Exhibit 10.1

 

EXECUTION VERSION

 

 

SUMMER INFANT, INC., and

 

SUMMER INFANT (USA), INC.,

 

as Borrowers, and

 

THE GUARANTORS FROM TIME TO TIME PARTY HERETO

 

 

LOAN AND SECURITY AGREEMENT

 

Dated as of February 28, 2013

 

$80,000,000

 

 

CERTAIN FINANCIAL INSTITUTIONS,

 

as Lenders

 

and

 

BANK OF AMERICA, N.A.,

 

as Agent

 

and

 

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

 

as Sole Lead Arranger and Sole Book Runner

 

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

SECTION 1.

DEFINITIONS; RULES OF CONSTRUCTION

1

 

 

 

1.1.

Definitions

1

1.2.

Accounting Terms

26

1.3.

Uniform Commercial Code and PPSA

26

1.4.

Certain Matters of Construction

26

1.5.

Currency Equivalents

27

 

 

 

SECTION 2.

CREDIT FACILITIES

28

 

 

 

2.1.

Commitment

28

2.2.

[Intentionally deleted]

29

2.3.

Letter of Credit Facility

29

 

 

 

SECTION 3.

INTEREST, FEES AND CHARGES

31

 

 

 

3.1.

Interest

31

3.2.

Fees

32

3.3.

Computation of Interest, Fees, Yield Protection

33

3.4.

Reimbursement Obligations

33

3.5.

Illegality

33

3.6.

Inability to Determine Rates

33

3.7.

Increased Costs; Capital Adequacy

34

3.8.

Mitigation

35

3.9.

Funding Losses

35

3.10.

Maximum Interest

35

 

 

 

SECTION 4.

LOAN ADMINISTRATION

35

 

 

 

4.1.

Manner of Borrowing and Funding Revolver Loans

35

4.2.

Defaulting Lender

37

4.3.

Number and Amount of LIBOR Loans; Determination of Rate

37

4.4.

Borrower Agent

37

4.5.

One Obligation

38

4.6.

Effect of Termination

38

 

 

 

SECTION 5.

PAYMENTS

38

 

 

 

5.1.

General Payment Provisions

38

5.2.

Repayment of Revolver Loans

38

5.3.

[Intentionally deleted]

38

5.4.

Payment of Other Obligations

38

 

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5.5.

Marshaling; Payments Set Aside

38

5.6.

Application and Allocation of Payments

39

5.7.

Dominion Accounts

40

5.8.

Account Stated

40

5.9.

Taxes

40

5.10.

Lender Tax Information

41

5.11.

Nature and Extent of Each Borrower’s Liability

41

 

 

 

SECTION 6.

CONDITIONS PRECEDENT

43

 

 

 

6.1.

Conditions Precedent to Initial Loans

43

6.2.

Conditions Precedent to All Credit Extensions

45

 

 

 

SECTION 7.

COLLATERAL

45

 

 

 

7.1.

Grant of Security Interest

45

7.2.

Lien on Deposit Accounts; Cash Collateral

46

7.3.

Real Estate Collateral

46

7.4.

Other Collateral

47

7.5.

No Assumption of Liability

47

7.6.

Further Assurances

47

 

 

 

SECTION 8.

COLLATERAL ADMINISTRATION

47

 

 

 

8.1.

Borrowing Base Certificates

47

8.2.

Administration of Accounts

47

8.3.

Administration of Inventory

48

8.4.

Administration of Equipment

49

8.5.

Administration of Deposit Accounts

49

8.6.

General Provisions

49

8.7.

Power of Attorney

50

 

 

 

SECTION 9.

REPRESENTATIONS AND WARRANTIES

51

 

 

 

9.1.

General Representations and Warranties

51

9.2.

Complete Disclosure

56

 

 

 

SECTION 10.

COVENANTS AND CONTINUING AGREEMENTS

56

 

 

 

10.1.

Affirmative Covenants

56

10.2.

Negative Covenants

59

10.3.

Financial Covenants

63

10.4.

Restrictions on Activities of Company

63

10.5.

Restrictions on Activities of Foreign Subsidiaries

63

 

 

 

SECTION 11.

EVENTS OF DEFAULT; REMEDIES ON DEFAULT

64

 

 

 

11.1.

Events of Default

64

 

2

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11.2.

Remedies upon Default

65

11.3.

License

66

11.4.

Setoff

66

11.5.

Remedies Cumulative; No Waiver

66

 

 

 

SECTION 12.

AGENT

67

 

 

 

12.1.

Appointment, Authority and Duties of Agent

67

12.2.

Agreements Regarding Collateral and Borrower Materials

68

12.3.

Reliance By Agent

68

12.4.

Action Upon Default

68

12.5.

Ratable Sharing

69

12.6.

Indemnification

69

12.7.

Limitation on Responsibilities of Agent

69

12.8.

Successor Agent and Co-Agents

69

12.9.

Due Diligence and Non-Reliance

70

12.10.

Remittance of Payments and Collections

70

12.11.

Individual Capacities

71

12.12.

Titles

71

12.13.

Bank Product Providers

71

12.14.

No Third Party Beneficiaries

71

 

 

 

SECTION 13.

BENEFIT OF AGREEMENT; ASSIGNMENTS

71

 

 

 

13.1.

Successors and Assigns

71

13.2.

Participations

71

13.3.

Assignments

72

13.4.

Replacement of Certain Lenders

73

 

 

 

SECTION 14.

THE GUARANTEE

73

 

 

 

14.1.

Guarantee

73

14.2.

Obligations Unconditional

73

14.3.

Reinstatement

74

14.4.

Subrogation

74

14.5.

Remedies

74

14.6.

Instrument for the Payment of Money

75

14.7.

Continuing Guarantee

75

14.8.

General Limitation on Amount of Obligations Guaranteed

75

14.9.

Joint Enterprise

75

14.10.

Subordination

75

14.11.

Conflicts with Canadian Guaranty or UK Guaranty

75

 

3

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SECTION 15.

MISCELLANEOUS

75

 

 

 

15.1.

Consents, Amendments and Waivers

75

15.2.

Indemnity

76

15.3.

Notices and Communications

76

15.4.

Performance of Obligors’ Obligations

77

15.5.

Credit Inquiries

77

15.6.

Severability

78

15.7.

Cumulative Effect; Conflict of Terms

78

15.8.

Counterparts

78

15.9.

Entire Agreement

78

15.10.

Relationship with Lenders

78

15.11.

No Advisory or Fiduciary Responsibility

78

15.12.

Confidentiality

78

15.13.

GOVERNING LAW

79

15.14.

Consent to Forum

79

15.15.

Waivers by Obligors

79

15.16.

Patriot Act Notice

80

15.17.

Intercreditor Agreement.

80

 

LIST OF EXHIBITS AND SCHEDULES

 

Exhibit A

 

Assignment and Acceptance

Exhibit B

 

Assignment Notice

 

 

 

Schedule 1.1(a)

 

Commitments of Lenders

Schedule 1.1(b)

 

Accruals

Schedule 8.5

 

Deposit Accounts

Schedule 8.6.1

 

Business Locations

Schedule 9.1.4

 

Names and Capital Structure

Schedule 9.1.5

 

Title to Properties; Liens

Schedule 9.1.8

 

Surety Obligations

Schedule 9.1.11

 

Patents, Trademarks, Copyrights and Licenses

Schedule 9.1.13

 

Compliance with Laws

Schedule 9.1.14

 

Environmental Matters

Schedule 9.1.15

 

Restrictive Agreements

Schedule 9.1.16

 

Litigation

Schedule 9.1.18

 

Pension Plans

Schedule 9.1.20

 

Labor Contracts

Schedule 10.2.2

 

Permitted Liens

Schedule 10.2.17

 

Existing Affiliate Transactions

 

4

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LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT is dated as of February 28, 2013, among SUMMER
INFANT, INC., a Delaware corporation (the “Company”), SUMMER INFANT (USA), INC.,
a Rhode Island corporation (“SI USA”, and together with Company, collectively,
“Borrowers”), THE GUARANTORS FROM TIME TO TIME PARTY HERETO, the financial
institutions party to this Agreement from time to time as lenders (collectively,
“Lenders”), BANK OF AMERICA, N.A., a national banking association, as agent for
the Lenders (“Agent”) and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as
Sole Lead Arranger and Sole Bookrunner (“Arranger”).

 

R E C I T A L S:

 

Borrowers have requested that Lenders provide a credit facility to Borrowers to
finance their mutual and collective business enterprise of the Borrowers and the
other Obligors.  Lenders are willing to provide the credit facility on the terms
and conditions set forth in this Agreement.

 

NOW, THEREFORE, for valuable consideration hereby acknowledged, the parties
agree as follows:

 

SECTION 1.                         DEFINITIONS; RULES OF CONSTRUCTION

 

1.1.                            Definitions.  As used herein, the following
terms have the meanings set forth below:

 

Account: as defined in the UCC (or, with respect to any account receivable of
any Canadian Guarantor to which the PPSA is applicable, as defined in the PPSA
or, with respect to any UK Guarantor, Book Debts), including all rights to
payment for goods sold or leased, or for services rendered.

 

Account Debtor: a Person obligated under an Account, Chattel Paper, General
Intangible or Intangible.

 

Accounts Formula Amount: 85% of the Value of Eligible Accounts, provided that
the Agent shall have the right, in its Permitted Discretion, to reduce such
percentage at any time upon three (3) Business Days prior notice to the Borrower
Agent.

 

Acquisition: a transaction or series of transactions resulting in
(a) acquisition of a business, division, or substantially all assets of a
Person; (b) record or beneficial ownership of 50% or more of the Equity
Interests of a Person; or (c) merger, consolidation or combination of a Borrower
or Subsidiary with another Person.

 

Affiliate: with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified.  “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise.  “Controlling” and
“Controlled” have correlative meanings.

 

Agent Indemnitees: Agent and its officers, directors, employees, Affiliates,
agents and attorneys.

 

Agent Professionals: attorneys, accountants, appraisers, auditors, business
valuation experts, environmental engineers or consultants, turnaround
consultants, and other professionals and experts retained by Agent.

 

Agreement Currency: as defined in Section 1.5.

 

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Allocable Amount: as defined in Section 5.11.3.

 

Anti-Terrorism Law: any law relating to terrorism or money laundering, including
the Patriot Act, the Proceeds of Crime Act and the UK Anti-Terrorism Laws.

 

Applicable Law: all laws, rules, regulations and governmental guidelines
applicable to the Person, conduct, transaction, agreement or matter in question,
including all applicable statutory law, common law and equitable principles, and
all provisions of constitutions, treaties, statutes, rules, regulations, orders
and decrees of Governmental Authorities, and including, without limitation, the
CPSC Regulations.

 

Applicable Margin: with respect to any Type of Loan, the margin set forth below,
as determined for the most recently ended Fiscal Quarter:

 

Level

 

Average Quarterly
Availability

 

Base Rate
Revolver
Loans

 

LIBOR
Revolver
Loans

 

I

 

> $22,000,000

 

0.25

%

1.75

%

II

 

< $22,000,000 but > $16,000,000

 

0.50

%

2.00

%

III

 

< $16,000,000

 

0.75

%

2.25

%

 

Until August 1, 2013, margins shall be determined as if Level II were
applicable.  Thereafter, the margins shall be determined based upon Average
Quarterly Availability for each Fiscal Quarter as determined by Agent based upon
the Borrowing Base Certificates delivered pursuant to Section 8.1 for each week
during such Fiscal Quarter, which determination shall be effective on the first
day of the calendar month after receipt by Agent of the Borrowing Base
Certificate for the last week in such Fiscal Quarter.  If any financial
statement, Borrowing Base Certificate or Compliance Certificate due in the
preceding month has not been received, then, at the option of Agent or Required
Lenders, the margins shall be determined as if Level III were applicable, from
such day until the first day of the calendar month following actual receipt.

 

Approved Fund: any Person (other than a natural person) that is engaged in
making, purchasing, holding or otherwise investing in commercial loans and
similar extensions of credit in its ordinary course of activities, and is
administered or managed by a Lender, an entity that administers or manages a
Lender, or an Affiliate of either.

 

Approved Processors:  collectively, Port Erie Plastics, Inc., TNT Plastic
Molding, Inc., AMA Plastics, Norco Plastics, Inc., and such other processors as
Agent shall approve from time to time in its Permitted Discretion.

 

Asset Disposition: a sale, lease, license, consignment, transfer or other
disposition of Property of an Obligor, including a disposition of Property in
connection with a sale-leaseback transaction or synthetic lease.

 

Assignment and Acceptance: an assignment agreement between a Lender and Eligible
Assignee, in the form of Exhibit A.

 

Availability: at any time, (a) the lesser of (i) the Total Commitment Amount at
such time and (ii) the Borrowing Base, at such time minus (b) the Revolver
Exposure at such time.

 

Availability Reserve: the sum (without duplication) of (a) the Inventory
Reserve; (b) the Rent and Charges Reserve; (c) reserves for accrued and unpaid
Royalties, whether or not then due and payable;

 

2

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(d) the Bank Product Reserve; (e) the Canadian Priority Payables Reserve;
(f) the UK Priority Payables Reserve; (g) the Dilution Reserve; (h) reserves for
amounts owed by any Obligor to any processor (including, without limitation, the
Approved Processors); (i) the aggregate amount of liabilities secured by Liens
upon Collateral that are senior to Agent’s Liens (but imposition of any such
reserve shall not waive an Event of Default arising therefrom); and (j) such
additional reserves, in such amounts and with respect to such matters, as Agent
in its Permitted Discretion may elect to impose from time to time.

 

Average Availability: the average daily Availability for an applicable period.

 

Average Quarterly Availability: the average daily Availability for the
applicable Fiscal Quarter.

 

Bank of America: Bank of America, N.A., a national banking association, and its
successors and assigns.

 

Bank of America Indemnitees: Bank of America and its officers, directors,
employees, Affiliates, agents and attorneys.

 

Bank Product: any of the following products, services or facilities extended to
any Borrower or Subsidiary by a Lender or any of its Affiliates: (a) Cash
Management Services; (b) foreign exchange products or services; (c) products
under Hedging Agreements; (d) commercial credit card and merchant card services;
and (e) other banking products or services as may be requested by any Borrower
or Subsidiary, other than Letters of Credit.

 

Bank Product Reserve: the aggregate amount of reserves established by Agent from
time to time in its Permitted Discretion in respect of Secured Bank Product
Obligations.

 

Bankruptcy Code: Title 11 of the United States Code.

 

Base Rate: for any day, a per annum rate equal to the greater of (a) the Prime
Rate for such day; (b) the Federal Funds Rate for such day, plus 0.50%; or
(c) LIBOR for a 30 day interest period as determined on such day, plus 1.5%.

 

Base Rate Loan: any Loan that bears interest based on the Base Rate.

 

Base Rate Revolver Loan: a Revolver Loan that bears interest based on the Base
Rate.

 

Board of Governors: the Board of Governors of the Federal Reserve System.

 

Book Debts:  as defined in the UK Security Agreements.

 

Borrowed Money: with respect to any Obligor, without duplication, its (a) Debt
that (i) arises from the lending of money by any Person to such Obligor, (ii) is
evidenced by notes, drafts, bonds, debentures, credit documents or similar
instruments, (iii) accrues interest or is a type upon which interest charges are
customarily paid (excluding trade payables owing in the Ordinary Course of
Business), or (iv) was issued or assumed as full or partial payment for
Property; (b) Capital Leases; (c) reimbursement obligations with respect to
letters of credit; and (d) guaranties of any Debt of the foregoing types owing
by another Person.

 

Borrower Agent: as defined in Section 4.4.

 

Borrower Materials: Borrowing Base information, reports, financial statements
and other materials delivered by Borrowers hereunder, as well as other Reports
and information provided by Agent to Lenders.

 

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Borrowing: a group of Loans of one Type that are made on the same day or are
converted into Loans of one Type on the same day.

 

Borrowing Base: on any date of determination, an amount equal to the sum of
(a) the Accounts Formula Amount, plus (b) the Inventory Formula Amount, minus
(c) the Availability Reserve established by Agent in its Permitted Discretion,
provided, however, that (i) Eligible In-Transit Inventory shall in no event
contribute more than $7,000,000 (after giving effect to the Inventory Formula
Amount) to the Borrowing Base at any time and (ii) Eligible Accounts owing to
and Eligible Inventory held by the UK Guarantors shall not contribute more than
an aggregate of $6,000,000 (after giving effect to the Account Formula Amount
and Inventory Formula Amount, respectively) to the Borrowing Base at any time. 
If any amount in this definition is stated in a currency other than Dollars on
any date, then such amount on such date shall be equal to the Dollar Equivalent
of such amount in such other currency.

 

Borrowing Base Certificate: a certificate, in form and substance satisfactory to
Agent, by which Borrowers certify calculation of the Borrowing Base.

 

Business Day: any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the laws of, or are in fact
closed in, North Carolina and New York, and (i) if such day relates to a LIBOR
Loan, any such day on which dealings in Dollar deposits are conducted between
banks in the London interbank Eurodollar market or (ii) if the term “Business
Day” has a different meaning in the Canadian Security Agreements or the UK
Security Agreements, the definition in such other document shall control as to
issues covered in both this Agreement and such other document.

 

Canadian Benefit Plans:  all employee benefit plans, programs or arrangements of
any nature or kind whatsoever that are not Canadian Pension Plans or Canadian
MEPPs and are maintained or contributed to by, or to which there is any
liability, contingent or otherwise by, any Obligor or its Subsidiaries which are
governed by Canadian Applicable Law.

 

Canadian Dollars:  lawful money of Canada.

 

Canadian Guarantor:  each Canadian Subsidiary that guarantees payment or
performance of the Obligations.  The definition of “Canadian Guarantors” means
all of such entities collectively.

 

Canadian Guaranty:  that certain Guarantee and Indemnity Agreement of even date
herewith made by the Canadian Guarantor, as may be amended, restated or
otherwise modified from time to time.

 

Canadian MEPP:  any “multi-employer pension plan” as such term is defined in the
PBA to which any Obligor or its Subsidiaries has any liability, contingent or
otherwise.

 

Canadian Pension Plan:  a pension plan that is required to be registered as a
pension plan under any applicable pension benefits standards statute or tax
statute or regulation in Canada that any Obligor or its Subsidiaries has any
liability, contingent or otherwise which are governed by Canadian Applicable
Law.

 

Canadian Priority Payables Reserve: on any date of determination, reserves
established by Agent in its Permitted Discretion for amounts payable by Canadian
Guarantors and secured by any Liens, choate or inchoate, which rank or which
would reasonably be expected to rank in priority to or pari passu with Agent’s
Liens on Collateral in the Borrowing Base, amounts deemed to be held in trust,
or held in trust, pursuant to Applicable Law and/or for amounts which represent
costs in connection with the preservation, protection, collection or realization
of the Collateral, including, without limitation, any such amounts due and not
paid for wages, vacation pay, amounts (including severance pay) payable under
the Wage Earner Protection Program Act (Canada) or under the Bankruptcy and
Insolvency Act (Canada), amounts due and not paid under any legislation relating
to workers’ compensation or to employment insurance, all

 

4

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amounts deducted or withheld and not paid and remitted when due under the Income
Tax Act (Canada), sales tax, goods and services tax, value added tax, harmonized
tax, excise tax, tax payable pursuant to Part IX of the Excise Tax Act (Canada)
or similar applicable provincial legislation, government royalties, amounts
currently or past due and not paid for realty, municipal or similar taxes and
all amounts currently or past due and not contributed, remitted or paid to any
Canadian Pension Plan or Canadian Benefit Plan under the Canada Pension Plan,
the PBA, or any similar statutory or other claims that would have or would
reasonably be expected to have priority over or pari passu with any Liens
granted to Agent in the future.

 

Canadian Security Agreements:  (a) the General Security Agreement dated as of
the date hereof, in form and substance reasonably acceptable to Agent, executed
by the Canadian Guarantors in favor of Agent, as the same may be amended,
restated or supplemented from time to time, and (b) any other Canadian security
agreement required to be executed by any Obligor in favor of Agent after the
Closing Date, in each case, as the same may be amended, restated or supplemented
from time to time.

 

Canadian Subsidiary:  any Subsidiary of Company that is organized under the
federal laws of Canada or any province or territory thereof.

 

Capital Expenditures: all liabilities incurred or expenditures made by a
Borrower or Subsidiary for the acquisition of fixed assets, or any improvements,
replacements, substitutions or additions thereto with a useful life of more than
one year.

 

Capital Lease: any lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, provided, however, notwithstanding
anything to the contrary in the financial statements of the Obligors, the Lease
dated March 24, 2009 between Faith Realty II, LLC and SI USA shall not
constitute a “Capital Lease” for purposes of this Agreement.

 

Cash Collateral: cash, and any interest or other income earned thereon, that is
delivered to Agent to Cash Collateralize any Obligations.

 

Cash Collateral Account: a demand deposit, money market or other account
established by Agent at such financial institution as Agent may select in its
discretion, which account shall be subject to a Lien in favor of Agent.

 

Cash Collateralize: the delivery of cash to Agent, as security for the payment
of Obligations, in an amount equal to (a) with respect to LC Obligations, 105%
of the aggregate LC Obligations, and (b) with respect to any inchoate,
contingent or other Obligations (including Secured Bank Product Obligations),
Agent’s good faith estimate of the amount that is due or could become due,
including all fees and other amounts relating to such Obligations.  “Cash
Collateralization” has a correlative meaning.

 

Cash Dominion Period: the period (a) commencing on the day that an Default
occurs, or Availability is less than the Cash Dominion Trigger Amount; and
(b) continuing until (x) no Event of Default shall have occurred and be
continuing and (y) during the preceding 30 consecutive days, Availability shall
have been greater than the Cash Dominion Trigger Amount at all times.

 

Cash Dominion Trigger Amount:  an amount equal to 15% of the lesser of (A) the
Total Commitment Amount and (B) the Borrowing Base.

 

Cash Equivalents: (a) marketable obligations issued or unconditionally
guaranteed by, and backed by the full faith and credit of, the United States,
Canadian, the United Kingdom or English government, maturing within 12 months of
the date of acquisition; (b) certificates of deposit, time deposits and bankers’
acceptances maturing within 12 months of the date of acquisition, and overnight
bank deposits, in each case which are issued by Bank of America or a commercial
bank organized under the laws of the

 

5

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United States, Canada, the United Kingdom or England or any state, province or
district thereof, rated A-1 (or better) by S&P or P-1 (or better) by Moody’s at
the time of acquisition, and (unless issued by a Lender) not subject to offset
rights; (c) repurchase obligations with a term of not more than 30 days for
underlying investments of the types described in clauses (a) and (b) entered
into with any bank described in clause (b); (d) commercial paper issued by Bank
of America or rated A-1 (or better) by S&P or P-1 (or better) by Moody’s, and
maturing within nine months of the date of acquisition; and (e) shares of any
money market fund that has substantially all of its assets invested continuously
in the types of investments referred to above, has net assets of at least
$500,000,000 and has the highest rating obtainable from either Moody’s or S&P.

 

Cash Management Services: any services provided from time to time by Bank of
America or any of its Affiliates to any Borrower or Subsidiary in connection
with operating, collections, payroll, trust, or other depository or disbursement
accounts, including automated clearinghouse, e-payable, electronic funds
transfer, wire transfer, controlled disbursement, overdraft, depository,
information reporting, lockbox and stop payment services.

 

CERCLA: the Comprehensive Environmental Response Compensation and Liability Act
(42 U.S.C. § 9601 et seq.).

 

Change in Law: the occurrence, after the date hereof, of (a) the adoption,
taking effect or phasing in 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; or (c) the making, issuance or
application of any request, guideline, requirement or directive (whether or not
having the force of law) by any Governmental Authority; provided, however, that
“Change in Law” shall include, regardless of the date enacted, adopted or
issued, all requests, guidelines, requirements or directives (i) under or
relating to the Dodd-Frank Wall Street Reform and Consumer Protection Act, or
(ii) promulgated pursuant to Basel III by the Bank of International Settlements,
the Basel Committee on Banking Supervision (or any similar authority) or any
other Governmental Authority.

 

Change of Control: an event or series of events by which:

 

(a)           any “person” or “group” (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any
employee benefit plan of such person or its subsidiaries, and any person or
entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) becomes the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a
person or group shall be deemed to have “beneficial ownership” of all securities
that such person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time (such right, an
“option right”)), directly or indirectly, of 35% or more of the Equity Interests
of a Borrower entitled to vote for members of the board of directors or
equivalent governing body of such Borrower on a fully-diluted basis (and taking
into account all such Equity Interests that such person or group has the right
to acquire pursuant to any option right);

 

(b)                                 during any period of 12 consecutive months,
a majority of the members of the board of directors or other equivalent
governing body of a Borrower cease to be composed of individuals (i) who were
members of that board or equivalent governing body on the first day of such
period, (ii) whose election or nomination to that board or equivalent governing
body was approved by individuals referred to in clause (i) above constituting at
the time of such election or nomination at least a majority of that board or
equivalent governing body or (iii) whose election or nomination to that board or
other equivalent governing body was approved by individuals referred to in
clauses (i) and (ii) above constituting at the time of such election or
nomination at least a majority of that board or equivalent governing body
(excluding, in the case of both clause (ii) and clause (iii), any individual
whose initial nomination for, or assumption of office as, a

 

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member of that board or equivalent governing body occurs as a result of an
actual or threatened solicitation of proxies or consents for the election or
removal of one or more directors by any person or group other than a
solicitation for the election of one or more directors by or on behalf of the
board of directors);

 

(c)                                  the passage of thirty days from the date
upon which any Person or two or more Persons acting in concert shall have
acquired by contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation thereof, will result in its or their
acquisition of the power to exercise, directly or indirectly, a controlling
influence over the management or policies of a Borrower, or control over the
Equity Interests of a Borrower entitled to vote for members of the board of
directors or equivalent governing body of such Borrower on a fully-diluted basis
(and taking into account all such Equity Interests that such Person or group has
the right to acquire pursuant to any option right) representing 35% or more of
the combined voting power of such Equity Interests;

 

(d)                                 a Borrower ceases to own, directly or
indirectly 100% of the Equity Interests of any Guarantor;

 

(e)                                  the sale or transfer of all or
substantially all of an Obligor’s assets except to another Obligor; or

 

(f)                                   a “Change of Control” occurs under the
Permitted Term Debt Documents.

 

Claims: all claims, liabilities, obligations, losses, damages, penalties,
judgments, proceedings, interest, costs and expenses of any kind (including
remedial response costs, reasonable attorneys’ fees and Extraordinary Expenses)
at any time (including after Full Payment of the Obligations or replacement of
Agent or any Lender) incurred by any Indemnitee or asserted against any
Indemnitee by any Obligor or other Person, in any way relating to (a) any Loans,
Letters of Credit, Loan Documents, Borrower Materials, or the use thereof or
transactions relating thereto, (b) any action taken or omitted in connection
with any Loan Documents, (c) the existence or perfection of any Liens, or
realization upon any Collateral, (d) exercise of any rights or remedies under
any Loan Documents or Applicable Law, or (e) failure by any Obligor to perform
or observe any terms of any Loan Document, in each case including all costs and
expenses relating to any investigation, litigation, arbitration or other
proceeding (including an Insolvency Proceeding or appellate proceedings),
whether or not the applicable Indemnitee is a party thereto.

 

Closing Date: as defined in Section 6.1.

 

Code: the Internal Revenue Code of 1986, as amended.

 

Collateral: all Property described in Section 7.1, all Property described in any
Security Documents as security for any Obligations, and all other Property that
now or hereafter secures (or is intended to secure) any Obligations.

 

Commitment: for any Lender, its obligation to make Revolver Loans and to
participate in LC Obligations up to the maximum principal amount shown on
Schedule 1.1(a), as hereafter modified pursuant to an Assignment and Acceptance
to which it is a party.  “Commitments” means the commitments of all Lenders.

 

Commitment Termination Date: the earliest to occur of (a) the Revolver
Termination Date; (b) the date on which Borrowers terminate the Commitments
pursuant to Section 2.1.4; or (c) the date on which the Commitments are
terminated pursuant to Section 11.2.

 

Company:  as defined in the Preamble hereto.

 

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Compliance Certificate: a certificate, in form and substance satisfactory to
Agent, by which Borrowers certify compliance with Sections 10.2.3 and 10.3.

 

Contingent Obligation: any obligation of a Person arising from a guaranty,
indemnity or other assurance of payment or performance of any Debt, lease,
dividend or other obligation (“primary obligations”) of another obligor
(“primary obligor”) in any manner, whether directly or indirectly, including any
obligation of such Person under any (a) guaranty, endorsement, co-making or sale
with recourse of an obligation of a primary obligor; (b) obligation to make
take-or-pay or similar payments regardless of nonperformance by any other party
to an agreement; and (c) arrangement (i) to purchase any primary obligation or
security therefor, (ii) to supply funds for the purchase or payment of any
primary obligation, (iii) to maintain or assure working capital, equity capital,
net worth or solvency of the primary obligor, (iv) to purchase Property or
services for the purpose of assuring the ability of the primary obligor to
perform a primary obligation, or (v) otherwise to assure or hold harmless the
holder of any primary obligation against loss in respect thereof.  The amount of
any Contingent Obligation shall be deemed to be the stated or determinable
amount of the primary obligation (or, if less, the maximum amount for which such
Person may be liable under the instrument evidencing the Contingent Obligation)
or, if not stated or determinable, the maximum reasonably anticipated liability
with respect thereto.

 

Contribution Notice:  a contribution notice issued by the Pensions Regulator
under section 38 or section 47 of the Pensions Act 2004.

 

CPSC: means the U.S. Consumer Products Safety Commission.

 

CPSC Regulations: means all laws and regulations enforced by the CPSC.

 

CWA: the Clean Water Act (33 U.S.C. §§ 1251 et seq.).

 

Debt: as applied to any Person, without duplication, (a) all items that would be
included as liabilities on a balance sheet in accordance with GAAP, including
Capital Leases, but excluding trade payables incurred and being paid in the
Ordinary Course of Business; (b) all Contingent Obligations; (c) all
reimbursement obligations in connection with letters of credit issued for the
account of such Person; and (d) in the case of any Obligor, the Obligations. 
The Debt of a Person shall include any recourse Debt of any partnership in which
such Person is a general partner or joint venturer.

 

Default: an event or condition that, with the lapse of time or giving of notice,
would constitute an Event of Default.

 

Default Rate: for any Obligation (including, to the extent permitted by law,
interest not paid when due), 2% plus the interest rate otherwise applicable
thereto.

 

Defaulting Lender: any Lender that, as determined by Agent, (a) has failed to
perform any funding obligations hereunder, and such failure is not cured within
three Business Days; (b) has notified Agent or any Borrower that such Lender
does not intend to comply with its funding obligations hereunder or has made a
public statement to the effect that it does not intend to comply with its
funding obligations hereunder or under any other credit facility; (c) has
failed, within three Business Days following request by Agent, to confirm in a
manner satisfactory to Agent that such Lender will comply with its funding
obligations hereunder; or (d) has, or has a direct or indirect parent company
that has, become the subject of an Insolvency Proceeding or taken any action in
furtherance thereof; provided, however, that a Lender shall not be a Defaulting
Lender solely by virtue of a Governmental Authority’s ownership of an equity
interest in such Lender or parent company.

 

Deposit Account Control Agreements: the Deposit Account control agreements to be
executed by each institution maintaining a Deposit Account for an Obligor, in
favor of Agent, as security for the

 

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Obligations.

 

Discharge of Term Obligations: as defined in the Intercreditor Agreement on the
Closing Date.

 

Dilution Reserve: a reserve in an amount equal to the sum of the following:
(a) the aggregate amount of accruals described on Schedule 1.1(b) attached
hereto established by the Company from time to time and reflected on the most
recent balance sheet of the Company and its Subsidiaries; and (b) an additional
amount determined by Agent in its Permitted Discretion from time to time based
upon the most recent field examination conducted by Agent, which additional
amount shall initially equal $1,000,000.

 

Distribution: any declaration or payment of a distribution, interest or dividend
on any Equity Interest (other than a rights distribution and/or payment-in-kind
by the Company); any distribution, advance or repayment of Debt to a holder of
Equity Interests; or any purchase, redemption, or other acquisition or
retirement for value of any Equity Interest.

 

Dollars: lawful money of the United States.

 

Dominion Account: a collection or similar account established by an Obligor at
Bank of America over which Agent has exclusive control for withdrawal purposes.

 

EBITDA: determined on a consolidated basis for Company and Subsidiaries, equal
to the aggregate of (a) net income, calculated before (i) interest expense,
(ii) provision for income taxes and (iii) depreciation and amortization expense;
plus (b) the sum (without duplication) of the following: (i) expenses, fees and
charges incurred in connection with the closing of the transactions contemplated
by this Agreement; (ii) non-cash charges resulting from the write-down of
goodwill, furniture, fixtures, equipment and software; (iii) non-cash charges
associated with the issuance and periodic re-measurement of Equity Interests in
the Company; (iv) non-cash losses attributable to deferred financing costs;
(v) non-cash losses attributable to fluctuations in currency values;
(vi) non-cash charges attributable to write-offs resulting from the exercise of
employee options to the extent permitted by this Agreement; (vii) non-cash
losses or charges resulting from the impact of purchase accounting adjustments
in connection with any Permitted Acquisition; (viii) other non-cash losses or
charges deducted in determining net income (including, without limitation,
non-cash losses or charges resulting from the application of Statement of
Financial Accounting Standards No. 142, Goodwill and other Intangible Assets
(FAS-142) and FAS-144, Accounting for Impairment of Long-Lived Assets);
(ix) losses attributable to the early retirement of Indebtedness (other than the
Obligations or the Permitted Term Debt); (x) transaction related fees and
expenses incurred in connection with any Permitted Asset Disposition or any
Permitted Acquisition, all as approved by Agent in its Permitted Discretion;
(xi) indemnification payments made by the Obligors and for which the Obligors
have received reimbursement from third parties; (xii) fees and expenses of
advisors and independent consultants retained by Obligors and approved by Agent
in its Permitted Discretion; (xiii) fees and expenses paid to members of the
Board of Directors of the Company in an aggregate amount not to exceed $500,000
during any twelve-month period; (xiv) restructuring charges; (xv) earn-out
payments and severance payments which, when taken together with amounts in
subsection (xiv) shall not exceed $1,000,000 in the aggregate in any
twelve-month period; and (xvi) losses arising from the sale of fixed or capital
assets; minus the sum (without duplication) of the following: (i) non-cash
income or gains resulting form the write-up of goodwill, furniture, fixtures,
equipment and software; (ii) non-cash income or gains attributable to
fluctuations in currency values; (iii) any other non-cash income or gains;
(iv) income or gains arising from the sale of fixed or capital assets;
(v) income or gains attributable to the early retirement of Indebtedness (other
than the Obligations or the Permitted Term Debt); (vi) any other non-recurring
or extraordinary gains (in each case, to the extent included in determining net
income).

