Exhibit 10.1

 

EXECUTION COPY

 

FORBEARANCE AGREEMENT AND

SECOND AMENDMENT TO CREDIT AGREEMENT

 

This FORBEARANCE AGREEMENT AND SECOND AMENDMENT TO CREDIT AGREEMENT (this
“Forbearance Agreement”), dated as of October 15, 2012, is entered into by and
among LODGENET INTERACTIVE CORPORATION, a Delaware corporation (the “Borrower”),
the other Loan Parties party hereto, the Lenders party hereto (the “Participant
Lenders”) and GLEACHER PRODUCTS CORP., as administrative agent (in such
capacity, the “Agent”), and is made with reference to that certain Credit
Agreement, dated as of April 4, 2007 (as amended, restated, amended and
restated, supplemented or otherwise modified prior to the date hereof, the
“Credit Agreement”) by and among the Borrower, the banks, financial institutions
and other entities party thereto as Lenders (the “Lenders”) and the Agent.

 

RECITALS:

 

WHEREAS, as of the date hereof, the Events of Default listed in Annex A hereto
have occurred and are continuing as of the date hereof (collectively, the
“Specified Defaults”);

 

WHEREAS, upon the Borrower’s request, the Participant Lenders constituting the
Required Lenders under the Credit Agreement have agreed, and the Agent, at the
direction of the such Participant Lenders, has agreed, in each case subject to
the terms and conditions set forth herein, to forbear from exercising certain of
their default-related rights and remedies against the Borrower and the other
Loan Parties with respect to the Specified Defaults (the “Forbearance”);

 

WHEREAS, in consideration for the Participant Lenders and the Agent agreeing to
the Forbearance, and as a condition precedent thereto, the Borrower has agreed,
subject to the terms and conditions set forth herein, to amend the Credit
Agreement in certain respects as more particularly set forth below.

 

NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants and agreements set forth in this
Forbearance Agreement, and intending to be legally bound, the parties hereto
agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1                               Defined Terms.

 

(a)                                  Capitalized terms that are defined in this
Forbearance Agreement shall have the meanings ascribed to such terms in this
Forbearance Agreement. All other capitalized terms shall have the respective
meanings ascribed thereto in the Credit Agreement (as amended hereby).

 

(b)                                 This Forbearance Agreement constitutes a
“Loan Document” as defined in the Credit Agreement.

 

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ARTICLE II

CONFIRMATION OF OBLIGATIONS AND SPECIFIED DEFAULTS

 

The Borrower and each other Loan Party acknowledges and confirms that (a) as of
October 15, 2012, the aggregate principal amount of the Term Loans was
$345,583,243.89 and the aggregate principal amount outstanding under the
Revolving Loans was $21,350,000.00, which amounts constitute valid and
subsisting obligations of the Borrower to the Lenders that are not subject to
any credits, offsets, defenses, claims, counterclaims or adjustments of any
kind, (b) any notice requirement in respect of any Specified Default is hereby
waived and (c) each of the Specified Defaults constitutes an Event of Default
that has occurred and is continuing as of the date hereof.  The foregoing
amounts do not include any fees, expenses or other amounts that are chargeable
or otherwise reimbursable under the Credit Agreement (as amended hereby) or the
other Loan Documents.  Each of the Borrower and the other Loan Parties hereby
(i) acknowledges its obligations under the Loan Documents, (ii) reaffirms that
each of the Liens created and granted pursuant to the Loan Documents is valid,
subsisting, perfected and of the priority required pursuant to the Loan
Documents and (iii) acknowledges that this Forbearance Agreement shall in no
manner impair or otherwise adversely affect such Liens.  Prior to the
Forbearance Period, the existence of the Specified Defaults (a) relieved the
Agent and Lenders from any obligation to provide further financial
accommodations under the Credit Agreement or any other Loan Document, and
(b) permitted the Agent to, among other things, (i) accelerate all or any
portion of the Obligations, (ii) commence any legal or other action to collect
any or all of the Obligations from the Borrower, any other Loan Party and/or any
Collateral or any other property as to which any other Person granted the Agent
a security interest therein as security for the Obligations or any guaranty
thereof (collectively, the “Other Collateral”), (iii) foreclose or otherwise
realize on any or all of the Collateral and Other Collateral, and/or
appropriate, set-off and apply to the payment of any or all of the Obligations,
any or all of the Collateral and Other Collateral, and/or (iv) take any other
enforcement action or otherwise exercise any or all rights and remedies provided
for by any or all of the Credit Agreement, the other Loan Documents or
applicable law.

 

ARTICLE III
FORBEARANCE

 

3.1                               Forbearance; Forbearance Default Rights and
Remedies.

 

(a)                                  Effective as of the Forbearance Effective
Date (as defined below), each of the Participant Lenders and the Agent agrees
that until the expiration of the Forbearance Period, it will, during such
Forbearance Period, forbear (subject to the terms of this Forbearance Agreement)
from exercising its default-related rights and remedies against the Borrower and
the other Loan Parties under the Credit Agreement, the other Loan Documents
and/or applicable law solely to the extent the availability of such remedies
arises from the Specified Defaults; provided, however, (i) each of the Borrower
and the other Loan Parties shall comply, except to the extent such compliance is
expressly excused by the terms of this Forbearance Agreement, with all explicit
restrictions or prohibitions triggered by the existence and/or continuance of
any Default or Event of Default under the Credit Agreement (as amended hereby),
this Forbearance Agreement or any of the other Loan Documents, (ii) nothing
herein shall restrict, impair or otherwise affect the Agent’s rights and
remedies under any agreements containing subordination provisions in favor of
the Agent (including any rights or remedies available to the

