such Information (A) becomes publicly available
other than as a result of a breach of this Section or (B) becomes available to
the Administrative Agent, any Lender, the Issuing Lender or any of their
respective Affiliates on a nonconfidential basis from a source other than the
Borrower or (j) to governmental regulatory authorities in connection with any
regulatory examination of the Administrative Agent or any Lender or in
accordance with the Administrative Agent’s or any Lender’s regulatory compliance
policy if the Administrative Agent or such Lender deems necessary for the
mitigation of claims by those authorities against the Administrative Agent or
such Lender or any of its subsidiaries or affiliates. For purposes of this
Section, “Information” means all information received from any Credit Party or
any Subsidiary thereof relating to any Credit Party or any Subsidiary thereof or
any of their respective businesses, other than any such information that is
available to the Administrative Agent, any Lender or the Issuing Lender on a
nonconfidential basis prior to disclosure by any Credit Party or any Subsidiary
thereof; provided that, in the case of information received from a Credit Party
or any Subsidiary thereof after the date hereof, such information is clearly
identified at the time of delivery as confidential. Any Person required to
maintain the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

 

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SECTION 14.12 Performance of Duties. Each of the Credit Party’s obligations
under this Agreement and each of the other Loan Documents shall be performed by
such Credit Party at its sole cost and expense.

SECTION 14.13 All Powers Coupled with Interest. All powers of attorney and other
authorizations granted to the Administrative Agent, any Lender or any Person
designated by the Administrative Agent or any Lender pursuant to any provisions
of this Agreement or any of the other Loan Documents shall be deemed coupled
with an interest and shall be irrevocable so long as any of the Obligations
remain unpaid or unsatisfied, the Revolving Credit Commitment remains in effect
or any Credit Facility has not been terminated.

SECTION 14.14 Survival.

(a) All representations and warranties set forth in Article VII and all
representations and warranties contained in any certificate or any of the Loan
Documents (including, but not limited to, any such representation or warranty
made in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. Unless otherwise
expressly provided in this Agreement or the other applicable Loan Document(s),
all representations and warranties made under this Agreement shall be made or
deemed to be made at and as of the Closing Date and on each borrowing,
continuation, conversion, issuance or extension date as provided in
Section 6.2(a), shall survive the Closing Date and shall not be waived by the
execution and delivery of this Agreement, any investigation made by or on behalf
of the Lenders or any borrowing, continuation, conversion, issuance or extension
hereunder.

(b) Notwithstanding any termination of this Agreement, the indemnities to which
the Administrative Agent and the Lenders are entitled under the provisions of
this Article XIV and any other provision of this Agreement and the other Loan
Documents shall continue in full force and effect and shall protect the
Administrative Agent and the Lenders against events and circumstances arising
after such termination as well as before.

SECTION 14.15 Titles and Captions. Titles and captions of Articles, Sections and
subsections in, and the table of contents of, this Agreement are for convenience
only, and neither limit nor amplify the provisions of this Agreement.

SECTION 14.16 Severability of Provisions. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating the remainder of such
provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

SECTION 14.17 Counterparts; Integration; Effectiveness; Electronic Execution.

(a) Counterparts; Integration; Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. Delivery of an executed signature page of
this Agreement by facsimile or electronic transmission shall be effective as
delivery of a manually executed counterparty hereof. This Agreement and the
other Loan Documents, and any separate letter agreements with respect to fees
payable to the Administrative Agent, constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. In the event of any conflict between the provisions of this Agreement
and those of any other Loan Document, the provisions of this Agreement shall
control; provided that the inclusion of supplemental rights or remedies in favor
of the Administrative Agent or the Lenders in any other Loan Document shall not
be deemed a conflict with this Agreement. Each Loan Document was drafted with
the joint participation of the respective parties thereto and shall be construed
neither against nor in favor of any party, but rather in accordance with the
fair meaning thereof. Except as provided in Section 6.1, this Agreement shall
become effective when it shall have been executed by the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof that,
when taken together, bear the signatures of each of the other parties hereto.

 

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(b) Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records Act,
or any other similar state laws based on the Uniform Electronic Transactions
Act.