 

Eligible Account: an Account owing to a Borrower or Guarantor that arises in the
Ordinary Course of Business from the sale of goods, is payable in Dollars,
Canadian Dollars or GBP and is deemed

 

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by Agent, in its Permitted Discretion, to be an Eligible Account.  Without
limiting the foregoing, no Account shall be an Eligible Account if (a) it is
unpaid for more than 60 days after the original due date, or more than 120 days
after the original invoice date; (b) 50% or more of the Accounts owing by the
Account Debtor are not Eligible Accounts; (c) when aggregated with other
Accounts owing by the Account Debtor and its Affiliates, it exceeds 15% of the
aggregate Eligible Accounts (or such higher percentage as Agent may establish
for the Account Debtor from time to time), provided, however, that this clause
(c) shall not apply to the following Account Debtors: (i) the Toys “R” Us
Companies, (ii) the Wal-Mart Companies or (iii) the Target Companies; (d) with
respect to any Account owing by the Toys “R” Us Companies, when aggregated with
other Accounts owing by the Toys “R” Us Companies, it exceeds 35% of the
aggregate Eligible Accounts, provided, however, that if, at any time, the
corporate credit rating of Toys “R” Us, Inc. falls below “B-” (by S&P or Fitch)
or “B3” (by Moody’s), the Agent shall have the right, in its sole discretion to
decrease such maximum percentage; (e) with respect to any Account owing by the
Wal-Mart Companies, when aggregated with other Accounts owing by the Wal-Mart
Companies, it exceeds 25% of the aggregate Eligible Accounts; (f) with respect
to any Account owing by the Target Companies, when aggregated with other
Accounts owing by the Target Companies, it exceeds 25% of the aggregate Eligible
Accounts; (g) it does not conform with a covenant or representation herein;
(h) it is owing by a creditor or supplier, or is otherwise subject to a
potential offset, counterclaim, dispute, deduction, discount, recoupment,
reserve, defense, chargeback, credit or allowance (but ineligibility shall be
limited to the amount thereof); (i) an Insolvency Proceeding has been commenced
by or against the Account Debtor; or the Account Debtor has failed, has
suspended or ceased doing business, is liquidating, dissolving or winding up its
affairs, is not Solvent, or is subject to any country sanctions program or
specially designated nationals list maintained by the Office of Foreign Assets
Control of the U.S. Treasury Department; or the Borrower is not able to bring
suit or enforce remedies against the Account Debtor through judicial process;
(j) the Account Debtor is organized or has its principal offices or assets
outside the United States, Canada or the United Kingdom, unless the Account is
(i) supported by a letter of credit (delivered to and directly drawable by
Agent) satisfactory in all respects to Agent; or (ii) is a Mexican subsidiary of
Target Corporation or Wal-Mart Stores, Inc. and the aggregate amount of all
Accounts deemed eligible by this clause (j)(ii) does not exceed $1,000,000 at
any time; (k) it is owing by a Governmental Authority, unless the Account Debtor
is the United States, Canada or any province or territory thereof or the United
Kingdom or any department, agency or instrumentality thereof and the Account has
been assigned to Agent in compliance with the federal Assignment of Claims Act
or other Applicable Law; (l) it is not subject to a duly perfected, first
priority Lien in favor of Agent, or is subject to any other Lien; (m) the goods
giving rise to it have not been delivered to the Account Debtor, or it otherwise
does not represent a final sale; (n) it is evidenced by Chattel Paper or an
Instrument of any kind, or has been reduced to judgment; (o) its payment has
been extended or the Account Debtor has made a partial payment; (p) it arises
from a sale to an Affiliate, from a sale on a cash-on-delivery, bill-and-hold,
sale-or-return, sale-on-approval, consignment, or other repurchase or return
basis, or from a sale for personal, family or household purposes; (q) it
represents a progress billing or retainage, or relates to services for which a
performance, surety or completion bond or similar assurance has been issued; or
(r) it includes a billing for interest, fees or late charges, but ineligibility
shall be limited to the extent thereof.  In calculating delinquent portions of
Accounts under clauses (a) and (b), credit balances more than 120 days old will
be excluded.

 

Eligible Assignee: a Person that is (a) a Lender, Affiliate of a Lender or
Approved Fund; (b) any other financial institution approved by Borrower Agent
(which approval shall not be unreasonably withheld or delayed, and shall be
deemed given if no objection is made within two Business Days after notice of
the proposed assignment) and Agent, which extends revolving credit facilities of
this type in its ordinary course of business; and (c) during any Event of
Default, any Person acceptable to Agent in its discretion.

 

Eligible In-Transit Inventory: Inventory owned by a Borrower or Guarantor that
would be Eligible Inventory if it were not subject to a Document and in transit
from a foreign location to a location of the Borrower or Guarantor within the
United States, Canada or the United Kingdom, and that Agent, in

 

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its Permitted Discretion, deems to be Eligible In-Transit Inventory.  Without
limiting the foregoing, no Inventory shall be Eligible In-Transit Inventory
unless it (a) is subject to a negotiable Document showing Agent (or, with the
consent of Agent, the applicable Borrower or Guarantor) as consignee, which
Document is in the possession of Agent or such other Person as Agent shall
approve; (b) is fully insured by marine cargo or other similar insurance, in
such amounts, with such insurance companies and subject to such deductibles as
are satisfactory to Agent and in respect of which Agent has been named as loss
payee; (c) is not sold by a vendor that has a right to reclaim, divert shipment
of, repossess, stop delivery, claim any reservation of title or otherwise assert
Lien rights against the Inventory, or with respect to whom any Borrower or
Guarantor is in default of any obligations; (d) is evidenced by a full set of
clean, original negotiable bills of lading consigned to the order of Agent and
such original bills of lading are in the possession of Agent or a customs broker
from whom Agent has received an executed Customs Broker Agreement with respect
to such inventory and title has passed to the Borrower or Guarantor at the time
such inventory is delivered to the common carrier; (e) is shipped by a common
carrier that is not affiliated with the vendor; and (f) is being handled by a
customs broker, freight-forwarder or other handler that has delivered a Lien
Waiver.

 

Eligible Inventory: Inventory owned by a Borrower or Guarantor that Agent, in
its Permitted Discretion, deems to be Eligible Inventory.  Without limiting the
foregoing, no Inventory shall be Eligible Inventory unless it (a) is finished
goods or raw materials, and not work-in-process, packaging or shipping
materials, labels, samples, display items, bags, replacement parts or
manufacturing supplies, provided that component parts and replacement parts
shall not be deemed ineligible under this clause (a) to the extent the most
recent inventory appraisal delivered to Agent ascribes a value to such component
parts and/or replacement parts (b) is not held on consignment, nor subject to
any deposit or down payment; (c) is in new and saleable condition and is not
damaged, defective, shopworn or otherwise unfit for sale; (d) is not
slow-moving, perishable, obsolete or unmerchantable, and does not constitute
returned or repossessed goods, provided that slow-moving or obsolete inventory
shall not be deemed ineligible under this clause (d) to the extent the most
recent inventory appraisal delivered to Agent ascribes a value to such
slow-moving or obsolete inventory; (e) meets all standards imposed by any
Governmental Authority, and does not constitute hazardous materials under any
Environmental Law; (f) conforms with the covenants and representations herein;
(g) is subject to Agent’s duly perfected, first priority Lien, and no other Lien
except for Liens in favor of the Permitted Term Agent as permitted by the
Intercreditor Agreement; (h) is within the continental United States, New
Brunswick or Ontario, Canada, or the United Kingdom, is not in transit except
between locations of Borrowers, unless such inventory constitutes Eligible
In-Transit Inventory and is not consigned to any Person; (i) is not subject to
any warehouse receipt or negotiable Document (other than Eligible In-Transit
Inventory subject to a Lien Waiver); (j) is not subject to any License or other
property or property right or other arrangement that restricts such Borrower’s
or Agent’s right to dispose of such Inventory, unless Agent has received an
appropriate Lien Waiver or is otherwise satisfied that it could sell such
inventory on favorable terms following a Default; (k) is not located on leased
premises or in the possession of a warehouseman, processor, repairman, mechanic,
shipper, freight forwarder or other Person, unless the lessor or such Person is
an Approved Processor and (i) has delivered a Lien Waiver or (ii) an appropriate
Rent and Charges Reserve has been established for such location; and (l) is
reflected in the details of a current perpetual inventory report.

 

Enforcement Action: any action to enforce any Obligations (other than Secured
Bank Product Obligations) or Loan Documents or to exercise any rights or
remedies relating to any Collateral (whether by judicial action, self-help,
notification of Account Debtors, exercise of setoff or recoupment, exercise of
any right to act in an Obligor’s Insolvency Proceeding or to credit bid
Obligations, or otherwise).

 

Environmental Laws: all Applicable Laws (including all programs, permits and
guidance promulgated by regulatory agencies), relating to public health (but
excluding occupational safety and health, to the extent regulated by OSHA) or
the protection or pollution of the environment, including CERCLA, RCRA and CWA.

 

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Environmental Notice: a notice (whether written or oral) from any Governmental
Authority or other Person of any possible noncompliance with, investigation of a
possible violation of, litigation relating to, or potential fine or liability
under any Environmental Law, or with respect to any Environmental Release,
environmental pollution or hazardous materials, including any complaint,
summons, citation, order, claim, demand or request for correction, remediation
or otherwise.

 

Environmental Release: a release as defined in CERCLA or under any other
Environmental Law.

 

Equity Interest: the interest of any (a) shareholder in a corporation;
(b) partner in a partnership (whether general, limited, limited liability or
joint venture); (c) member in a limited liability company; or (d) other Person
having any other form of equity security or ownership interest.

 

ERISA: the Employee Retirement Income Security Act of 1974.

 

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

 

ERISA Event: (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by any Obligor or ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by any Obligor or ERISA Affiliate from a Multiemployer Plan
or notification that a Multiemployer Plan is in reorganization; (d) the filing
of a notice of intent to terminate, the treatment of a Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan;
(e) the determination that any Pension Plan or Multiemployer Plan is considered
an at risk plan or a plan in critical or endangered status under the Code, ERISA
or the Pension Protection Act of 2006; (f) an event or condition which
constitutes grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan;
or (g) the imposition of any liability under Title IV of ERISA, other than for
PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any
Obligor or ERISA Affiliate.

 

Event of Default: as defined in Section 11.

 

Excluded Deposit Account: a Deposit Account maintained by any Obligor (a) which
has been established and is used exclusively for the sole purpose of making
payroll and withholding tax payments related thereto and other employee wage and
benefit payments to or for the benefit of such Obligor’s employees and accrued
and unpaid employee compensation (including salaries, wages, benefits and
expense reimbursements), (b) which is a zero balance operational disbursement or
similar account, (c) has been established and is used exclusively for the sole
purpose of making and remitting sales and use taxes, VAT and/or such Canadian
sales and use tax equivalents or (d) which is used for petty cash or similar
purposes so long as the amount on deposit (i) in each such individual Deposit
Account described in this clause (d) does not exceed $10,000 during any period
of seventy-two consecutive hours and (ii) in all Deposit Accounts referred to in
this clause (d) does not exceed $50,000 in the aggregate during any period of
seventy-two consecutive hours.

 

Excluded Tax: with respect to Agent, any Lender, Issuing Bank or any other
recipient of a payment to be made by or on account of any Obligation, (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

 

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other jurisdiction in which Borrower Agent is located; (c) any backup
withholding tax required by the Code to be withheld from amounts payable to a
Lender that has failed to comply with Section 5.10; (d) in the case of a Foreign
Lender, any United States withholding tax that is (i) required pursuant to laws
in force at the time such Lender becomes a Lender (or designates a new Lending
Office) hereunder, or (ii) attributable to such Lender’s failure or inability
(other than as a result of a Change in Law) to comply with Section 5.10, 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 Borrowers with respect to such withholding tax; and
(e) taxes imposed on it by reason of Section 1471 or 1472 of the Code.

 

Extraordinary Expenses: all costs, expenses or advances that Agent may incur
during a Default or Event of Default, or during the pendency of an Insolvency
Proceeding of an Obligor, including those relating to (a) any audit, inspection,
repossession, storage, repair, appraisal, insurance, manufacture, preparation or
advertising for sale, sale, collection, or other preservation of or realization
upon any Collateral; (b) any action, arbitration or other proceeding (whether
instituted by or against Agent, any Lender, any Obligor, any representative of
creditors of an Obligor or any other Person) in any way relating to any
Collateral (including the validity, perfection, priority or avoidability of
Agent’s Liens with respect to any Collateral), Loan Documents, Letters of Credit
or Obligations, including any lender liability or other Claims; (c) the
exercise, protection or enforcement of any rights or remedies of Agent in, or
the monitoring of, any Insolvency Proceeding; (d) settlement or satisfaction of
any taxes, charges or Liens with respect to any Collateral; (e) any Enforcement
Action; (f) negotiation and documentation of any modification, waiver, workout,
restructuring or forbearance with respect to any Loan Documents or Obligations;
and (g) Protective Advances.  Such costs, expenses and advances include transfer
fees, Other Taxes, storage fees, insurance costs, permit fees, utility
reservation and standby fees, legal fees, appraisal fees, brokers’ fees and
commissions, auctioneers’ fees and commissions, accountants’ fees, environmental
study fees, wages and salaries paid to employees of any Obligor or independent
contractors in liquidating any Collateral, and travel expenses.

 

Federal Funds Rate: (a) the weighted average of interest rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers on the applicable Business Day (or on the preceding
Business Day, if the applicable day is not a Business Day), as published by the
Federal Reserve Bank of New York on the next Business Day; or (b) if no such
rate is published on the next Business Day, the average rate (rounded up, if
necessary, to the nearest 1/8 of 1%) charged to Bank of America on the
applicable day on such transactions, as determined by Agent.

 

Fee Letter: that certain fee letter dated as of January 22, 2013 among Agent,
Arranger and Company as amended from time to time.

 

Financial Support Direction:  a financial support direction issued by the
Pensions Regulator under section 43 of the Pensions Act 2004.

 

Fiscal Quarter: each period of three months, commencing on the first day of a
Fiscal Year.

 

Fiscal Year: the fiscal year of Company and Subsidiaries for accounting and tax
purposes, ending on December 31 of each year.

 

Fixed Charge Coverage Ratio: the ratio, determined on a consolidated basis for
Company and Subsidiaries for the most recent four Fiscal Quarters, of (a) EBITDA
minus Capital Expenditures (except those financed with (i) Borrowed Money other
than Revolver Loans or (ii) proceeds of casualty events or the issuance of
Equity Interests to the extent such Capital Expenditures are made substantially
contemporaneously with the receipt of such proceeds) and cash taxes paid for
such period, to (b) Fixed Charge paid in cash during such period.

 

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Fixed Charges: the sum of interest expense (other than payment-in-kind),
principal payments made on Borrowed Money (including, without limitation,
Permitted Term Debt Payments), and Distributions made.

 

FLSA: the Fair Labor Standards Act of 1938.

 

Foreign Lender: any Lender that is organized under the laws of a jurisdiction
other than the laws of the United States, or any state or district thereof.

 

Foreign Plan: any employee benefit plan or arrangement (a) maintained or
contributed to by any Obligor or Subsidiary that is not subject to the laws of
the United States or Canada; or (b) mandated by a government other than the
United States, Canada or the United Kingdom for employees of any Obligor or
Subsidiary.

 

Foreign Subsidiary: a Subsidiary that is a “controlled foreign corporation”
under Section 957 of the Code, such that a guaranty by such Subsidiary of the
Obligations or a Lien on the assets of such Subsidiary to secure the Obligations
would result in material tax liability to Borrowers, provided, however, that SI
Canada and SI UK shall be deemed to not be Foreign Subsidiaries.

 

Fronting Exposure: a Defaulting Lender’s Pro Rata share of LC Obligations or
Swingline Loans, as applicable, except to the extent allocated to other Lenders
under Section 4.2.

 

Full Payment: with respect to any Obligations, (a) the full and indefeasible
cash payment thereof, including any interest, fees and other charges accruing
during an Insolvency Proceeding (whether or not allowed in the proceeding); and
(b) if such Obligations are LC Obligations or inchoate or contingent in nature,
Cash Collateralization thereof (or delivery of a standby letter of credit
acceptable to Agent in its discretion, in the amount of required Cash
Collateral).  No Loans shall be deemed to have been paid in full until all
Commitments related to such Loans have expired or been terminated.

 

GAAP: generally accepted accounting principles in effect in the United States
from time to time.

 

GBP: means the lawful currency of the United Kingdom of Great Britain and
Northern Ireland.

 

Governmental Approvals: all authorizations, consents, approvals, licenses and
exemptions of, registrations and filings with, and required reports to, all
Governmental Authorities.

 

Governmental Authority: any federal, state, provincial, territorial, municipal,
local, foreign or other agency, authority, body, commission, court,
instrumentality, political subdivision, or other entity or officer exercising
executive, legislative, judicial, regulatory or administrative functions for any
governmental, judicial, investigative, regulatory or self-regulatory authority,
in each case whether associated with the United States, a state, district or
territory thereof, Canada, a province or territory thereof, the United Kingdom
or a country thereof or any other foreign entity or government.

 

Guarantor Payment: as defined in Section 5.11.3.

 

Guarantors: SI Canada, SI UK and each other Person who guarantees payment or
performance of any Obligations.

 

Guaranty: each guaranty agreement executed by a Guarantor in favor of Agent,
including, without limitation, the Canadian Guaranty and the UK Guaranty.

 

Hedging Agreement: any “swap agreement” as defined in Section 101(53B)(A) of the
Bankruptcy Code.

 

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Indemnified Taxes: Taxes other than Excluded Taxes.

 

Indemnitees: Agent Indemnitees, Lender Indemnitees, Issuing Bank Indemnitees and
Bank of America Indemnitees.

 

Insolvency Law: collectively, the Bankruptcy Code, or any other insolvency,
debtor relief, debt adjustment or similar law (whether state, provincial,
territorial, federal or foreign), including, without limitation, the Bankruptcy
and Insolvency Act (Canada), the Companies Creditors Arrangement Act (Canada)
and the Insolvency Act 1986 (UK).

 

Insolvency Proceeding: any case or proceeding commenced by or against a Person
under any state, federal or foreign law for, or any agreement of such Person to,
(a) the entry of an order for relief under any Insolvency Law; (b) the
appointment of a receiver, trustee, liquidator, administrator, conservator or
other custodian for such Person or any part of its Property; or (c) an
assignment or trust mortgage for the benefit of creditors.

 

Intellectual Property: all intellectual and similar Property of a Person,
including inventions, designs, patents, copyrights, trademarks, service marks,
trade names, trade secrets, confidential or proprietary information, customer
lists, know-how, software and databases; all embodiments or fixations thereof
and all related documentation, applications, registrations and franchises; all
licenses or other rights to use any of the foregoing; and all books and records
relating to the foregoing.

 

Intellectual Property Claim: any claim or assertion (whether in writing, by suit
or otherwise) that a Borrower’s or Subsidiary’s ownership, use, marketing, sale
or distribution of any Inventory, Equipment, Intellectual Property or other
Property violates another Person’s Intellectual Property.

 

Intercreditor Agreement: the Intercreditor Agreement of even date herewith,
between the Permitted Term Agent and Agent, relating to the Permitted Term Debt,
as amended from time to time.

 

Interest Period: as defined in Section 3.1.3.

 

Inventory: as defined in the UCC (or, with respect to any inventory of any
Canadian Guarantor to which the PPSA is applicable, as defined in the PPSA),
including all goods intended for sale, lease, display or demonstration; all work
in process; and all raw materials, and other materials and supplies of any kind
that are or could be used in connection with the manufacture, printing, packing,
shipping, advertising, sale, lease or furnishing of such goods, or otherwise
used or consumed in a Borrower’s or Guarantor’s business (but excluding
Equipment).

 

Inventory Formula Amount: the lesser of (i) 70% of the Value of Eligible
Inventory; or (iii) 85% of the NOLV Percentage of the Value of Eligible
Inventory, provided that the Agent shall have the right, in its Permitted
Discretion, to reduce such percentages at any time upon three (3) Business Days
prior notice to the Borrower Agent.

 

Inventory Reserve: reserves established by Agent to reflect factors that may
negatively impact the Value of Inventory, including change in salability,
obsolescence, seasonality, theft, shrinkage, imbalance, change in composition or
mix, markdowns and vendor chargebacks.

 

Investment: an Acquisition; an acquisition of record or beneficial ownership of
any Equity Interests of a Person; or an advance or capital contribution to or
other investment in a Person.

 

IRS: the United States Internal Revenue Service.

 

Issuing Bank: Bank of America or any Affiliate of Bank of America, or any
replacement issuer appointed pursuant to Section 2.3.4.

 

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Issuing Bank Indemnitees: Issuing Bank and its officers, directors, employees,
Affiliates, agents and attorneys.

 

Judgment Currency: as defined in Section 1.5.

 

LC Application: an application by Borrower Agent to Issuing Bank for issuance of
a Letter of Credit, in form and substance satisfactory to Issuing Bank.

 

LC Conditions: the following conditions necessary for issuance of a Letter of
Credit: (a) each of the conditions set forth in Section 6; (b) after giving
effect to such issuance, total LC Obligations do not exceed the Letter of Credit
Subline, no Overadvance exists and, if no Revolver Loans are outstanding, the LC
Obligations do not exceed the Borrowing Base (without giving effect to the LC
Reserve for purposes of this calculation); (c) the expiration date of such
Letter of Credit is (i) no more than 365 days from issuance, in the case of
standby Letters of Credit, and (ii) no more than 120 days from issuance, in the
case of documentary Letters of Credit; (d) the Letter of Credit and payments
thereunder are denominated in Dollars; and (e) the purpose and form of the
proposed Letter of Credit is satisfactory to Agent and Issuing Bank in their
discretion.

 

LC Documents: all documents, instruments and agreements (including LC Requests
and LC Applications) delivered by Borrowers or any other Person to Issuing Bank
or Agent in connection with any Letter of Credit.

 

LC Obligations: the sum (without duplication) of (a) all amounts owing by
Borrowers for any drawings under Letters of Credit; and (b) the stated amount of
all outstanding Letters of Credit.

 

LC Request: a request for issuance of a Letter of Credit, to be provided by
Borrower Agent to Issuing Bank, in form satisfactory to Agent and Issuing Bank.

 

LC Reserve: the aggregate of all LC Obligations, other than those that have been
Cash Collateralized by Borrowers.

 

Lender Indemnitees: Lenders and their officers, directors, employees,
Affiliates, agents and attorneys.

 

Lenders: as defined in the preamble to this Agreement, including Agent in its
capacity as a provider of Swingline Loans and any other Person who hereafter
becomes a “Lender” pursuant to an Assignment and Acceptance.

 

Lending Office: the office designated as such by the applicable Lender at the
time it becomes party to this Agreement or thereafter by notice to Agent and
Borrower Agent.

 

Letter of Credit: any standby or documentary letter of credit issued by Issuing
Bank for the account of an Obligor, or any indemnity, guarantee, exposure
transmittal memorandum or similar form of credit support issued by Agent or
Issuing Bank for the benefit of an Obligor.

 

Letter of Credit Subline: $10,000,000.

 

LIBOR: for any Interest Period for a LIBOR Loan, the per annum rate of interest
(rounded up, if necessary, to the nearest 1/8th of 1%) determined by Agent at
approximately 11:00 a.m. (London time) two Business Days prior to commencement
of such Interest Period, for a term comparable to such Interest Period, equal to
(a) the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by
Reuters (or other commercially available source designated by Agent); or (b) if
BBA LIBOR is unavailable for any reason, the interest rate at which Dollar
deposits in the approximate amount of the LIBOR Loan would be offered by Agent’s
London branch to major banks in the London interbank

 

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Eurodollar market.  If the Board of Governors imposes a Reserve Percentage with
respect to LIBOR deposits, then LIBOR shall be the foregoing rate, divided by 1
minus the Reserve Percentage.

 

LIBOR Loan: each set of LIBOR Revolver Loans having a common length and
commencement of Interest Period.

 

LIBOR Revolver Loan: a Revolver Loan that bears interest based on LIBOR.

 

License: any license or agreement under which an Obligor is authorized to use
Intellectual Property in connection with any manufacture, marketing,
distribution or disposition of Collateral, any use of Property or any other
conduct of its business.

 

Licensor: any Person from whom an Obligor obtains the right to use any
Intellectual Property.

 

Lien: any Person’s interest in Property securing an obligation owed to, or a
claim by, such Person, including any lien, security interest, pledge,
hypothecation, trust, reservation, encroachment, easement, right-of-way,
covenant, condition, restriction, leases, or other title exception or
encumbrance.

 

Lien Waiver: an agreement, in form and substance satisfactory to Agent, by which
(a) for any material Collateral located on leased premises, the lessor waives or
subordinates any Lien it may have on the Collateral, and agrees to permit Agent
to enter upon the premises and remove the Collateral or to use the premises to
store or dispose of the Collateral; (b) for any Collateral held by a
warehouseman, processor, shipper, customs broker or freight forwarder, such
Person waives or subordinates any Lien it may have on the Collateral, agrees to
hold any Documents in its possession relating to the Collateral as agent for
Agent, and agrees to deliver the Collateral to Agent upon request; (c) for any
Collateral held by a repairman, mechanic or bailee, such Person acknowledges
Agent’s Lien, waives or subordinates any Lien it may have on the Collateral, and
agrees to deliver the Collateral to Agent upon request; and (d) for any
Collateral subject to a Licensor’s Intellectual Property rights, the Licensor
grants to Agent the right, vis-à-vis such Licensor, to enforce Agent’s Liens
with respect to the Collateral, including the right to dispose of it with the
benefit of the Intellectual Property, whether or not a default exists under any
applicable License.

 

Loan: a Revolver Loan.

 

Loan Documents: this Agreement, Other Agreements and Security Documents.

 

Loan Year: each 12 month period commencing on the Closing Date and on each
anniversary of the Closing Date.

 

Margin Stock: as defined in Regulation U of the Board of Governors.

 

Material Adverse Effect: the effect of any event, fact, circumstance or change
that, taken alone or in conjunction with other events or circumstances, (a) has
a material adverse effect on the business, assets, Properties, liabilities,
operations condition (financial or otherwise) or prospects of either (i) the
Borrowers or (ii) the Company and its Subsidiaries, taken as a whole, on the
value of any material Collateral, on the enforceability of any Loan Document, or
on the validity or priority of Agent’s Liens on any Collateral; (b) that could
materially impair the ability of the Borrowers or the Guarantors to perform
satisfactorily under the Loan Documents, including repayment of any Obligations;
(c) that could reasonably be expected to materially and adversely affect the
Loans or the transactions contemplated by this Agreement and the Loan Documents;
or (d) otherwise impairs the ability of Agent or any Lender to enforce or
collect any Obligations or realize upon any Collateral.

 

Material Contract: any agreement or arrangement to which a Borrower or
Subsidiary is party (other than the Loan Documents) (a) that is deemed to be a
material contract under any securities law

 

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applicable to such Person, including the Securities Act of 1933; (b) for which
breach, termination, nonperformance or failure to renew could reasonably be
expected to have a Material Adverse Effect; or (c) that relates to Subordinated
Debt, or to Debt in an aggregate amount of $3,000,000 or more.

 

Moody’s: Moody’s Investors Service, Inc., and its successors.

 

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

 

Net Proceeds: with respect to an Asset Disposition, proceeds (including, when
received, any deferred or escrowed payments) received by a Borrower or
Subsidiary in cash from such disposition, net of (a) reasonable and customary
costs and expenses actually incurred in connection therewith, including legal
fees and sales commissions; (b) amounts applied to repayment of Debt secured by
a Permitted Lien senior to Agent’s Liens on Collateral sold; (c) transfer or
similar taxes; and (d) reserves for indemnities, until such reserves are no
longer needed.

 

NOLV Percentage: the net orderly liquidation value of Inventory of any Borrower
or Guarantor, expressed as a percentage, expected to be realized at an orderly,
negotiated sale held within a reasonable period of time, net of all liquidation
expenses, as determined from the most recent appraisal of such Borrower’s and/or
Guarantor’s Inventory performed by an appraiser and on terms satisfactory to
Agent.

 

Notice of Borrowing: a Notice of Borrowing to be provided by Borrower Agent to
request a Borrowing of Revolver Loans, in form satisfactory to Agent.

 

Notice of Conversion/Continuation: a Notice of Conversion/Continuation to be
provided by Borrower Agent to request a conversion or continuation of any Loans
as LIBOR Loans, in form satisfactory to Agent.

 

Obligations: all (a) principal of and premium, if any, on the Loans, (b) LC
Obligations and other obligations of Obligors with respect to Letters of Credit,
(c) interest, expenses, fees, indemnification obligations, Extraordinary
Expenses and other amounts payable by Obligors under the Loan Documents,
(d) Secured Bank Product Obligations, and (e) other Debts, obligations and
liabilities of any kind owing by Obligors pursuant to the Loan Documents,
whether now existing or hereafter arising, whether evidenced by a note or other
writing, whether allowed in any Insolvency Proceeding, whether arising from an
extension of credit, issuance of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, and whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary, or joint or several.

 

Obligor: each Borrower, Guarantor, or other Person that is liable for payment of
any Obligations or that has granted a Lien in favor of Agent on its assets to
secure any Obligations.

 

Ordinary Course of Business: the ordinary course of business of any Borrower or
Subsidiary, consistent with past practices and undertaken in good faith.

 

Organic Documents: with respect to any Person, its charter, certificate or
articles of incorporation, bylaws, articles of organization, limited liability
agreement, operating agreement, members agreement, shareholders agreement,
partnership agreement, certificate of partnership, certificate of formation,
voting trust agreement, or similar agreement or instrument governing the
formation or operation of such Person.

 

OSHA: the Occupational Safety and Hazard Act of 1970.

 

Other Agreement: each LC Document, fee letter, Lien Waiver, Intercreditor
Agreement, Borrowing Base Certificate, Compliance Certificate, Borrower
Materials, or other note, document,

 

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instrument or agreement (other than this Agreement or a Security Document) now
or hereafter delivered by an Obligor or other Person to Agent or a Lender in
connection with any transactions relating hereto.

 

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

 

Overadvance: as defined in Section 2.1.5.

 

Overadvance Loan: a Base Rate Revolver Loan made when an Overadvance exists or
is caused by the funding thereof.

 

Participant: as defined in Section 13.2.

 

Patriot Act: the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L.
No. 107-56, 115 Stat. 272 (2001).

 

Payment Item: each check, draft or other item of payment payable to a Borrower,
including those constituting proceeds of any Collateral.

 

PBA: the Pension Benefits Act (Canada), as amended.

 

PBGC: the Pension Benefit Guaranty Corporation.

 

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

 

Pensions Regulator: the body corporate called the Pensions Regulator established
under Part I of the Pensions Act 2004.

 

Permitted Acquisition: any Acquisition as long as (a) no Default or Event of
Default exists or is caused thereby; (b) the Acquisition is consensual; (c) the
assets, business or Person being acquired is useful or engaged in the business
of Borrowers and Subsidiaries, is located and organized within the United States
(or such other jurisdiction as Agent shall approve in its Permitted Discretion)
and had positive EBITDA for the 12 month period most recently ended; (d) no Debt
or Liens are incurred, assumed or result from the Acquisition, except Debt
permitted under Section 10.2.1(f) or (i); (e) the Person to be acquired (or its
board of directors or equivalent governing body) has not (i) announced it will
oppose such Acquisition or (ii) commenced any action which alleges that such
Acquisition violates, or will violate, any Applicable Law; (f) upon giving pro
forma effect thereto, Availability (calculated without giving effect to the
assets acquired in the Acquisition unless Agent has completed its diligence
(including a field exam) with respect to such assets) is at least equal to 25%
of the Total Commitment Amount for the 30 days preceding and as of the
Acquisition; (g) the Fixed Charge Coverage Ratio, determined on a pro forma
basis giving effect to the Acquisition, is not less than 1.10 to 1 at any time;
and (h) Borrowers deliver to Agent, at least 10 Business Days prior to the
Acquisition, copies of all material agreements relating thereto and a
certificate, in form and substance satisfactory to Agent, stating that the
Acquisition is a “Permitted Acquisition” and demonstrating compliance with the
foregoing requirements.

 

Permitted Asset Disposition: (a) until the Discharge of Term Obligations, sales
and other dispositions of Term Priority Collateral permitted under the Permitted
Term Debt Documents in effect on the Closing Date; and (b) as long as no Default
or Event of Default exists and all Net Proceeds are remitted to Agent, an Asset
Disposition that is (i) a sale of Inventory in the Ordinary Course of Business;

 

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(ii) after the Discharge of Term Obligations, a disposition of Equipment that,
in the aggregate during any 12 month period, has a fair market or book value
(whichever is more) of $500,000 or less; (iii) a disposition of Inventory that
is obsolete, unmerchantable or otherwise unsalable in the Ordinary Course of
Business; (iv) termination of a lease of real or personal Property that is not
necessary for the Ordinary Course of Business, could not reasonably be expected
to have a Material Adverse Effect and does not result from an Obligor’s default;
or (v) approved in writing by Agent and Required Lenders.

 

Permitted Contingent Obligations: Contingent Obligations (a) arising from
endorsements of Payment Items for collection or deposit in the Ordinary Course
of Business; (b) arising from Hedging Agreements permitted hereunder;
(c) existing on the Closing Date, and any extension or renewal thereof that does
not increase the amount of such Contingent Obligation when extended or renewed;
(d) incurred in the Ordinary Course of Business with respect to surety, appeal
or performance bonds, or other similar obligations; (e) arising from customary
indemnification obligations in favor of purchasers in connection with
dispositions of Equipment permitted hereunder; (f) arising under the Loan
Documents; or (g) in an aggregate amount of $3,000,000 or less at any time.

 

Permitted Discretion:  a determination made by Agent, in good faith, in the
exercise of reasonable business judgment (from the perspective of a secured,
asset-based lender), based upon Agent’s consideration of factors that in the
exercise of such reasonable business judgment Agent believes: (a) could be
expected to materially and adversely affect the quantity, quality, mix or value
of Collateral (including any Applicable Law that may inhibit collection of an
Account), the enforceability or priority of Agent’s Liens, or the amount that
Agent and Lenders could receive in liquidation of any Collateral; (b) that any
collateral report or financial information delivered by any Obligor is
incomplete, inaccurate or misleading in any material respect; (c) could
materially increase the likelihood of any Insolvency Proceeding involving an
Obligor; (d) could increase the credit risk of lending to Borrowers on the
security of the Collateral; or (e) could reasonably be expected to result in a
Default or Event of Default.

 

Permitted Lien: as defined in Section 10.2.2.

 

Permitted Purchase Money Debt: Purchase Money Debt of Borrowers and Subsidiaries
that is unsecured or secured only by a Purchase Money Lien, as long as the
aggregate amount does not exceed $2,500,000 at any time when combined with
Capital Lease obligations permitted under Section 10.1.1(c).

 

Permitted Term Agent: means Salus Capital Partners, LLC, in its capacity as
administrative and collateral agent for the Permitted Term Debt Lenders, or any
successor administrative agent or collateral agent appointed under the Permitted
Term Debt Documents in accordance with the provisions thereof.

 

Permitted Term Debt:  means Debt incurred pursuant to the Permitted Term Debt
Documents, as in effect on the Closing Date (and as the same may be amended or
refinanced from time to time in accordance with the terms of the Intercreditor
Agreement).

 

Permitted Term Debt Agreement:  the “Term Loan Agreement”, as such term is
defined in the Intercreditor Agreement.

 

Permitted Term Debt Documents:  the “Term Documents”, as such term is defined in
the Intercreditor Agreement.

 

Permitted Term Debt Lenders: the “Lenders” as such term is defined in the
Permitted Term Debt Agreement.

 

Permitted Term Debt Payments:  (a) regularly scheduled payments of principal and
interest, and other payments of fees and expenses, in respect of Permitted Term
Debt as required by the Permitted Term Debt Agreement in existence as of the
Closing Date, (b) upon the maturity of the Permitted Term

 

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Debt on February 28, 2018 (or any later date to which the maturity of the
Permitted Term Debt shall be extended), payments of principal in respect of the
Permitted Term Debt then outstanding, (c) other mandatory payments and
prepayments as required by the terms of the Permitted Term Debt Agreement in
existence as of the Closing Date and permitted by the terms of the Intercreditor
Agreement; and (d) other payments and prepayments in respect of Permitted Term
Debt; provided that, solely with respect to any payments or prepayment pursuant
to this clause (d), (i) at the time of any such payment or prepayment and
immediately after giving effect to such payment or prepayment, the funding of
any Revolver Loans made to finance such payment or prepayment, and the payment
of any reasonable costs and expenses related thereto, no Event of Default shall
have occurred and be continuing; (ii) on a pro forma basis as if such Permitted
Term Debt Payment and any Revolving Loans made in connection therewith occurred
on the first day of such 30 day period after giving effect to any such payment
or prepayment and all Debt incurred to finance such payment or prepayment
(including without limitation, any Revolver Loans made to finance such payment
or prepayment), both (x) Average Availability during the period of 30
consecutive days prior to such payment or prepayment and (y) Availability as of
the date of such payment or prepayment, shall equal or exceed an amount equal to
25% of the Total Commitment Amount at such time; and (iii) after giving effect
to any such payment or prepayment and all Debt incurred to finance such payment
or prepayment (including without limitation, any Revolver Loans made to finance
such payment or prepayment), on a pro forma basis, the Fixed Charge Coverage
Ratio determined as if such payment or prepayment had been made, and all Debt
related to such payment or prepayment (including without limitation, any
Revolver Loans made to finance such payment or prepayment) had been incurred, on
the first day of the period of four Fiscal Quarters then most recently ended for
which financial statements have been (or required to have been) delivered to
Agent pursuant to Section 10.1.2(a) or (b), shall equal or exceed 1.10 to 1.00.