 

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Agent as a result of the occurrence or continuation of the Specified Defaults),
(iii) the Agent and the Lenders shall have no obligation to provide any Loans,
Letters of Credit or other financial accommodations and (iv) nothing herein
shall restrict, impair or otherwise affect the exercise of the Participant
Lenders’ and the Agent’s rights under this Forbearance Agreement, provided,
further, the agreement of the Agent and the Participant Lenders set forth in
this Section 3.1 shall not apply to nor preclude any remedy available to the
Agent and the Lenders, in connection with any proceeding commenced under any
bankruptcy or insolvency law, including without limitation, to any relief in
respect of adequate protection or relief from any stay imposed under such law. 
Each of the Borrower and the other Loan Parties hereby agrees and acknowledges
that if any Default or Event of Default other than the Specified Defaults occurs
during the Forbearance Period, or if a Termination Event (as defined below)
occurs, the Agent and the Lenders have reserved the right to, and may, in
accordance with the terms of the Credit Agreement, exercise at any time and from
time to time any and all rights and remedies under the Loan Documents and
applicable law in connection therewith or with the Specified Defaults.

 

(b)                                 As used herein, the term “Forbearance
Period” shall mean the period beginning on the Forbearance Effective Date and
ending upon the occurrence of a Termination Event.  As used herein, “Termination
Event” shall mean the earlier to occur of (i) December 17, 2012 and (ii) the
occurrence of any Forbearance Default.  As used herein, the term “Forbearance
Default” shall mean:  (i) the occurrence of any Default or Event of Default
(other than the Specified Defaults) under and as defined in the Credit Agreement
(as amended hereby) or any other Loan Document; (ii) the failure of the Borrower
or any other Loan Party to timely comply with any term, condition, covenant or
agreement set forth in this Forbearance Agreement; (iii) subject to the
exceptions in Section 7.1(b) below, the material breach of any representation or
warranty made by the Borrower or any other Loan Party in this Forbearance
Agreement;  (iv) the failure of the Borrower to timely comply with each term,
condition, covenant and agreement set forth in (A) that certain Forbearance
Agreement to SMATV Sales Agency and Transport Services Agreement, dated as of
September 19, 2012, as in effect on the Forbearance Effective Date (the “DirecTV
Forbearance”), between DirecTV, LLC and the Borrower, (B) that certain letter
agreement, dated September 20, 2012, as in effect on the Effective Date (the
“HBO Forbearance”), from Home Box Office, Inc. to the Borrower, (C) that certain
SMATV Sales Agency and Transport Services Agreement, dated as of March 31, 2010,
as in effect on the Forbearance Effective Date (the “DirecTV Agreement”),
between DirecTV, Inc. and the Borrower (other than the Specified Defaults as
defined in the DirecTV Forbearance) or (D) the HBO Services Affiliation
Agreement for Lodging Industry Distributor, dated as of December 1, 2003, as in
effect on the Forbearance Effective Date (the “HBO Agreement”), between Home Box
Office, Inc. and the Borrower (other than the payment default referenced in the
HBO Forbearance) or (v) the receipt of any notice of default or event of default
(howsoever described or defined) in respect of any material contract from the
counterparty to such material contract.

 

(c)                                  Upon the occurrence of a Termination Event,
the agreement of each Participant Lender and the Agent hereunder to forbear from
exercising its default-related rights and remedies in respect of the Specified
Defaults shall immediately terminate without the requirement of any further
demand, presentment, protest, or notice of any kind, all of which each of the
Borrower and the other Loan Parties hereby waive.  Each of the Borrower and the
other Loan Parties agrees that the Agent and the Lenders may at any time after
the occurrence

 

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of a Termination Event proceed to exercise any or all of its rights and remedies
under the Credit Agreement (as amended hereby), any other Loan Document, and/or
applicable law, all of which rights and remedies are fully reserved by the
Lenders and the Agent, including, without limitation, its rights and remedies on
account of the Specified Defaults and any other Defaults or Events of Default
that may then exist.  Without limiting the generality of the foregoing, upon the
occurrence of a Termination Event, the Agent may upon such notice or demand as
is specified by the Credit Agreement (as amended hereby), any other Loan
Documents, or applicable law, (i) collect and/or commence any legal or other
action to collect any or all of the Obligations from the Borrower and/or the
other Loan Parties, (ii) foreclose or otherwise realize on any or all of the
Collateral, and/or appropriate, setoff or apply to the payment of any or all of
the Obligations, any or all of the Collateral or proceeds thereof, and
(iii) take any other enforcement action or otherwise exercise any or all rights
and remedies provided for by or under the Credit Agreement (as amended hereby),
any other Loan Documents and/or applicable law, all of which rights and remedies
are fully reserved by the Agent and the Lenders.

 

(d)                                 Nothing in this Forbearance Agreement shall
be construed as a waiver of or acquiescence to the Specified Defaults and the
Specified Defaults shall continue in existence notwithstanding the agreement of
the Participant Lenders and the Agent, as set forth herein, to forbear in the
exercise of default-related rights and remedies against the Borrower on the
terms and for the periods set forth herein.  Any agreement by the Required
Lenders and the Agent to extend the Forbearance Period or enter into any other
forbearance or similar arrangement must be set forth in writing and signed by a
duly authorized signatory of the Agent (as instructed by the Required Lenders)
and the Required Lenders.  The Borrower and the other Loan Parties each hereby
acknowledges that the Participant Lenders and the Agent have made no assurances
whatsoever concerning any possibility of any extension of the Forbearance
Period, any other forbearance or similar arrangement or any other limitations on
the exercise of their rights, remedies and privileges under or otherwise in
connection with the Credit Agreement (as amended hereby), the other Loan
Documents, and/or applicable law, except as expressly set forth herein.