SECTION 14.18 Term of Agreement. This Agreement shall remain in effect from the
Closing Date through and including the date upon which all Obligations (other
than (a) contingent indemnification obligations not then due and (b) the
Specified Obligations) arising hereunder or under any other Loan Document shall
have been indefeasibly and irrevocably paid and satisfied in full and the
Revolving Credit Commitment has been terminated. No termination of this
Agreement shall affect the rights and obligations of the parties hereto arising
prior to such termination or in respect of any provision of this Agreement which
survives such termination.

SECTION 14.19 USA Patriot Act. The Administrative Agent and each Lender hereby
notifies the Borrower that pursuant to the requirements of the Act, it is
required to obtain, verify and record information that identifies the Borrower
and Guarantors, which information includes the name and address of each Borrower
and Guarantor and other information that will allow such Lender to identify such
Borrower or Guarantor in accordance with the Act.

SECTION 14.20 [Intentionally omitted.]

SECTION 14.21 Independent Effect of Covenants. Each of the Borrower and the
other Credit Parties expressly acknowledges and agrees that each covenant
contained in Article VIII, IX, X or XI hereof shall be given independent effect.
Accordingly, each of the Borrower and the other Credit Parties shall not engage
in any transaction or other act otherwise permitted under any covenant contained
in Article VIII, IX, X or XI if, before or after giving effect to such
transaction or act, the Borrower or such other Credit Party shall or would be in
breach of any other covenant contained in Article VIII, IX, X or XI.

SECTION 14.22 [Intentionally omitted.]

 

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SECTION 14.23 Inconsistencies with Other Documents. In the event there is a
conflict or inconsistency between this Agreement and any other Loan Document,
the terms of this Agreement shall control; provided that any provision of the
Security Documents which imposes additional burdens on the Borrower or any of
its Subsidiaries or further restricts the rights of the Borrower or any of its
Subsidiaries or gives the Administrative Agent or Lenders additional rights
shall not be deemed to be in conflict or inconsistent with this Agreement and
shall be given full force and effect.

[Signature pages to follow]

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its duly authorized officer(s) as of the day and year first written
above.

 

THE CREDIT PARTIES:

FOSSIL, INC.,

as the Borrower

By:  

/s/ Mike L. Kovar

Name:  

Mike L. Kovar

Title:  

Executive Vice President

and Chief Financial Officer

FOSSIL INTERMEDIATE, INC.,

as a Credit Party and a Subsidiary Guarantor

By:  

/s/ Mike L. Kovar

Name:  

Mike L. Kovar

Title:  

Treasurer

FOSSIL TRUST,

as a Credit Party and a Subsidiary Guarantor

By:  

/s/ Mike L. Kovar

Name:  

Mike L. Kovar

Title:  

Treasurer

FOSSIL PARTNERS, L.P.,

as a Credit Party

By:  

Fossil, Inc.

Title:  

General Partner

 

By:

 

/s/ Mike L. Kovar

 

Name:

  Mike L. Kovar  

Title:

  Treasurer

ARROW MERCHANDISING, INC.,

as a Credit Party

By:  

/s/ Mike L. Kovar

Name:  

Mike L. Kovar

Title:  

Treasurer

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

 

FOSSIL STORES I, INC., as a Credit Party and a Subsidiary Guarantor By:  

/s/ Mike L. Kovar

Name:   Mike L. Kovar Title:   Treasurer

FOSSIL HOLDINGS, LLC,

as a Credit Party

By:  

/s/ Mike L. Kovar

Name:   Mike L. Kovar Title:   Manager

FOSSIL INTERNATIONAL HOLDINGS, INC.,

as a Credit Party and a Subsidiary Guarantor

By:  

/s/ Mike L. Kovar

Name:   Mike L. Kovar Title:   Treasurer

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

 

THE ADMINISTRATIVE AGENT AND THE LENDERS:

WELLS FARGO BANK, NATIONAL ASSOCIATION

as the Administrative Agent, the Swingline Lender, the Issuing Lender and a
Lender

By:  

/s/ Thomas J. Krueger

Name:   Thomas J. Krueger Title:   Senior Vice President

BANK OF AMERICA, N.A.,

as a Lender

By:  

/s/ Allison W. Connally

Name:   Allison W. Connally Title:   Vice President