 

Person: any individual, corporation, limited liability company, partnership,
joint venture, association, trust, unincorporated organization, Governmental
Authority or other entity.

 

Plan: any employee benefit plan (as defined in Section 3(3) of ERISA)
established by an Obligor or, with respect to any such plan that is subject to
Section 412 of the Code or Title IV of ERISA, an ERISA Affiliate.

 

Platform: as defined in Section 14.3.3.

 

PPSA:  the Personal Property Security Act (Ontario) and/or the Personal Property
Security Act (New Brunswick), as applicable, and the regulations thereunder;
provided, that, if validity, perfection and effect of perfection and
non-perfection of Agent’s security interest in any Collateral of any Canadian
Guarantor or any other Obligor are governed by the personal property security
laws of any jurisdiction other than Ontario or New Brunswick, PPSA shall mean
those personal property security laws and regulations thereunder (including the
Civil Code of Quebec in the case of the Province of Quebec) in such other
jurisdiction for the purposes of the provisions hereof relating to such
validity, perfection, and effect of perfection and non-perfection and for the
definitions related to such provisions, as from time to time in effect.

 

Prime Rate: the rate of interest announced by Bank of America from time to time
as its prime rate.  Such rate is set by Bank of America on the basis of various
factors, including its costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans, which
may be priced at, above or below such rate.  Any change in such rate publicly
announced by Bank of America shall take effect at the opening of business on the
day specified in the announcement.

 

Pro Rata: with respect to any Lender, a percentage (rounded to the ninth decimal
place) determined (a) while Commitments are outstanding, by dividing the amount
of such Lender’s Commitment by the Total Commitment Amount; and (b) at any other
time, by dividing the amount of such Lender’s Loans and LC Obligations by the
aggregate amount of all outstanding Loans and LC

 

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Obligations.

 

Proceeds of Crime Act: means the Proceeds of Crime (Money Laundering) and
Terrorist Financing Act (Canada).

 

Properly Contested: with respect to any obligation of an Obligor, (a) the
obligation is subject to a bona fide dispute regarding amount or the Obligor’s
liability to pay; (b) the obligation is being properly contested in good faith
by appropriate proceedings promptly instituted and diligently pursued;
(c) appropriate reserves have been established in accordance with GAAP;
(d) non-payment could not have a Material Adverse Effect, nor result in
forfeiture or sale of any assets of the Obligor; (e) no Lien is imposed on
assets of the Obligor, unless bonded and stayed to the satisfaction of Agent;
and (f) if the obligation results from entry of a judgment or other order, such
judgment or order is stayed pending appeal or other judicial review.

 

Property: any interest in any kind of property or asset, whether real, personal
or mixed, or tangible or intangible.

 

Protective Advances: as defined in Section 2.1.6.

 

Purchase Money Debt: (a) Debt (other than the Obligations) for payment of any of
the purchase price of fixed assets; (b) Debt (other than the Obligations)
incurred within 10 days before or after acquisition of any fixed assets, for the
purpose of financing any of the purchase price thereof; and (c) any renewals,
extensions or refinancings (but not increases) thereof.

 

Purchase Money Lien: a Lien that secures Purchase Money Debt, encumbering only
the fixed assets acquired with such Debt and constituting a Capital Lease or a
purchase money security interest under the UCC or the PPSA.

 

RCRA: the Resource Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i).

 

Real Estate: all right, title and interest (whether as owner, lessor or lessee)
in any real Property or any buildings, structures, parking areas or other
improvements thereon.

 

Refinancing Conditions: (a) the following conditions for Refinancing Debt (other
than the Permitted Term Debt):  (i) it is in an aggregate principal amount that
does not exceed the principal amount of the Debt being extended, renewed or
refinanced; (ii) it has a final maturity no sooner than, a weighted average life
no less than, and an interest rate no greater than, the Debt being extended,
renewed or refinanced; (iii) it is subordinated to the Obligations at least to
the same extent as the Debt being extended, renewed or refinanced; (iv) the
representations, covenants and defaults applicable to it are no less favorable
to Borrowers than those applicable to the Debt being extended, renewed or
refinanced; (v) no additional Lien is granted to secure it; (vi) no additional
Person is obligated on such Debt; and (v) upon giving effect to it, no Default
or Event of Default exists; and (b) in respect of the Permitted Term Debt,
Refinancing Debt permitted by the Intercreditor Agreement.

 

Refinancing Debt: Borrowed Money that is the result of an extension, renewal or
refinancing of Debt permitted under Section 10.2.1(b), (d) or (f).

 

Reimbursement Date: as defined in Section 2.3.2.

 

Rent and Charges Reserve: the aggregate of (a) all past due rent and other
amounts owing by an Obligor to any landlord, warehouseman, processor, repairman,
mechanic, shipper, freight forwarder, broker or other Person who possesses any
Collateral or could assert a Lien on any Collateral; and (b) a reserve at least
equal to three months rent and other charges that could be payable to any such
Person, unless it has executed a Lien Waiver.

 

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Report: as defined in Section 12.2.3.

 

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

 

Required Lenders: Lenders (subject to Section 4.2) having (a) Commitments in
excess of 50% of the aggregate Commitments; and (b) if the Commitments have
terminated, Loans in excess of 50% of all outstanding Loans; provided, however,
that (i) if at any time there shall be two or fewer Lenders, “Required Lenders”
shall mean all Lenders and (ii) the Commitments and Loans of any Defaulting
Lender shall be excluded from such calculation.

 

Reserve Percentage: the reserve percentage (expressed as a decimal, rounded up
to the nearest 1/8th of 1%) applicable to member banks under regulations issued
by the Board of Governors for determining the maximum reserve requirement for
Eurocurrency liabilities.

 

Restricted Investment: any Investment by a Borrower or Subsidiary, other than
(a) Investments in Subsidiaries to the extent existing on the Closing Date;
(b) Cash Equivalents that are subject to Agent’s Lien and control, pursuant to
documentation in form and substance satisfactory to Agent; (c) loans and
advances permitted under Section 10.2.7; (d) Permitted Acquisitions and
(e) Investments in Foreign Subsidiaries in an aggregate amount not to exceed
$250,000 per Fiscal Year.

 

Restrictive Agreement: an agreement (other than a Loan Document) that conditions
or restricts the right of any Borrower, Subsidiary or other Obligor to incur or
repay Borrowed Money, to grant Liens on any assets, to declare or make
Distributions, to modify, extend or renew any agreement evidencing Borrowed
Money, or to repay any intercompany Debt.

 

Revolver Exposure:  at any time, the sum of (i) the outstanding principal amount
of Revolver Loans at such time plus (ii) the aggregate amount of LC Obligations
at such time.

 

Revolver Loan: a loan made pursuant to Section 2.1, and any Swingline Loan,
Overadvance Loan or Protective Advance.

 

Revolver Termination Date: February 28, 2018.

 

Royalties: all royalties, fees, expense reimbursement and other amounts payable
by an Obligor under a License.

 

S&P: Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services
LLC business, and its successors.

 

Secured Bank Product Obligations: Debt, obligations and other liabilities with
respect to Bank Products owing by a Borrower or Subsidiary to a Secured Bank
Product Provider.

 

Secured Bank Product Provider: (a) Bank of America or any of its Affiliates; and
(b) any other Lender or Affiliate of a Lender that is providing a Bank Product,
provided such provider delivers written notice to Agent, in form and substance
satisfactory to Agent, within 10 days following the later of the Closing Date or
creation of the Bank Product, (i) describing the Bank Product and setting forth
the maximum amount to be secured by the Collateral and the methodology to be
used in calculating such amount, and (ii) agreeing to be bound by Section 12.13.

 

Secured Parties: Agent, Issuing Bank, Lenders and Secured Bank Product
Providers.

 

Security Documents: the Guaranties, IP Assignments, Deposit Account Control
Agreements, the Canadian Security Agreements, the UK Security Agreements and all
other documents, instruments and

 

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agreements now or hereafter securing (or given with the intent to secure) any
Obligations.

 

Senior Officer: the chairman of the board, president, chief executive officer or
chief financial officer of a Borrower or, if the context requires, an Obligor.

 

Settlement Report: a report summarizing Revolver Loans and participations in LC
Obligations outstanding as of a given settlement date, allocated to Lenders on a
Pro Rata basis in accordance with their Commitments.

 

SI Asia:  means Summer Infant Asia, Ltd., a Hong Kong Private Limited Company.

 

SI Canada: means Summer Infant Canada, Limited, a corporation formed under the
laws of the Province of New Brunswick.

 

SI UK: means Summer Infant Europe Limited, a private company with limited
liability incorporated in and registered under the laws of England and Wales
with company number 4322137.

 

Solvent: as to any Person, such Person (a) owns Property whose fair salable
value is greater than the amount required to pay all of its debts (including
contingent, subordinated, unmatured and unliquidated liabilities); (b) owns
Property whose present Fair Salable Value (as defined below) is greater than the
probable total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such Person as they become absolute and matured;
(c) is able to pay all of its debts as they mature; (d) has capital that is not
unreasonably small for its business and is sufficient to carry on its business
and transactions and all business and transactions in which it is about to
engage; (e) is not “insolvent” within the meaning of Section 101(32) of the
Bankruptcy Code (for SI UK this subsection (e) shall not be applicable); and
(f) has not incurred (by way of assumption or otherwise) any obligations or
liabilities (contingent or otherwise) under any Loan Documents, or made any
conveyance in connection therewith, with actual intent to hinder, delay or
defraud either present or future creditors of such Person or any of its
Affiliates.  “Fair Salable Value” means the amount that could be obtained for
assets within a reasonable time, either through collection or through sale under
ordinary selling conditions by a capable and diligent seller to an interested
buyer who is willing (but under no compulsion) to purchase.

 

Spot Rate: the exchange rate, as determined by Agent, that is applicable to
conversion of one currency into another currency, which is (a) the exchange rate
reported by Bloomberg (or other commercially available source designated by
Agent) as of the end of the preceding business day in the financial market for
the first currency; or (b) if such report is unavailable for any reason, the
spot rate for the purchase of the first currency with the second currency as in
effect during the preceding business day in Agent’s principal foreign exchange
trading office for the first currency.

 

Subordinated Debt: Debt incurred by a Borrower that is expressly subordinate and
junior in right of payment to Full Payment of all Obligations, and is on terms
(including maturity, interest, fees, repayment, covenants and subordination)
satisfactory to Agent.

 

Subsidiary: any entity at least 50% of whose voting securities or Equity
Interests is owned by a Borrower or any combination of Borrowers (including
indirect ownership by a Borrower through other entities in which the Borrower
directly or indirectly owns 50% of the voting securities or Equity Interests).

 

Swingline Loan: any Borrowing of Base Rate Revolver Loans funded with Agent’s
funds, until such Borrowing is settled among Lenders or repaid by Borrowers.

 

Target Companies: collectively, Target Corporation and its Affiliates.

 

Taxes: all present or future taxes, levies, imposts, duties, deductions,
withholdings (including

 

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backup withholding), assessments, fees or other charges imposed by any
Governmental Authority, including any interest, additions to tax or penalties
applicable thereto.

 

Term Priority Collateral:  as defined in the Intercreditor Agreement.

 

Termination Event:  (a) the whole or partial withdrawal of any Canadian
Guarantor from a Canadian Pension Plan or Canadian MEPP during a plan year; or
(b) the filing of a notice of intent to terminate in whole or in part a Canadian
Pension Plan or Canadian MEPP or the treatment of a Canadian Pension Plan or
Canadian MEPP amendment as a termination or partial termination; or (c) the
institution of proceedings by any Governmental Authority to terminate in whole
or in part or have a trustee appointed to administer a Canadian Pension Plan or
Canadian MEPP; or (d) any other event or condition which might constitute
grounds for the termination or winding up or partial termination or winding up
of any Canadian Pension Plan or Canadian MEPP.

 

Total Commitment Amount:  the aggregate of all Commitments at any time.  As of
the Closing Date, the Total Commitment Amount shall be $80,000,000.

 

Toys “R” Us Companies: collectively, Toys “R” Us, Inc., Babies “R” Us, Inc., and
their respective Affiliates.

 

Transferee: any actual or potential Eligible Assignee, Participant or other
Person acquiring an interest in any Obligations.

 

Type: any type of a Loan (i.e., Base Rate Loan or LIBOR Loan) that has the same
interest option and, in the case of LIBOR Loans, the same Interest Period.

 

UCC: the Uniform Commercial Code as in effect in the State of New York or, when
the laws of any other jurisdiction govern the perfection or enforcement of any
Lien, the Uniform Commercial Code of such jurisdiction.

 

UK Anti-Terrorism Laws: the Criminal Justice (Terrorism and Conspiracy) Act
1998, the Terrorism Act 2000, the Anti-Terrorism, Crime and Security Act 2001,
the Prevention of Terrorism Act 2005, the Terrorism Act 2006, the Money
Laundering Regulations 2007 and the Counter-Terrorism Act 2008.

 

UK Guarantor: collectively, SI UK and each other UK Subsidiary that guarantees
payment or performance of the Obligations.  The definition of “UK Guarantors”
means all of such entities collectively.

 

UK Guaranty:  that certain Guarantee of even date herewith made by the UK
Guarantor, as may be amended, restated or otherwise modified from time to time.

 

UK Pension Scheme:  any pension, retirement benefits or employee benefit scheme
established by any UK Guarantor.

 

UK Priority Payables Reserve:  means (a) the prescribed part of the UK
Guarantors’ net property that would be made available for the satisfaction of
its unsecured debts pursuant to section 176A of the Insolvency Act 1986 together
with the UK Guarantors’ liabilities which constitute preferential debts pursuant
to section 386 of the Insolvency Act 1986 and any sums payable as administration
or liquidation expenses pursuant to rules 2.67(1) and 4.218(1) of the Insolvency
Rules 1986 plus (b) third party claims against the assets of the UK Guarantors
ranking or which may rank equal or prior to the claims of Agent (including by
way of retention of title); provided that such amounts shall be adjusted from
time to time hereafter upon delivery to the Agent of an acceptable waiver.

 

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UK Security Agreements:  (a) the Debenture dated as of the date hereof, in form
and substance reasonably acceptable to Agent, executed by the UK Guarantors in
favor of Agent, as the same may be amended, restated or supplemented from time
to time, and (b) any other UK security agreement required to be executed by any
Obligor in favor of Agent after the Closing Date, in each case, as the same may
be amended, restated or supplemented from time to time.

 

UK Subsidiaries: any Subsidiary of Company that is organized under the laws of
England and Wales.

 

UK ST Law: the Law of Property Act 1925.

 

Unfunded Pension Liability: the excess of a Pension Plan’s benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Pension
Plan’s assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to the Code, ERISA or the Pension Protection Act of
2006 for the applicable plan year; and with respect to a Canadian Pension Plan,
shall mean the amount, if any, by which a Canadian Pension Plan’s liabilities,
calculated on a solvency basis and going concern basis (using actuarial methods
and assumptions which are consistent with the valuations last filed with the
applicable Governmental Authorities and consistent with GAAP), exceeds the
market value of such Canadian Pension Plan’s assets as disclosed in a finalized
or draft actuarial report most recently filed with the applicable Governmental
Authority or commissioned by any Obligor (specifically excluding SI UK from this
definition).

 

Unused Line Fee Rate: a per annum rate equal to 0.375%.

 

Upstream Payment: a Distribution by a Subsidiary of a Borrower to such Borrower.

 

Value: (a) for Inventory, its value determined on the basis of the lower of cost
or market, calculated on a first-in, first-out basis, and excluding any portion
of cost attributable to intercompany profit among Obligors and their Affiliates;
and (b) for an Account, its face amount, net of any returns, rebates, discounts
(calculated on the shortest terms), credits, allowances or Taxes (including
sales, excise or other taxes) that have been or could be claimed by the Account
Debtor or any other Person.

 

Wal-Mart Companies: collectively, Wal-Mart Stores, Inc. and its Affiliates.

 

1.2.         Accounting Terms.  Under the Loan Documents (except as otherwise
specified herein), all accounting terms shall be interpreted, all accounting
determinations shall be made, and all financial statements shall be prepared, in
accordance with GAAP applied on a basis consistent with the most recent audited
financial statements of Borrowers delivered to Agent before the Closing Date and
using the same inventory valuation method as used in such financial statements,
except for any change required or permitted by GAAP if Borrowers’ certified
public accountants concur in such change, the change is disclosed to Agent, and
Section 10.3 is amended in a manner satisfactory to Required Lenders to take
into account the effects of the change.

 

1.3.         Uniform Commercial Code and PPSA.  As used herein, the following
terms are defined in accordance with the UCC in effect in the State of New York
from time to time (or, with respect to any such property of Canadian Guarantor
to which the PPSA is applicable, in accordance with the PPSA in effect in the
Province of Ontario from time to time or, if applicable, with respect to any
such property of the UK Guarantor to which the UK Security Agreements are
applicable, in accordance with the UK Security Agreements).  “Chattel Paper,”
“Commercial Tort Claim,” “Deposit Account,” “Document,” “Equipment,” “General
Intangibles,” “Goods,” “Instrument,” “Intangible,” “Investment Property,”
“Letter-of-Credit Right”, “Securities Account” and “Supporting Obligation.”

 

1.4.         Certain Matters of Construction.  The terms “herein,” “hereof,”
“hereunder” and other

 

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words of similar import refer to this Agreement as a whole and not to any
particular section, paragraph or subdivision.  Any pronoun used shall be deemed
to cover all genders.  In the computation of periods of time from a specified
date to a later specified date, “from” means “from and including,” and “to” and
“until” each mean “to but excluding.”  The terms “including” and “include” shall
mean “including, without limitation” and, for purposes of each Loan Document,
the parties agree that the rule of ejusdem generis shall not be applicable to
limit any provision.  Section titles appear as a matter of convenience only and
shall not affect the interpretation of any Loan Document.  All references to
(a) laws or statutes include all related rules, regulations, interpretations,
amendments and successor provisions; (b) any document, instrument or agreement
include any amendments, waivers and other modifications, extensions or renewals
(to the extent permitted by the Loan Documents); (c) any section mean, unless
the context otherwise requires, a section of this Agreement; (d) any exhibits or
schedules mean, unless the context otherwise requires, exhibits and schedules
attached hereto, which are hereby incorporated by reference; (e) any Person
include successors and assigns; (f) time of day mean time of day at Agent’s
notice address under Section 14.3.1; or (g) discretion of Agent, Issuing Bank or
any Lender mean the sole and absolute discretion of such Person.  All
determinations (including calculations of Borrowing Base and financial
covenants) made from time to time under the Loan Documents shall be made in
light of the circumstances existing at such time.  Borrowing Base calculations
shall be consistent with historical methods of valuation and calculation, and
otherwise satisfactory to Agent (and not necessarily calculated in accordance
with GAAP).  Borrowers shall have the burden of establishing any alleged
negligence, misconduct or lack of good faith by Agent, Issuing Bank or any
Lender under any Loan Documents.  No provision of any Loan Documents shall be
construed against any party by reason of such party having, or being deemed to
have, drafted the provision.  A reference to Borrowers’ “knowledge” or similar
concept means actual knowledge of a Senior Officer, or knowledge that a Senior
Officer would have obtained if he or she had engaged in good faith and diligent
performance of his or her duties, including reasonably specific inquiries of
employees or agents and a good faith attempt to ascertain the matter.

 

1.5.         Currency Equivalents.

 

1.5.1.      Calculations.  All references in the Loan Documents to Loans,
Letters of Credit, Obligations, Borrowing Base components and other amounts
shall be denominated in Dollars, unless expressly provided otherwise.  The
“Dollar Equivalent” of any amounts denominated or reported under a Loan Document
in a currency other than Dollars shall be determined by Agent on a daily basis,
based on the current Spot Rate.  Borrowers shall report Value and other
Borrowing Base components to Agent in the currency invoiced by Borrowers or
shown in Borrowers’ financial records, and unless expressly provided otherwise,
shall deliver financial statements and calculate financial covenants in
Dollars.  Notwithstanding anything herein to the contrary, if any Obligation is
funded and expressly denominated in a currency other than Dollars, Borrowers
shall repay such Obligation in such other currency.

 

1.5.2.      Judgments.  If, for purposes of obtaining judgment in any court, it
is necessary to convert a sum from the currency provided under a Loan Document
(“Agreement Currency”) into another currency, the Spot Rate shall be used as the
rate of exchange.  Notwithstanding any judgment in a currency (“Judgment
Currency”) other than the Agreement Currency, a Borrower shall discharge its
obligation in respect of any sum due under a Loan Document only if, on the
Business Day following receipt by Agent of payment in the Judgment Currency,
Agent can use the amount paid to purchase the sum originally due in the
Agreement Currency.  If the purchased amount is less than the sum originally
due, such Borrower agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify Agent and Lenders against such loss.  If the purchased
amount is greater than the sum originally due, Agent shall return the excess
amount to such Borrower (or to the Person legally entitled thereto).

 

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SECTION 2.        CREDIT FACILITIES

 

2.1.         Commitment.

 

2.1.1.      Revolver Loans.  Each Lender agrees, severally on a Pro Rata basis
up to its Commitment, on the terms set forth herein, to make Revolver Loans to
Borrowers from time to time through the Commitment Termination Date.  The
Revolver Loans may be repaid and reborrowed as provided herein.  In no event
shall Lenders have any obligation to honor a request for a Revolver Loan if the
unpaid balance of Revolver Loans outstanding at such time (including the
requested Loan) would cause Availability to be less than zero.

 

2.1.2.      Revolver Notes.  The Revolver Loans made by each Lender and interest
accruing thereon shall be evidenced by the records of Agent and such Lender.  At
the request of any Lender, Borrowers shall deliver to such Lender a promissory
note evidencing its Revolver Loans.

 

2.1.3.      Use of Proceeds.  The proceeds of Revolver Loans shall be used by
Borrowers solely (a) to satisfy existing Debt; (b) to pay fees and transaction
expenses associated with the closing of this credit facility; (c) to pay
Obligations in accordance with this Agreement; (d) to make Permitted Term Debt
Payments, and (e) for lawful corporate purposes of Borrowers, including working
capital.

 

2.1.4.      Voluntary Reduction or Termination of Commitments.

 

(a)           The Commitments shall terminate on the Revolver Termination Date,
unless sooner terminated in accordance with this Agreement.  Upon at least 90
days prior written notice to Agent at any time after the first Loan Year,
Borrowers may, at their option, terminate the Commitments and this credit
facility.  Any notice of termination given by Borrowers shall be irrevocable. 
On the termination date, Borrowers shall make Full Payment of all Obligations.

 

(b)           Borrowers may permanently reduce the Commitments, on a Pro Rata
basis for each Lender, upon at least 90 days prior written notice to Agent,
which notice shall specify the amount of the reduction and shall be irrevocable
once given.  Each reduction shall be in a minimum amount of $5,000,000, or an
increment of $1,000,000 in excess thereof.

 

2.1.5.      Overadvances.  If the aggregate Revolver Loans exceed the Borrowing
Base (“Overadvance”) at any time, the excess amount shall be payable by
Borrowers on demand by Agent, but all such Revolver Loans shall nevertheless
constitute Obligations secured by the Collateral and entitled to all benefits of
the Loan Documents.  Agent may require Lenders to honor requests for Overadvance
Loans and to forbear from requiring Borrowers to cure an Overadvance, as long as
(a) the Overadvance does not continue for more than 30 consecutive days (and no
Overadvance may exist for at least five consecutive days thereafter before
further Overadvance Loans are required), and (b) the Overadvance is not known by
Agent to exceed $8,000,000.  In no event shall Overadvance Loans be required
that would cause the outstanding Revolver Loans and LC Obligations to exceed the
Total Commitment Amount.  Any funding of an Overadvance Loan or sufferance of an
Overadvance shall not constitute a waiver by Agent or Lenders of the Event of
Default caused thereby.  In no event shall any Borrower or other Obligor be
deemed a beneficiary of this Section nor authorized to enforce any of its terms.

 

2.1.6.      Protective Advances.  Agent shall be authorized, in its discretion,
at any time that any conditions in Section 6 are not satisfied to make Base Rate
Revolver Loans (“Protective Advances”) (a) up to an aggregate amount of
$8,000,000 outstanding at any time, if Agent deems such Loans necessary or
desirable to preserve or protect Collateral, or to enhance the collectibility or
repayment of Obligations, as long as such Loans do not cause the outstanding
Revolver Loans and LC Obligations to exceed the aggregate Commitments; or (b) to
pay any other amounts chargeable to Obligors under any Loan Documents, including
interest, costs, fees and expenses.  Each Lender shall participate in each
Protective Advance on a Pro Rata basis.  Required Lenders may at any time revoke
Agent’s authority to make further Protective Advances under clause (a) by
written notice to Agent.

 

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Absent such revocation, Agent’s determination that funding of a Protective
Advance is appropriate shall be conclusive.

 

2.2.         [Intentionally deleted].

 

2.3.         Letter of Credit Facility.

 

2.3.1.      Issuance of Letters of Credit.  Issuing Bank shall issue Letters of
Credit from time to time until 30 days prior to the Revolver Termination Date
(or until the Commitment Termination Date, if earlier), on the terms set forth
herein, including the following:

 

(a)           Each Borrower acknowledges that Issuing Bank’s issuance of any
Letter of Credit is conditioned upon Issuing Bank’s receipt of a LC Application
with respect to the requested Letter of Credit, as well as such other
instruments and agreements as Issuing Bank may customarily require for issuance
of a letter of credit of similar type and amount.  Issuing Bank shall have no
obligation to issue any Letter of Credit unless (i) Issuing Bank receives a LC
Request and LC Application at least three Business Days prior to the requested
date of issuance; (ii) each LC Condition is satisfied; and (iii) if a Defaulting
Lender exists, such Lender or Borrowers have entered into arrangements
satisfactory to Agent and Issuing Bank to eliminate any Fronting Exposure
associated with such Lender.  If, in sufficient time to act, Issuing Bank
receives written notice from Required Lenders that a LC Condition has not been
satisfied, Issuing Bank shall not issue the requested Letter of Credit.  Prior
to receipt of any such notice, Issuing Bank shall not be deemed to have
knowledge of any failure of LC Conditions.

 

(b)           Letters of Credit may be requested by Borrower Agent, on behalf of
an Obligor, to support obligations incurred in the Ordinary Course of Business,
or as otherwise approved by Agent.  The renewal or extension of any Letter of
Credit shall be treated as the issuance of a new Letter of Credit, except that
delivery of a new LC Application shall be required at the discretion of Issuing
Bank.

 

(c)           Obligors assume all risks of the acts, omissions or misuses of any
Letter of Credit by the beneficiary.  In connection with issuance of any Letter
of Credit, none of Agent, Issuing Bank or any Lender shall be responsible for
the existence, character, quality, quantity, condition, packing, value or
delivery of any goods purported to be represented by any Documents; any
differences or variation in the character, quality, quantity, condition,
packing, value or delivery of any goods from that expressed in any Documents;
the form, validity, sufficiency, accuracy, genuineness or legal effect of any
Documents or of any endorsements thereon; the time, place, manner or order in
which shipment of goods is made; partial or incomplete shipment of, or failure
to ship, any goods referred to in a Letter of Credit or Documents; any deviation
from instructions, delay, default or fraud by any shipper or other Person in
connection with any goods, shipment or delivery; any breach of contract between
a shipper or vendor and a Borrower; errors, omissions, interruptions or delays
in transmission or delivery of any messages, by mail, cable, telegraph, telex,
telecopy, e-mail, telephone or otherwise; errors in interpretation of technical
terms; the misapplication by a beneficiary of any Letter of Credit or the
proceeds thereof; or any consequences arising from causes beyond the control of
Issuing Bank, Agent or any Lender, including any act or omission of a
Governmental Authority.  The rights and remedies of Issuing Bank under the Loan
Documents shall be cumulative.  Issuing Bank shall be fully subrogated to the
rights and remedies of each beneficiary whose claims against Borrowers are
discharged with proceeds of any Letter of Credit.

 

(d)           In connection with its administration of and enforcement of rights
or remedies under any Letters of Credit or LC Documents, Issuing Bank shall be
entitled to act, and shall be fully protected in acting, upon any certification,
documentation or communication in whatever form believed by Issuing Bank, in
good faith, to be genuine and correct and to have been signed, sent or made by a
proper Person.  Issuing Bank may consult with and employ legal counsel,
accountants and other experts to advise it concerning its obligations, rights
and remedies, and shall be entitled to act upon, and shall be fully protected in
any action taken in good faith reliance upon, any advice given by such experts. 
Issuing

 

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Bank may employ agents and attorneys-in-fact in connection with any matter
relating to Letters of Credit or LC Documents, and shall not be liable for the
negligence or misconduct of agents and attorneys-in-fact selected with
reasonable care.

 

2.3.2.      Reimbursement; Participations.

 

(a)           If Issuing Bank honors any request for payment under a Letter of
Credit, Borrowers shall pay to Issuing Bank, on the same day (“Reimbursement
Date”), the amount paid by Issuing Bank under such Letter of Credit, together
with interest at the interest rate for Base Rate Revolver Loans from the
Reimbursement Date until payment by Borrowers.  The obligation of Borrowers to
reimburse Issuing Bank for any payment made under a Letter of Credit shall be
absolute, unconditional, irrevocable, and joint and several, and shall be paid
without regard to any lack of validity or enforceability of any Letter of Credit
or the existence of any claim, setoff, defense or other right that Borrowers may
have at any time against the beneficiary.  Whether or not Borrower Agent submits
a Notice of Borrowing, Borrowers shall be deemed to have requested a Borrowing
of Base Rate Revolver Loans in an amount necessary to pay all amounts due
Issuing Bank on any Reimbursement Date and each Lender agrees to fund its Pro
Rata share of such Borrowing whether or not the Commitments have terminated, an
Overadvance exists or is created thereby, or the conditions in Section 6 are
satisfied.

 

(b)           Upon issuance of a Letter of Credit, each Lender shall be deemed
to have irrevocably and unconditionally purchased from Issuing Bank, without
recourse or warranty, an undivided Pro Rata interest and participation in all LC
Obligations relating to the Letter of Credit.  If Issuing Bank makes any payment
under a Letter of Credit and Borrowers do not reimburse such payment on the
Reimbursement Date, Agent shall promptly notify Lenders and each Lender shall
promptly (within one Business Day) and unconditionally pay to Agent, for the
benefit of Issuing Bank, the Lender’s Pro Rata share of such payment.  Upon
request by a Lender, Issuing Bank shall furnish copies of any Letters of Credit
and LC Documents in its possession at such time.

 

(c)           The obligation of each Lender to make payments to Agent for the
account of Issuing Bank in connection with Issuing Bank’s payment under a Letter
of Credit shall be absolute, unconditional and irrevocable, not subject to any
counterclaim, setoff, qualification or exception whatsoever, and shall be made
in accordance with this Agreement under all circumstances, irrespective of any
lack of validity or unenforceability of any Loan Documents; any draft,
certificate or other document presented under a Letter of Credit having been
determined to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect; or the
existence of any setoff or defense that any Obligor may have with respect to any
Obligations.  Issuing Bank does not assume any responsibility for any failure or
delay in performance or any breach by any Borrower or other Person of any
obligations under any LC Documents.  Issuing Bank does not make to Lenders any
express or implied warranty, representation or guaranty with respect to the
Collateral, LC Documents or any Obligor.  Issuing Bank shall not be responsible
to any Lender for any recitals, statements, information, representations or
warranties contained in, or for the execution, validity, genuineness,
effectiveness or enforceability of any LC Documents; the validity, genuineness,
enforceability, collectibility, value or sufficiency of any Collateral or the
perfection of any Lien therein; or the assets, liabilities, financial condition,
results of operations, business, creditworthiness or legal status of any
Obligor.

 

(d)           No Issuing Bank Indemnitee shall be liable to any Lender or other
Person for any action taken or omitted to be taken in connection with any Letter
of Credit or LC Document except as a result of its gross negligence or willful
misconduct.  Issuing Bank may refrain from taking any action with respect to a
Letter of Credit until it receives written instructions from Required Lenders.

 

2.3.3.      Cash Collateral.  If any LC Obligations, whether or not then due or
payable, shall for any reason be outstanding at any time (a) that an Event of
Default exists, (b) that Availability is less than zero, (c) after the
Commitment Termination Date, or (d) within 20 Business Days prior to the

 

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Revolver Termination Date, then Borrowers shall, at Issuing Bank’s or Agent’s
request, Cash Collateralize the stated amount of all outstanding Letters of
Credit and pay to Issuing Bank the amount of all other LC Obligations. 
Borrowers shall, on demand by Issuing Bank or Agent from time to time, Cash
Collateralize the Fronting Exposure of any Defaulting Lender.  If Borrowers fail
to provide any Cash Collateral as required hereunder, Lenders may (and shall
upon direction of Agent) advance, as Revolver Loans, the amount of the Cash
Collateral required (whether or not the Commitments have terminated, an
Overadvance exists or the conditions in Section 6 are satisfied).

 

2.3.4.      Resignation of Issuing Bank.  Issuing Bank may resign at any time
upon notice to Agent and Borrowers.  On and after the effective date of such
resignation, Issuing Bank shall have no obligation to issue, amend, renew,
extend or otherwise modify any Letter of Credit, but shall continue to have all
rights and other obligations of an Issuing Bank hereunder relating to any Letter
of Credit issued by it prior to such date.  Agent shall promptly appoint a
replacement Issuing Bank, which, as long as no Default or Event of Default
exists, shall be reasonably acceptable to Borrowers.

 

SECTION 3.        INTEREST, FEES AND CHARGES

 

3.1.         Interest.

 

3.1.1.      Rates and Payment of Interest.

 

(a)           The Obligations shall bear interest (i) if a Base Rate Loan, at
the Base Rate in effect from time to time, plus the Applicable Margin; (ii) if a
LIBOR Loan, at LIBOR for the applicable Interest Period, plus the Applicable
Margin; and (iii) if any other Obligation (including, to the extent permitted by
law, interest not paid when due), at the Base Rate in effect from time to time,
plus the Applicable Margin for Base Rate Revolver Loans.

 

(b)           During an Insolvency Proceeding with respect to any Obligor, or
during any other Event of Default if Agent or Required Lenders in their
discretion so elect, Obligations shall bear interest at the Default Rate
(whether before or after any judgment).  Each Obligor acknowledges that the cost
and expense to Agent and Lenders due to an Event of Default are difficult to
ascertain and that the Default Rate is fair and reasonable compensation for
this.

 

(c)           Interest shall accrue from the date a Loan is advanced or
Obligation is incurred or payable, until paid in full by Borrowers.  If a Loan
is repaid on the same day made, one day’s interest shall accrue.  Interest
accrued on the Loans shall be due and payable in arrears, (i) on the first day
of each month; (ii) on any date of prepayment, with respect to the principal
amount of Loans being prepaid; and (iii) on the Commitment Termination Date. 
Interest accrued on any other Obligations shall be due and payable as provided
in the Loan Documents and, if no payment date is specified, shall be due and
payable on demand.  Notwithstanding the foregoing, interest accrued at the
Default Rate shall be due and payable on demand.