 

(e)                                  The Borrower and the other Loan Parties
each hereby acknowledges and agrees that any forbearance, waiver, consent or
other financial accommodation which the Participant Lenders or the Agent may
make on or after the date hereof will have been made by the Participant Lenders
or the Agent in reliance upon, and is consideration for, among other things, the
general releases and reaffirmation of indemnities contained in Article VIII
hereof and the other covenants, agreements, including the amendments to the
Credit Agreement set forth in Article IV hereof, representations and warranties
of the Borrower and the other Loan Parties hereunder.

 

(f)                                    For the avoidance of doubt, the Borrower
and the other Loan Parties agree that they will comply with all terms,
conditions, covenants and restrictions in the Credit Agreement (as amended
hereby) and the other Loan Documents that apply at any time that a Default or
Event of Default has occurred and is continuing.

 

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ARTICLE IV

AMENDMENTS TO CREDIT AGREEMENT

 

4.1                               Amendments to Credit Agreement.

 

Effective as of the Forbearance Effective Date (as defined below), the Credit
Agreement is hereby amended as follows:

 

(a)                                  Section 1.1 of the Credit Agreement is
hereby amended by adding the following term in proper alphabetical order:

 

“Forbearance Agreement”: that certain Forbearance Agreement and Second Amendment
to Credit Agreement, dated as of October 15, 2012, among the Borrower, the other
Loan Parties party thereto, the Lenders party thereto and the Agent.”

 

(b)                                 Section 4.5(c) of the Credit Agreement is
hereby amended by deleting it in its entirety and replacing it with the
following:

 

“(c)                            Notwithstanding the foregoing, upon the
occurrence and continuance of any Default or Event of Default (including the
Specified Defaults (as defined in the Forbearance Agreement) on September 30,
2012), any principal of or due but unpaid interest on any Loan, Reimbursement
Obligations or any other amount due but unpaid under the Loan Documents shall
bear interest, after as well as before judgment, at a rate per annum equal to
(x) in the case of the principal amount of the Loans, the rate then applicable
to the Loans under the relevant Facility plus 2% or (y) in the case of the due
but unpaid interest on the Loans, Reimbursement Obligations or any other amount
due but unpaid under the Loan Documents, the rate applicable to Base Rate Loans
under the Revolving Facility plus 2%.”

 

ARTICLE V
SUPPLEMENTAL TERMS AND COVENANTS

 

5.1                               Supplemental Terms and Covenants.  Each of the
Loan Parties hereby agrees to comply with the following terms and covenants, in
each case, notwithstanding any provision to the contrary set forth in this
Forbearance Agreement, the Credit Agreement or any other Loan Documents:

 

(a)                                  Strategic Planning Officer.  Within 5 days
of the Forbearance Effective Date, the Borrower shall retain a strategic
planning officer that is reasonably acceptable to the Participant Lenders (it
being agreed that the joint retention of Mark Weinstein and Chad Coben, each an
employee of FTI Consulting, is reasonably acceptable to the Participant
Lenders), who will report directly to the chief executive officer and will
perform the services as set forth on Annex B hereto.

 

(b)                                 Management Conference Call.  The Borrower
shall hold a management conference call at least twice a month with the Agent
and the Lenders, including their respective financial and legal advisors, during
normal business hours on dates and at times to be mutually agreed upon by the
Borrower and the Agent.

 

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(c)                                  Information to Agent. The Borrower shall
furnish to the Agent within 5 days of the Forbearance Effective Date (or such
longer period as may be agreed by the Agent), a completed perfection certificate
in substantially the form agreed with the Agent prior to the Forbearance
Effective Date.

 

(d)                                 Information to Advisors.  The Borrower shall
cause its financial advisors to keep CDG and Akin Gump reasonably apprised of
its strategic alternatives for the period commencing August 22, 2012 (being the
date such financial advisors were retained), including, without limitation,
updates regarding (a) the sales process including information regarding buyers
contacted, confidentiality agreements signed, buyers in the data room and offers
received, (b) term sheets or other written indications of interest with respect
to the Borrower’s efforts to consummate a refinancing, recapitalization,
restructuring or sale and (c) term sheets or similar written correspondence
regarding transactions with respect to the Borrower’s private network.

 

(e)                                  Confidential Information.  The Borrower
shall furnish to CDG, Akin Gump and the Agent (to the extent the Agent has
executed a confidentiality agreement), for itself and for distribution only to
Lenders who have executed an express confidentiality agreement for such purposes
with the Borrower on or after the Forbearance Effective Date (“Specified
Lenders”): (i) within 5 days of the Forbearance Effective Date (or such longer
period as may be agreed by the Agent), (A) a summary business plan, (B) summary
profit and loss projections, (C) summary capital expenditure projections and
(D) the information listed on Annex C attached hereto that is available to the
Borrower (it being acknowledged all available information listed on Annex C was
provided to CDG prior to the Forbearance Effective Date); (ii) within 10 days of
the Forbearance Effective Date (or such longer period as may be agreed by the
Agent), Consolidated EBITDA for the fiscal quarter and fiscal month ending
September 30, 2012, (iii) within 20 days following the end of each calendar
month, a monthly financial statement in a form reasonably acceptable to the
Agent and (iv) on Tuesday of each calendar week, a variance report setting forth
the actual cash flow of the Loan Parties for the immediately preceding calendar
week including a reasonably detailed explanation of all material variances from
the initial cash flow forecast delivered pursuant to Section 6.1(e) of the
Forbearance Agreement, in each case, in a form reasonably acceptable to the
Agent; provided that CDG, Akin Gump, the Agent and those Specified Lenders who
receive such information will not be permitted to (and agree not to) distribute
such information to any other Lender who does not execute such confidentiality
agreement on or after the Forbearance Effective Date with the Borrower.