 

3.1.2.      Application of LIBOR to Outstanding Loans.

 

(a)           Borrowers may on any Business Day, subject to delivery of a Notice
of Conversion/Continuation, elect to convert any portion of the Base Rate Loans
to, or to continue any LIBOR Loan at the end of its Interest Period as, a LIBOR
Loan.  During any Default or Event of Default, Agent may (and shall at the
direction of Required Lenders) declare that no Loan may be made, converted or
continued as a LIBOR Loan.  In addition, until Agent notifies Borrowers that
syndication of the credit facility hereunder is complete, no Loan may be made as
or converted into a LIBOR Loan with an Interest Period of greater than 30 days.

 

(b)           Whenever Borrowers desire to convert or continue Loans as LIBOR
Loans,

 

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Borrower Agent shall give Agent a Notice of Conversion/Continuation, no later
than 11:00 a.m. at least three Business Days before the requested conversion or
continuation date.  Promptly after receiving any such notice, Agent shall notify
each Lender thereof.  Each Notice of Conversion/Continuation shall be
irrevocable, and shall specify the amount of Loans to be converted or continued,
the conversion or continuation date (which shall be a Business Day), and the
duration of the Interest Period (which shall be deemed to be 30 days if not
specified).  If, upon the expiration of any Interest Period in respect of any
LIBOR Loans, Borrowers shall have failed to deliver a Notice of
Conversion/Continuation, they shall be deemed to have elected to convert such
Loans into Base Rate Loans.

 

3.1.3.      Interest Periods.  In connection with the making, conversion or
continuation of any LIBOR Loans, Borrowers shall select an interest period
(“Interest Period”) to apply, which interest period shall be 30, 60 or 90 days;
provided, however, that:

 

(a)           the Interest Period shall begin on the date the Loan is made or
continued as, or converted into, a LIBOR Loan, and shall expire on the
numerically corresponding day in the calendar month at its end;

 

(b)           if any Interest Period begins on a day for which there is no
corresponding day in the calendar month at its end or if such corresponding day
falls after the last Business Day of such month, then the Interest Period shall
expire on the last Business Day of such month; and if any Interest Period would
otherwise expire on a day that is not a Business Day, the period shall expire on
the next Business Day; and

 

(c)           no Interest Period shall extend beyond the Revolver Termination
Date.

 

3.1.4.      Interest Rate Not Ascertainable.  If Agent shall determine that on
any date for determining LIBOR, due to any circumstance affecting the London
interbank market, adequate and fair means do not exist for ascertaining such
rate on the basis provided herein, then Agent shall immediately notify Borrowers
of such determination.  Until Agent notifies Borrowers that such circumstance no
longer exists, the obligation of Lenders to make LIBOR Loans shall be suspended,
and no further Loans may be converted into or continued as LIBOR Loans.

 

3.2.         Fees.

 

3.2.1.      Unused Line Fee.  Borrowers shall pay to Agent, for the Pro Rata
benefit of Lenders, a fee equal to the Unused Line Fee Rate times the amount by
which the Commitments exceed the average daily balance of Revolver Loans and
stated amount of Letters of Credit during any month.  Such fee shall be payable
in arrears, on the first day of each month and on the Commitment Termination
Date.

 

3.2.2.      LC Facility Fees.  Obligors shall pay (a) to Agent, for the Pro Rata
benefit of Lenders, a fee equal to the Applicable Margin in effect for LIBOR
Revolver Loans times the average daily stated amount of Letters of Credit, which
fee shall be payable monthly in arrears, on the first day of each month; (b) to
Agent, for its own account, a fronting fee as set forth in the Fee Letter on the
stated amount of each Letter of Credit, which fee shall be payable monthly in
arrears, on the first day of each month; and (c) to Issuing Bank, for its own
account, all customary charges associated with the issuance, amending,
negotiating, payment, processing, transfer and administration of Letters of
Credit, which charges shall be paid as and when incurred.  During an Event of
Default, the fee payable under clause (a) shall be increased by 2% per annum.

 

3.2.3.      Fee Letters.  Borrowers shall pay all fees set forth in any fee
letter executed in connection with this Agreement, including the Fee Letter.

 

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3.3.         Computation of Interest, Fees, Yield Protection.  All interest, as
well as fees and other charges calculated on a per annum basis, shall be
computed for the actual days elapsed, based on a year of 360 days.  For purposes
of the Interest Act (Canada), if applicable, (i) whenever any interest or fee
under this Agreement is calculated using a rate based on a year of 360 days, the
rate determined pursuant to such calculation, when expressed as an annual rate,
is equivalent to (x) the applicable rate based on a year of 360 days, multiplied
by (y) the actual number of days in the calendar year in which the period for
which such interest or fee is payable (or compounded) ends, and divided by
(z) 360, (ii) the principle of deemed reinvestment of interest does not apply to
any interest calculation under this Agreement, and (iii) the rates of interest
stipulated in this Agreement are intended to be nominal rates and not effective
rates or yields.  Each determination by Agent of any interest, fees or interest
rate hereunder shall be final, conclusive and binding for all purposes, absent
manifest error.  All fees shall be fully earned when due and shall not be
subject to rebate, refund or proration.  All fees payable under Section 3.2 are
compensation for services and are not, and shall not be deemed to be, interest
or any other charge for the use, forbearance or detention of money.  A
certificate as to amounts payable by Borrowers under Section 3.4, 3.6, 3.7, 3.9
or 5.9, submitted to Borrower Agent by Agent or the affected Lender, as
applicable, shall be final, conclusive and binding for all purposes, absent
manifest error, and Borrowers shall pay such amounts to the appropriate party
within 10 days following receipt of the certificate.

 

3.4.         Reimbursement Obligations.  Borrowers shall reimburse Agent for all
Extraordinary Expenses.  Borrowers shall also reimburse Agent for all legal,
accounting, appraisal, consulting, and other fees, costs and expenses incurred
by it in connection with (a) negotiation and preparation of any Loan Documents,
including any amendment or other modification thereof; (b) administration of and
actions relating to any Collateral, Loan Documents and transactions contemplated
thereby, including any actions taken to perfect or maintain priority of Agent’s
Liens on any Collateral, to maintain any insurance required hereunder or to
verify Collateral; and (c) subject to the limits of Section 10.1.1(b), each
inspection, audit or appraisal with respect to any Obligor or Collateral,
whether prepared by Agent’s personnel or a third party.  If, for any reason
(including inaccurate reporting on financial statements or a Compliance
Certificate), it is determined that a higher Applicable Margin should have
applied to a period than was actually applied, then the proper margin shall be
applied retroactively and Borrowers shall immediately pay to Agent, for the Pro
Rata benefit of Lenders, an amount equal to the difference between the amount of
interest and fees that would have accrued using the proper margin and the amount
actually paid.  All amounts payable by Borrowers under this Section shall be due
on demand.

 

3.5.         Illegality.  If any Lender determines that any Applicable Law has
made it unlawful, or that any Governmental Authority has asserted that it is
unlawful, for any Lender or its applicable Lending Office to make, maintain or
fund LIBOR Loans, or to determine or charge interest rates based upon LIBOR, or
any Governmental Authority has imposed material restrictions on the authority of
such Lender to purchase or sell, or to take deposits of, Dollars in the London
interbank market, then, on notice thereof by such Lender to Agent, any
obligation of such Lender to make or continue LIBOR Loans or to convert Base
Rate Loans to LIBOR Loans shall be suspended until such Lender notifies Agent
that the circumstances giving rise to such determination no longer exist.  Upon
delivery of such notice, Borrowers shall prepay or, if applicable, convert all
LIBOR Loans of such Lender to Base Rate Loans, either on the last day of the
Interest Period therefor, if such Lender may lawfully continue to maintain such
LIBOR Loans to such day, or immediately, if such Lender may not lawfully
continue to maintain such LIBOR Loans.  Upon any such prepayment or conversion,
Borrowers shall also pay accrued interest on the amount so prepaid or converted.

 

3.6.         Inability to Determine Rates.  If Required Lenders notify Agent for
any reason in connection with a request for a Borrowing of, or conversion to or
continuation of, a LIBOR Loan that (a) Dollar deposits are not being offered to
banks in the London interbank Eurodollar market for the applicable amount and
Interest Period of such Loan, (b) adequate and reasonable means do not exist for
determining LIBOR for the requested Interest Period, or (c) LIBOR for the
requested Interest Period does not adequately and fairly reflect the cost to
such Lenders of funding such Loan, then Agent will promptly

 

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so notify Borrower Agent and each Lender.  Thereafter, the obligation of Lenders
to make or maintain LIBOR Loans shall be suspended until Agent (upon instruction
by Required Lenders) revokes such notice.  Upon receipt of such notice, Borrower
Agent may revoke any pending request for a Borrowing of, conversion to or
continuation of a LIBOR Loan or, failing that, will be deemed to have submitted
a request for a Base Rate Loan.

 

3.7.         Increased Costs; Capital Adequacy.

 

3.7.1.      Change in Law.  If any Change in Law shall:

 

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

 

(b)           subject any Lender or Issuing Bank to any Tax with respect to any
Loan, Loan Document, Letter of Credit or participation in LC Obligations, or
change the basis of taxation of payments to such Lender or Issuing Bank in
respect thereof (except for Indemnified Taxes or Other Taxes covered by
Section 5.9 and the imposition of, or any change in the rate of, any Excluded
Tax payable by such Lender or Issuing Bank); or

 

(c)           impose on any Lender, Issuing Bank or interbank market any other
condition, cost or expense affecting any Loan, Loan Document, Letter of Credit,
participation in LC Obligations, or Commitment;

 

and the result thereof shall be to increase the cost to such Lender of making or
maintaining any Loan or Commitment, or to increase the cost to such Lender or
Issuing Bank of participating in, issuing or maintaining any Letter of Credit,
or to reduce the amount of any sum received or receivable by such Lender or
Issuing Bank hereunder (whether of principal, interest or any other amount)
then, upon request of such Lender or Issuing Bank, Borrowers will pay to such
Lender or Issuing Bank, as applicable, such additional amount or amounts as will
compensate such Lender or Issuing Bank, as applicable, for such additional costs
incurred or reduction suffered.

 

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

 

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

 

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3.8.         Mitigation.  If any Lender gives a notice under Section 3.5 or
requests compensation under Section 3.7, or if Borrowers are required to pay
additional amounts with respect to a Lender under Section 5.9, then such Lender
shall use reasonable efforts to designate a different Lending Office 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 (a) would eliminate the need for such notice or reduce amounts
payable or to be withheld in the future, as applicable; and (b) would not
subject the Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to it or unlawful.  Borrowers shall pay all reasonable costs
and expenses incurred by any Lender in connection with any such designation or
assignment.

 

3.9.         Funding Losses.  If for any reason (other than default by a Lender)
(a) any Borrowing of, or conversion to or continuation of, a LIBOR Loan does not
occur on the date specified therefor in a Notice of Borrowing or Notice of
Conversion/Continuation (whether or not withdrawn), (b) any repayment or
conversion of a LIBOR Loan occurs on a day other than the end of its Interest
Period, (c) Borrowers fail to repay a LIBOR Loan when required hereunder, or
(d) a Lender (other than a Defaulting Lender) is required to assign a LIBOR Loan
prior to the end of its Interest Period pursuant to Section 13.4, then Borrowers
shall pay to Agent its customary administrative charge and to each Lender all
resulting losses and expenses, including loss of anticipated profits and any
loss or expense arising from liquidation or redeployment of funds or from fees
payable to terminate deposits of matching funds.  Lenders shall not be required
to purchase Dollar deposits in any interbank or offshore Dollar market to fund
any LIBOR Loan, but this Section shall apply as if each Lender had purchased
such deposits.

 

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

 

SECTION 4.        LOAN ADMINISTRATION

 

4.1.         Manner of Borrowing and Funding Revolver Loans.

 

4.1.1.      Notice of Borrowing.

 

(a)           Whenever Borrowers desire funding of a Borrowing of Revolver
Loans, Borrower Agent shall give Agent a Notice of Borrowing.  Such notice must
be received by Agent no later than 11:00 a.m. (i) on the Business Day of the
requested funding date, in the case of Base Rate Loans, and (ii) at least three
Business Days prior to the requested funding date, in the case of LIBOR Loans. 
Notices received after 11:00 a.m. shall be deemed received on the next Business
Day.  Each Notice of Borrowing shall be irrevocable and shall specify (A) the
amount of the Borrowing, (B) the requested funding date (which must be a
Business Day), (C) whether the Borrowing is to be made as Base Rate Loans or
LIBOR Loans, and (D) in the case of LIBOR Loans, the duration of the applicable
Interest Period (which shall be deemed to be 30 days if not specified).

 

(b)           Unless payment is otherwise timely made by Borrowers, the becoming
due of any Obligations (whether principal, interest, fees or other charges,
including Extraordinary Expenses, LC Obligations, Cash Collateral and Secured
Bank Product Obligations) shall be deemed to be a request for Base Rate Revolver
Loans on the due date, in the amount of such Obligations.  The proceeds of such

 

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Revolver Loans shall be disbursed as direct payment of the relevant Obligation. 
In addition, Agent may, at its option, charge such Obligations against any
operating, investment or other account of a Borrower maintained with Agent or
any of its Affiliates.

 

(c)                                  If Borrowers maintain any disbursement
account with Agent or any Affiliate of Agent, then presentation for payment of
any Payment Item when there are insufficient funds to cover it shall be deemed
to be a request for a Base Rate Revolver Loan on the date of such presentation,
in the amount of the Payment Item.  The proceeds of such Revolver Loan may be
disbursed directly to the disbursement account.

 

4.1.2.                  Fundings by Lenders.  Each Lender shall timely honor its
Commitment by funding its Pro Rata share of each Borrowing of Revolver Loans
that is properly requested hereunder.  Except for Borrowings to be made as
Swingline Loans, Agent shall endeavor to notify Lenders of each Notice of
Borrowing (or deemed request for a Borrowing) by 12:00 noon on the proposed
funding date for Base Rate Loans or by 3:00 p.m. at least two Business Days
before any proposed funding of LIBOR Loans.  Each Lender shall fund to Agent
such Lender’s Pro Rata share of the Borrowing to the account specified by Agent
in immediately available funds not later than 2:00 p.m. on the requested funding
date, unless Agent’s notice is received after the times provided above, in which
case Lender shall fund its Pro Rata share by 11:00 a.m. on the next Business
Day.  Subject to its receipt of such amounts from Lenders, Agent shall disburse
the proceeds of the Revolver Loans as directed by Borrower Agent.  Unless Agent
shall have received (in sufficient time to act) written notice from a Lender
that it does not intend to fund its Pro Rata share of a Borrowing, Agent may
assume that such Lender has deposited or promptly will deposit its share with
Agent, and Agent may disburse a corresponding amount to Borrowers.  If a
Lender’s share of any Borrowing or of any settlement pursuant to
Section 4.1.3(b) is not received by Agent, then Borrowers agree to repay to
Agent on demand the amount of such share, together with interest thereon from
the date disbursed until repaid, at the rate applicable to the Borrowing.

 

4.1.3.                  Swingline Loans; Settlement.

 

(a)                                 Agent may, but shall not be obligated to,
advance Swingline Loans to Borrowers, up to an aggregate outstanding amount of
$8,000,000, unless the funding is specifically required to be made by all
Lenders hereunder.  Each Swingline Loan shall constitute a Revolver Loan for all
purposes, except that payments thereon shall be made to Agent for its own
account.  The obligation of Borrowers to repay Swingline Loans shall be
evidenced by the records of Agent and need not be evidenced by any promissory
note.

 

(b)                                 Settlement of Swingline Loans and other
Revolver Loans among Lenders and Agent shall take place on a date determined
from time to time by Agent (but at least weekly),  in accordance with the
Settlement Report delivered by Agent to Lenders.  Between settlement dates,
Agent may in its discretion apply payments on Revolver Loans to Swingline Loans,
regardless of any designation by Borrower or any provision herein to the
contrary.  Each Lender’s obligation to make settlements with Agent is absolute
and unconditional, without offset, counterclaim or other defense, and whether or
not the Commitments have terminated, an Overadvance exists or the conditions in
Section 6 are satisfied.  If, due to an Insolvency Proceeding with respect to a
Borrower or otherwise, any Swingline Loan may not be settled among Lenders
hereunder, then each Lender shall be deemed to have purchased from Agent a Pro
Rata participation in such Loan and shall transfer the amount of such
participation to Agent, in immediately available funds, within one Business Day
after Agent’s request therefor.

 

4.1.4.                  Notices.  Borrowers may request, convert or continue
Loans, select interest rates and transfer funds based on telephonic or e-mailed
instructions to Agent.  Borrowers shall confirm each such request by prompt
delivery to Agent of a Notice of Borrowing or Notice of Conversion/Continuation,
if applicable, but if it differs materially from the action taken by Agent or
Lenders, the records of Agent and Lenders shall govern.  Neither Agent nor any
Lender shall have any

 

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liability for any loss suffered by a Borrower as a result of Agent or any Lender
acting upon its understanding of telephonic or e-mailed instructions from a
person believed in good faith by Agent or any Lender to be a person authorized
to give such instructions on a Borrower’s behalf.

 

4.2.                            Defaulting Lender.

 

4.2.1.                  Reallocation of Pro Rata Share; Amendments.  For
purposes of determining Lenders’ obligations to fund or participate in Loans or
Letters of Credit, Agent may exclude the Commitments and Loans of any Defaulting
Lender(s) from the calculation of Pro Rata shares.  A Defaulting Lender shall
have no right to vote on any amendment, waiver or other modification of a Loan
Document, except as provided in Section 14.1.1(c).

 

4.2.2.                  Payments; Fees.  Agent may, in its discretion, receive
and retain any amounts payable to a Defaulting Lender under the Loan Documents,
and a Defaulting Lender shall be deemed to have assigned to Agent such amounts
until all Obligations owing to Agent, non-Defaulting Lenders and other Secured
Parties have been paid in full.  Agent may apply such amounts to the Defaulting
Lender’s defaulted obligations, use the funds to Cash Collateralize such
Lender’s Fronting Exposure, or readvance the amounts to Borrowers hereunder.  A
Lender shall not be entitled to receive any fees accruing hereunder during the
period in which it is a Defaulting Lender, and the unfunded portion of its
Commitment shall be disregarded for purposes of calculating the unused line fee
under Section 3.2.1.  If any LC Obligations owing to a Defaulted Lender are
reallocated to other Lenders, fees attributable to such LC Obligations under
Section 3.2.2 shall be paid to such Lenders.  Agent shall be paid all fees
attributable to LC Obligations that are not reallocated.

 

4.2.3.                  Cure.  Borrowers, Agent and Issuing Bank may agree in
writing that a Lender is no longer a Defaulting Lender.  At such time, Pro Rata
shares shall be reallocated without exclusion of such Lender’s Commitments and
Loans, and all outstanding Revolver Loans, LC Obligations and other exposures
under the Commitments shall be reallocated among Lenders and settled by Agent
(with appropriate payments by the reinstated Lender) in accordance with the
readjusted Pro Rata shares.  Unless expressly agreed by Borrowers, Agent and
Issuing Bank, no reinstatement of a Defaulting Lender shall constitute a waiver
or release of claims against such Lender.  The failure of any Lender to fund a
Loan, to make a payment in respect of LC Obligations or otherwise to perform its
obligations hereunder shall not relieve any other Lender of its obligations, and
no Lender shall be responsible for default by another Lender.

 

4.3.                            Number and Amount of LIBOR Loans; Determination
of Rate.  Each Borrowing of LIBOR Loans when made shall be in a minimum amount
of $1,000,000, plus any increment of $500,000 in excess thereof.  No more than
six (6) Borrowings of LIBOR Loans may be outstanding at any time, and all LIBOR
Loans having the same length and beginning date of their Interest Periods shall
be aggregated together and considered one Borrowing for this purpose.  Upon
determining LIBOR for any Interest Period requested by Borrowers, Agent shall
promptly notify Borrowers thereof by telephone or electronically and, if
requested by Borrowers, shall confirm any telephonic notice in writing.

 

4.4.                            Borrower Agent.  Each Borrower and Obligor
hereby designates SI USA (“Borrower Agent”) as its representative and agent for
all purposes under the Loan Documents, including requests for Loans and Letters
of Credit, designation of interest rates, delivery or receipt of communications,
preparation and delivery of Borrowing Base and financial reports, receipt and
payment of Obligations, requests for waivers, amendments or other
accommodations, actions under the Loan Documents (including in respect of
compliance with covenants), and all other dealings with Agent, Issuing Bank or
any Lender.  Borrower Agent hereby accepts such appointment.  Agent and Lenders
shall be entitled to rely upon, and shall be fully protected in relying upon,
any notice or communication (including any notice of borrowing) delivered by
Borrower Agent on behalf of any Borrower or another Obligor.  Agent and Lenders
may give any notice or communication with a Borrower or another Obligor
hereunder to

 

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Borrower Agent on behalf of such Borrower or another Obligor.  Each of
Agent, Issuing Bank and Lenders shall have the right, in its discretion, to deal
exclusively with Borrower Agent for any or all purposes under the Loan
Documents.  Each Borrower and Obligor agrees that any notice, election,
communication, representation, agreement or undertaking made on its behalf by
Borrower Agent shall be binding upon and enforceable against it.

 

4.5.                            One Obligation.  The Loans, LC Obligations and
other Obligations constitute one general obligation of Borrowers and are secured
by Agent’s Lien on all Collateral; provided, however, that Agent and each Lender
shall be deemed to be a creditor of, and the holder of a separate claim against,
each Borrower to the extent of any Obligations jointly or severally owed by such
Borrower.

 

4.6.                            Effect of Termination.  On the effective date of
the termination of all Commitments, the Obligations shall be immediately due and
payable, and any Lender may terminate its and its Affiliates’ Bank Products
(including, only with the consent of Agent, any Cash Management Services). 
Until Full Payment of the Obligations, all undertakings of Borrowers contained
in the Loan Documents shall continue, and Agent shall retain its Liens in the
Collateral and all of its rights and remedies under the Loan Documents.  Agent
shall not be required to terminate its Liens unless it receives Cash Collateral
or a written agreement, in each case satisfactory to it, protecting Agent and
Lenders from the dishonor or return of any Payment Items previously applied to
the Obligations.  Sections 2.3, 3.4, 3.6, 3.7, 3.9, 5.5, 5.9, 5.10, 12, 14.2,
this Section, and each indemnity or waiver given by an Obligor or Lender in any
Loan Document, shall survive Full Payment of the Obligations.

 

SECTION 5.                         PAYMENTS

 

5.1.                            General Payment Provisions.  All payments of
Obligations shall be made in Dollars, without offset, counterclaim or defense of
any kind, free of (and without deduction for) any Taxes, and in immediately
available funds, not later than 12:00 noon on the due date.  Any payment after
such time shall be deemed made on the next Business Day.  Any payment of a LIBOR
Loan prior to the end of its Interest Period shall be accompanied by all amounts
due under Section 3.9.  Borrowers agree that Agent shall have the continuing,
exclusive right to apply and reapply payments and proceeds of Collateral against
the Obligations, in such manner as Agent deems advisable, but whenever possible,
any prepayment of Loans shall be applied first to Base Rate Loans and then to
LIBOR Loans.

 

5.2.                            Repayment of Revolver Loans.  Revolver Loans
shall be due and payable in full on the Revolver Termination Date, unless
payment is sooner required hereunder.  Revolver Loans may be prepaid from time
to time, without penalty or premium.  If any Asset Disposition includes the
disposition of Accounts or Inventory, then Net Proceeds equal to the greater of
(a) the net book value of such Accounts and Inventory, or (b) the reduction in
the Borrowing Base upon giving effect to such disposition, shall be applied to
the Revolver Loans.  Notwithstanding anything herein to the contrary, if an
Overadvance exists, Borrowers shall, on the sooner of Agent’s demand or the
first Business Day after any Borrower has knowledge thereof, repay the
outstanding Revolver Loans in an amount sufficient to cause Availability to no
longer be less than zero.

 

5.3.                            [Intentionally deleted].

 

5.4.                            Payment of Other Obligations.  Obligations other
than Loans, including LC Obligations and Extraordinary Expenses, shall be paid
by Borrowers as provided in the Loan Documents or, if no payment date is
specified, on demand.

 

5.5.                            Marshaling; Payments Set Aside.  None of Agent
or Lenders shall be under any obligation to marshal any assets in favor of any
Obligor or against any Obligations.  If any payment by or on behalf of Borrowers
is made to Agent, Issuing Bank or any Lender, or Agent, Issuing Bank or any
Lender exercises a right of setoff, and such payment or the proceeds of such
setoff or any part thereof is

 

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subsequently invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by Agent, Issuing
Bank or such Lender in its discretion) to be repaid to a trustee, receiver or
any other Person, then to the extent of such recovery, the Obligation originally
intended to be satisfied, and all Liens, rights and remedies relating thereto,
shall be revived and continued in full force and effect as if such payment had
not been made or such setoff had not occurred.

 

5.6.                            Application and Allocation of Payments.

 

5.6.1.                  Application.  Payments made by Borrowers hereunder shall
be applied (a) first, as specifically required hereby; (b) second, to
Obligations then due and owing; (b) third, to other Obligations specified by
Borrowers; and (c) fourth, as determined by Agent in its discretion.

 

5.6.2.                  Post-Default Allocation.  Notwithstanding anything in
any Loan Document to the contrary, during an Event of Default, monies to be
applied to the Obligations, whether arising from payments by Obligors,
realization on Collateral, setoff or otherwise, shall be allocated as follows:

 

(a)                                 first, to all costs and expenses, including
Extraordinary Expenses, owing to Agent;

 

(b)                                 second, to all amounts owing to Agent on
Swingline Loans;

 

(c)                                  third, to all amounts owing to Issuing
Bank;

 

(d)                                 fourth, to all Obligations constituting fees
(other than Secured Bank Product Obligations);

 

(e)                                  fifth, to all Obligations constituting
interest (other than Secured Bank Product Obligations);

 

(f)                                   sixth, to Cash Collateralization of LC
Obligations;

 

(g)                                  seventh, to all Loans, and to Secured Bank
Product Obligations arising under Hedge Agreements (including Cash
Collateralization thereof) up to the amount of Reserves existing therefor;

 

(h)                                 eighth, to all other Secured Bank Product
Obligations; and

 

(i)                                     last, to all remaining Obligations.

 

Amounts shall be applied to payment of each category of Obligations only after
Full Payment of all preceding categories.  If amounts are insufficient to
satisfy a category, Obligations in the category shall be paid on a pro rata
basis.  Amounts distributed with respect to any Secured Bank Product Obligation
shall be calculated using the methodology reported to Agent for such Obligation
(but no greater than the maximum amount reported to Agent).  Agent shall have no
obligation to calculate the amount of any Secured Bank Product Obligation and
may request a reasonably detailed calculation thereof from the applicable
Secured Bank Product Provider.  If the provider fails to deliver the calculation
within five days following request, Agent may assume the amount is zero.  The
allocations set forth in this Section are solely to determine the rights and
priorities among Secured Parties, and may be changed by agreement among them
without the consent of any Obligor.  This Section is not for the benefit of or
enforceable by any Obligor, and each Borrower irrevocably waives the right to
direct the application of any payments or Collateral proceeds subject to this
Section.

 

5.6.3.                  Erroneous Application.  Agent shall not be liable for
any application of amounts made by it in good faith and, if any such application
is subsequently determined to have been

 

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made in error, the sole recourse of any Lender or other Person to which such
amount should have been made shall be to recover the amount from the Person that
actually received it (and, if such amount was received by any Lender, such
Lender hereby agrees to return it).

 

5.7.                            Dominion Accounts.  During any Cash Dominion
Period, the ledger balances in the Dominion Accounts as of the end of each
Business Day shall be applied to the Obligations at the beginning of the next
Business Day.  If, as a result of such application, a credit balance exists, the
balance shall not accrue interest in favor of Borrowers and shall be made
available to Borrowers as long as no Default or Event of Default exists.  If, at
any time a Cash Dominion Period shall not be in effect, the aggregate balance of
all cash held in all Deposit Accounts of Obligors (including all Dominion
Accounts and all Excluded Deposit Accounts (other than Deposit Accounts
described in clause (a) of the definition of “Excluded Deposit Accounts”) shall
exceed $2,000,000 for more than five Business Days, the Obligors shall remit to
Agent to be applied to the Obligations an amount sufficient to cause such
aggregate balance in all Deposit Accounts to be less than $2,000,000.  For the
avoidance of doubt, the Agent hereby agrees that a notice regarding the
commencement of a Cash Dominion Period shall not be delivered to the applicable
depository bank under a Deposit Account Control Agreement until such time as a
Cash Dominion Period has occurred.

 

5.8.                            Account Stated.  The Agent shall maintain in
accordance with its usual and customary practices account(s) evidencing the Debt
of Borrowers hereunder.  Any failure of Agent to record anything in a loan
account, or any error in doing so, shall not limit or otherwise affect the
obligation of Borrowers to pay any amount owing hereunder.  Entries made in a
loan account shall constitute presumptive evidence of the information contained
therein.  If any information contained in a loan account is provided to or
inspected by any Person, the information shall be conclusive and binding on such
Person for all purposes absent manifest error, except to the extent such Person
notifies Agent in writing within 30 days after receipt or inspection that
specific information is subject to dispute.

 

5.9.                            Taxes.

 

5.9.1.                  Payments Free of Taxes.  All payments by Obligors of
Obligations shall be free and clear of and without reduction for any Taxes.  If
Applicable Law requires any Obligor or Agent to withhold or deduct any Tax
(including backup withholding or withholding Tax), the withholding or deduction
shall be based on information provided pursuant to Section 5.10 and the Obligors
or Agent shall pay the amount withheld or deducted to the relevant Governmental
Authority.  If the withholding or deduction is made on account of Indemnified
Taxes or Other Taxes, the sum payable by Borrowers shall be increased so that
Agent, Lender or Issuing Bank, as applicable, receives an amount equal to the
sum it would have received if no such withholding or deduction (including
deductions applicable to additional sums payable under this Section) had been
made.  Without limiting the foregoing, Borrowers shall timely pay all Other
Taxes to the relevant Governmental Authorities.

 

5.9.2.                  Payment.  Borrowers shall indemnify, hold harmless and
reimburse (within 10 days after demand therefor) Agent, Lenders and Issuing Bank
for any Indemnified Taxes or Other Taxes (including those attributable to
amounts payable under this Section) withheld or deducted by any Obligor or
Agent, or paid by Agent, any Lender or Issuing Bank, with respect to any
Obligations, Letters of Credit or Loan Documents, whether or not such Taxes were
properly asserted by the relevant Governmental Authority, and including all
penalties, interest and reasonable expenses relating thereto, as well as any
amount that a Lender or Issuing Bank fails to pay indefeasibly to Agent under
Section 5.10.  A certificate as to the amount of any such payment or liability
delivered to Borrower Agent by Agent, or by a Lender or Issuing Bank (with a
copy to Agent), shall be conclusive, absent manifest error.  As soon as
practicable after any payment of Taxes by a Borrower, Borrower Agent shall
deliver to Agent a receipt from the Governmental Authority or other evidence of
payment satisfactory to Agent.

 

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5.10.                     Lender Tax Information.

 

5.10.1.           Status of Lenders.  Each Lender shall deliver documentation
and information to Agent and Borrower Agent, at the times and in form required
by Applicable Law or reasonably requested by Agent or Borrower Agent, sufficient
to permit Agent or Borrowers to determine (a) whether or not payments made with
respect to Obligations are subject to Taxes, (b) if applicable, the required
rate of withholding or deduction, and (c) such Lender’s entitlement to any
available exemption from, or reduction of, applicable Taxes for such payments or
otherwise to establish such Lender’s status for withholding tax purposes in the
applicable jurisdiction.

 

5.10.2.           Documentation.  If a Borrower is resident for tax purposes in
the United States, any Lender that is a “United States person” within the
meaning of section 7701(a)(30) of the Code shall deliver to Agent and Borrower
Agent IRS Form W-9 or such other documentation or information prescribed by
Applicable Law or reasonably requested by Agent or Borrower Agent to determine
whether such Lender is subject to backup withholding or information reporting
requirements.  If any Foreign Lender is entitled to any exemption from or
reduction of withholding tax for payments with respect to the Obligations, it
shall deliver to Agent and Borrower Agent, on or prior to the date on which it
becomes a Lender hereunder (and from time to time thereafter upon request by
Agent or Borrower Agent, but only if such Foreign Lender is legally entitled to
do so), (a) IRS Form W-8BEN claiming eligibility for benefits of an income tax
treaty to which the United States is a party; (b) IRS Form W-8ECI; (c) IRS
Form W-8IMY and all required supporting documentation; (d) in the case of a
Foreign Lender claiming the benefits of the exemption for portfolio interest
under section 881(c) of the Code, IRS Form W-8BEN and a certificate showing such
Foreign Lender is not (i) a “bank” within the meaning of section 881(c)(3)(A) of
the Code, (ii) a “10 percent shareholder” of any Obligor within the meaning of
section 881(c)(3)(B) of the Code, or (iii) a “controlled foreign corporation”
described in section 881(c)(3)(C) of the Code; or (e) any other form prescribed
by Applicable Law as a basis for claiming exemption from or a reduction in
withholding tax, together with such supplementary documentation necessary to
allow Agent and Borrowers to determine the withholding or deduction required to
be made.

 

5.10.3.           Lender Obligations.  Each Lender and Issuing Bank shall
promptly notify Borrowers and Agent of any change in circumstances that would
change any claimed Tax exemption or reduction.  Each Lender and Issuing Bank
shall indemnify, hold harmless and reimburse (within 10 days after demand
therefor) Borrowers and Agent for any Taxes, losses, claims, liabilities,
penalties, interest and expenses (including reasonable attorneys’ fees) incurred
by or asserted against a Borrower or Agent by any Governmental Authority due to
such Lender’s or Issuing Bank’s failure to deliver, or inaccuracy or deficiency
in, any documentation required to be delivered by it pursuant to this Section. 
Each Lender and Issuing Bank authorizes Agent to set off any amounts due to
Agent under this Section against any amounts payable to such Lender or Issuing
Bank under any Loan Document.

 

5.11.                     Nature and Extent of Each Borrower’s Liability.

 

5.11.1.           Joint and Several Liability.  Each Borrower agrees that it is
jointly and severally liable for, and absolutely and unconditionally guarantees
to Agent and Lenders the prompt payment and performance of, all Obligations and
all agreements under the Loan Documents.  Each Borrower agrees that its guaranty
obligations hereunder constitute a continuing guaranty of payment and not of
collection, that such obligations shall not be discharged until Full Payment of
the Obligations, and that such obligations are absolute and unconditional,
irrespective of (a) the genuineness, validity, regularity, enforceability,
subordination or any future modification of, or change in, any Obligations or
Loan Document, or any other document, instrument or agreement to which any
Obligor is or may become a party or be bound; (b) the absence of any action to
enforce this Agreement (including this Section) or any other Loan Document, or
any waiver, consent or indulgence of any kind by Agent or any Lender with
respect thereto; (c) the existence, value or condition of, or failure to perfect
a Lien or to preserve rights against, any security or guaranty for the
Obligations or any action, or the absence of any action, by Agent or any Lender
in respect thereof (including the release of any security or guaranty); (d) the
insolvency of any Obligor; (e) any election by Agent or any Lender in an
Insolvency Proceeding for the application of

 

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Section 1111(b)(2) of the Bankruptcy Code; (f) any borrowing or grant of a Lien
by any other Borrower, as debtor-in-possession under Section 364 of the
Bankruptcy Code or otherwise; (g) the disallowance of any claims of Agent or any
Lender against any Obligor for the repayment of any Obligations under
Section 502 of the Bankruptcy Code or otherwise; or (h) any other action or
circumstances that might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor, except Full Payment of all Obligations.

 

5.11.2.           Waivers.

 

(a)                                 Each Borrower expressly waives all rights
that it may have now or in the future under any statute, at common law, in
equity or otherwise, to compel Agent or Lenders to marshal assets or to proceed
against any Obligor, other Person or security for the payment or performance of
any Obligations before, or as a condition to, proceeding against such Borrower. 
Each Borrower waives all defenses available to a surety, guarantor or
accommodation co-obligor other than Full Payment of all Obligations and waives,
to the maximum extent permitted by law, any right to revoke any guaranty of any
Obligations as long as it is a Borrower.  It is agreed among each Borrower,
Agent and Lenders that the provisions of this Section 5.11 are of the essence of
the transaction contemplated by the Loan Documents and that, but for such
provisions, Agent and Lenders would decline to make Loans and issue Letters of
Credit.  Each Borrower acknowledges that its guaranty pursuant to this
Section is necessary to the conduct and promotion of its business, and can be
expected to benefit such business.

 

(b)                                 Agent and Lenders may, in their discretion,
pursue such rights and remedies as they deem appropriate, including realization
upon Collateral or any Real Estate by judicial foreclosure or nonjudicial sale
or enforcement, without affecting any rights and remedies under this
Section 5.11.  If, in taking any action in connection with the exercise of any
rights or remedies, Agent or any Lender shall forfeit any other rights or
remedies, including the right to enter a deficiency judgment against any
Borrower or other Person, whether because of any Applicable Laws pertaining to
“election of remedies” or otherwise, each Borrower consents to such action and
waives any claim based upon it, even if the action may result in loss of any
rights of subrogation that any Borrower might otherwise have had.  Any election
of remedies that results in denial or impairment of the right of Agent or any
Lender to seek a deficiency judgment against any Borrower shall not impair any
other Borrower’s obligation to pay the full amount of the Obligations.  Each
Borrower waives all rights and defenses arising out of an election of remedies,
such as nonjudicial foreclosure with respect to any security for the
Obligations, even though that election of remedies destroys such Borrower’s
rights of subrogation against any other Person.  Agent may bid all or a portion
of the Obligations at any foreclosure, trustee or other sale, including any
private sale, and the amount of such bid need not be paid by Agent but shall be
credited against the Obligations.  The amount of the successful bid at any such
sale, whether Agent or any other Person is the successful bidder, shall be
conclusively deemed to be the fair market value of the Collateral, and the
difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the Obligations guaranteed
under this Section 5.11, notwithstanding that any present or future law or court
decision may have the effect of reducing the amount of any deficiency claim to
which Agent or any Lender might otherwise be entitled but for such bidding at
any such sale.

 

5.11.3.           Extent of Liability; Contribution.

 

(a)                                 Notwithstanding anything herein to the
contrary, each Borrower’s liability under this Section 5.11 shall be limited to
the greater of (i) all amounts for which such Borrower is primarily liable, as
described below, and (ii) such Borrower’s Allocable Amount.

 

(b)                                 If any Borrower makes a payment under this
Section 5.11 of any Obligations (other than amounts for which such Borrower is
primarily liable) (a “Guarantor Payment”) that, taking into account all other
Guarantor Payments previously or concurrently made by any other Borrower,
exceeds the amount that such Borrower would otherwise have paid if each Borrower
had paid the

 

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aggregate Obligations satisfied by such Guarantor Payments in the same
proportion that such Borrower’s Allocable Amount bore to the total Allocable
Amounts of all Borrowers, then such Borrower shall be entitled to receive
contribution and indemnification payments from, and to be reimbursed by, each
other Borrower for the amount of such excess, pro rata based upon their
respective Allocable Amounts in effect immediately prior to such Guarantor
Payment.  The “Allocable Amount” for any Borrower shall be the maximum amount
that could then be recovered from such Borrower under this Section 5.11 without
rendering such payment voidable under Section 548 of the Bankruptcy Code or
under any applicable state fraudulent transfer or conveyance act, or similar
statute or common law.

 

(c)                                  Nothing contained in this Section 5.11
shall limit the liability of any Borrower to pay Loans made directly or
indirectly to that Borrower (including Loans advanced to any other Borrower and
then re-loaned or otherwise transferred to, or for the benefit of, such
Borrower), LC Obligations relating to Letters of Credit issued to support such
Borrower’s business, and all accrued interest, fees, expenses and other related
Obligations with respect thereto, for which such Borrower shall be primarily
liable for all purposes hereunder.  Agent and Lenders shall have the right, at
any time in their discretion, to condition Loans and Letters of Credit upon a
separate calculation of borrowing availability for each Borrower and to restrict
the disbursement and use of such Loans and Letters of Credit to such Borrower.

 

5.11.4.           Joint Enterprise.  Each Borrower has requested that Agent and
Lenders make this credit facility available to Borrowers on a combined basis, in
order to finance Borrowers’ business most efficiently and economically. 
Borrowers’ business is a mutual and collective enterprise, and the successful
operation of each Borrower is dependent upon the successful performance of the
integrated group.  Borrowers believe that consolidation of their credit facility
will enhance the borrowing power of each Borrower and ease administration of the
facility, all to their mutual advantage.  Borrowers acknowledge that Agent’s and
Lenders’ willingness to extend credit and to administer the Collateral on a
combined basis hereunder is done solely as an accommodation to Borrowers and at
Borrowers’ request.

 

5.11.5.           Subordination.  Each Borrower hereby subordinates any claims,
including any rights at law or in equity to payment, subrogation, reimbursement,
exoneration, contribution, indemnification or set off, that it may have at any
time against any other Obligor, howsoever arising, to the Full Payment of all
Obligations.

 

SECTION 6.                         CONDITIONS PRECEDENT

 

6.1.                            Conditions Precedent to Initial Loans.  In
addition to the conditions set forth in Section 6.2, Lenders shall not be
required to fund any requested Loan, issue any Letter of Credit, or otherwise
extend credit to Borrowers hereunder, until the date (“Closing Date”) that each
of the following conditions has been satisfied:

 

(a)                                 Each Loan Document shall have been duly
executed and delivered to Agent by each of the signatories thereto, and each
Obligor shall be in compliance with all terms thereof.

 

(b)                                 Agent shall have received acknowledgments of
all filings or recordations necessary to perfect its Liens in the Collateral, as
well as UCC, PPSA and Lien searches and other evidence satisfactory to Agent
that such Liens are the only Liens upon the Collateral, except Permitted Liens.

 

(c)                                  Agent shall have received certificates, in
form and substance satisfactory to it, from a knowledgeable Senior Officer of
each Borrower certifying that, after giving effect to the initial Loans and
transactions hereunder, (i) the Company and its Subsidiaries, taken as a whole,
are Solvent; (ii) no Default or Event of Default exists; (iii) the
representations and warranties set forth in Section 9 are true and correct; and
(iv) such Borrower has complied with all agreements and conditions to be
satisfied by it under the Loan Documents.

 

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(e)                                  Agent shall have received a certificate of
a duly authorized officer of each Obligor, certifying (i) that attached copies
of such Obligor’s Organic Documents are true and complete, and in full force and
effect, without amendment except as shown; (ii) that an attached copy of
resolutions authorizing execution and delivery of the Loan Documents is true and
complete, and that such resolutions are in full force and effect, were duly
adopted, have not been amended, modified or revoked, and constitute all
resolutions adopted with respect to this credit facility; and (iii) to the
title, name and signature of each Person authorized to sign the Loan Documents. 
Agent may conclusively rely on this certificate until it is otherwise notified
by the applicable Obligor in writing.

 

(f)                                   Agent shall have received a written
opinion of (i) Poore & Rosenbaum LLP, US counsel to the Obligors, (ii) Stikeman
Elliott LLP, special Ontario counsel to the Canadian Guarantor, (iii) Stewart
McKelvey, special New Brunswick counsel to the Canadian Guarantor, and
(iv) Clyde & Co LLP, special UK counsel to Agent, as well as any local counsel
to Borrowers or Agent, in form and substance satisfactory to Agent.

 

(g)                                  Agent shall have received copies of the
charter documents of each Obligor, certified by the Secretary of State or other
appropriate official of such Obligor’s jurisdiction of organization (or, if
customary in a particular jurisdiction, certified by an officer of such
Obligor).  Agent shall have received good standing certificates (or their
equivalents) for each Obligor, issued by the Secretary of State or other
appropriate official of such Obligor’s jurisdiction of organization and each
jurisdiction where such Obligor’s conduct of business or ownership of Property
necessitates qualification.

 

(h)                                 Agent shall have received copies of policies
or certificates of insurance for the insurance policies carried by Borrowers,
together with loss payable endorsements naming Agent as loss payee and as
additional insured (in the case of Canadian insurance policies, first mortgagee,
and in the case of UK Insurance policies, first loss payee, all in compliance
with the Loan Documents.

 

(i)                                     Agent shall have completed its business,
financial and legal due diligence of Obligors, including a satisfactory
confirmatory field examination with results satisfactory to Agent.  Except for
the matters disclosed in the Company’s filings with the Securities and Exchange
Commission, no material adverse change, in the opinion of Agent, in the
business, assets, Properties, liabilities, operations, condition (financial or
otherwise) or prospects of the Borrowers and the Guarantors, taken as a whole,
financial condition of any Obligor or in the quality, quantity or value of any
Collateral has occurred since December 31, 2011.

 

(j)                                    Borrowers shall have paid all fees and
expenses to be paid to Agent and Lenders on the Closing Date.

 

(k)                                 Agent shall have received a Borrowing Base
Certificate prepared as of January 31, 2013.  Upon giving effect to the initial
funding of Loans and issuance of Letters of Credit, and the payment by Borrowers
of all fees and expenses incurred in connection herewith as well as any payables
stretched beyond their customary payment practices, Availability (after the
netting of any Accounts stretched beyond contractual selling terms provided by
vendors) shall be at least $7,500,000.

 

(l)                                     Agent shall have received reasonably
satisfactory evidence that all principal, interest, and other amounts owing in
respect of all indebtedness for borrowed money of Obligors (other than
indebtedness listed on Schedule 10.2.1) hereto) will be repaid in full on the
Closing Date with the proceeds of the initial Loans hereunder on the Closing
Date and any and all Liens securing such indebtedness will be terminated and
released on the Closing Date.

 

(m)                             With respect to each leased property or
warehouse of each Obligor, Agent shall have either (i) received a Lien Waiver
with respect to such leased property or warehouse or (ii) established a Rent and
Charges Reserve with respect to such leased property or warehouse.

 

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(n)                                 Agent shall have received the internally
prepared monthly divisional financial statements of the Company and its
Subsidiaries for the month and fiscal year ended December 31, 2012 and, if the
Closing Date occurs after February 28, 2013, for the month ended January 31,
2013.

 

(o)                                 The Obligors shall have entered into
definitive financing documentation with respect to the Permitted Term Debt on
terms and conditions reasonably acceptable to Agent, the Borrowers shall have
received the cash proceeds of such Permitted Term Debt, and Agent and the
holders of the Permitted Term Debt shall have entered into the Intercreditor
Agreement.

 

(p)                                 No action, suit, investigation, litigation
or proceeding shall be threatened or pending in any court or before any
arbitrator or governmental instrumentality that in Agent’s judgment could
reasonably be expected to have a Material Adverse Effect.

 

(q)                                 Agent shall have received satisfactory
evidence that the Obligors have received all governmental and third party
consents and approvals as may be appropriate in connection with the Loans and
the transactions contemplated by this Agreement.

 

6.2.                            Conditions Precedent to All Credit Extensions. 
Agent, Issuing Bank and Lenders shall not be required to fund any Loans, arrange
for issuance of any Letters of Credit or grant any other accommodation to or for
the benefit of Borrowers, unless the following conditions are satisfied:

 

(a)                                 No Default or Event of Default shall exist
at the time of, or result from, such funding, issuance or grant;

 

(b)                                 The representations and warranties of each
Obligor in the Loan Documents shall be true and correct on the date of, and upon
giving effect to, such funding, issuance or grant (except for representations
and warranties that expressly relate to an earlier date);

 

(c)                                  All conditions precedent in any other Loan
Document shall be satisfied;

 

(d)                                 No event shall have occurred or circumstance
exist that has or could reasonably be expected to have a Material Adverse
Effect; and

 

(e)                                  With respect to issuance of a Letter of
Credit, the LC Conditions shall be satisfied.

 

Each request (or deemed request) by Borrowers for funding of a Loan, issuance of
a Letter of Credit or grant of an accommodation shall constitute a
representation by Borrowers that the foregoing conditions are satisfied on the
date of such request and on the date of such funding, issuance or grant.  As an
additional condition to any funding, issuance or grant, Agent shall have
received such other information, documents, instruments and agreements as it
deems appropriate in connection therewith.

 

SECTION 7.                         COLLATERAL

 

7.1.                            Grant of Security Interest.  To secure the
prompt payment and performance of all Obligations, each Obligor hereby grants to
Agent, for the benefit of Secured Parties, a continuing security interest in and
Lien upon all Property of such Obligor, including all of the following Property,
whether now owned or hereafter acquired, and wherever located:

 

(a)                                 all Accounts;

 

(b)                                 all Chattel Paper, including electronic
chattel paper;

 

(c)                                  all Commercial Tort Claims, including those
shown on Schedule 9.1.16;

 

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(d)           all Deposit Accounts;

 

(e)           all Documents;

 

(f)            all General Intangibles and Intangibles, including Intellectual
Property;

 

(g)           all Goods, including Inventory, Equipment and fixtures;

 

(h)           all Instruments;

 

(i)            all Investment Property;

 

(j)            all Letters of Credit (which, for purposes of this clause
(j) only, shall have the meaning given to such term in the UCC) and
Letter-of-Credit Rights;

 

(k)           all Supporting Obligations;

 

(l)            all monies, whether or not in the possession or under the control
of Agent, a Lender, or a bailee or Affiliate of Agent or a Lender, including any
Cash Collateral;

 

(m)          all accessions to, substitutions for, and all replacements,
products, and cash and non-cash proceeds of the foregoing, including proceeds of
and unearned premiums with respect to insurance policies, and claims against any
Person for loss, damage or destruction of any Collateral; and

 

(n)           all books and records (including customer lists, files,
correspondence, tapes, computer programs, print-outs and computer records)
pertaining to the foregoing.

 

7.2.         Lien on Deposit Accounts; Cash Collateral.

 

7.2.1.      Deposit Accounts.  To further secure the prompt payment and
performance of all Obligations, each Obligor hereby grants to Agent a continuing
security interest in and Lien upon all amounts credited to any Deposit Account
of such Obligor, including any sums in any lockbox or Dominion Account.  Within
60 days of the Closing Date (or such later date as Agent, in its discretion, may
otherwise specify), each Obligor (i) shall cause separate lockbox or Dominion
Accounts and separate disbursement accounts to be established at Bank of America
for the Obligors operations in each of the United States, Canada and the United
Kingdom, (ii) shall enter into a Deposit Account Control Agreement with respect
to each Dominion Account that provides, during a Cash Dominion Period, for all
cash in each Dominion Account to be applied against the Obligations on a daily
basis, and (iii) shall close any Deposit Account maintained by any Obligor at
any financial institution other than Bank of America.

 

7.2.2.      Cash Collateral.  Cash Collateral may be invested, at Agent’s
discretion (and with the consent of Borrower Agent, as long as no Event of
Default exists), but Agent shall have no duty to do so, regardless of any
agreement or course of dealing with any Obligor, and shall have no
responsibility for any investment or loss.  Each Obligor hereby grants to Agent,
as security for the Obligations, a security interest in all Cash Collateral held
from time to time and all proceeds thereof, whether held in a Cash Collateral
Account or otherwise.  Agent may apply Cash Collateral to the payment of
Obligations as they become due, in such order as Agent may elect.  Each Cash
Collateral Account and all Cash Collateral shall be under the sole dominion and
control of Agent, and no Obligor or other Person shall have any right to any
Cash Collateral, until Full Payment of all Obligations.

 

7.3.         Real Estate Collateral.  To further secure the prompt payment and
performance of all Obligations, each Obligor hereby transfers and assigns to
Agent all of such Obligor’s right, title and interest in, to and under all now
or hereafter existing leases of real Property to which such Borrower is a party,
whether as lessor or lessee, and all extensions, renewals, modifications and
proceeds thereof.

 

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7.4.         Other Collateral.

 

7.4.1.      Commercial Tort Claims.  Obligors shall promptly notify Agent in
writing if any Obligor has a Commercial Tort Claim (other than, as long as no
Default or Event of Default exists, a Commercial Tort Claim for less than
$100,000), shall promptly amend Schedule 9.1.16 to include such claim, and shall
take such actions as Agent deems appropriate to subject such claim to a duly
perfected, first priority Lien in favor of Agent.

 

7.4.2.      Certain After-Acquired Collateral.  Obligors shall promptly notify
Agent in writing if, after the Closing Date, any Obligor obtains any interest in
any Collateral consisting of Deposit Accounts, Chattel Paper, Documents,
Instruments, Intellectual Property, Investment Property or Letter-of-Credit
Rights and, upon Agent’s request, shall promptly take such actions as Agent
deems appropriate to effect Agent’s duly perfected, first priority Lien upon
such Collateral, including obtaining any appropriate possession, control
agreement or Lien Waiver.  If any Collateral is in the possession of a third
party, at Agent’s request, Obligors shall obtain an acknowledgment that such
third party holds the Collateral for the benefit of Agent.

 

7.5.         No Assumption of Liability.  The Lien on Collateral granted
hereunder is given as security only and shall not subject Agent or any Lender
to, or in any way modify, any obligation or liability of Obligors relating to
any Collateral.

 

7.6.         Further Assurances.  All Liens granted to Agent under the Loan
Documents are for the benefit of Secured Parties.  Promptly upon request,
Obligors shall deliver such instruments and agreements, and shall take such
actions, as Agent deems appropriate under Applicable Law to evidence or perfect
its Lien on any Collateral, or otherwise to give effect to the intent of this
Agreement.  Each Obligor authorizes Agent to file any financing statement that
describes the Collateral as “all assets” or “all personal property” of such
Obligor, or words to similar effect, and ratifies any action taken by Agent
before the Closing Date to effect or perfect its Lien on any Collateral.

 

SECTION 8.        COLLATERAL ADMINISTRATION

 

8.1.         Borrowing Base Certificates.  Obligors shall deliver to Agent (and
Agent shall promptly deliver same to Lenders) (i) by the fifteenth (15th) day of
each calendar month, and at such other times as Agent may request, a Borrowing
Base Certificate setting forth the amounts of Accounts, Inventory, Eligible
Accounts, Eligible Inventory, the Accounts Formula Amount, the Inventory Formula
Amount, the Availability Reserve, the Borrowing Base, the Revolver Exposure and
Availability as of the most recently ended calendar month, and (ii) by Wednesday
of each week, an updated Borrowing Base Certificate (which updated Borrowing
Base Certificate shall include updated calculations of the Borrowing Base and
Availability as of the end of the most recently ended week based solely upon
sales, collections and Loan activity since the last day of the calendar month
for which a monthly Borrowing Base Certificate shall have been prepared).  All
calculations of Availability in any Borrowing Base Certificate shall originally
be made by Obligors and certified by a Senior Officer, provided that Agent may
from time to time review and, in its Permitted Discretion, adjust any such
calculation (a) to reflect its estimate of declines in value of any Collateral,
due to collections received or otherwise; or (b) to the extent Agent believes
that the calculation was not made in accordance with this Agreement or does not
accurately reflect the Availability Reserve.

 

8.2.         Administration of Accounts.

 

8.2.1.      Records and Schedules of Accounts.  Each Obligor shall keep accurate
and complete records of its Accounts, including all payments and collections
thereon, and shall submit to Agent sales, collection, reconciliation and other
reports in form satisfactory to Agent, on such periodic basis as Agent may
request.  Each Obligor shall also provide to Agent, on or before the 15th day of
each

 

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month, a detailed aged trial balance of all Accounts as of the end of the most
recent month, specifying each Account’s Account Debtor name and address, amount,
invoice date and due date, showing any discount, allowance, credit, authorized
return or dispute, and including such proof of delivery, copies of invoices and
invoice registers, copies of related documents, repayment histories, status
reports and other information as Agent may reasonably request.  If Accounts in
an aggregate face amount of $250,000 or more cease to be Eligible Accounts,
Obligors shall notify Agent of such occurrence promptly (and in any event within
one Business Day) after any Obligor has knowledge thereof.

 

8.2.2.      Taxes.  If an Account of any Obligor includes a charge for any
Taxes, Agent is authorized, in its discretion, to pay the amount thereof to the
proper taxing authority for the account of such Obligor and to charge Obligors
therefor; provided, however, that neither Agent nor Lenders shall be liable for
any Taxes that may be due from Obligors or with respect to any Collateral.

 

8.2.3.      Account Verification.  Whether or not a Default or Event of Default
exists, Agent shall have the right at any time, in the name of Agent, any
designee of Agent or any Obligor, to verify the validity, amount or any other
matter relating to any Accounts of Obligors by mail, telephone or otherwise. 
Obligors shall cooperate fully with Agent in an effort to facilitate and
promptly conclude any such verification process.

 

8.2.4.      Maintenance of Dominion Accounts.  Obligors shall maintain Dominion
Accounts pursuant to lockbox or other arrangements acceptable to Agent.  Within
60 days of the Closing Date (or such later date as Agent, in its discretion, may
otherwise specify), Obligors shall have entered into agreements (in form and
substance satisfactory to Agent) with Bank of America, in its capacity as
lockbox servicer and Dominion Account bank, establishing Agent’s Lien on and
control over all lockboxes and Dominion Accounts, which may be exercised by
Agent during any Cash Dominion Period, requiring immediate deposit of all
remittances received in a lockbox to a Dominion Account. Agent and Lenders
assume no responsibility to Obligors for any lockbox arrangement or Dominion
Account, including any claim of accord and satisfaction or release with respect
to any Payment Items accepted by any bank.

 

8.2.5.      Proceeds of Collateral.  Borrowers shall request in writing and
otherwise take all necessary steps to ensure that not later than 60 days after
the Closing Date (or such later date as Agent, in its discretion, may otherwise
specify) and at all times thereafter all payments on Accounts or otherwise
relating to Collateral are made directly to a Dominion Account (or a lockbox
relating to a Dominion Account).  If any Obligor or Subsidiary receives cash or
Payment Items with respect to any Collateral, it shall hold same in trust for
Agent and promptly (not later than the next Business Day) deposit same into a
Dominion Account (or a lockbox which is swept into a Dominion Account).

 

8.3.         Administration of Inventory.

 

8.3.1.      Records and Reports of Inventory.  Each Obligor shall keep accurate
and complete records of its Inventory, including costs and daily withdrawals and
additions, and, prior to the 15th day after the end of each month, shall submit
to Agent inventory and reconciliation reports for such month in form
satisfactory to Agent.  Each Obligor shall conduct a physical inventory at least
once per calendar year (and on a more frequent basis if requested by Agent when
an Event of Default exists) and periodic cycle counts consistent with historical
practices, and shall provide to Agent a report based on each such inventory and
count promptly upon completion thereof, together with such supporting
information as Agent may request.  Agent may participate in and observe each
physical count.

 

8.3.2.      Returns of Inventory.  No Obligor shall return any Inventory to a
supplier, vendor or other Person, whether for cash, credit or otherwise, unless
(a) such return is in the Ordinary Course of Business; (b) no Default, Event of
Default or Overadvance exists or would result therefrom; (c) Agent is promptly
notified if the aggregate Value of all Inventory returned in any month exceeds

 

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$375,000; and (d) any payment received by an Obligor for a return is promptly
remitted to Agent for application to the Obligations.

 

8.3.3.      Acquisition, Sale and Maintenance.  No Obligor shall acquire or
accept any Inventory on consignment or approval, and shall take all steps to
assure that all Inventory is produced in accordance with Applicable Law,
including the FLSA.  No Obligor shall sell any Inventory on consignment or
approval or any other basis under which the customer may return or require an
Obligor to repurchase such Inventory.  Obligors shall use, store and maintain
all Inventory with reasonable care and caution, in accordance with applicable
standards of any insurance and in conformity with all Applicable Law, and shall
make current rent payments (within applicable grace periods provided for in
leases) at all locations where any Collateral is located.

 

8.4.         Administration of Equipment.

 

8.4.1.      Records and Schedules of Equipment.  Each Obligor shall keep
accurate and complete records of its Equipment, including kind, quality,
quantity, cost, acquisitions and dispositions thereof, and shall submit to
Agent, on such periodic basis as Agent may request, a current schedule thereof,
in form satisfactory to Agent.  Promptly upon request, Obligors shall deliver to
Agent evidence of their ownership or interests in any Equipment.

 

8.4.2.      Dispositions of Equipment.  No Obligor shall sell, lease or
otherwise dispose of any Equipment, without the prior written consent of Agent,
other than (a) a Permitted Asset Disposition; and (b) replacement of Equipment
that is worn, damaged or obsolete with Equipment of like function and value, if
the replacement Equipment is acquired substantially contemporaneously with such
disposition and is free of Liens (other than Permitted Liens).

 

8.4.3.      Condition of Equipment.  The Equipment is in good operating
condition and repair, and all necessary replacements and repairs have been made
so that the value and operating efficiency of the Equipment is preserved at all
times, reasonable wear and tear excepted.  Each Obligor shall ensure that the
Equipment is mechanically and structurally sound, and capable of performing the
functions for which it was designed, in accordance with manufacturer
specifications.  No Obligor shall permit any Equipment to become affixed to real
Property unless any landlord or mortgagee delivers a Lien Waiver.

 

8.5.         Administration of Deposit Accounts.  Schedule 8.5 sets forth all
Deposit Accounts maintained by Obligors, including all Dominion Accounts.  Each
Obligor shall take all actions necessary to establish as soon as possible but
not later than 60 days after the Closing Date (or such later date as Agent, in
its discretion, may otherwise specify) Agent’s control over each such Deposit
Account (other than Excluded Deposit Accounts).  Each Obligor shall be the sole
account holder of each Deposit Account and shall not allow any Person (other
than Agent) to have control over a Deposit Account or any Property deposited
therein.  Each Obligor shall promptly notify Agent of any opening or closing of
a Deposit Account and, with the consent of Agent, will amend Schedule 8.5 to
reflect same.

 

8.6.         General Provisions.

 

8.6.1.      Location of Collateral.  All tangible items of Collateral, other
than Inventory in transit, shall at all times be kept by Obligors at the
business locations set forth in Schedule 8.6.1, except that Obligors may
(a) make sales or other dispositions of Collateral in accordance with
Section 10.2.6; and (b) move Collateral to another location in the United
States, upon 30 Business Days prior written notice to Agent.

 

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8.6.2.      Insurance of Collateral; Condemnation Proceeds.

 

(a)           Each Obligor shall maintain insurance with respect to the
Collateral, covering casualty, hazard, theft, malicious mischief, flood and
other risks, in amounts, with endorsements and with insurers (with a Best’s
Financial Strength Rating of at least A-, unless otherwise approved by Agent)
satisfactory to Agent.  All proceeds under each policy shall be payable to
Agent.  From time to time upon request, Obligors shall deliver to Agent the
originals or certified copies of its insurance policies and updated flood plain
searches.  Unless Agent shall agree otherwise, each policy shall include
satisfactory endorsements (i) showing Agent as loss payee; (ii) requiring 30
days prior written notice to Agent in the event of cancellation of the policy
for any reason whatsoever; and (iii) specifying that the interest of Agent shall
not be impaired or invalidated by any act or neglect of any Obligor or the owner
of the Property, nor by the occupation of the premises for purposes more
hazardous than are permitted by the policy.  If any Obligor fails to provide and
pay for any insurance, Agent may, at its option, but shall not be required to,
procure the insurance and charge Obligors therefor.  Each Obligor agrees to
deliver to Agent, promptly as rendered, copies of all reports made to insurance
companies.  While no Event of Default exists, Obligors may settle, adjust or
compromise any insurance claim, as long as the proceeds are delivered to Agent. 
If an Event of Default exists, only Agent shall be authorized to settle, adjust
and compromise such claims.

 

(b)           Any proceeds of insurance (other than proceeds from workers’
compensation or D&O insurance) and any awards arising from condemnation of any
Collateral shall be paid to Agent.  Any such proceeds or awards that relate to
Inventory shall be applied to payment of the Revolver Loans, and then to any
other Obligations outstanding.  Subject to clause (c) below and the
Intercreditor Agreement, any proceeds or awards that relate to Equipment or Real
Estate shall be applied first to Revolver Loans and then to other Obligations.

 

(c)           If requested by Obligors in writing within 15 days after Agent’s
receipt of any insurance proceeds or condemnation awards relating to any loss or
destruction of Equipment or Real Estate, Obligors may use such proceeds or
awards to repair or replace such Equipment or Real Estate (and until so used,
the proceeds shall be held by Agent as Cash Collateral) as long as (i) no
Default or Event of Default exists; (ii) such repair or replacement is promptly
undertaken and concluded, in accordance with plans satisfactory to Agent;
(iii) replacement buildings are constructed on the sites of the original
casualties and are of comparable size, quality and utility to the destroyed
buildings; (iv) the repaired or replaced Property is free of Liens, other than
Permitted Liens that are not Purchase Money Liens; (v) Borrowers comply with
disbursement procedures for such repair or replacement as Agent may reasonably
require; and (vi) the aggregate amount of such proceeds or awards from any
single casualty or condemnation does not exceed $1,000,000.

 

8.6.3.      Protection of Collateral.  All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping any Collateral, all
Taxes payable with respect to any Collateral (including any sale thereof), and
all other payments required to be made by Agent to any Person to realize upon
any Collateral, shall be borne and paid by Obligors.  Agent shall not be liable
or responsible in any way for the safekeeping of any Collateral, for any loss or
damage thereto (except for reasonable care in its custody while Collateral is in
Agent’s actual possession), for any diminution in the value thereof, or for any
act or default of any warehouseman, carrier, forwarding agency or other Person
whatsoever, but the same shall be at Obligors’ sole risk.

 

8.6.4.      Defense of Title.  Each Borrower shall defend its title to
Collateral and Agent’s Liens therein against all Persons, claims and demands,
except Permitted Liens.

 

8.7.         Power of Attorney.  Each Obligor hereby irrevocably constitutes and
appoints Agent (and all Persons designated by Agent) as such Obligor’s true and
lawful attorney (and agent-in-fact) for the purposes provided in this Section. 
Agent, or Agent’s designee, may, without notice and in either its or an
Obligor’s name, but at the cost and expense of Obligors:

 

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(a)           Endorse an Obligor’s name on any Payment Item remitted to or
deposited in any lockbox or Dominion Account; and

 

(b)           During an Event of Default, (i) notify any Account Debtors of the
assignment of their Accounts, demand and enforce payment of Accounts by legal
proceedings or otherwise, and generally exercise any rights and remedies with
respect to Accounts; (ii) settle, adjust, modify, compromise, discharge or
release any Accounts or other Collateral, or any legal proceedings brought to
collect Accounts or Collateral; (iii) sell or assign any Accounts and other
Collateral upon such terms, for such amounts and at such times as Agent deems
advisable; (iv) collect, liquidate and receive balances in Deposit Accounts or
investment accounts, and take control, in any manner, of proceeds of Collateral;
(v) prepare, file and sign an Obligor’s name to a proof of claim or other
document in a bankruptcy of an Account Debtor, or to any notice, assignment or
satisfaction of Lien or similar document; (vi) receive, open and dispose of mail
addressed to an Obligor, and notify postal authorities to deliver any such mail
to an address designated by Agent; (vii) endorse any Chattel Paper,
Document, Instrument, bill of lading, or other document or agreement relating to
any Accounts, Inventory or other Collateral; (viii) use an Obligor’s stationery
and sign its name to verifications of Accounts and notices to Account Debtors;
(ix) use information contained in any data processing, electronic or information
systems relating to Collateral; (x) make and adjust claims under insurance
policies; (xi) take any action as may be necessary or appropriate to obtain
payment under any letter of credit, banker’s acceptance or other instrument for
which an Obligor is a beneficiary; and (xii) take all other actions as Agent
deems appropriate to fulfill any Borrower’s obligations under the Loan
Documents.

 

SECTION 9.        REPRESENTATIONS AND WARRANTIES

 

9.1.         General Representations and Warranties.  To induce Agent and
Lenders to enter into this Agreement and to make available the Commitments,
Loans and Letters of Credit, each Obligor represents and warrants that:

 

9.1.1.      Organization and Qualification.  Each Obligor and Subsidiary is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization.  Each Obligor and Subsidiary is duly
qualified, authorized to do business and in good standing as a foreign
corporation in each jurisdiction where failure to be so qualified could
reasonably be expected to have a Material Adverse Effect.

 

9.1.2.      Power and Authority.  Each Obligor is duly authorized to execute,
deliver and perform its Loan Documents.  The execution, delivery and performance
of the Loan Documents have been duly authorized by all necessary action, and do
not (a) require any consent or approval of any holders of Equity Interests of
any Obligor, except those already obtained; (b) contravene the Organic Documents
of any Obligor; (c) violate or cause a default under any Applicable Law or
Material Contract; or (d) result in or require the imposition of any Lien (other
than Permitted Liens) on any Obligor’s Property.

 

9.1.3.      Enforceability.  Each Loan Document is a legal, valid and binding
obligation of each Obligor party thereto, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors’ rights generally.

 

9.1.4.      Capital Structure.  Schedule 9.1.4 shows (a) for each Obligor and
Subsidiary, its name, jurisdiction of organization and any agreement binding on
the holders of its Equity Interests with respect to such Equity Interests, and
(b) for each Subsidiary of the Company, its authorized and issued Equity
Interests and the names of the holders of its Equity Interests.  Except as
disclosed on Schedule 9.1.4, in the five years preceding the Closing Date, no
Obligor or Subsidiary has acquired any substantial assets from any other Person
nor been the surviving entity in a merger or combination.  Each

 

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Obligor has good title to its Equity Interests in its Subsidiaries, subject only
to Liens in favor of Agent and the Permitted Term Agent, and all such Equity
Interests are duly issued, fully paid and non-assessable.  Except for the Equity
Interests issued under the 2006 Performance Equity Plan of the Company and the
2012 Incentive Compensation Plan for the Company, there are no outstanding
purchase options, warrants, subscription rights, agreements to issue or sell,
convertible interests, phantom rights or powers of attorney relating to Equity
Interests of any Obligor or Subsidiary.

 

9.1.5.      Title to Properties; Priority of Liens.  Each Obligor and Subsidiary
has good and marketable title to (or valid leasehold interests in) all of its
Real Estate, and good title to all of its personal Property, including all
Property reflected in any financial statements delivered to Agent or Lenders, in
each case free of Liens except Permitted Liens.  Except as otherwise indicated
on Schedule 9.1.5, each Obligor and Subsidiary has paid and discharged all
lawful claims that, if unpaid, could become a Lien on its Properties, other than
Permitted Liens.  All Liens of Agent in the Collateral are duly perfected, first
priority Liens, subject only to Permitted Liens that are expressly allowed to
have priority over Agent’s Liens.