 

(f)                                    Negative Covenants.  During the
Forbearance Period, (i) the baskets set forth in Sections 8.2(h), 8.2(m),
8.2(n), 8.5(l), 8.5(m), 8.5(n), 8.8(d) and 8.8(p) of the Credit Agreement shall
not be available other than those amounts already utilized as of the Forbearance
Effective Date and (ii) Indebtedness pursuant to Section 8.2(e) of the Credit
Agreement shall not exceed an aggregate principal amount of $5,000,000 at any
one time outstanding.

 

(g)                                 Capital Expenditures.  The Borrower shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
make any cash Capital Expenditure, except cash Capital Expenditures of the
Borrower and its Subsidiaries in the ordinary course of business not exceeding
$10,500,000 during the Forbearance Period.

 

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(h)                                 Minimum Consolidated EBITDA.  The Borrower
shall maintain Consolidated EBITDA for the periods set out below in an amount
greater than or equal to the corresponding amount set forth opposite such
period:

 

Period

 

Consolidated EBITDA

 

 

 

 

 

October 1, 2012 through October 31, 2012

 

$

4,543,000

 

 

 

 

 

October 1, 2012 through November 30, 2012

 

$

8,701,000

 

 

(i)                                     Material Contracts.  The Borrower shall,
and shall cause each of its Subsidiaries to, promptly give notice to the Agent
and each Lender of the occurrence of any default under any material contract.

 

(j)                                     Milestone.  On or before November 19,
2012, the Borrower shall hold an in-person meeting with the private Lenders,
including their respective financial and legal advisors, to discuss any bid for
a strategic transaction which may have been selected by the Borrower by such
date.

 

ARTICLE VI

CONDITIONS TO EFFECTIVENESS

 

6.1                               Effectiveness.  This Forbearance Agreement
shall become effective as of the first date (the “Forbearance Effective Date”)
on which each of the following conditions is satisfied and evidence of its
satisfaction has been delivered to counsel to the Agent:

 

(a)                                  The Agent shall have received a duly
executed signature page of the Forbearance Agreement from (i) each of the
Participant Lenders constituting the Required Lenders and (ii) the Borrower and
each other Loan Party;

 

(b)                                 The Borrower shall be in compliance with the
terms, conditions, covenants and agreements set forth in the DirecTV
Forbearance, HBO Forbearance, the DirecTV Agreement (other than the Specified
Defaults as defined in the DirecTV Forbearance) and the HBO Agreement (other
than the payment default referenced in the HBO Forbearance);

 

(c)                                  The Borrower shall have entered into letter
agreements with (i) Akin Gump Strauss Hauer & Feld LLP (“Akin Gump”), legal
advisor to the Agent, and (ii) CDG Group, LLC (“CDG Group”), financial advisor
to the Agent, in each case, on terms reasonably acceptable to Agent and the
applicable advisors providing for the timely payment of reasonable and
documented fees and expenses of Akin Gump and CDG Group, respectively, and shall
have paid the accrued and unpaid reasonable and documented fees and
out-of-pocket expenses of, and funded any agreed advance payment retainers for,
Akin Gump and CDG Group;

 

(d)                                 The Agent shall have received for
distribution to the private Lenders: (i) preliminary Consolidated EBITDA for the
fiscal quarter and fiscal month ending September 30, 2012, and (ii) Consolidated
EBITDA, revenue and net income projections for the fiscal months ending
October 31, 2012 and November 30, 2012;

 

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(e)                                  CDG, Akin Gump, the Agent (to the extent
the Agent has executed a confidentiality agreement) and the Specified Lenders
shall have received a cash flow forecast through December 14, 2012; provided
that CDG, Akin Gump and each Specified Lender will not be permitted to (and
agree not to) distribute such information to any other Lender who does not
execute a confidentiality agreement on or after the Forbearance Effective Date
with the Borrower; and

 

(f)                                    The representations and warranties set
forth in Article VII below shall be true and correct.

 

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

 

7.1                               Representations and Warranties.  To induce the
Agent and the Participant Lenders to enter into this Forbearance Agreement, each
of the Loan Parties hereby represents and warrants as follows:

 

(a)                                  Except for the Specified Defaults or as
otherwise expressly provided herein (including the following paragraph (b)),
after giving effect to the Forbearance Agreement, each of the Borrower and the
other Loan Parties is in compliance with all of the terms and provisions set
forth in the Credit Agreement and the other Loan Documents on its part to be
observed or performed, and no Default or Event of Default has occurred and is
continuing.

 

(b)                                 Except with respect to the Specified
Defaults, each of the representations and warranties in Section 5 of the Credit
Agreement shall be true and correct in all material respects on and as of the
date hereof, except to the extent any such representation and warranty expressly
relates to an earlier date, in which case such representation and warranty shall
be true and correct in all material respects as of such earlier date.