 

9.1.6.      Accounts.  Agent may rely, in determining which Accounts are
Eligible Accounts, on all statements and representations made by Obligors with
respect thereto.  Obligors warrant, with respect to each Account at the time it
is shown as an Eligible Account in a Borrowing Base Certificate, that:

 

(a)           it is genuine and in all respects what it purports to be, and is
not evidenced by a judgment;

 

(b)           it arises out of a completed, bona fide sale and delivery of goods
in the Ordinary Course of Business, and substantially in accordance with any
purchase order, contract or other document relating thereto;

 

(c)           it is for a sum certain, maturing as stated in the invoice
covering such sale, a copy of which has been furnished or is available to Agent
on request;

 

(d)           it is not subject to any offset, Lien (other than Agent’s Lien and
the Lien in favor of the Permitted Term Agent), defense, dispute, counterclaim
or other adverse condition except as arising in the Ordinary Course of Business
and disclosed to Agent and is not subject to any discount or deduction except
discounts and deductions arising in the Ordinary Course of Business consistent
with past practices or otherwise disclosed in writing to Agent; and it is
absolutely owing by the Account Debtor, without contingency in any respect;

 

(e)           no purchase order, agreement, document or Applicable Law restricts
assignment of the Account to Agent (regardless of whether, under the UCC, the
restriction is ineffective), and the applicable Obligor is the sole payee or
remittance party shown on the invoice;

 

(f)            no extension, compromise, settlement, modification, credit,
deduction or return has been authorized with respect to the Account, except
discounts or allowances granted in the Ordinary Course of Business for prompt
payment that are reflected on the face of the invoice related thereto and in the
reports submitted to Agent hereunder; and

 

(g)           to the best of Obligors’ knowledge, (i) there are no facts or
circumstances that are reasonably likely to impair the enforceability or
collectibility of such Account; (ii) the Account Debtor had the capacity to
contract when the Account arose, continues to meet the applicable Obligor’s
customary credit standards, is Solvent, is not contemplating or subject to an
Insolvency Proceeding, and has not failed, or suspended or ceased doing
business; and (iii) there are no proceedings or actions threatened or pending
against any Account Debtor that could reasonably be expected to have a material

 

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adverse effect on the Account Debtor’s financial condition.

 

9.1.7.      Financial Statements.  The consolidated and consolidating balance
sheets, and related statements of income, cash flow and shareholder’s equity, of
Company and Subsidiaries that have been and are hereafter delivered to Agent and
Lenders, are prepared in accordance with GAAP, and fairly present the financial
positions and results of operations of Company and Subsidiaries at the dates and
for the periods indicated.  All projections delivered from time to time to Agent
and Lenders have been prepared in good faith, based on reasonable assumptions in
light of the circumstances at such time.  Except as otherwise disclosed by the
Company in its filings with the Securities and Exchange Commission, since
December 31, 2011, there has been no change in the business, assets, Properties,
liabilities, operations, condition (financial or otherwise) or prospects of the
Obligors, taken as a whole, that could reasonably be expected to have a Material
Adverse Effect.  No financial statement delivered to Agent or Lenders at any
time contains any untrue statement of a material fact, nor fails to disclose any
material fact necessary to make such statement not materially misleading.  The
Obligors, taken as a whole, are Solvent.

 

9.1.8.      Surety Obligations.  Except as disclosed on Schedule 9.1.8, no
Obligor or Subsidiary is obligated as surety or indemnitor under any bond or
other Material Contract that assures payment or performance of any obligation of
any Person, except as permitted hereunder.

 

9.1.9.      Taxes.  Each Obligor and Subsidiary has filed all federal, state,
provincial, municipal, foreign and local tax returns and other reports that it
is required by law to file, and has paid, or made provision for the payment of,
all Taxes upon it, its income and its Properties that are due and payable,
except to the extent being Properly Contested.  The provision for Taxes on the
books of each Obligor and Subsidiary is adequate for all years not closed by
applicable statutes, and for its current Fiscal Year.

 

9.1.10.    Brokers.  There are no brokerage commissions, finder’s fees or
investment banking fees payable in connection with any transactions contemplated
by the Loan Documents.

 

9.1.11.    Intellectual Property. Each Obligor and Subsidiary owns or has the
lawful right to use all Intellectual Property necessary for the conduct of its
business, without conflict with any rights of others.  There is no pending or,
to any Obligor’s knowledge, threatened Intellectual Property Claim with respect
to any Obligor, any Subsidiary or any of their Property (including any
Intellectual Property).  Except as disclosed on Schedule 9.1.11, no Obligor or
Subsidiary pays or owes any Royalty or other compensation to any Person with
respect to any Intellectual Property.  All Intellectual Property owned, used or
licensed by, or otherwise subject to any interests of, any Obligor or Subsidiary
is shown on Schedule 9.1.11.

 

9.1.12.    Governmental Approvals.  Each Obligor and Subsidiary has, is in
compliance with, and is in good standing with respect to, all Governmental
Approvals necessary to conduct its business and to own, lease and operate its
Properties.  All necessary import, export or other licenses, permits or
certificates for the import or handling of any goods or other Collateral have
been procured and are in effect, and Obligors and Subsidiaries have complied
with all foreign and domestic laws with respect to the shipment and importation
of any goods or Collateral, except where noncompliance could not reasonably be
expected to have a Material Adverse Effect.

 

9.1.13.    Compliance with Laws.  Each Obligor and Subsidiary has duly complied,
and its Properties and business operations are in compliance, in all material
respects with all Applicable Law, except where noncompliance could not
reasonably be expected to have a Material Adverse Effect.  There have been
(i) no citations, notices of noncompliance or requests for information issued to
any Obligor by the CPSC other than those described on Schedule 9.1.13, and
(ii) no notices or orders of material noncompliance issued to any Obligor by any
other Governmental Authority under any

 

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Applicable Law.  To the best knowledge of the Obligors, no Inventory has been
produced by Obligors in violation of the FLSA or in violation of any CPSC
Regulations.  The Obligors have current and effective certificates of compliance
for each children’s product and each children’s toy that the Obligors sell,
manufacture or distribute.  The Obligors conduct current testing of all
children’s products and children’s toys that the Obligors sell, manufacture or
distribute.  Except as described on Schedule 9.1.13, there are no pending or, to
the knowledge of the Obligors, threatened regulatory actions or investigations
by the CPSC with respect to the Obligors or any of the products or toys that the
Obligors sell, manufacture or distribute.  To the best knowledge of the
Obligors, none of the products or toys that the Obligors sell, manufacture or
distribute contains a defect that could create a substantial product hazard or
could create an unreasonable risk of serious injury or death.  The Obligors
have complied in a timely manner with all reporting requirements under the CPSC
Regulations.  To the best knowledge of the Obligors, the Obligors have not
misrepresented in any report filed by the Obligors with the CPSC, the scope of
the hazards posed by any toys or products that the Obligors sell, manufacture or
distribute or the numbers of incidents or injuries that have been caused by or
that have been alleged to have been caused by such toys and products.

 

9.1.14.    Compliance with Environmental Laws.  Except as disclosed on Schedule
9.1.14, no Obligor’s or Subsidiary’s past or present operations, Real Estate or
other Properties are subject to any federal, state, provincial, municipal or
local investigation to determine whether any remedial action is needed to
address any environmental pollution, hazardous material or environmental
clean-up.  No Obligor or Subsidiary has received any Environmental Notice.  No
Obligor or Subsidiary has any contingent liability with respect to any
Environmental Release, environmental pollution or hazardous material on any Real
Estate now or previously owned, leased or operated by it.

 

9.1.15.    Burdensome Contracts.  No Obligor or Subsidiary is a party or subject
to any contract, agreement or charter restriction that could reasonably be
expected to have a Material Adverse Effect.  No Obligor or Subsidiary is party
or subject to any Restrictive Agreement, except as shown on Schedule 9.1.15.  No
such Restrictive Agreement prohibits the execution, delivery or performance of
any Loan Document by an Obligor.

 

9.1.16.    Litigation.  Except as shown on Schedule 9.1.16, there are no
proceedings or investigations pending or, to any Obligor’s knowledge, threatened
against any Obligor or Subsidiary, or any of their businesses, operations,
Properties, prospects or conditions, that (a) relate to any Loan Documents or
transactions contemplated thereby; or (b) could reasonably be expected to have a
Material Adverse Effect if determined adversely to any Obligor or Subsidiary. 
Except as shown on such Schedule, no Obligor has a Commercial Tort Claim (other
than, as long as no Default or Event of Default exists, a Commercial Tort Claim
for less than $100,000).  No Obligor or Subsidiary is in default with respect to
any order, injunction or judgment of any Governmental Authority.

 

9.1.17.    No Defaults.  No event or circumstance has occurred or exists that
constitutes a Default or Event of Default.  No Obligor or Subsidiary is in
default, and no event or circumstance has occurred or exists that with the
passage of time or giving of notice would constitute a default, under any
Material Contract or in the payment of any Borrowed Money.  There is no basis
upon which any party (other than an Obligor or Subsidiary) could terminate a
Material Contract prior to its scheduled termination date.

 

9.1.18.    ERISA.  Except as disclosed on Schedule 9.1.18:

 

(a)           Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code, and other federal and state laws. 
Each Plan that is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS or an application for
such a letter is currently being processed by the IRS with respect thereto and,
to the knowledge of Borrowers, nothing has occurred which would prevent, or
cause the loss of, such qualification.  Each Obligor and

 

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ERISA Affiliate has met all applicable requirements under the Code, ERISA and
the Pension Protection Act of 2006, and no application for a waiver of the
minimum funding standards or an extension of any amortization period has been
made with respect to any Plan.

 

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

 

(c)           (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan, Canadian Pension Plan or Canadian MEPP has any
Unfunded Pension Liability; (iii) no Obligor or ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect
to any Pension Plan (other than premiums due and not delinquent under
Section 4007 of ERISA); (iv) no Obligor or ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; (v) no Obligor or ERISA Affiliate has engaged in a transaction that could
be subject to Section 4069 or 4212(c) of ERISA; and (vi) as of the most recent
valuation date for any Pension Plan or Multiemployer Plan, the funding target
attainment percentage (as defined in Section 430(d)(2) of the Code) is at least
60%, and no Obligor or ERISA Affiliate knows of any fact or circumstance that
could reasonably be expected to cause the funding target attainment percentage
for any such plan to drop below 60% as of such date.

 

(d)           With respect to any Foreign Plan, (i) all employer and employee
contributions required by law or by the terms of the Foreign Plan have been
made, or, if applicable, accrued, in accordance with normal accounting
practices; (ii) the fair market value of the assets of each funded Foreign Plan,
the liability of each insurer for any Foreign Plan funded through insurance, or
the book reserve established for any Foreign Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations with respect to all current and former participants in such Foreign
Plan according to the actuarial assumptions and valuations most recently used to
account for such obligations in accordance with applicable generally accepted
accounting principles; and (iii) it has been registered as required and has been
maintained in good standing with applicable regulatory authorities.

 

(e)           Except as would not reasonably be expected to result in a Material
Adverse Effect: (i) each Obligor is in compliance with the requirements of the
PBA and other federal, provincial or territorial Applicable Laws with respect to
each Canadian Pension Plan, (ii) to the knowledge of the Obligors, no fact or
situation that may reasonably be expected to result in liability to Obligors
exists in connection with any Canadian Pension Plan, (iii) no Obligor or any
Subsidiary of a Obligor has any withdrawal liability in connection with a
Canadian Pension Plan or Canadian MEPP, and (iv) no Canadian MEPP requires any
Obligor to make deficit payments.  No Termination Event has occurred.  No Lien
has arisen in respect of Obligors or their property in connection with any
Canadian Pension Plan or Canadian MEPP (save for contribution amounts not yet
due).  All required contributions of any Obligor to each Canadian Pension Plan
and Canadian MEPP have been made.  No Canadian Benefit Plan is self insured, has
deficit reserve or permits a retroactive increase in premiums.  All Canadian
Pension Plans are administered by an Obligor, or an Obligor is the delegated
administrator.

 

(f)            Neither SI UK nor any of its Subsidiaries is or has at any time
been (i) an employer (for the purposes of sections 38 to 51 of the Pensions Act
2004) of an occupational pension scheme which is not a money purchase scheme
(both terms as defined in the Pensions Schemes Act 1993); or (ii) “connected”
with or an “associate” of (as those terms are used in sections 38 and 43 of the
Pensions Act 2004) such an employer.

 

9.1.19.    Trade Relations.  Except as set forth on the Company’s filings with
the

 

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Securities and Exchange Commission, there exists no actual or threatened
termination, limitation or modification of any business relationship between any
Obligor or Subsidiary and any customer or supplier, or any group of customers or
suppliers, who individually or in the aggregate are material to the business of
such Obligor or Subsidiary.  There exists no condition or circumstance that
could reasonably be expected to impair the ability of any Obligor or Subsidiary
to conduct its business at any time hereafter in substantially the same manner
as conducted on the Closing Date.

 

9.1.20.           Labor Relations.  Except as described on Schedule 9.1.20, no
Obligor or Subsidiary is party to or bound by any collective bargaining
agreement, management agreement or consulting agreement (other than design
services consulting agreements and other consulting agreements that have been
disclosed to Agent).  There are no material grievances, disputes or
controversies with any union or other organization of any Obligor’s or
Subsidiary’s employees, or, to any Obligor’s knowledge, any asserted or
threatened strikes, work stoppages or demands for collective bargaining.

 

9.1.21.           Payable Practices.  No Obligor or Subsidiary has made any
material change in its historical accounts payable practices from those in
effect on the Closing Date.

 

9.1.22.           Not a Regulated Entity.  No Obligor is (a) an “investment
company” or a “person directly or indirectly controlled by or acting on behalf
of an investment company” within the meaning of the Investment Company Act of
1940; or (b) subject to regulation under the Federal Power Act, the Interstate
Commerce Act, any public utilities code or any other Applicable Law regarding
its authority to incur Debt.

 

9.1.23.           Margin Stock.  No Obligor or Subsidiary is engaged,
principally or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock.  No Loan
proceeds or Letters of Credit will be used by Obligors to purchase or carry, or
to reduce or refinance any Debt incurred to purchase or carry, any Margin Stock
or for any related purpose governed by Regulations T, U or X of the Board of
Governors.

 

9.2.                            Complete Disclosure.  No Loan Document contains
any untrue statement of a material fact, nor fails to disclose any material fact
necessary to make the statements contained therein not materially misleading. 
There is no fact or circumstance that any Obligor has failed to disclose to
Agent in writing that could reasonably be expected to have a Material Adverse
Effect.

 

SECTION 10.                  COVENANTS AND CONTINUING AGREEMENTS

 

10.1.                     Affirmative Covenants.  As long as any Commitments or
Obligations are outstanding, each Obligor shall, and shall cause each Subsidiary
to:

 

10.1.1.           Inspections; Appraisals.

 

(a)                                 Permit Agent from time to time, subject
(except when a Default or Event of Default exists) to reasonable notice and
normal business hours, to visit and inspect the Properties of any Obligor or
Subsidiary, inspect, audit and make extracts from any Obligor’s or Subsidiary’s
books and records, and discuss with its officers, employees, agents, advisors
and independent accountants such Obligor’s or Subsidiary’s business, financial
condition, assets, prospects and results of operations.  Lenders may participate
in any such visit or inspection, at their own expense.  Neither Agent nor any
Lender shall have any duty to any Obligor to make any inspection, nor to share
any results of any inspection, appraisal or report with any Obligor.  Obligors
acknowledge that all inspections, appraisals and reports are prepared by Agent
and Lenders for their purposes, and Obligors shall not be entitled to rely upon
them.

 

(b)                                 Reimburse Agent for all reasonable charges,
costs and expenses of Agent in

 

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connection with (i) examinations of any Obligor’s books and records or any other
financial or Collateral matters as Agent deems appropriate, up to two times per
Loan Year; and (ii) appraisals of Inventory, up to two times per Loan Year;
provided, however, that if an examination or appraisal is initiated (i) at any
time Availability falls below 15% of the Total Commitment Amount, the Obligors
shall reimburse Agent for up to three appraisals of Inventory and field
examinations per Loan Year, and (ii) during a Default or Event of Default, all
charges, costs and expenses therefor shall be reimbursed by Borrowers without
regard to such limits.  Obligors agree to pay Agent’s then standard charges for
examination activities, including the standard charges of Agent’s internal
examination and appraisal groups, as well as the charges of any third party used
for such purposes.

 

10.1.2.           Financial and Other Information.  Keep adequate records and
books of account with respect to its business activities, in which proper
entries are made in accordance with GAAP reflecting all financial transactions;
and furnish to Agent and Lenders:

 

(a)                                 as soon as available, and in any event
within 90 days after the close of each Fiscal Year, balance sheets as of the end
of such Fiscal Year and the related statements of income, cash flow and
shareholders’ equity for such Fiscal Year, on consolidated and consolidating
bases for Obligors and Subsidiaries, which consolidated statements shall be
audited and certified (without qualification) by a firm of independent certified
public accountants of recognized standing selected by Borrowers and acceptable
to Agent, and shall set forth in comparative form corresponding figures for the
preceding Fiscal Year and other information reasonably acceptable to Agent;

 

(b)                                 as soon as available, and in any event
within 45 days after the end of each Fiscal Quarter ending thereafter, unaudited
balance sheets as of the end of such quarter and the related statements of
income and cash flow for such Fiscal Quarter and for the portion of the Fiscal
Year then elapsed, on consolidated and, to the extent applicable, consolidating
bases for Obligors and Subsidiaries, setting forth in comparative form
corresponding figures for the preceding Fiscal Year and certified by a Senior
Officer of Obligors as prepared in accordance with GAAP and fairly presenting in
all material respects the financial position and results of operations for such
Fiscal Quarter and period, subject to normal year-end adjustments and the
absence of footnotes;

 

(c)                                  as soon as available, and in any event
within 30 days after the end of each month, unaudited balance sheets as of the
end of such month and the related statements of income and cash flow for such
month and for the portion of the Fiscal Year then elapsed, on consolidated and,
to the extent applicable, consolidating bases for Obligors and Subsidiaries,
setting forth in comparative form corresponding figures for the preceding Fiscal
Year and certified by the chief financial officer of Borrower Agent as prepared
in accordance with GAAP and fairly presenting the financial position and results
of operations for such month and period, subject to normal year-end adjustments
and the absence of footnotes;

 

(d)                                 concurrently with delivery of financial
statements under clauses (a), (b) and (c) above, or more frequently if requested
by Agent while a Default or Event of Default exists, a Compliance Certificate
executed by the chief financial officer of Borrower Agent;

 

(e)                                  concurrently with delivery of financial
statements under clause (a) above, copies of all management letters and other
material reports submitted to Borrowers by their accountants in connection with
such financial statements;

 

(f)                                   not later than 30 days prior to the end of
each Fiscal Year, projections of Borrowers’ consolidated balance sheets, results
of operations, cash flow and Availability for the next Fiscal Year, month by
month;

 

(g)                                  at Agent’s request, a listing of each
Borrower’s trade payables, specifying the

 

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trade creditor and balance due, and a detailed trade payable aging, all in form
satisfactory to Agent;

 

(h)                                 promptly after the sending or filing
thereof, copies of any proxy statements, financial statements or reports that
any Borrower has made generally available to its shareholders; copies of any
regular, periodic and special reports or registration statements or prospectuses
that any Borrower files with the Securities and Exchange Commission or any other
Governmental Authority, or any securities exchange; and copies of any press
releases or other statements made available by a Borrower to the public
concerning material changes to or developments in the business of such Borrower;

 

(i)                                     promptly after the sending or filing
thereof, copies of any annual report to be filed in connection with each Plan,
Canadian Pension Plan or Foreign Plan; and

 

(j)                                    such other reports and information
(financial or otherwise) as Agent may request from time to time in connection
with any Collateral or any Borrower’s, Subsidiary’s or other Obligor’s financial
condition or business.

 

10.1.3.           Notices.  Notify Agent and Lenders in writing, promptly after
an Obligor’s obtaining knowledge thereof, of any of the following that affects
an Obligor:  (a) the threat or commencement of any proceeding or investigation,
whether or not covered by insurance, if an adverse determination could have a
Material Adverse Effect; (b) any pending or threatened labor dispute, strike or
walkout, or the expiration of any material labor contract; (c) any default under
or termination of a Material Contract; (d) the existence of any Default or Event
of Default; (e) any judgment in an amount exceeding $1,000,000; (f) the
assertion of any Intellectual Property Claim, if an adverse resolution could
have a Material Adverse Effect; (g) any violation or asserted violation of any
Applicable Law (including ERISA, OSHA, FLSA or any Environmental Laws), if an
adverse resolution could have a Material Adverse Effect; (h) any Environmental
Release by an Obligor or on any Property owned, leased or occupied by an
Obligor; or receipt of any Environmental Notice; (i) the occurrence of any ERISA
Event or Termination Event; (j) the discharge of or any withdrawal or
resignation by Borrowers’ independent accountants; (k) any opening of a new
office or place of business, at least 30 days prior to such opening;
(l) simultaneously with delivery of such notice under the Permitted Term Debt
Agreement, the existence of any default or event of default under the Permitted
Term Debt Documents; (m) the threat or commencement of any regulatory action or
investigation by the CPSC with respect to any Obligor or with respect to any
product or toy sold, manufactured or distributed by any Obligor; (n) the receipt
by any Obligor of any Epidemiological Report, the posting of any notice on
SaferProducts.gov, or request for information issued to any Obligor by the CPSC,
all with respect to any product or toy sold, manufactured or distributed by any
Obligor; or (o) the commencement of any voluntary or involuntary recall of any
product or toy that the Obligors sell, manufacture or distribute.

 

10.1.4.           Landlord and Storage Agreements.  Upon request, provide Agent
with copies of all existing agreements, and promptly after execution thereof
provide Agent with copies of all future agreements, between an Obligor and any
landlord, warehouseman, processor, shipper, bailee or other Person that owns any
premises at which any Collateral may be kept or that otherwise may possess or
handle any Collateral.

 

10.1.5.           Compliance with Laws.  Comply with all Applicable Laws,
including ERISA, PBA, Environmental Laws, FLSA, OSHA, Anti-Terrorism Laws, CPSC
Regulations and laws regarding collection and payment of Taxes, and maintain all
Governmental Approvals necessary to the ownership of its Properties or conduct
of its business, unless failure to comply (other than failure to comply with
Anti-Terrorism Laws) or maintain could not reasonably be expected to have a
Material Adverse Effect.  Without limiting the generality of the foregoing, if
any Environmental Release occurs at or on any Properties of any Obligor or
Subsidiary, it shall act promptly and diligently to investigate and report to
Agent and all appropriate Governmental Authorities the extent of, and to make
appropriate remedial action to eliminate, such Environmental Release, whether or
not directed to do so by any

 

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Governmental Authority.  Maintain adequate testing and other procedures to
ensure the safety of all products and toys that the Obligors sell, manufacture
or distribute.

 

10.1.6.           Taxes.  Pay and discharge all Taxes prior to the date on which
they become delinquent or penalties attach, unless such Taxes are being Properly
Contested.

 

10.1.7.           Insurance.  In addition to the insurance required hereunder
with respect to Collateral, maintain insurance with insurers (with a Best Rating
of at least A-, unless otherwise approved by Agent) satisfactory to Agent,
(a) with respect to the Properties and business of Obligors and Subsidiaries of
such type (including product liability, workers’ compensation, larceny,
embezzlement, or other criminal misappropriation insurance), in such amounts,
and with such coverages and deductibles as are customary for companies similarly
situated; and (b) business interruption insurance in an amount not less than
$20,000,000, with deductibles and subject to an insurance assignment
satisfactory to Agent, which shall provide for the proceeds of business
interruption insurance to be payable to Agent for application to the
Obligations.

 

10.1.8.           Licenses.  Keep each License which constitutes a Material
Contract affecting any Collateral (including the manufacture, distribution or
disposition of Inventory) or any other material Property of Obligors and
Subsidiaries in full force and effect; promptly notify Agent of any proposed
modification to any such License, or entry into any new License which
constitutes a Material Contract, in each case at least 30 days prior to its
effective date; pay all Royalties when due; and notify Agent of any default or
breach asserted by any Person to have occurred under any License which
constitutes a Material Contract.

 

10.1.9.           Future Subsidiaries.  Promptly notify Agent upon any Person
becoming a Subsidiary and, if such Person is not a Foreign Subsidiary, cause it
to guaranty the Obligations in a manner satisfactory to Agent, and to execute
and deliver such documents, instruments and agreements and to take such other
actions as Agent shall require to evidence and perfect a Lien in favor of Agent
on all assets of such Person, including delivery of such legal opinions, in form
and substance satisfactory to Agent, as it shall deem appropriate.

 

10.1.10.    UK Pension Schemes.  Ensure that neither SI UK nor any of its
Subsidiaries is or has been at any time an employer (for the purposes of
sections 38 to 51 of the Pensions Act 2004) of an occupational pension scheme
which is not a money purchase scheme (both terms as defined in the Pension
Schemes Act 1993) or “connected” with or an “associate” of (as those terms are
used in sections 38 or 43 of the Pensions Act 2004) such an employer.

 

10.2.                     Negative Covenants.  As long as any Commitments or
Obligations are outstanding, each Obligor shall not and shall not permit any
Subsidiary (other than Foreign Subsidiaries) to:

 

10.2.1.           Permitted Debt.  Create, incur, guarantee or suffer to exist
any Debt, except:

 

(a)                                 the Obligations;

 

(b)                                 Subordinated Debt and the Permitted Term
Debt;

 

(c)                                  Permitted Purchase Money Debt and
obligations with respect to Capital Leases so long as the aggregate amount
outstanding under this clause (c) does not exceed $2,500,000 at any time;

 

(d)                                 Borrowed Money (other than the Obligations,
Subordinated Debt and Permitted Purchase Money Debt), but only to the extent
outstanding on the Closing Date and not satisfied with proceeds of the initial
Loans;

 

(e)                                  Debt with respect to Bank Products incurred
in the ordinary course of business;

 

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(f)                                   Debt that is in existence when a Person
becomes a Subsidiary or that is secured by an asset when acquired by a Borrower
or Subsidiary, as long as such Debt was not incurred in contemplation of such
Person becoming a Subsidiary or such acquisition, and does not exceed $1,000,000
in the aggregate at any time;

 

(g)                                  Permitted Contingent Obligations;

 

(h)                                 Refinancing Debt as long as each Refinancing
Condition is satisfied; and

 

(i)                                     Debt that is not included in any of the
preceding clauses of this Section, is not secured by a Lien and does not exceed
$500,000 in the aggregate at any time.

 

10.2.2.           Permitted Liens.  Create or suffer to exist any Lien upon any
of its Property, except the following (collectively, “Permitted Liens”):

 

(a)                                 Liens in favor of Agent;

 

(b)                                 Liens in favor of the Permitted Term Agent
subject to the Intercreditor Agreement;

 

(c)                                  Purchase Money Liens securing Permitted
Purchase Money Debt;

 

(d)                                 Liens for Taxes not yet due or being
Properly Contested;

 

(e)                                  inchoate statutory Liens (other than Liens
for Taxes or imposed under ERISA) arising in the Ordinary Course of Business,
but only if (i) payment of the obligations secured thereby is not yet due or is
being Properly Contested, and (ii) such Liens do not materially impair the value
or use of the Property or materially impair operation of the business of any
Borrower or Subsidiary;

 

(f)                                   Liens incurred or deposits made in the
Ordinary Course of Business to secure the performance of tenders, bids, leases,
contracts (except those relating to Borrowed Money), statutory obligations and
other similar obligations, or arising as a result of progress payments under
government contracts, as long as such Liens are at all times junior to Agent’s
Liens;

 

(g)                                  Liens arising in the Ordinary Course of
Business that are subject to Lien Waivers;

 

(h)                                 Liens arising by virtue of a judgment or
judicial order against any Borrower or Subsidiary, or any Property of a Borrower
or Subsidiary, as long as such Liens are (i) in existence for less than 20
consecutive days or being Properly Contested, and (ii) at all times junior to
Agent’s Liens;

 

(i)                                     easements, rights-of-way, restrictions,
covenants or other agreements of record, and other similar charges or
encumbrances on Real Estate, that do not secure any monetary obligation and do
not interfere with the Ordinary Course of Business;

 

(j)                                    normal and customary rights of setoff
upon deposits in favor of depository institutions, and Liens of a collecting
bank on Payment Items in the course of collection;

 

(k)                                 Liens securing Debt permitted by
Section 10.2.1(b) so long as such Lien does not cover more than the property
subject to such Capital Lease;

 

(l)                                     with respect to any Collateral covered
by the UK Security Agreements, any Security (as such term is defined in the UK
Security Agreements) arising solely by operation of law or in the ordinary
course of trading securing amounts not more than 30 days overdue and not arising
as a result

 

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of any default or omission of an Obligor or its Subsidiaries; and

 

(o)                                 existing Liens shown on Schedule 10.2.2.

 

Notwithstanding anything to the contrary contained in this Agreement or any
other Loan Document (including any provision for, reference to, or
acknowledgement of, any Lien or Permitted Lien), nothing herein and no approval
by the Agent or any Lender of any Lien or Permitted Lien (whether such approval
is oral or in writing) shall be construed as or deemed to constitute a
subordination by the Agent or such Lender of any security interest or other
right, interest or Lien in or to the Collateral or any part thereof in favor of
any Lien or Permitted Lien or any holder of any Lien or Permitted Lien.

 

10.2.3.           [Intentionally Deleted].

 

10.2.4.           Distributions; Upstream Payments.  Declare or make any
Distributions, except Upstream Payments; or create or suffer to exist any
encumbrance or restriction on the ability of a Subsidiary to make any Upstream
Payment, except for restrictions under the Loan Documents, the Permitted Term
Debt Documents, under Applicable Law or in effect on the Closing Date as shown
on Schedule 9.1.15.

 

10.2.5.           Restricted Investments.  Make any Restricted Investment.

 

10.2.6.           Disposition of Assets.  Make any Asset Disposition, except a
Permitted Asset Disposition, a disposition of Equipment under Section 8.4.2, or
a transfer of Property by a Subsidiary or Obligor to a Borrower.

 

10.2.7.           Loans.  Make any loans or other advances of money to any
Person, except (a) advances to an officer or employee for salary, travel
expenses, commissions and similar items in the Ordinary Course of Business;
(b) prepaid expenses and extensions of trade credit made in the Ordinary Course
of Business; (c) deposits with financial institutions permitted hereunder; 
(d) as long as no Default or Event of Default exists, intercompany loans by an
Obligor to another Obligor, provided that intercompany loans from the Borrowers
(i) to the Canadian Guarantors shall not exceed $500,000 in the aggregate at any
time and (ii) to the UK Guarantors shall not exceed $500,000 in the aggregate at
any time; and (e) so long as no Default or Event of Default exists, intercompany
loans by Obligors to Foreign Subsidiaries not to exceed $250,000 in the
aggregate at any time.

 

10.2.8.           Restrictions on Payment of Certain Debt.  Except in connection
with any Refinancing permitted under Section 10.2.1, make any payments (whether
voluntary or mandatory, or a prepayment, redemption, retirement, defeasance or
acquisition) with respect to any (a) Subordinated Debt, except regularly
scheduled payments of principal, interest and fees, but only to the extent
permitted under any subordination agreement relating to such Debt (and a Senior
Officer of Borrower Agent shall certify to Agent, not less than five Business
Days prior to the date of payment, that all conditions under such agreement have
been satisfied); or (b) Borrowed Money (other than the Obligations) prior to its
due date under the agreements evidencing such Debt as in effect on the Closing
Date (or as amended thereafter with the consent of Agent), provided that
Borrowers may make Permitted Term Debt Payments.

 

10.2.9.           Fundamental Changes.  Change its name or conduct business
under any fictitious name; change its tax, charter or other organizational
identification number; change its form or state of organization; liquidate, wind
up its affairs or dissolve itself; or merge, combine or consolidate with any
Person, whether in a single transaction or in a series of related transactions,
except for (a) mergers or consolidations of a wholly-owned Subsidiary with
another wholly-owned Subsidiary or into a Borrower; or (b) Permitted
Acquisitions.

 

10.2.10.    Subsidiaries.  Form or acquire any Subsidiary after the Closing
Date,

 

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except in accordance with Sections 10.1.9, 10.2.5 and 10.2.9; or permit any
existing Subsidiary to issue any additional Equity Interests except director’s
qualifying shares.

 

10.2.11.    Organic Documents.  Amend, modify or otherwise change any of its
Organic Documents, except in connection with either a rights distribution by the
Company or a transaction permitted under Section 10.2.9.

 

10.2.12.    Tax Consolidation.  File or consent to the filing of any
consolidated income tax return with any Person other than Obligors and
Subsidiaries.

 

10.2.13.    Accounting Changes.  Make any material change in accounting
treatment or reporting practices, except as required by GAAP and in accordance
with Section 1.2; or change its Fiscal Year.

 

10.2.14.    Restrictive Agreements.  Become a party to any Restrictive
Agreement, except a Restrictive Agreement (a) in effect on the Closing Date
(including the Permitted Term Debt Documents); (b) relating to secured Debt
permitted hereunder, as long as the restrictions apply only to collateral for
such Debt; or (c) constituting customary restrictions on assignment in leases
and other contracts.

 

10.2.15.    Hedging Agreements.  Enter into any Hedging Agreement, except to
hedge risks arising in the Ordinary Course of Business and not for speculative
purposes.

 

10.2.16.    Conduct of Business.  Engage in any business, other than (i) the
businesses conducted by the Obligors on the Closing Date and activities
incidental or supplemental thereto, and (ii) businesses similar to the business
conducted by the Obligors on the Closing Date or other businesses approved by
Agent in its Permitted Discretion.

 

10.2.17.    Affiliate Transactions.  Enter into or be party to any transaction
with an Affiliate, except (a) transactions expressly permitted by the Loan
Documents; (b) payment of reasonable compensation to officers and employees for
services actually rendered, and payment of customary directors’ fees and
indemnities; (c) transactions solely among Borrowers; (d) transactions with
Affiliates that were consummated prior to the Closing Date, as shown on Schedule
10.2.17; (e) intercompany loans permitted under Section 10.2.7; and
(f) transactions with Affiliates in the Ordinary Course of Business, upon fair
and reasonable terms fully disclosed to Agent and no less favorable than would
be obtained in a comparable arm’s-length transaction with a non-Affiliate.

 

10.2.18.    Plans.  Become party to any Multiemployer Plan, Canadian Plan,
Canadian MEPP or Foreign Plan, other than any in existence on the Closing Date.

 

10.2.19.    Amendments to Subordinated Debt or Permitted Term Debt.  Amend,
supplement or otherwise modify the (a) the Permitted Term Debt Agreement or any
other document, instrument or agreement relating to the Permitted Term Debt
except as permitted by the Intercreditor Agreement or (b) amend, supplement or
otherwise modify any document, instrument or agreement relating to the
Subordinated Debt, if such modification (i) increases the principal balance of
such Debt, or increases any required payment of principal or interest;
(ii) accelerates the date on which any installment of principal or any interest
is due, or adds any additional redemption, put or prepayment provisions;
(iii) shortens the final maturity date or otherwise accelerates amortization;
(iv) increases the interest rate; (v) increases or adds any fees or charges;
(vi) modifies any covenant in a manner or adds any representation, covenant or
default that is more onerous or restrictive in any material respect for any
Obligor or Subsidiary, or that is otherwise materially adverse to any Obligor,
any Subsidiary or Lenders; or (vii) results in the Obligations not being fully
benefited by the subordination provisions thereof.

 

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10.3.                     Financial Covenants.  As long as any Commitments or
Obligations are outstanding, Obligors shall:

 

10.3.1.           Minimum EBITDA.  For the first Loan Year, maintain
Consolidated EBITDA for each of the consecutive month periods set forth below at
least equal to the amounts set forth below for such periods:

 

Period of Consecutive Months Beginning
March 1, 2013 and Ending

 

Minimum Consolidated
EBITDA

 

 

 

 

 

March 31, 2013

 

$

750,000

 

April 30, 2013

 

$

1,500,000

 

May 31, 2013

 

$

2,500,000

 

June 30, 2013

 

$

3,500,000

 

July 31, 2013

 

$

4,500,000

 

August 31, 2013

 

$

6,000,000

 

September 30, 2013

 

$

7,000,000

 

October 31, 2013

 

$

8,000,000

 

November 30, 2013

 

$

9,000,000

 

December 31, 2013

 

$

10,000,000

 

January 31, 2014

 

$

11,000,000

 

February 28, 2014

 

$

12,000,000

 

 

10.3.2.           Fixed Charge Coverage Ratio.  At all times after the end of
the first Loan Year (beginning with the Fiscal Quarter ending March 31, 2014),
maintain a Fixed Charge Coverage Ratio of at least 1.0 to 1.0 for each period of
four Fiscal Quarters most recently ended.

 

10.4.                     Restrictions on Activities of Company.  Obligors
covenant and agree that Company shall not (i) hold any assets other than the
Equity Interests of SI USA, SI UK or SI Asia cash and Cash Equivalents,
(ii) have any material liabilities other than liabilities under the Loan
Documents and under the Permitted Term Debt Documents, tax liabilities in the
Ordinary Course of Business, liabilities under employment agreements and written
employment arrangements, and corporate, administrative and operating expenses in
the Ordinary Course of Business, or (iii) engage in any business other than
owning the Equity Interests of SI USA and activities incidental to such
ownership, acting as a co-borrower in respect of the Obligations hereunder and
under the Permitted Term Debt Documents, and granting to Agent for the benefit
of Lenders, and granting to Permitted Term Agent for the benefit of Term Debt
Lenders, security interests in and Liens upon its assets pursuant to the
Security Documents and Permitted Term Debt Documents to which it is a party.

 

10.5.                     Restrictions on Activities of Foreign Subsidiaries. 
Obligors covenant and agree that (a) no Obligor shall guaranty any liabilities
or obligations of any Foreign Subsidiary; (b) no Obligor shall make any
Investment in, or transfer any properties or assets to, any Foreign Subsidiary,
other than as permitted under Sections 10.2.5 and 10.2.17; (c) no Foreign
Subsidiary shall create or suffer to exist any encumbrance or restriction on the
ability of a Subsidiary to make any Upstream Payment, except for restrictions
under the Loan Documents, under Applicable Law or in effect on the Closing Date
as shown on Schedule 9.1.15 and (d) the aggregate outstanding Debt owed by
Foreign Subsidiaries (excluding Debt owed to Obligors that is permitted under
Section 10.2.7) shall not at any time exceed the foreign currency equivalent of
$250,000.

 

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SECTION 11.                  EVENTS OF DEFAULT; REMEDIES ON DEFAULT

 

11.1.                     Events of Default.  Each of the following shall be an
“Event of Default” if it occurs for any reason whatsoever, whether voluntary or
involuntary, by operation of law or otherwise:

 

(a)                                 An Obligor fails to pay any Obligations when
due (whether at stated maturity, on demand, upon acceleration or otherwise);

 

(b)                                 Any representation, warranty or other
written statement of an Obligor made in connection with any Loan Documents or
transactions contemplated thereby is incorrect or misleading in any material
respect when given;

 

(c)                                  An Obligor breaches or fail to perform any
covenant contained in Section 7.2, 7.4, 8.1, 8.2.4, 8.2.5, 8.6.2, 10.1.1(a),
10.1.2, 10.2 or 10.3;

 

(d)                                 An Obligor breaches or fails to perform any
other covenant contained in any Loan Documents, and such breach or failure is
not cured within 15 days after a Senior Officer of such Obligor has knowledge
thereof or receives notice thereof from Agent, whichever is sooner; provided,
however, that such notice and opportunity to cure shall not apply if the breach
or failure to perform is not capable of being cured within such period or is a
willful breach by an Obligor;

 

(e)                                  A Guarantor repudiates, revokes or attempts
to revoke its Guaranty; an Obligor or third party denies or contests the
validity or enforceability of any Loan Documents or Obligations, or the
perfection or priority of any Lien granted to Agent; or any Loan Document ceases
to be in full force or effect for any reason (other than a waiver or release by
Agent and Lenders);

 

(f)                                   Any (i) breach or default of an Obligor
occurs under the Permitted Term Debt or any Hedging Agreement, or any breach or
default of an Obligor occurs under any instrument or agreement to which it is a
party or by which it or any of its Properties is bound, relating to any Debt
(other than the Obligations) in excess of $1,000,000, if, with respect to this
clause (ii), the maturity of or any payment with respect to such Debt may be
accelerated or demanded due to such breach;

 

(g)                                  Any judgment or order for the payment of
money is entered against an Obligor in an amount that exceeds, individually or
cumulatively with all unsatisfied judgments or orders against all Obligors,
$1,000,000 (net of insurance coverage therefor that has not been denied by the
insurer), unless a stay of enforcement of such judgment or order is in effect,
by reason of a pending appeal or otherwise;

 

(h)                                 A loss, theft, damage or destruction occurs
with respect to any Collateral if the amount not covered by insurance exceeds
$1,000,000;

 

(i)                                     An Obligor is enjoined, restrained or in
any way prevented by any Governmental Authority from conducting any material
part of its business; an Obligor suffers the loss, revocation or termination of
any material license, permit, lease or agreement necessary to its business;
there is a cessation of any material part of an Obligor’s business for a
material period of time; any material Collateral or Property of an Obligor is
taken or impaired through condemnation; an Obligor agrees to or commences any
liquidation, dissolution or winding up of its affairs; or an Obligor is not
Solvent;

 

(j)                                    An Insolvency Proceeding is commenced by
an Obligor; an Obligor makes an offer of settlement, extension or composition to
its unsecured creditors generally; a trustee is appointed to take possession of
any substantial Property of or to operate any of the business of an Obligor; or
an Insolvency Proceeding is commenced against an Obligor and:  the Obligor
consents to institution of the proceeding, the petition commencing the
proceeding is not timely contested by the Obligor, the petition is not dismissed
within 30 days after filing, or an order for relief is entered in the
proceeding;

 

(k)                                 (i) An ERISA Event occurs with respect to a
Pension Plan or Multiemployer Plan

 

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that has resulted or could reasonably be expected to result in liability of an
Obligor to a Pension Plan, Multiemployer Plan or PBGC or that constitutes
grounds for appointment of a trustee for or termination by the PBGC of any
Pension Plan or Multiemployer Plan; an Obligor or ERISA Affiliate fails to pay
when due any installment payment with respect to its withdrawal liability under
Section 4201 of ERISA under a Multiemployer Plan; (ii) a Termination Event shall
occur which constitutes grounds for the termination under any Applicable Law, of
any Canadian Pension Plan or Canadian MEPP or for the appointment by the
appropriate Governmental Authority of a trustee for any Canadian Pension Plan,
or if any Canadian Pension Plan or Canadian MEPP shall be terminated or any such
trustee shall be requested or appointed, or if any Obligor is in default with
respect to payments to a Canadian Pension Plan or Canadian MEPP resulting from
their complete or partial withdrawal from such Canadian Pension Plan or Canadian
MEPP or failure of any Obligor to make required payments to any Canadian Pension
Plan or Canadian MEPP, or any Lien arises in respect of Obligors (save for
contribution amounts not yet due) in connection with any Canadian Pension Plan
or Canadian MEPP, or an Unfunded Pension Liability; (iii) an event occurs which
constitutes grounds for the termination of any UK Pension Scheme or for the
appointment of a receiver, liquidator, administrator or trustee in bankruptcy of
any UK Pension Scheme or if any Loan Party is in default with respect to the
terms of payment or the performance of its obligations under any UK Pension
Scheme or any Lien arises in respect of any Loan Party in connection with any UK
Pension Scheme or (iv) any event similar to the foregoing occurs or exists with
respect to a Foreign Plan;

 

(l)                                     An Obligor or any of its Senior Officers
is criminally indicted or convicted for (i) a felony committed in the conduct of
the Obligor’s business, or (ii) violating any state or federal law (including
the Controlled Substances Act, Money Laundering Control Act of 1986 and Illegal
Exportation of War Materials Act) that could lead to forfeiture of any material
Property or any Collateral;

 

(m)                             A Change of Control occurs;

 

(n)                                 Any event occurs or condition exists that
has a Material Adverse Effect; or

 

(o)                                 Any fine is issued against any Obligors by
the CPSC in an amount that exceeds, individually or cumulatively with all other
fines issued by the CPSC against the Obligors within the prior 12 months,
$1,000,000; or

 

(p)                                 Obligors institute a recall of products or
toys having an aggregate Value of $2,000,000 or more.

 

11.2.                     Remedies upon Default.  If an Event of Default
described in Section 11.1(j) occurs with respect to any Borrower, then to the
extent permitted by Applicable Law, all Obligations (other than Secured Bank
Product Obligations) shall become automatically due and payable and all
Commitments shall terminate, without any action by Agent or notice of any kind. 
In addition, or if any other Event of Default exists, Agent may in its
discretion (and shall upon written direction of Required Lenders) do any one or
more of the following from time to time:

 

(a)                                 declare any Obligations (other than Secured
Bank Product Obligations) immediately due and payable, whereupon they shall be
due and payable without diligence, presentment, demand, protest or notice of any
kind, all of which are hereby waived by Borrowers to the fullest extent
permitted by law;

 

(b)                                 terminate, reduce or condition any
Commitment, or make any adjustment to the Borrowing Base;

 

(c)                                  require Obligors to Cash Collateralize LC
Obligations, Secured Bank Product Obligations and other Obligations that are
contingent or not yet due and payable, and, if Obligors fail

 

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promptly to deposit such Cash Collateral, Agent may (and shall upon the
direction of Required Lenders) advance the required Cash Collateral as Revolver
Loans (whether or not an Overadvance exists or is created thereby, or the
conditions in Section 6 are satisfied); and

 

(d)                                 exercise any other rights or remedies
afforded under any agreement, by law, at equity or otherwise, including the
rights and remedies of a secured party under the UCC, PPSA or UK ST Law.  Such
rights and remedies include the rights to (i) take possession of any Collateral;
(ii) require Obligors to assemble Collateral, at Obligors’ expense, and make it
available to Agent at a place designated by Agent; (iii) enter any premises
where Collateral is located and store Collateral on such premises until sold
(and if the premises are owned or leased by an Obligor, Obligors agree not to
charge for such storage); and (iv) sell or otherwise dispose of any Collateral
in its then condition, or after any further manufacturing or processing thereof,
at public or private sale, with such notice as may be required by Applicable
Law, in lots or in bulk, at such locations, all as Agent, in its discretion,
deems advisable.  Each Obligor agrees that 10 days’ notice of any proposed sale
or other disposition of Collateral by Agent shall be reasonable, and that any
sale conducted on the internet or to a licensor of Intellectual Property shall
be commercially reasonable.  Agent may conduct sales on any Obligor’s premises,
without charge, and any sale may be adjourned from time to time in accordance
with Applicable Law.  Agent shall have the right to sell, lease or otherwise
dispose of any Collateral for cash, credit or any combination thereof, and Agent
may purchase any Collateral at public or, if permitted by law, private sale and,
in lieu of actual payment of the purchase price, may credit bid and set off the
amount of such price against the Obligations.

 

11.3.                     License.  Subject to the terms of the Intercreditor
Agreement, Agent is hereby granted an irrevocable, non-exclusive license or
other right to use, license or sub-license (without payment of royalty or other
compensation to any Person) any or all Intellectual Property of Obligors,
computer hardware and software, trade secrets, brochures, customer lists,
promotional and advertising materials, labels, packaging materials and other
Property, in advertising for sale, marketing, selling, collecting, completing
manufacture of, or otherwise exercising any rights or remedies with respect to,
any Collateral.  Each Obligor’s rights and interests under Intellectual Property
shall inure to Agent’s benefit.

 

11.4.                     Setoff.  At any time during an Event of Default,
Agent, Issuing Bank, Lenders, and any of their Affiliates are authorized, 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 Agent, Issuing Bank, such Lender or such Affiliate to or for the
credit or the account of an Obligor against any Obligations, irrespective of
whether or not Agent, Issuing Bank, such Lender or such Affiliate shall have
made any demand under this Agreement or any other Loan Document and although
such Obligations may be contingent or unmatured or are owed to a branch or
office of Agent, Issuing Bank, such Lender or such Affiliate different from the
branch or office holding such deposit or obligated on such indebtedness.  The
rights of Agent, Issuing Bank, each Lender and each such Affiliate under this
Section are in addition to other rights and remedies (including other rights of
setoff) that such Person may have.

 

11.5.                     Remedies Cumulative; No Waiver.

 

11.5.1.                                         Cumulative Rights.  All
agreements, warranties, guaranties, indemnities and other undertakings of
Obligors under the Loan Documents are cumulative and not in derogation of each
other.  The rights and remedies of Agent and Lenders are cumulative, may be
exercised at any time and from time to time, concurrently or in any order, and
are not exclusive of any other rights or remedies available by agreement, by
law, at equity or otherwise.  All such rights and remedies shall continue in
full force and effect until Full Payment of all Obligations.

 

11.5.2.                                         Waivers.  No waiver or course of
dealing shall be established by (a) the failure or delay of Agent or any Lender
to require strict performance by Obligors with any terms of the

 

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Loan Documents, or to exercise any rights or remedies with respect to Collateral
or otherwise; (b) the making of any Loan or issuance of any Letter of Credit
during a Default, Event of Default or other failure to satisfy any conditions
precedent; or (c) acceptance by Agent or any Lender of any payment or
performance by an Obligor under any Loan Documents in a manner other than that
specified therein.  It is expressly acknowledged by Obligors that any failure to
satisfy a financial covenant on a measurement date shall not be cured or
remedied by satisfaction of such covenant on a subsequent date.

 

SECTION 12.                  AGENT

 

12.1.                     Appointment, Authority and Duties of Agent.

 

12.1.1.                                         Appointment and Authority.  Each
Secured Party appoints and designates Bank of America as Agent under all Loan
Documents.  Agent may, and each Secured Party authorizes Agent to, enter into
all Loan Documents to which Agent is intended to be a party and accept all
Security Documents, for the benefit of Secured Parties.  Any action taken by
Agent in accordance with the provisions of the Loan Documents, and the exercise
by Agent of any rights or remedies set forth therein, together with all other
powers reasonably incidental thereto, shall be authorized by and binding upon
all Secured Parties.  Without limiting the generality of the foregoing, Agent
shall have the sole and exclusive authority to (a) act as the disbursing and
collecting agent for Lenders with respect to all payments and collections
arising in connection with the Loan Documents; (b) execute and deliver as Agent
each Loan Document, including any intercreditor or subordination agreement, and
accept delivery of each Loan Document; (c) act as collateral agent for Secured
Parties for purposes of perfecting and administering Liens under the Loan
Documents, and for all other purposes stated therein; (d) manage, supervise or
otherwise deal with Collateral; and (e) take any Enforcement Action or otherwise
exercise any rights or remedies with respect to any Collateral or under any Loan
Documents, Applicable Law or otherwise.  The duties of Agent are ministerial and
administrative in nature only, and Agent shall not have a fiduciary relationship
with any Secured Party, Participant or other Person, by reason of any Loan
Document or any transaction relating thereto.  Agent alone shall be authorized
to determine whether any Account or Inventory constitutes an Eligible Account,
Eligible In-Transit Inventory or Eligible Inventory, whether to impose or
release any reserve, or whether any conditions to funding or to issuance of a
Letter of Credit have been satisfied, which determinations and judgments, if
exercised in good faith, shall exonerate Agent from liability to any Secured
Party or other Person for any error in judgment.

 

12.1.2.                                         Duties.  Agent shall not have
any duties except those expressly set forth in the Loan Documents.  The
conferral upon Agent of any right shall not imply a duty to exercise such right,
unless instructed to do so by Lenders in accordance with this Agreement.

 

12.1.3.                                         Agent Professionals.  Agent may
perform its duties through agents and employees.  Agent may consult with and
employ Agent Professionals, and shall be entitled to act upon, and shall be
fully protected in any action taken in good faith reliance upon, any advice
given by an Agent Professional.  Agent shall not be responsible for the
negligence or misconduct of any agents, employees or Agent Professionals
selected by it with reasonable care.

 

12.1.4.                                         Instructions of Required
Lenders.  The rights and remedies conferred upon Agent under the Loan Documents
may be exercised without the necessity of joinder of any other party, unless
required by Applicable Law.  Agent may request instructions from Required
Lenders or other Secured Parties with respect to any act (including the failure
to act) in connection with any Loan Documents or Collateral, and may seek
assurances to its satisfaction from Secured Parties of their indemnification
obligations against Claims that could be incurred by Agent.  Agent may refrain
from any act until it has received such instructions or assurances, and shall
not incur liability to any Person by reason of so refraining.  Instructions of
Required Lenders shall be binding upon all Secured Parties, and no Secured Party
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting pursuant to instructions of Required Lenders. 
Notwithstanding the foregoing,

 

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instructions by and consent of specific parties shall be required to the extent
provided in Section 14.1.1.  In no event shall Agent be required to take any
action that, in its opinion, is contrary to Applicable Law or any Loan Documents
or could subject any Agent Indemnitee to personal liability.

 

12.2.                     Agreements Regarding Collateral and Borrower
Materials.

 

12.2.1.           Lien Releases; Care of Collateral.  Secured Parties authorize
Agent to release any Lien with respect to any Collateral (a) upon Full Payment
of the Obligations; (b) that is the subject of a disposition or Lien that
Borrowers certify in writing is a Permitted Asset Disposition or a Permitted
Lien entitled to priority over Agent’s Liens (and Agent may rely conclusively on
any such certificate without further inquiry); (c) that does not constitute a
material part of the Collateral; or (d) subject to Section 14.1, with the
consent of Required Lenders.  Secured Parties authorize Agent to subordinate its
Liens to any Purchase Money Lien or other Lien entitled to priority hereunder. 
Agent shall have no obligation to assure that any Collateral exists or is owned
by an Obligor, or is cared for, protected or insured, nor to assure that Agent’s
Liens have been properly created, perfected or enforced, or are entitled to any
particular priority, nor to exercise any duty of care with respect to any
Collateral.

 

12.2.2.           Possession of Collateral.  Agent and Secured Parties appoint
each Lender as agent (for the benefit of Secured Parties) for the purpose of
perfecting Liens in any Collateral held or controlled by such Lender, to the
extent such Liens are perfected by possession or control.  If any Lender obtains
possession or control of any Collateral, it shall notify Agent thereof and,
promptly upon Agent’s request, deliver such Collateral to Agent or otherwise
deal with it in accordance with Agent’s instructions.

 

12.2.3.           Reports.  Agent shall promptly provide to Lenders, when
complete, any field audit, examination or appraisal report prepared for Agent
with respect to any Obligor or Collateral (“Report”).  Reports and other
Borrower Materials may be made available to Lenders by providing access to them
on the Platform, but Agent shall not be responsible for system failures or
access issues that may occur from time to time.  Each Lender agrees (a) that
Reports are not intended to be comprehensive audits or examinations, and that
Agent or any other Person performing an audit or examination will inspect only
specific information regarding the Obligations or Collateral and will rely
significantly upon Obligors’ books, records and representations; (b) that Agent
makes no representation or warranty as to the accuracy or completeness of any
Borrower Materials and shall not be liable for any information contained in or
omitted from any Borrower Materials, including any Report; and (c) to keep all
Borrower Materials confidential and strictly for such Lender’s internal use, not
to distribute any Report or other Borrower Materials (or the contents thereof)
to any Person (except to such Lender’s Participants, attorneys and accountants),
and to use all Borrower Materials solely for administration of the Obligations. 
Each Lender shall indemnify and hold harmless Agent and any other Person
preparing a Report from any action such Lender may take as a result of or any
conclusion it may draw from any Borrower Materials, as well as from any Claims
arising as a direct or indirect result of Agent furnishing same to such Lender,
via the Platform or otherwise.

 

12.3.                     Reliance By Agent.  Agent shall be entitled to rely,
and shall be fully protected in relying, upon any certification, notice or other
communication (including those by telephone, telex, telegram, telecopy or
e-mail) believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person.  Agent shall have a reasonable and practicable
amount of time to act upon any instruction, notice or other communication under
any Loan Document, and shall not be liable for any delay in acting.

 

12.4.                     Action Upon Default.  Agent shall not be deemed to
have knowledge of any Default or Event of Default, or of any failure to satisfy
any conditions in Section 6, unless it has received written notice from a
Borrower or Required Lenders specifying the occurrence and nature thereof.  If
any Lender acquires knowledge of a Default, Event of Default or failure of such
conditions, it shall promptly notify Agent and the other Lenders thereof in
writing.  Each Secured Party agrees that, except as otherwise

 

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provided in any Loan Documents or with the written consent of Agent and Required
Lenders, it will not take any Enforcement Action, accelerate Obligations (other
than Secured Bank Product Obligations), or exercise any right that it might
otherwise have under Applicable Law to credit bid at foreclosure sales, UCC
sales or other dispositions of Collateral, or to assert any rights relating to
any Collateral.

 

12.5.                     Ratable Sharing.  If any Lender obtains any payment or
reduction of any Obligation, whether through set-off or otherwise, in excess of
its share of such Obligation, determined on a Pro Rata basis or in accordance
with Section 5.6.2, as applicable, such Lender shall forthwith purchase from
Agent, Issuing Bank and the other Lenders such participations in the affected
Obligation as are necessary to share the excess payment or reduction on a Pro
Rata basis or in accordance with Section 5.6.2, as applicable.  If any of such
payment or reduction is thereafter recovered from the purchasing Lender, the
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.  Notwithstanding the foregoing, if a
Defaulting Lender obtains a payment or reduction of any Obligation, it shall
immediately turn over the amount thereof to Agent for application under
Section 4.2.2 and it shall provide a written statement to Agent describing the
Obligation affected by such payment or reduction.  No Lender shall set off
against any Dominion Account without Agent’s prior consent.

 

12.6.                     Indemnification.  EACH LENDER SHALL INDEMNIFY AND HOLD
HARMLESS AGENT INDEMNITEES AND ISSUING BANK INDEMNITEES, TO THE EXTENT NOT
REIMBURSED BY OBLIGORS, ON A PRO RATA BASIS, AGAINST ALL CLAIMS THAT MAY BE
INCURRED BY OR ASSERTED AGAINST ANY SUCH INDEMNITEE, PROVIDED THAT ANY CLAIM
AGAINST AN AGENT INDEMNITEE RELATES TO OR ARISES FROM ITS ACTING AS OR FOR AGENT
(IN THE CAPACITY OF AGENT).  In Agent’s discretion, it may reserve for any
Claims made against an Agent Indemnitee or Issuing Bank Indemnitee, and may
satisfy any judgment, order or settlement relating thereto, from proceeds of
Collateral prior to making any distribution of Collateral proceeds to Secured
Parties.  If Agent is sued by any receiver, trustee or other Person for any
alleged preference or fraudulent transfer, then any monies paid by Agent in
settlement or satisfaction of such proceeding, together with all interest, costs
and expenses (including attorneys’ fees) incurred in the defense of same, shall
be promptly reimbursed to Agent by each Lender to the extent of its Pro Rata
share.

 

12.7.                     Limitation on Responsibilities of Agent.  Agent shall
not be liable to any Secured Party for any action taken or omitted to be taken
under the Loan Documents, except for losses directly and solely caused by
Agent’s gross negligence or willful misconduct.  Agent does not assume any
responsibility for any failure or delay in performance or any breach by any
Obligor, Lender or other Secured Party of any obligations under the Loan
Documents.  Agent does not make any express or implied representation, warranty
or guarantee to Secured Parties with respect to any Obligations, Collateral,
Loan Documents or Obligor.  No Agent Indemnitee shall be responsible to Secured
Parties for any recitals, statements, information, representations or warranties
contained in any Loan Documents or Borrower Materials; the execution, validity,
genuineness, effectiveness or enforceability of any Loan Documents; the
genuineness, enforceability, collectibility, value, sufficiency, location or
existence of any Collateral, or the validity, extent, perfection or priority of
any Lien therein; the validity, enforceability or collectibility of any
Obligations; or the assets, liabilities, financial condition, results of
operations, business, creditworthiness or legal status of any Obligor or Account
Debtor.  No Agent Indemnitee shall have any obligation to any Secured Party to
ascertain or inquire into the existence of any Default or Event of Default, the
observance by any Obligor of any terms of the Loan Documents, or the
satisfaction of any conditions precedent contained in any Loan Documents.

 

12.8.                     Successor Agent and Co-Agents.

 

12.8.1.                                         Resignation; Successor Agent. 
Subject to the appointment and acceptance of a successor Agent as provided
below, Agent may resign at any time by giving at least 30 days written notice
thereof to Lenders and Borrower Agent.  Upon receipt of such notice, Required
Lenders shall have

 

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the right to appoint a successor Agent which shall be (a) a Lender or an
Affiliate of a Lender; or (b) a financial institution reasonably acceptable to
Required Lenders and (provided no Default or Event of Default exists) Borrower
Agent.  If no successor agent is appointed prior to the effective date of
Agent’s resignation, then Agent may appoint a successor agent that is a
financial institution acceptable to it, which shall be a Lender unless no Lender
accepts the role.  Upon acceptance by a successor Agent of its appointment
hereunder, such successor Agent shall thereupon succeed to and become vested
with all the powers and duties of the retiring Agent without further act, and
the retiring Agent shall be discharged from its duties and obligations hereunder
but shall continue to have the benefits of the indemnification set forth in
Sections 12.6 and 14.2.  Notwithstanding any Agent’s resignation, the provisions
of this Section 12 shall continue in effect for its benefit with respect to any
actions taken or omitted to be taken by it while Agent.  Any successor to Bank
of America by merger or acquisition of stock or this loan shall continue to be
Agent hereunder without further act on the part of any Secured Party or Obligor.

 

12.8.2.                                         Co-Collateral Agent.  If
necessary or appropriate under Applicable Law, Agent may appoint a Person to
serve as a co-collateral agent or separate collateral agent under any Loan
Document.  Each right and remedy intended to be available to Agent under the
Loan Document shall also be vested in such agent.  Secured Parties shall execute
and deliver any instrument or agreement that Agent may request to effect such
appointment.  If the agent shall die, dissolve, become incapable of acting,
resign or be removed, then all the rights and remedies of such agent, to the
extent permitted by Applicable Law, shall vest in and be exercised by Agent
until appointment of a new agent.

 

12.9.                     Due Diligence and Non-Reliance.  Each Lender
acknowledges and agrees that it has, independently and without reliance upon
Agent or any other Lenders, and based upon such documents, information and
analyses as it has deemed appropriate, made its own credit analysis of each
Obligor and its own decision to enter into this Agreement and to fund Loans and
participate in LC Obligations hereunder.  Each Secured Party has made such
inquiries as it feels necessary concerning the Loan Documents, Collateral and
Obligors.  Each Secured Party acknowledges and agrees that the other Secured
Parties have made no representations or warranties concerning any Obligor, any
Collateral or the legality, validity, sufficiency or enforceability of any Loan
Documents or Obligations.  Each Secured Party will, independently and without
reliance upon any other Secured Party, and based upon such financial statements,
documents and information as it deems appropriate at the time, continue to make
and rely upon its own credit decisions in making Loans and participating in LC
Obligations, and in taking or refraining from any action under any Loan
Documents.  Except for notices, reports and other information expressly
requested by a Lender, Agent shall have no duty or responsibility to provide any
Secured Party with any notices, reports or certificates furnished to Agent by
any Obligor or any credit or other information concerning the affairs, financial
condition, business or Properties of any Obligor (or any of its Affiliates)
which may come into possession of Agent or its Affiliates.

 

12.10.              Remittance of Payments and Collections.

 

12.10.1.                    Remittances Generally.  All payments by any Lender
to Agent shall be made by the time and on the day set forth in this Agreement,
in immediately available funds.  If no time for payment is specified or if
payment is due on demand by Agent and request for payment is made by Agent by
11:00 a.m. on a Business Day, payment shall be made by Lender not later than
2:00 p.m. on such day, and if request is made after 11:00 a.m., then payment
shall be made by 11:00 a.m. on the next Business Day.  Payment by Agent to any
Secured Party shall be made by wire transfer, in the type of funds received by
Agent.  Any such payment shall be subject to Agent’s right of offset for any
amounts due from such payee under the Loan Documents.

 

12.10.2.                    Failure to Pay.  If any Secured Party fails to pay
any amount when due by it to Agent pursuant to the terms hereof, such amount
shall bear interest, from the due date until paid in full, at the rate
determined by Agent as customary for interbank compensation for two Business
Days and thereafter at the Default Rate for Base Rate Revolver Loans.  In no
event shall Borrowers be entitled to

 

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receive credit for any interest paid by a Secured Party to Agent, nor shall any
Defaulting Lender be entitled to interest on any amounts held by Agent pursuant
to Section 4.2.

 

12.10.3.                    Recovery of Payments.  If Agent pays an amount to a
Secured Party in the expectation that a related payment will be received by
Agent from an Obligor and such related payment is not received, then Agent may
recover such amount from the Secured Party.  If Agent determines that an amount
received by it must be returned or paid to an Obligor or other Person pursuant
to Applicable Law or otherwise, then, notwithstanding any other term of any Loan
Document, Agent shall not be required to distribute such amount to any Secured
Party.  If any amounts received and applied by Agent to any Obligations are
later required to be returned by Agent pursuant to Applicable Law, each Lender
shall pay to Agent, on demand, such Lender’s Pro Rata share of the amounts
required to be returned.

 

12.11.              Individual Capacities.  As a Lender, Bank of America shall
have the same rights and remedies under the Loan Documents as any other Lender,
and the terms “Lenders,” “Required Lenders” or any similar term shall include
Bank of America in its capacity as a Lender.  Agent, Lenders and their
Affiliates may accept deposits from, lend money to, provide Bank Products to,
act as financial or other advisor to, and generally engage in any kind of
business with, Obligors and their Affiliates, as if they were not Agent or
Lenders hereunder, without any duty to account therefor to any Secured Party. 
In their individual capacities, Agent, Lenders and their Affiliates may receive
information regarding Obligors, their Affiliates and their Account Debtors
(including information subject to confidentiality obligations), and shall have
no obligation to provide such information to any Secured Party.

 

12.12.              Titles.  Each Lender, other than Bank of America, that is
designated (on the cover page of this Agreement or otherwise) by Bank of America
as an “Arranger,” “Bookrunner” or “Agent” of any type shall have no right, power
or duty under any Loan Documents other than those applicable to all Lenders, and
shall in no event have any fiduciary duty to any Secured Party.

 

12.13.              Bank Product Providers.  Each Secured Bank Product Provider,
by delivery of a notice to Agent of a Bank Product, agrees to be bound by
Section 5.6 and this Section 12.  Each Secured Bank Product Provider shall
indemnify and hold harmless Agent Indemnitees, to the extent not reimbursed by
Obligors, against all Claims that may be incurred by or asserted against any
Agent Indemnitee in connection with such provider’s Secured Bank Product
Obligations.

 

12.14.              No Third Party Beneficiaries.  This Section 12 is an
agreement solely among Secured Parties and Agent, and shall survive Full Payment
of the Obligations.  This Section 12 does not confer any rights or benefits upon
Borrowers or any other Person.  As between Obligors and Agent, any action that
Agent may take under any Loan Documents or with respect to any Obligations shall
be conclusively presumed to have been authorized and directed by Secured
Parties.

 

SECTION 13.                  BENEFIT OF AGREEMENT; ASSIGNMENTS

 

13.1.                     Successors and Assigns.  This Agreement shall be
binding upon and inure to the benefit of Obligors, Agent, Lenders, Secured
Parties, and their respective successors and assigns, except that (a) no Obligor
shall have the right to assign its rights or delegate its obligations under any
Loan Documents; and (b) any assignment by a Lender must be made in compliance
with Section 13.3.  Agent may treat the Person which made any Loan as the owner
thereof for all purposes until such Person makes an assignment in accordance
with Section 13.3.  Any authorization or consent of a Lender shall be conclusive
and binding on any subsequent transferee or assignee of such Lender.

 

13.2.                     Participations.

 

13.2.1.                                         Permitted Participants; Effect. 
Subject to Section 13.3.3, any Lender may sell to a financial institution
(“Participant”) a participating interest in the rights and obligations of such

 

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Lender under any Loan Documents.  Despite any sale by a Lender of participating
interests to a Participant, such Lender’s obligations under the Loan Documents
shall remain unchanged, it shall remain solely responsible to the other parties
hereto for performance of such obligations, it shall remain the holder of its
Loans and Commitments for all purposes, all amounts payable by Obligors shall be
determined as if it had not sold such participating interests, and Obligors and
Agent shall continue to deal solely and directly with such Lender in connection
with the Loan Documents.  Each Lender shall be solely responsible for notifying
its Participants of any matters under the Loan Documents, and Agent and the
other Lenders shall not have any obligation or liability to any such
Participant.  A Participant that would be a Foreign Lender if it were a Lender
shall not be entitled to the benefits of Section 5.9 unless Borrower Agent
agrees otherwise in writing.

 

13.2.2.                                         Voting Rights.  Each Lender
shall retain the sole right to approve, without the consent of any Participant,
any amendment, waiver or other modification of a Loan Document other than that
which forgives principal, interest or fees, reduces the stated interest rate or
fees payable with respect to any Loan or Commitment in which such Participant
has an interest, postpones the Commitment Termination Date or any date fixed for
any regularly scheduled payment of principal, interest or fees on such Loan or
Commitment, or releases any Borrower, Guarantor or substantially all Collateral.

 

13.2.3.                                         Benefit of Set-Off.  Obligors
agree that each Participant shall have a right of set-off in respect of its
participating interest to the same extent as if such interest were owing
directly to a Lender, and each Lender shall also retain the right of set-off
with respect to any participating interests sold by it.  By exercising any right
of set-off, a Participant agrees to share with Lenders all amounts received
through its set-off, in accordance with Section 12.5 as if such Participant were
a Lender.

 

13.3.                     Assignments.

 

13.3.1.                                         Permitted Assignments.  A Lender
may assign to an Eligible Assignee any of its rights and obligations under the
Loan Documents, as long as (a) each assignment is of a constant, and not a
varying, percentage of the transferor Lender’s rights and obligations under the
Loan Documents and, in the case of a partial assignment, is in a minimum
principal amount of $10,000,000 (unless otherwise agreed by Agent in its
discretion) and integral multiples of $500,000 in excess of that amount;
(b) except in the case of an assignment in whole of a Lender’s rights and
obligations, the aggregate amount of the Commitments retained by the transferor
Lender is at least $10,000,000 (unless otherwise agreed by Agent in its
discretion); and (c) the parties to each such assignment shall execute and
deliver to Agent, for its acceptance and recording, an Assignment and
Acceptance.  Nothing herein shall limit the right of a Lender to pledge or
assign any rights under the Loan Documents to secure obligations of such Lender,
including a pledge or assignment to a Federal Reserve Bank; provided, however,
that no such pledge or assignment shall release the Lender from its obligations
hereunder nor substitute the pledge or assignee for such Lender as a party
hereto.

 

13.3.2.                                         Effect; Effective Date.  Upon
delivery to Agent of an assignment notice in the form of Exhibit B and a
processing fee of $3,500 (unless otherwise agreed by Agent in its discretion),
the assignment shall become effective as specified in the notice, if it complies
with this Section 13.3.  From such effective date, the Eligible Assignee shall
for all purposes be a Lender under the Loan Documents, and shall have all rights
and obligations of a Lender thereunder.  Upon consummation of an assignment, the
transferor Lender, Agent and Borrowers shall make appropriate arrangements for
issuance of replacement and/or new notes, if applicable.  The transferee Lender
shall comply with Section 5.10 and deliver, upon request, an administrative
questionnaire satisfactory to Agent.

 

13.3.3.                                         Certain Assignees.  No
assignment or participation may be made to an Obligor, Affiliate of an Obligor,
Defaulting Lender or natural person.  Any assignment by a Defaulting Lender
shall be effective only upon payment by the Eligible Assignee or Defaulting
Lender to Agent of an aggregate amount sufficient, upon distribution (through
direct payment, purchases of participations or

 

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other compensating actions as Agent deems appropriate), to satisfy all funding
and payment liabilities then owing by the Defaulting Lender hereunder.  If an
assignment by a Defaulting Lender shall become effective under Applicable Law
for any reason without compliance with the foregoing sentence, then the assignee
shall be deemed a Defaulting Lender for all purposes until such compliance
occurs.