 

(c)                                  The execution, delivery and performance by
each of the Borrower and the other Loan Parties of this Forbearance Agreement:

 

(i)                                     are within its corporate, limited
liability company or similar powers, as applicable;

 

(ii)                                  have been duly authorized by all necessary
corporate or limited liability company or similar, as applicable, action
including the consent of the holders of its equity interests where required;

 

(iii)                               do not and will not (A) contravene its
certificate of incorporation, certificate of formation, by-laws or limited
liability company agreement or other constituent documents, as applicable,
(B) violate any applicable requirement of law or any order or decree of any
governmental authority or arbitrator applicable to it, (C) conflict with or
result in the breach of, or constitute a default under, or result in or permit
the termination or acceleration (where such conflict, breach, default,
termination or acceleration could reasonably be expected to result in a Material
Adverse Effect) of, any contractual obligation of the Borrower or any of the
other Loan Parties, or (D) result in

 

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the creation or imposition of any lien or encumbrance upon any of the property
of the Loan Parties, except pursuant to the terms of any Loan Document; and

 

(iv)                              do not and will not require the consent of,
authorization by, approval of, notice to, or filing or registration with, any
governmental authority or any other Person, other than those which prior to the
Forbearance Effective Date will have been obtained or made and copies of which
prior to the Forbearance Effective Date will have been delivered to the Agent
and each of which on the Forbearance Effective Date will be in full force and
effect.

 

(d)                                 This Forbearance Agreement has been duly
executed and delivered by the Borrower and the other Loan Parties party hereto. 
Each of this Forbearance Agreement, the Credit Agreement and the other Loan
Documents constitutes a legal, valid and binding obligation of each of the
Borrower and the other Loan Parties party hereto, enforceable against each such
Person in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors’ rights generally, concepts of
reasonableness, general equitable principles (whether considered in a proceeding
in equity or at law) and an implied covenant of good faith and fair dealing.

 

(e)                                  The Liens granted to the Agent, for the
benefit of itself and the other Secured Parties, to secure any of the
Obligations under the Credit Agreement (as amended hereby) remain in full force
and effect and continue to constitute first priority perfected liens therein,
subject only to Liens permitted pursuant to Section 8.3 of the Credit Agreement
(as amended hereby).

 

7.2                               Survival.  The representations and warranties
in Section 7.1 shall survive the execution and delivery of this Forbearance
Agreement and the Forbearance Effective Date.

 

ARTICLE VIII

GENERAL RELEASE; REAFFIRMATION OF INDEMNITY

 

(a)                                  In consideration of, among other things,
the Agent’s and the Participant Lenders’ execution and delivery of this
Forbearance Agreement, each of the Borrower or any other Loan Parties, on behalf
of itself and on behalf of its agents, representatives, officers, directors,
advisors, employees, affiliates, Subsidiaries, successors, assigns, legal
representatives and financial advisors (the “LodgeNet Parties”), hereby jointly
and severally releases, acquits and forever discharges (collectively, the
“Releases”) the Agent and each Lender (collectively, the “Lender Parties”), and
their respective subsidiaries, parents, affiliates, officers, directors,
employees, agents, attorneys, financial advisors, successors and assigns, both
present and former (collectively, the “Lenders’ Affiliates” and together with
the Lender Parties, the “Releasees”) from any and all manner of actions, causes
of action, suits, debts, controversies, damages, judgments, executions, claims
and demands whatsoever, asserted or unasserted, in contract, tort, law or equity
which the Borrower or any other LodgeNet Party has or may have against any of
the Lender Parties and/or the Lenders’ Affiliates by reason of any action,
failure to act, matter or thing whatsoever arising from or based on facts
occurring prior to the date of the Forbearance Agreement in respect of the Loan
Documents, including but not limited to, any claim or defense that relates to,
in whole or in part, directly or indirectly, (i)

 

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the making or administration of the Loans and Letters of Credit, including,
without limitation, any such claims and defenses based on fraud, mistake,
duress, usury or misrepresentation, or any other claim based on so-called
“lender liability theories”, (ii) any covenants, agreements, duties or
obligations set forth in the Loan Documents or Forbearance Agreement, (iii) any
actions or omissions of any of the Lender Parties and/or the Lenders’ Affiliates
in connections with the initiation or continuing exercise of any right or remedy
contained in the Loan Documents  or at law or in equity, (iv) lost profits,
(v) loss of business opportunity, (vi) increased financing costs,
(vii) increased legal or other administrative fees or (viii) damages to business
reputation (collectively, the “Claims”).  In entering into this Forbearance
Agreement, each of the Borrower and the other Loan Parties party hereto
consulted with, and has been represented by, legal counsel and expressly
disclaims any reliance on any representations, acts or omissions by any of the
Releasees and each hereby agrees and acknowledges that the validity and
effectiveness of the releases set forth herein do not depend in any way on any
such representations, acts and/or omissions or the accuracy, completeness or
validity hereof.  The provisions of this Article VIII shall survive the
expiration of the Forbearance Period and the termination of this Forbearance
Agreement, the Credit Agreement, the other Loan Documents and payment in full of
the Obligations.

 

(b)                                 Without in any way limiting their
reaffirmations and acknowledgements set forth in Article IX hereof, the Borrower
hereby expressly acknowledges, agrees and reaffirms its reimbursement,
indemnification and other obligations to and agreements set forth in
Section 11.5 of the Credit Agreement.  The Borrower further acknowledges, agrees
and reaffirms that all of such reimbursement, indemnification and other
obligations and agreements set forth in Section 11.5 of the Credit Agreement
shall survive the expiration of the Forbearance Period and the termination of
this Forbearance Agreement, the Credit Agreement, the other Loan Documents and
the payment in full of the Obligations.

 

(c)                                  The Borrower and each other Loan Party, on
behalf of itself and its successors, assigns, and other legal representatives,
hereby unconditionally and irrevocably agrees that it will not sue any Releasee
on the basis of any Claim released, remised and discharged by the Borrower or
any other Loan Party pursuant to Section VIII(a).  If the Borrower, any other
Loan Party or any of its successors, assigns or other legal representatives
violates the foregoing covenant, the Borrower and each other Loan Party, for
itself and its successors, assigns and legal representatives, agrees to pay, in
addition to such other damages as any Releasee may sustain as a result of such
violation, all attorneys’ fees and costs incurred by any Releasee as a result of
such violation.

 

ARTICLE IX

RATIFICATION OF LIABILITY

 

Each of the Borrower and the other Loan Parties party hereto hereby ratifies and
reaffirms all of its payment and performance obligations and obligations to
indemnify, contingent or otherwise, under this Forbearance Agreement and each
other Loan Document to which it is a party, and hereby ratifies and reaffirms
its grant of Liens on or security interests in its properties pursuant to such
Loan Documents to which it is a party as security for the Obligations, and
confirms and agrees that such Liens and security interests hereafter secure all
of the Obligations, including, without limitation, all additional Obligations
hereafter arising or incurred pursuant to or in connection with this Forbearance
Agreement, the Credit Agreement or

 

10

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any other Loan Document. The Borrower and the other Loan Parties party hereto
(a) acknowledge receipt of a copy of this Forbearance Agreement, (b) consent to
the terms and conditions of same, and (c) agree and acknowledge that each of the
Loan Documents remains in full force and effect and is hereby ratified and
confirmed.

 

ARTICLE X

MISCELLANEOUS

 

10.1                        No Other Amendments; Reservation of Rights; No
Waiver.

 

(a)                                  Except as expressly modified hereby, all
terms, conditions, covenants, representations and warranties contained in the
Credit Agreement and each other Loan Document, and all rights of the Agent and
Lenders, and all of the Obligations, shall remain in full force and effect. 
Each of the Borrower and the other Loan Parties party hereto hereby confirms
that no such party has any right of setoff, recoupment or other offset or any
defense, claim or counterclaim with respect to any of the Obligations, the
Credit Agreement or any other Loan Document.

 

(b)                                 Except as expressly set forth herein, the
effectiveness of this Forbearance Agreement shall not directly or indirectly
(i) create any obligation to make any further Loans or to continue to defer any
enforcement action after the occurrence of any Default or Event of Default
(including, without limitation, any Forbearance Default), (ii) constitute a
consent, amendment or waiver of any past, present or future violations of any
provisions of the Credit Agreement or any other Loan Document, or to prejudice,
any right, power, privilege or remedy of the Lenders or the Agent under the
Credit Agreement, any other Loan Document or applicable law, nor shall the
entering into this Forbearance Agreement preclude the Lenders or the Agent from
refusing to enter into any further amendments or forbearances with respect to
the Credit Agreement or any other Loan Document, (iii) amend, modify or operate
as a waiver of any provision of the Credit Agreement or any other Loan Document
or any right, power or remedy of the Agent or any Lender, (iv) constitute a
consent to any merger or other transaction or to any sale, restructuring or
refinancing transaction, or (v) constitute a course of dealing or other basis
for altering any Obligations or any other contract or instrument.  Except as
expressly set forth herein, the Agent and the Lenders reserve all of their
rights, powers, and remedies under the Credit Agreement, the other Loan
Documents and applicable law.  All of the provisions of the Credit Agreement and
the other Loan Documents are hereby reiterated. For the avoidance of doubt,
other than as otherwise expressly provided herein, this Forbearance Agreement
shall not constitute a forbearance with respect to (i) any failure by the
Borrower or any other Loan Party to comply with any covenant or other provision
in the Credit Agreement or any other Loan Document or (ii) the occurrence or
continuance of any present or future Default or Event of Default.

 

(c)                                  From and after the Forbearance Effective
Date, (i) the term “Agreement” in the Credit Agreement, and all references to
the Credit Agreement in any Loan Document shall mean the Credit Agreement as
modified or supplemented by this Forbearance Agreement, and (ii) the term “Loan
Documents” in the Credit Agreement and the other Loan Documents shall include,
without limitation, this Forbearance Agreement and any agreement, instrument or
other document executed and/or delivered in connection herewith.

 

11

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(d)                                 This Forbearance Agreement shall not be
deemed or construed to be a satisfaction, reinstatement, novation or release of
the Credit Agreement or any other Loan Document.

 

10.2                        Ratification and Confirmation; Survival.  Except as
expressly set forth in this Forbearance Agreement, the terms, provisions and
conditions of the Credit Agreement and the other Loan Documents are hereby
ratified and confirmed and shall remain unchanged and in full force and effect
without interruption or impairment of any kind.  Notwithstanding anything to the
contrary herein, Article VIII hereof shall survive the termination of this
Forbearance Agreement.

 

10.3                        APPLICABLE LAW.  THIS FORBEARANCE AGREEMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.

 

10.4                        Headings.  The various headings of this Forbearance
Agreement are inserted for convenience only and shall not affect the meaning or
interpretation of this Forbearance Agreement or any provision hereof.