 

13.3.4.                                         Register.  Agent, acting as a
non-fiduciary agent of Obligors (solely for tax purposes), shall maintain (a) a
copy of each Assignment and Acceptance delivered to it, and (b) a register for
recordation of the names, addresses and Commitments of, and the Loans, interest
and LC Obligations owing to, each Lender.  Entries in the register shall be
conclusive, absent manifest error, and Obligors, Agent and Lenders shall treat
each lender recorded in such register as a Lender for all purposes under the
Loan Documents, notwithstanding any notice to the contrary.  The register shall
be available for inspection by Obligors or any Lender, from time to time upon
reasonable notice.

 

13.4.                     Replacement of Certain Lenders.  If a Lender (a) fails
to give its consent to any amendment, waiver or action for which consent of all
Lenders was required and Required Lenders consented, or (b) is a Defaulting
Lender, then, in addition to any other rights and remedies that any Person may
have, Agent or Borrower Agent may, by notice to such Lender within 120 days
after such event, require such Lender to assign all of its rights and
obligations under the Loan Documents to Eligible Assignee(s), pursuant to
appropriate Assignment and Acceptance(s), within 20 days after the notice. 
Agent is irrevocably appointed as attorney-in-fact to execute any such
Assignment and Acceptance if the Lender fails to execute it.  Such Lender shall
be entitled to receive, in cash, concurrently with such assignment, all amounts
owed to it under the Loan Documents through the date of assignment.

 

SECTION 14.                  THE GUARANTEE

 

14.1.                     Guarantee.  The Guarantors hereby guarantee to each
Lender, the Issuing Bank and Agent and their respective successors and permitted
assigns the prompt payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations.  The Guarantors hereby further
agree that if the Borrowers shall fail to pay in full when due (whether at
stated maturity, by acceleration or otherwise) any of the obligations, the
Guarantors will promptly pay the same, without any demand or notice whatsoever,
and that in the case of any extension of time of payment or renewal of any of
the obligations, the same will be promptly paid in full when due (whether at
extended maturity, by acceleration or otherwise) in accordance with the terms of
such extension or renewal.

 

14.2.                     Obligations Unconditional.  The obligations of the
Guarantors under Section 14.1 are absolute and unconditional irrespective of the
value, genuineness, validity, regularity or enforceability of this Agreement,
the other Loan Documents or any other agreement or instrument referred to herein
or therein, or any substitution, release or exchange of any other guarantee of
or security for any of the obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 14.2 that the obligations of the
Guarantors hereunder shall be absolute and unconditional under any and all
circumstances.  Without limiting the generality of the foregoing, it is agreed
that the occurrence of any one or more of the following shall not alter or
impair the liability of the Guarantors hereunder, which shall remain absolute
and unconditional as described above:

 

(I)                                   AT ANY TIME OR FROM TIME TO TIME, WITHOUT
NOTICE TO SUCH GUARANTORS, THE TIME FOR ANY PERFORMANCE OF OR COMPLIANCE WITH
ANY OF THE OBLIGATIONS SHALL BE EXTENDED, OR SUCH PERFORMANCE OR COMPLIANCE
SHALL BE WAIVED;

 

(II)                              ANY OF THE ACTS MENTIONED IN ANY OF THE
PROVISIONS HEREOF OR OF THE OTHER LOAN DOCUMENTS OR ANY OTHER

 

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AGREEMENT OR INSTRUMENT REFERRED TO HEREIN OR THEREIN SHALL BE DONE OR OMITTED;

 

(III)                         THE MATURITY OF ANY OF THE OBLIGATIONS SHALL BE
ACCELERATED, OR ANY OF THE OBLIGATIONS SHALL BE MODIFIED, SUPPLEMENTED OR
AMENDED IN ANY RESPECT, OR ANY RIGHT HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS
OR ANY OTHER AGREEMENT OR INSTRUMENT REFERRED TO HEREIN OR THEREIN SHALL BE
WAIVED OR ANY OTHER GUARANTEE OF ANY OF THE OBLIGATIONS OR ANY SECURITY THEREFOR
SHALL BE RELEASED OR EXCHANGED IN WHOLE OR IN PART OR OTHERWISE DEALT WITH; OR

 

(IV)                          ANY LIEN OR SECURITY INTEREST GRANTED TO, OR IN
FAVOR OF, AGENT, THE ISSUING BANK OR ANY LENDER OR LENDERS AS SECURITY FOR ANY
OF THE OBLIGATIONS SHALL FAIL TO BE PERFECTED.

 

EACH GUARANTOR HEREBY EXPRESSLY WAIVES DILIGENCE, PRESENTMENT, DEMAND OF
PAYMENT, PROTEST AND ALL NOTICES WHATSOEVER, AND ANY REQUIREMENT THAT AGENT, THE
ISSUING BANK OR ANY LENDER EXHAUST ANY RIGHT, POWER OR REMEDY OR PROCEED AGAINST
BORROWERS OR ANY OTHER GUARANTOR HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS OR
ANY OTHER AGREEMENT OR INSTRUMENT REFERRED TO HEREIN OR THEREIN, OR AGAINST ANY
OTHER PERSON UNDER ANY OTHER GUARANTEE OF, OR SECURITY FOR, ANY OF THE
OBLIGATIONS, AND HEREBY WAIVE THE BENEFITS OF DIVISION AND DISCUSSION.

 

14.3.                     Reinstatement.  The obligations of the Guarantors
under this Section 14 shall be automatically reinstated if and to the extent
that for any reason any payment by or on behalf of any Borrower in respect of
the Obligations is rescinded or must be otherwise restored by any holder of any
of the Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
Agent, the Issuing Bank and each Lender on demand for all reasonable costs and
expenses (including fees and expenses of counsel) incurred by Agent, any Lender
or the Issuing Bank in connection with such rescission or restoration, including
any such costs and expenses incurred in defending against any claim alleging
that such payment constituted a preference, fraudulent transfer or similar
payment under any bankruptcy, insolvency or similar law.

 

14.4.                     Subrogation.  Until Full Payment of the Obligations,
each of the Guarantors hereby waives all rights of subrogation or contribution,
whether arising by contract or operation of law (including, without limitation,
any such right arising under the bankruptcy code, as amended) or otherwise by
reason of any payment by it pursuant to the provisions of this Section 14 and
further agrees with each Borrower for the benefit of each creditor of such
Borrower (including Agent, the Issuing Bank and each Lender) that any such
payment by it shall constitute a contribution of capital by such Guarantor to
such Borrower.

 

14.5.                     Remedies.  The Guarantors agree that, as between the
Guarantors and the Lenders, the Obligations of Borrowers hereunder may be
declared to be forthwith due and payable as provided in Section 11.2 (and shall
be deemed to have become automatically due and payable in the circumstances
provided in Section 11.2) for purposes of Section 14.1 notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such obligations
from becoming automatically due and payable) as against Borrowers and that, in
the event of such declaration (or such obligations being deemed to have become
automatically due and payable), such Obligations (whether or not due and payable
by Borrowers) shall forthwith become due and payable by the Guarantor for
purposes of, and, in the case of the Canadian Guarantors, subject to the
limitations set forth in, Section 14.1.

 

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14.6.                     Instrument for the Payment of Money.  Each of the
Guarantors hereby acknowledges that the guarantee in this Section 14 constitutes
an instrument for the payment of money only, and consents and agrees that Agent,
the Issuing Bank, or any Lender, at its sole option, in the event of a dispute
by such Guarantor in the payment of any moneys due hereunder, shall have the
right to summary judgment or such other expedited procedure as may be available
for a suit on a note or other instrument for the payment of money only.

 

14.7.                     Continuing Guarantee.  The guarantee in this
Section 14 is a continuing guarantee and shall apply to all Obligations whenever
arising.

 

14.8.                     General Limitation on Amount of Obligations
Guaranteed.   In any action or proceeding involving any state or non-U.S.
corporate law, or any state or federal or non-U.S. bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally, if the
obligations of the Guarantors under Section 14.1 would otherwise be held or
determined to be void, invalid or unenforceable, or subordinated to the claims
of any other creditors, on account of the amount of its liability under
Section 14.1, then, notwithstanding any other provision hereof to the contrary,
the amount of such liability shall, without any further action by the
Guarantors, any Lender, Agent or other Person, be automatically limited and
reduced to the highest amount that is valid and enforceable and not subordinated
to the claims of other creditors as determined in such action or proceeding.

 

14.9.                     Joint Enterprise.  Each Guarantor acknowledges that
(a) the Obligors’ business is a mutual and collective enterprise, and the
successful operation of each Obligor is dependent upon the successful
performance of the integrated group and (b) such Guarantor shall derive direct
and indirect economic and other benefits from the establishment by the Secured
Parties of the credit facility under this Agreement in favor of Borrowers.

 

14.10.              Subordination.  Each Borrower and each Guarantor hereby
subordinates any claims, including any right of payment, subrogation,
contribution and indemnity, that it may have at any time against any other
Obligor, howsoever arising, to the Full Payment of the Obligations.

 

14.11.              Conflicts with Canadian Guaranty or UK Guaranty.  In the
event that any of the terms of this Section 14 conflict with (i) the Canadian
Guaranty as they relate to the Canadian Guarantors and/or (ii) the UK Guaranty
as they relate to the UK Guarantors, the terms of the Canadian Guaranty and/or
the UK Guaranty (as applicable) shall control.

 

SECTION 15.                  MISCELLANEOUS

 

15.1.                     Consents, Amendments and Waivers.

 

15.1.1.                                         Amendment.  No modification of
any Loan Document, including any extension or amendment of a Loan Document or
any waiver of a Default or Event of Default, shall be effective without the
prior written agreement of Agent (with the consent of Required Lenders) and each
Obligor party to such Loan Document; provided, however, that

 

(a)                                 without the prior written consent of Agent,
no modification shall be effective with respect to any provision in a Loan
Document that relates to any rights, duties or discretion of Agent;

 

(b)                                 without the prior written consent of Issuing
Bank, no modification shall be effective with respect to any LC Obligations,
Section 2.3 or any other provision in a Loan Document that relates to any
rights, duties or discretion of Issuing Bank;

 

(c)                                  without the prior written consent of each
affected Lender, including a Defaulting

 

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Lender, no modification shall be effective that would (i) increase the
Commitment of such Lender; (ii) reduce the amount of, or waive or delay payment
of, any principal, interest or fees payable to such Lender (except as provided
in Section 4.2); (iii) extend the Revolver Termination Date applicable to such
Lender’s Obligations; or (iv) amend this clause (c);

 

(d)           without the prior written consent of all Lenders (except any
Defaulting Lender), no modification shall be effective that would (i) alter
Section 5.6.2, 7.1 (except to add Collateral) or 14.1.1; (ii) amend the
definitions of the terms “Pro Rata”, “Required Lenders” or “Borrowing Base” (or
any defined term used in the definition of “Borrowing Base”, provided that the
Agent may in its Permitted Discretion, without the necessity of obtaining the
consent of any Lender, increase or decrease the amount of the Availability
Reserve, or increase, decrease, add or eliminate any of the components thereof,
or reduce the percentages used in the definitions of Accounts Formula Amount and
Inventory Formula Amount); (iii) release all or substantially all of the
Collateral; or (iv) except in connection with a merger, disposition or similar
transaction expressly permitted hereby, release any Obligor from liability for
any Obligations; and

 

(e)           without the prior written consent of a Secured Bank Product
Provider, no modification shall be effective that affects its relative payment
priority under Section 5.6.2.

 

15.1.2.              Limitations.  The agreement of Obligors shall not be
necessary to the effectiveness of any modification of a Loan Document that deals
solely with the rights and duties of Lenders, Agent and/or Issuing Bank as among
themselves.  Only the consent of the parties to any agreement relating to fees
or a Bank Product shall be required for modification of such agreement, and no
Bank Product provider (in such capacity) shall have any right to consent to
modification of any Loan Document other than its Bank Product agreement.  Any
waiver or consent granted by Agent or Lenders hereunder shall be effective only
if in writing and only for the matter specified.

 

15.1.3.              Payment for Consents.  No Obligor will, directly or
indirectly, pay any remuneration or other thing of value, whether by way of
additional interest, fee or otherwise, to any Lender (in its capacity as a
Lender hereunder) as consideration for agreement by such Lender with any
modification of any Loan Documents, unless such remuneration or value is
concurrently paid, on the same terms, on a Pro Rata basis to all Lenders
providing their consent.

 

15.2.       Indemnity.  EACH OBLIGOR SHALL INDEMNIFY AND HOLD HARMLESS THE
INDEMNITEES AGAINST ANY CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY
INDEMNITEE, INCLUDING CLAIMS ASSERTED BY ANY OTHER OBLIGOR OR OTHER PERSON OR
ARISING FROM THE NEGLIGENCE OF AN INDEMNITEE.  In no event shall any party to a
Loan Document have any obligation thereunder to indemnify or hold harmless an
Indemnitee with respect to a Claim that is determined in a final, non-appealable
judgment by a court of competent jurisdiction to result from the gross
negligence or willful misconduct of such Indemnitee.

 

15.3.       Notices and Communications.

 

15.3.1.              Notice Address.  Subject to Section 4.1.4, all notices and
other communications by or to a party hereto shall be in writing and shall be
given to any Obligor, at Borrower Agent’s address shown on the signature
pages hereof, and to any other Person at its address shown on the signature
pages hereof (or, in the case of a Person who becomes a Lender after the Closing
Date, at the address shown on its Assignment and Acceptance), or at such other
address as a party may hereafter specify by notice in accordance with this
Section 14.3.  Each communication shall be effective only (a) if given by
facsimile transmission, when transmitted to the applicable facsimile number, if
confirmation of receipt is received; (b) if given by mail, three Business Days
after deposit in the U.S. mail, with first-class postage pre-paid, addressed to
the applicable address; or (c) if given by personal delivery, when duly

 

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delivered to the notice address with receipt acknowledged.  Notwithstanding the
foregoing, no notice to Agent pursuant to Section 2.1.4, 2.3, 3.1.2, 4.1.1 or
5.3.3 shall be effective until actually received by the individual to whose
attention at Agent such notice is required to be sent.  Any written
communication that is not sent in conformity with the foregoing provisions shall
nevertheless be effective on the date actually received by the noticed party. 
Any notice received by Borrower Agent shall be deemed received by all Obligors.

 

15.3.2.              Electronic Communications; Voice Mail.  Electronic mail and
internet websites may be used only for routine communications, such as delivery
of Borrower Materials, administrative matters, distribution of Loan Documents,
and matters permitted under Section 4.1.4.  Agent and Lenders make no assurances
as to the privacy and security of electronic communications.  Electronic and
voice mail may not be used as effective notice under the Loan Documents.

 

15.3.3.              Platform.  Borrower Materials shall be delivered pursuant
to procedures approved by Agent, including electronic delivery (if possible)
upon request by Agent to an electronic system maintained by Agent (“Platform”). 
Borrowers shall notify Agent of each posting of Borrower Materials on the
Platform and the materials shall be deemed received by Agent only upon its
receipt of such notice.  Borrower Materials and other information relating to
this credit facility may be made available to Lenders on the Platform.  The
Platform is provided “as is” and “as available.”  Agent does not warrant the
accuracy or completeness of any information on the Platform nor the adequacy or
functioning of the Platform, and expressly disclaims liability for any errors or
omissions in the Borrower Materials or any issues involving the Platform.  NO
WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS, OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY AGENT
WITH RESPECT TO BORROWER MATERIALS OR THE PLATFORM.  Lenders acknowledge that
Borrower Materials may include material non-public information of Obligors and
should not be made available to any personnel who do not wish to receive such
information or who may be engaged in investment or other market-related
activities with respect to any Obligor’s securities.  No Agent Indemnitee shall
have any liability to Borrowers, Lenders or any other Person for losses, claims,
damages, liabilities or expenses of any kind (whether in tort, contract or
otherwise) relating to use by any Person of the Platform or delivery of Borrower
Materials and other information through the Platform.

 

15.3.4.              Non-Conforming Communications.  Agent and Lenders may rely
upon any communications purportedly given by or on behalf of any Obligor even if
they were not made in a manner specified herein, were incomplete or were not
confirmed, or if the terms thereof, as understood by the recipient, varied from
a later confirmation.  Each Obligor shall indemnify and hold harmless each
Indemnitee from any liabilities, losses, costs and expenses arising from any
electronic or telephonic communication purportedly given by or on behalf of an
Obligor.

 

15.4.       Performance of Obligors’ Obligations.  Agent may, in its discretion
at any time and from time to time, at Obligors’ expense, pay any amount or do
any act required of an Obligor under any Loan Documents or otherwise lawfully
requested by Agent to (a) enforce any Loan Documents or collect any Obligations;
(b) protect, insure, maintain or realize upon any Collateral; or (c) defend or
maintain the validity or priority of Agent’s Liens in any Collateral, including
any payment of a judgment, insurance premium, warehouse charge, finishing or
processing charge, or landlord claim, or any discharge of a Lien.  All payments,
costs and expenses (including Extraordinary Expenses) of Agent under this
Section shall be reimbursed to Agent by Borrowers, on demand, with interest from
the date incurred until paid in full, at the Default Rate applicable to Base
Rate Revolver Loans.  Any payment made or action taken by Agent under this
Section shall be without prejudice to any right to assert an Event of Default or
to exercise any other rights or remedies under the Loan Documents.

 

15.5.       Credit Inquiries.  Agent and Lenders may (but shall have no
obligation) to respond to

 

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usual and customary credit inquiries from third parties concerning any Obligor
or Subsidiary.

 

15.6.       Severability.  Wherever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be valid under Applicable
Law.  If any provision is found to be invalid under Applicable Law, it shall be
ineffective only to the extent of such invalidity and the remaining provisions
of the Loan Documents shall remain in full force and effect.

 

15.7.       Cumulative Effect; Conflict of Terms.  The provisions of the Loan
Documents are cumulative.  The parties acknowledge that the Loan Documents may
use several limitations or measurements to regulate similar matters, and they
agree that these are cumulative and that each must be performed as provided. 
Except as otherwise provided in another Loan Document (by specific reference to
the applicable provision of this Agreement), if any provision contained herein
is in direct conflict with any provision in another Loan Document, the provision
herein shall govern and control.

 

15.8.       Counterparts.  Any Loan Document may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract.  This Agreement shall become effective when
Agent has received counterparts bearing the signatures of all parties hereto. 
Delivery of a signature page of any Loan Document by telecopy or other
electronic means shall be effective as delivery of a manually executed
counterpart of such agreement.

 

15.9.       Entire Agreement.  Time is of the essence with respect to all Loan
Documents and Obligations.  The Loan Documents constitute the entire agreement,
and supersede all prior understandings and agreements, among the parties
relating to the subject matter thereof.

 

15.10.     Relationship with Lenders.  The obligations of each Lender hereunder
are several, and no Lender shall be responsible for the obligations or
Commitments of any other Lender.  Amounts payable hereunder to each Lender shall
be a separate and independent debt.  It shall not be necessary for Agent or any
other Lender to be joined as an additional party in any proceeding for such
purposes.  Nothing in this Agreement and no action of Agent, Lenders or any
other Secured Party pursuant to the Loan Documents or otherwise shall be deemed
to constitute Agent and any Secured Party to be a partnership, joint venture or
similar arrangement, nor to constitute control of any Obligor.

 

15.11.     No Advisory or Fiduciary Responsibility.  In connection with all
aspects of each transaction contemplated by any Loan Document, Obligors
acknowledge and agree that (a)(i) this credit facility and any related arranging
or other services by Agent, any Lender, any of their Affiliates or any arranger
are arm’s-length commercial transactions between Obligors and such Person;
(ii) Obligors have consulted their own legal, accounting, regulatory and tax
advisors to the extent they have deemed appropriate; and (iii) Obligors are
capable of evaluating, and understand and accept, the terms, risks and
conditions of the transactions contemplated by the Loan Documents; (b) each of
Agent, Lenders, their Affiliates and any arranger is and has been acting solely
as a principal and, except as expressly agreed in writing by the relevant
parties, has not been, is not, and will not be acting as an advisor, agent or
fiduciary for Obligors, any of their Affiliates or any other Person, and has no
obligation with respect to the transactions contemplated by the Loan Documents
except as expressly set forth therein; and (c) Agent, Lenders, their Affiliates
and any arranger may be engaged in a broad range of transactions that involve
interests that differ from those of Obligors and their Affiliates, and have no
obligation to disclose any of such interests to Obligors or their Affiliates. 
To the fullest extent permitted by Applicable Law, each Obligor hereby waives
and releases any claims that it may have against Agent, Lenders, their
Affiliates and any arranger with respect to any breach of agency or fiduciary
duty in connection with any transaction contemplated by a Loan Document.

 

15.12.     Confidentiality.  Each of Agent, Lenders and Issuing Bank shall
maintain the confidentiality of all Information (as defined below), except that
Information may be disclosed (a) to its Affiliates, and to its and their
partners, directors, officers, employees, agents, advisors and representatives

 

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(provided such Persons are informed of the confidential nature of the
Information and instructed to keep it confidential); (b) to the extent requested
by any governmental, regulatory or self-regulatory authority purporting to have
jurisdiction over it or its Affiliates; (c) to the extent required by Applicable
Law or by any subpoena or other legal process; (d) to any other party hereto;
(e) in connection with any action or proceeding relating to any Loan Documents
or Obligations; (f) subject to an agreement containing provisions substantially
the same as this Section, to any Transferee or any actual or prospective party
(or its advisors) to any Bank Product; (g) with the consent of Borrower Agent;
or (h) to the extent such Information (i) becomes publicly available other than
as a result of a breach of this Section or (ii) is available to Agent, any
Lender, Issuing Bank or any of their Affiliates on a nonconfidential basis from
a source other than Obligors.  Notwithstanding the foregoing, Agent and Lenders
may publish or disseminate general information concerning this credit facility
for league table, tombstone and advertising purposes, and may use Obligors’
logos, trademarks or product photographs in advertising materials.  As used
herein, “Information” means all information received from an Obligor or
Subsidiary relating to it or its business that is identified as confidential
when delivered.  Any Person required to maintain the confidentiality of
Information pursuant to this Section shall be deemed to have complied if it
exercises a degree of care similar to that which it accords its own confidential
information.  Each of Agent, Lenders and Issuing Bank acknowledges that
(i) Information may include material non-public information; (ii) it has
developed compliance procedures regarding the use of material non-public
information; and (iii) it will handle such material non-public information in
accordance with Applicable Law.

 

15.13.     GOVERNING LAW.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, UNLESS
OTHERWISE SPECIFIED, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES (BUT GIVING EFFECT TO
FEDERAL LAWS RELATING TO NATIONAL BANKS).

 

15.14.     Consent to Forum.  EACH OBLIGOR HEREBY CONSENTS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY FEDERAL OR STATE COURT SITTING IN OR WITH JURISDICTION OVER
NEW YORK, IN ANY PROCEEDING OR DISPUTE RELATING IN ANY WAY TO ANY LOAN
DOCUMENTS, AND AGREES THAT ANY SUCH PROCEEDING SHALL BE BROUGHT BY IT SOLELY IN
ANY SUCH COURT.  EACH OBLIGOR IRREVOCABLY WAIVES ALL CLAIMS, OBJECTIONS AND
DEFENSES THAT IT MAY HAVE REGARDING SUCH COURT’S PERSONAL OR SUBJECT MATTER
JURISDICTION, VENUE OR INCONVENIENT FORUM.  EACH PARTY HERETO IRREVOCABLY
CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN
SECTION 14.3.1.  Nothing herein shall limit the right of Agent or any Lender to
bring proceedings against any Obligor in any other court, nor limit the right of
any party to serve process in any other manner permitted by Applicable Law. 
Nothing in this Agreement shall be deemed to preclude enforcement by Agent of
any judgment or order obtained in any forum or jurisdiction.

 

15.15.     Waivers by Obligors.  To the fullest extent permitted by Applicable
Law, each Obligor waives (a) the right to trial by jury (which Agent and each
Lender hereby also waives) in any proceeding or dispute of any kind relating in
any way to any Loan Documents, Obligations or Collateral; (b) presentment,
demand, protest, notice of presentment, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of any commercial paper, accounts,
documents, instruments, chattel paper and guaranties at any time held by Agent
on which an Obligor may in any way be liable, and hereby ratifies anything Agent
may do in this regard; (c) notice prior to taking possession or control of any
Collateral; (d) any bond or security that might be required by a court prior to
allowing Agent to exercise any rights or remedies; (e) the benefit of all
valuation, appraisement and exemption laws; (f) any claim against Agent, Issuing
Bank or any Lender, on any theory of liability, for special, indirect,
consequential, exemplary or punitive damages (as opposed to direct or actual
damages) in any way relating to any Enforcement Action, Obligations, Loan
Documents or transactions relating thereto; and (g) notice of acceptance hereof.

 

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Each Obligor acknowledges that the foregoing waivers are a material inducement
to Agent, Issuing Bank and Lenders entering into this Agreement and that they
are relying upon the foregoing in their dealings with Obligors.  Each Obligor
has reviewed the foregoing waivers with its legal counsel and has knowingly and
voluntarily waived its jury trial and other rights following consultation with
legal counsel.  In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.

 

15.16.     Patriot Act Notice.  Agent and Lenders hereby notify Obligors that
pursuant to the Patriot Act, Agent and Lenders are required to obtain, verify
and record information that identifies each Obligor, including its legal name,
address, tax ID number and other information that will allow Agent and Lenders
to identify it in accordance with the Patriot Act.  Agent and Lenders will also
require information regarding each personal guarantor, if any, and may require
information regarding Obligors’ management and owners, such as legal name,
address, social security number and date of birth.

 

15.17.     Intercreditor Agreement.  Notwithstanding anything herein to the
contrary, each of Agent, on behalf of the Lenders, and each Obligor acknowledges
that the Lien and security interests granted to Agent pursuant to this Agreement
and the other Loan Documents and the exercise of any right or remedy by Agent
thereunder and the obligations of the Obligors under this Agreement and the
other Loan Documents are subject to the provisions of the Intercreditor
Agreement, which Agent is hereby directed by the Lenders to execute and deliver,
and perform in accordance with its terms.  In the event of any conflict between
the terms of the Intercreditor Agreement and this Agreement or any other Loan
Document, the terms of the Intercreditor Agreement shall govern and control and
notwithstanding anything to the contrary herein, Agent and the Lenders hereby
agree and acknowledge that prior to the Discharge of Term Obligations any
requirement of this Agreement to deliver any Term Priority Collateral, or the
proceeds thereof, to Agent shall be deemed satisfied by delivery of such Term
Priority Collateral or the proceeds thereof to the Permitted Term Agent.

 

[Remainder of page intentionally left blank; signatures begin on following page]

 

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IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the
date set forth above.

 

 

BORROWERS:

 

 

 

 

SUMMER INFANT, INC.

 

 

 

 

 

 

 

By:

/s/ Paul Francese

 

Name:

Paul Francese

 

Title:

CFO

 

Address:

 

 

 

1275 Park East Drive

 

 

Woonsocket, Rhode Island 02895

 

 

Attn: Paul Francese

 

 

 

 

 

SUMMER INFANT (USA), INC.

 

 

 

 

 

 

 

By:

/s/ Paul Francese

 

Name:

Paul Francese

 

Title:

CFO

 

Address:

 

 

 

1275 Park East Drive

 

 

Woonsocket, Rhode Island 02895

 

 

Attn: Paul Francese

 

[Loan and Security Agreement (Revolver)]

 

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

 

 

GUARANTORS:

 

 

 

 

SUMMER INFANT CANADA, LIMITED

 

 

 

 

 

 

 

By:

/s/ David S. Hemendinger

 

Name:

David S. Hemendinger

 

Title:

COO

 

Address:

 

 

 

1275 Park East Drive

 

 

Woonsocket, Rhode Island 02895

 

 

Attn: Paul Francese

 

 

 

 

 

SUMMER INFANT EUROPE LIMITED

 

 

 

 

 

By:

/s/ Jason P. Macari

 

Name:

Jason P. Macari

 

Title:

Director

 

Address:

 

 

 

1275 Park East Drive

 

 

Woonsocket, Rhode Island 02895

 

 

Attn: Paul Francese

 

[Loan and Security Agreement (Revolver)]

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

 

 

AGENT AND LENDER:

 

 

 

BANK OF AMERICA, N.A.,

 

as Agent and Lender

 

 

 

 

 

By:

/s/ Steven Blumberg

 

Name:

Steven Blumberg

 

Title:

Senior Vice President

 

Address:

 

 

 

Bank of America, N.A.

 

 

Mail Code: CT2-500-35-02

 

 

Cityplace 1, 185 Asylum Street

 

 

Hartford, CT 06103

 

 

Attn: Cynthia Stannard, SVP

 

[Loan and Security Agreement (Revolver)]

 

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

 

Exhibit A

to

Loan and Security Agreement

 

ASSIGNMENT AND ACCEPTANCE

 

Reference is made to the Loan and Security Agreement dated as of February 28,
2013, as amended (“Loan Agreement”), among SUMMER INFANT, INC., and SUMMER
INFANT (USA), INC. (collectively, “Borrowers”), the Guarantors party thereto
from time to time, BANK OF AMERICA, N.A., as agent (“Agent”) for the financial
institutions from time to time party to the Loan Agreement (“Lenders”), and such
Lenders.  Terms are used herein as defined in the Loan Agreement.

 

(“Assignor”) and                                                   
                           (“Assignee”) agree as follows:

 

1.             Assignor hereby assigns to Assignee and Assignee hereby purchases
and assumes from Assignor (a) a principal amount of $                 of
Assignor’s outstanding Revolver Loans and $                       of Assignor’s
participations in LC Obligations and (b) the amount of $                     of
Assignor’s Commitment (which represents         % of the total Commitments) (the
foregoing items being, collectively, the “Assigned Interest”), together with an
interest in the Loan Documents corresponding to the Assigned Interest.  This
Agreement shall be effective as of the date (“Effective Date”) indicated in the
corresponding Assignment Notice delivered to Agent, provided such Assignment
Notice is executed by Assignor, Assignee, Agent and Borrower Agent, if
applicable.  From and after the Effective Date, Assignee hereby expressly
assumes, and undertakes to perform, all of Assignor’s obligations in respect of
the Assigned Interest, and all principal, interest, fees and other amounts which
would otherwise be payable to or for Assignor’s account in respect of the
Assigned Interest shall be payable to or for Assignee’s account, to the extent
such amounts accrue on or after the Effective Date.

 

2.             Assignor (a) represents that as of the date hereof, prior to
giving effect to this assignment, its Commitment is $                    , and
the outstanding balance of its Revolver Loans and participations in LC
Obligations is $                    ; (b) makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Loan Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Loan Agreement or any other instrument or document furnished pursuant
thereto, other than that Assignor is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and clear
of any adverse claim; and (c) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrowers or the
performance by Borrowers of their obligations under the Loan Documents. 
[Assignor is attaching the Note[s] held by it and requests that Agent exchange
such Note[s] for new Notes payable to Assignee [and Assignor].]

 

3.             Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received copies of the Loan Agreement and such other Loan Documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it shall,
independently and without reliance upon Assignor and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan Documents;
(d) confirms that it is an Eligible Assignee; (e) appoints and authorizes Agent
to take such action as agent on its behalf and to exercise such powers under the
Loan Agreement as are delegated to Agent by the terms thereof, together with
such powers as are incidental thereto; (f) agrees that it will observe and
perform all obligations that are required to be performed by it as a “Lender”
under the Loan Documents; and (g) represents and warrants that the assignment
evidenced hereby will not result in a non-exempt “prohibited transaction” under
Section 406 of ERISA.

 

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4.             This Agreement shall be governed by the laws of the State of New
York.  If any provision is found to be invalid under Applicable Law, it shall be
ineffective only to the extent of such invalidity and the remaining provisions
of this Agreement shall remain in full force and effect.

 

5.             Each notice or other communication hereunder shall be in writing,
shall be sent by messenger, by telecopy or facsimile transmission, or by
first-class mail, shall be deemed given when sent and shall be sent as follows:

 

(a)                                 If to Assignee, to the following address (or
to such other address as Assignee may designate from time to time):

 

 

 

(b)                                 If to Assignor, to the following address (or
to such other address as Assignor may designate from time to time):

 

 

 

Payments hereunder shall be made by wire transfer of immediately available
Dollars as follows:

 

If to Assignee, to the following account (or to such other account as Assignee
may designate from time to time):

 

 

ABA No.

 

Account No.

Reference:

 

If to Assignor, to the following account (or to such other account as Assignor
may designate from time to time):

 

 

ABA No.

 

Account No.

Reference:

 

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IN WITNESS WHEREOF, this Assignment and Acceptance is executed as of
                          .

 

 

 

 

 

(“Assignee”)

 

 

 

 

 

 

 

By

 

 

 

Title:

 

 

 

 

 

 

 

 

 

(“Assignor”)

 

 

 

 

 

 

 

By

 

 

 

Title:

 

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EXHIBIT B

to

Loan and Security Agreement

 

ASSIGNMENT NOTICE

 

Reference is made to (1) the Loan and Security Agreement dated as of
              , 20    , as amended (“Loan Agreement”), among SUMMER
INFANT, INC., and SUMMER INFANT (USA), INC. (collectively, “Borrowers”), the
Guarantors party thereto from time to time, BANK OF AMERICA, N.A., as agent
(“Agent”) for the financial institutions from time to time party to the Loan
Agreement (“Lenders”), and such Lenders; and (2) the Assignment and Acceptance
dated as of                         , 20     (“Assignment Agreement”), between
                                     (“Assignor”) and
                                         (“Assignee”).  Terms are used herein as
defined in the Loan Agreement.

 

Assignor hereby notifies Borrowers and Agent of Assignor’s intent to assign to
Assignee pursuant to the Assignment Agreement (a) a principal amount of
$                 of Assignor’s outstanding Revolver Loans and
$                       of Assignor’s participations in LC Obligations and
(b) the amount of $                     of Assignor’s Commitment (which
represents         % of the total Commitments) (the foregoing items being,
collectively, the “Assigned Interest”), together with an interest in the Loan
Documents corresponding to the Assigned Interest.  This Agreement shall be
effective as of the date (“Effective Date”) indicated below, provided this
Assignment Notice is executed by Assignor, Assignee, Agent and Borrower Agent,
if applicable.  Pursuant to the Assignment Agreement, Assignee has expressly
assumed all of Assignor’s obligations under the Loan Agreement to the extent of
the Assigned Interest, as of the Effective Date.

 

For purposes of the Loan Agreement, Agent shall deem Assignor’s Commitment to be
reduced by $                  , and Assignee’s Commitment to be increased by
$                  .

 

The address of Assignee to which notices and information are to be sent under
the terms of the Loan Agreement is:

 

 

 

The address of Assignee to which payments are to be sent under the terms of the
Loan Agreement is shown in the Assignment and Acceptance.

 

This Notice is being delivered to Borrowers and Agent pursuant to Section 13.3
of the Loan Agreement.  Please acknowledge your acceptance of this Notice by
executing and returning to Assignee and Assignor a copy of this Notice.

 

IN WITNESS WHEREOF, this Assignment Notice is executed as of
                          .

 

 

 

 

 

(“Assignee”)

 

 

 

 

 

 

 

By

 

 

 

Title:

 

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

 

 

 

 

(“Assignor”)

 

 

 

 

 

 

 

By

 

 

 

Title:

 

ACKNOWLEDGED AND AGREED,

AS OF THE DATE SET FORTH ABOVE:

 

BORROWER AGENT:*

 

SUMMER INFANT (USA), INC.

 

 

By

 

 

 

Title:

 

 

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* No signature required if Assignee is a Lender, U.S.-based Affiliate of a
Lender or Approved Fund, or if an Event of Default exists.

 

 

BANK OF AMERICA, N.A.,

as Agent

 

 

By

 

 

 

Title:

 

 

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