 

10.5                        Counterparts.  This Forbearance Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
an original and all of which shall constitute together but one and the same
agreement.  This Forbearance Agreement shall become effective when the
conditions set forth in Article VI hereof  have been satisfied.  Delivery of an
executed counterpart of a signature page of this Forbearance Agreement by
facsimile transmission or electronic transmission (in pdf format) will be
effective as delivery of a manually executed counterpart hereof.

 

10.6                        Severability.  Any provision of this Forbearance
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Forbearance Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.

 

10.7                        Agreement.  This Forbearance Agreement may not be
amended or modified except in the manner specified for an amendment of or
modification to the Credit Agreement in Section 11.1 of the Credit Agreement.

 

10.8                        Assignment; Binding Effect; Third Party
Beneficiaries.

 

(a)                                  This Forbearance Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and each of the
Lenders and their respective successors and assigns; provided that (i) the
Borrower may not assign or transfer its rights or obligations hereunder without
the prior written consent of the Agent and all Lenders, and (ii) the rights of
sale, assignment and transfer of the Lenders are subject to Section 11.6 of the
Credit Agreement.

 

(b)                                 Without limiting the requirements of
Section 11.6 of the Credit Agreement, each Participant Lender agrees that it
will not assign all, or any ratable part of its

 

12

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Loans, Commitments or any rights or obligations under the Loan Documents to any
Person unless such Person shall have agreed to be bound by this Forbearance
Agreement (including the forbearance granted hereunder) and any such assignments
shall be void in the absence of such agreement.

 

(c)                                  Except with respect to Article VIII hereof,
no Person other than the parties hereto, the Lenders and the Releasees, shall
have any rights hereunder or be entitled to rely on this Forbearance Agreement
and all third-party beneficiary rights (other than the rights of the Releasees
under Article VIII hereof) are hereby expressly disclaimed

 

10.9                        Entire Agreement.  This Forbearance Agreement, the
Credit Agreement and the other Loan Documents, together with any and all
Annexes, Exhibits and Schedules thereto that are or have been delivered pursuant
thereto, constitute the entire agreement and understanding of the parties in
respect of the subject matter of the Credit Agreement and supersede all prior
understandings, agreements or representations by or among the parties, written
or oral, to the extent they relate in any way with respect thereto.

 

10.10                 Payment of Expenses; Indemnification.  The Borrower agrees
(a) to pay or reimburse Agent and each Participant Lender for all its
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
the Forbearance Agreement and any other documents prepared in connection
therewith, the consummation of the transactions contemplated hereby or thereby,
and the enforcement or preservation of any rights under the Forbearance
Agreement, the other Loan Documents and any such other documents, but limited,
in the case of reimbursement of legal fees and disbursements, to the reasonable
fees and disbursements of one counsel for the Agent and the Participant Lenders,
taken as a whole, and (b) to pay, indemnify, and hold each Participant Lender
and Agent and their respective officers, directors, employees, affiliates,
agents, trustees, advisors and controlling persons (each, an “Indemnitee”)
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of the Forbearance Agreement, the
other Loan Documents (regardless of whether any Loan Party is or is not a party
to any such actions or suits) and any such other documents and the reasonable
fees and expenses of legal counsel in connection with claims, actions or
proceedings by any Indemnitee against any Loan Party under any Loan Document
(all the foregoing in this clause (b), collectively, the “Indemnified
Liabilities”), provided, that the Borrower shall have no obligation hereunder to
any Indemnitee with respect to Indemnified Liabilities to the extent such
Indemnified Liabilities are found by a final and nonappealable decision of a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of such Indemnitee.  The foregoing shall be in addition to,
and shall not limit, the expense reimbursement or indemnification obligations of
the Loan Parties under the Credit Agreement or other Loan Documents.

 

10.11                 Further Assurances.  The Borrower and each other Loan
Party agrees to take all further actions and execute all further documents as
the Agent or the Required Lenders may from time to time reasonably request to
carry out the transactions contemplated by this Forbearance Agreement and all
other agreements executed and delivered in connection herewith.

 

[SIGNATURE PAGE FOLLOWS]

 

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

 

 

 

 

LODGENET INTERACTIVE CORPORATION

 

 

 

 

 

 

 

 

By:

/s/ James G. Naro

 

 

 

Name: James G. Naro

 

 

 

Title: Secretary

 

 

 

 

 

 

 

 

 

 

LODGENET STAYONLINE, INC.

 

 

 

 

 

 

By:

/s/ James G. Naro

 

 

 

Name: James G. Naro

 

 

 

Title: Secretary

 

 

 

 

 

 

 

 

 

 

ON COMMAND CORPORATION

 

 

 

 

 

 

By:

/s/ James G. Naro

 

 

 

Name: James G. Naro

 

 

 

Title: Secretary

 

 

 

 

 

 

 

 

 

 

THE HOTEL NETWORKS, INC.

 

 

 

 

 

 

By:

/s/ James G. Naro

 

 

 

Name: James G. Naro

 

 

 

Title: Secretary

 

 

 

 

 

 

 

 

 

 

LODGENET INTERNATIONAL, INC.

 

 

 

 

 

 

By:

/s/ James G. Naro

 

 

 

Name: James G. Naro

 

 

 

Title: Secretary

 

 

 

 

 

 

 

 

 

 

ON COMMAND VIDEO CORPORATION

 

 

 

 

 

 

By:

/s/ James G. Naro

 

 

 

Name: James G. Naro

 

 

 

Title: Secretary

 

[Signature Page to Forbearance Agreement]

 

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PUERTO RICO VIDEO ENTERTAINMENT CORPORATION

 

 

 

 

 

By:

/s/ James G. Naro

 

 

 

Name: James G. Naro

 

 

 

Title: Secretary

 

 

 

 

 

 

 

 

 

 

VIRGIN ISLAND VIDEO ENTERTAINMENT CORPORATION

 

 

 

 

 

By:

/s/ James G. Naro

 

 

 

Name: James G. Naro

 

 

 

Title: Secretary

 

 

 

 

 

 

 

 

 

 

SPECTRADYNE INTERNATIONAL, INC.

 

 

 

 

 

By:

/s/ James G. Naro

 

 

 

Name: James G. Naro

 

 

 

Title: Secretary

 

 

 

 

 

 

 

 

 

 

HOTEL DIGITAL NETWORK, INC.

 

 

 

 

 

By:

/s/ James G. Naro

 

 

 

Name: James G. Naro

 

 

 

Title: Secretary

 

 

 

 

 

 

 

 

 

 

LODGENET HEALTHCARE INC.

 

 

 

 

 

By:

/s/ James G. Naro

 

 

 

Name: James G. Naro

 

 

 

Title: Secretary

 

[Signature Page to Forbearance Agreement]

 

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GLEACHER PRODUCTS CORP.,

 

 

as Agent

 

 

 

 

 

 

 

 

By:

/s/ Joanna Anderson

 

 

 

Name: Joanna Anderson

 

 

 

Title: Authorized Signatory

 

[Signature Page to Forbearance Agreement]

 

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ANNEX A

 

SPECIFIED DEFAULTS

 

1.

 

An Event of Default occurring under Section 9(c)(i) of the Credit Agreement as a
result of the Borrower’s failure to comply with Section 8.1(a) of the Credit
Agreement with respect to the fiscal quarter of the Borrower ended September 30,
2012.

 

 

 

2.

 

An Event of Default occurring under Section 9(d) of the Credit Agreement as a
result of the Borrower’s failure to comply with Section 7.3 of the Credit
Agreement solely in connection with the defaults under the SMATV Sales Agency
and Transport Services Agreement, dated as of March 31, 2010, between
DirecTV, Inc. and the Borrower or the HBO Services Affiliation Agreement for
Lodging Industry Distributor, dated as of December 1, between Home Box
Office, Inc. and the Borrower, in each case, as specified in the DirecTV
Forbearance or the HBO Forbearance, as applicable.

 

 

 

3.

 

An Event of Default occurring under Section 9(c)(i) of the Credit Agreement as a
result of the inability to make the representations and warranties in Sections
5.2 and 5.20 of the Credit Agreement.

 

 

 

4.

 

A Default in the performance of the affirmative covenant in Section 7.3 of the
Credit Agreement with respect of certain commercial agreements that have been
specified to the Agent, CDG and Akin Gump.

 

 

 

5.

 

An Event of Default occurring under Section 9(b) of the Credit Agreement as a
result of the inaccuracy of any representations and warranties under Section 5.7
of the Credit Agreement solely in connection with the foregoing Specified
Defaults.

 

 

 

6.

 

An Event of Default occurring under Section 9(c)(i) or Section 9(d) of the
Credit Agreement as a result of the Borrower’s failure to comply with Sections
7.7(a) and (b) of the Credit Agreement with respect to the failure to give
notice to the Agent and each Lender of the foregoing Specified Defaults.

 

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ANNEX B

 

Objective and Scope of Services for Strategic Planning Officer (“SPO”)

 

The SPO’s objective will be to lead the Company and its other members of
management in connection with a possible restructuring, refinancing and/or
recapitalization.  In connection with this objective, the SPO will report
directly to the CEO and perform the management services described below:

 

i.

 

Review and, where feasible, leverage existing work product created by FTI and/or
Miller Buckfire in rendering the services described below;

 

 

 

ii.

 

Review of established cash forecasting and liquidity management and assistance
with future liquidity management;

 

 

 

iii.

 

Review and assess the Company’s assets, customer relationships and operations.
In particular this includes a focus on stabilizing the business through, among
other things, (a) the development of a maintenance and capital plan to retain as
many rooms as possible; (b) assisting the CEO with a review and analysis of the
existing work force and with recruitment of new employees, where and if
appropriate; (c) assisting the CEO with reviewing the status of material
contracts on a regular basis to help ensure the preservation of commercial
relationships deemed by the CEO and the SPO to be important to the Company; and
(d) reporting to the Agent and the steering committee of Lenders on the progress
of the foregoing.

 

 

 

iv.

 

Evaluate the five-year business plan recently presented to the Board of
Directors, including an assessment of the achievability of such business plan;

 

 

 

v.

 

Review the identified cost savings initiatives and understand the implementation
strategy, as well as identify and work with the Company’s senior management to
implement potential additional cost savings;

 

 

 

vi.

 

Assist in the structuring and day to day management of restructuring,
recapitalization, refinancing and sale-related efforts;

 

 

 

vii.

 

Evaluate strategic alternatives with the goal of maximizing recovery for the
Company’s constituents;

 

 

 

viii.

 

Assist in negotiations with the Company’s constituents;

 

 

 

ix.

 

Review current status of, and assist with, the negotiation and implementation of
the restructuring, recapitalization, refinancing and/or sale; and

 

 

 

x.

 

Provide frequent communications to the Agent and the steering committee of
Lenders regarding the Company’s activities, receipts, cost controls and the
progress of the restructuring, recapitalization, refinancing and/or sale;
respond directly to questions from the Agent and meet directly with the Agent
and/or the steering committee of Lenders periodically at the Agent’s request.

 

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