Exhibit 10.1

 

 

SUMMER INFANT, INC., and

 

SUMMER INFANT (USA), INC.,

 

as Borrowers, and

 

THE GUARANTORS FROM TIME TO TIME PARTY HERETO

 

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Dated as of April 21, 2015

 

 

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

30

1.3.

UNIFORM COMMERCIAL CODE AND PPSA

30

1.4.

CERTAIN MATTERS OF CONSTRUCTION

31

1.5.

CURRENCY EQUIVALENTS

31

 

 

SECTION 2. CREDIT FACILITIES

32

 

 

2.1.

FILO AND REVOLVER COMMITMENTS

32

2.2.

TERM LOAN COMMITMENT

35

2.3.

LETTER OF CREDIT FACILITY

35

 

 

SECTION 3. INTEREST, FEES AND CHARGES

37

 

 

3.1.

INTEREST

37

3.2.

FEES

39

3.3.

COMPUTATION OF INTEREST, FEES, YIELD PROTECTION

39

3.4.

REIMBURSEMENT OBLIGATIONS

40

3.5.

ILLEGALITY

40

3.6.

INABILITY TO DETERMINE RATES

40

3.7.

INCREASED COSTS; CAPITAL ADEQUACY

40

3.8.

MITIGATION

41

3.9.

FUNDING LOSSES

42

3.10.

MAXIMUM INTEREST

42

 

 

 

SECTION 4. LOAN ADMINISTRATION

42

 

 

4.1.

MANNER OF BORROWING AND FUNDING OF FILO LOANS AND REVOLVER LOANS

42

4.2.

DEFAULTING LENDER

44

4.3.

NUMBER AND AMOUNT OF LIBOR LOANS; DETERMINATION OF RATE

44

4.4.

BORROWER AGENT

44

4.5.

ONE OBLIGATION

45

4.6.

EFFECT OF TERMINATION

45

 

 

 

SECTION 5. PAYMENTS

45

 

 

5.1.

GENERAL PAYMENT PROVISIONS

45

5.2.

REPAYMENT OF FILO LOANS AND REVOLVER LOANS; SPECIFIED INVENTORY DISPOSITION

45

 

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5.3.

REPAYMENT OF TERM LOANS

46

5.4.

PAYMENT OF OTHER OBLIGATIONS

47

5.5.

MARSHALING; PAYMENTS SET ASIDE

47

5.6.

APPLICATION AND ALLOCATION OF PAYMENTS

47

5.7.

DOMINION ACCOUNTS

49

5.8.

ACCOUNT STATED

50

5.9.

TAXES

50

5.10.

LENDER TAX INFORMATION

51

5.11.

NATURE AND EXTENT OF EACH BORROWER’S LIABILITY

53

 

 

 

SECTION 6. CONDITIONS PRECEDENT

55

 

 

6.1.

CONDITIONS PRECEDENT TO INITIAL LOANS

55

6.2.

CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS

57

 

 

 

SECTION 7. COLLATERAL

57

 

 

7.1.

GRANT OF SECURITY INTEREST

57

7.2.

LIEN ON DEPOSIT ACCOUNTS; CASH COLLATERAL

59

7.3.

REAL ESTATE COLLATERAL

59

7.4.

OTHER COLLATERAL

59

7.5.

NO ASSUMPTION OF LIABILITY

59

7.6.

FURTHER ASSURANCES

59

 

 

 

SECTION 8. COLLATERAL ADMINISTRATION

60

 

 

8.1.

BORROWING BASE CERTIFICATES

60

8.2.

ADMINISTRATION OF ACCOUNTS

60

8.3.

ADMINISTRATION OF INVENTORY

61

8.4.

ADMINISTRATION OF EQUIPMENT

61

8.5.

ADMINISTRATION OF DEPOSIT ACCOUNTS

62

8.6.

GENERAL PROVISIONS

62

8.7.

POWER OF ATTORNEY

63

 

 

 

SECTION 9. REPRESENTATIONS AND WARRANTIES

64

 

 

9.1.

GENERAL REPRESENTATIONS AND WARRANTIES

64

9.2.

COMPLETE DISCLOSURE

69

 

 

 

SECTION 10. COVENANTS AND CONTINUING AGREEMENTS

69

 

 

10.1.

AFFIRMATIVE COVENANTS

69

10.2.

NEGATIVE COVENANTS

72

10.3.

FINANCIAL COVENANTS

75

10.4.

RESTRICTIONS ON ACTIVITIES OF COMPANY

76

10.5.

RESTRICTIONS ON ACTIVITIES OF FOREIGN SUBSIDIARIES

76

 

ii

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SECTION 11. EVENTS OF DEFAULT; REMEDIES ON DEFAULT

76

 

 

 

11.1.

EVENTS OF DEFAULT

76

11.2.

REMEDIES UPON DEFAULT

78

11.3.

LICENSE

79

11.4.

SETOFF

79

11.5.

REMEDIES CUMULATIVE; NO WAIVER

79

 

 

 

SECTION 12. AGENT

79

 

 

12.1.

APPOINTMENT, AUTHORITY AND DUTIES OF AGENT

79

12.2.

AGREEMENTS REGARDING COLLATERAL AND BORROWER MATERIALS

80

12.3.

RELIANCE BY AGENT

81

12.4.

ACTION UPON DEFAULT

81

12.5.

RATABLE SHARING

81

12.6.

INDEMNIFICATION

82

12.7.

LIMITATION ON RESPONSIBILITIES OF AGENT

82

12.8.

SUCCESSOR AGENT AND CO-AGENTS

82

12.9.

DUE DILIGENCE AND NON-RELIANCE

83

12.10.

REMITTANCE OF PAYMENTS AND COLLECTIONS

83

12.11.

INDIVIDUAL CAPACITIES

83

12.12.

TITLES

84

12.13.

BANK PRODUCT PROVIDERS

84

12.14.

NO THIRD PARTY BENEFICIARIES

84

 

 

 

SECTION 13. BENEFIT OF AGREEMENT; ASSIGNMENTS

84

 

 

13.1.

SUCCESSORS AND ASSIGNS

84

13.2.

PARTICIPATIONS

84

13.3.

ASSIGNMENTS

85

13.4.

REPLACEMENT OF CERTAIN LENDERS

86

 

 

 

SECTION 14. THE GUARANTEE

86

 

 

14.1.

GUARANTEE

86

14.2.

OBLIGATIONS UNCONDITIONAL

86

14.3.

REINSTATEMENT

87

14.4.

SUBROGATION

87

14.5.

REMEDIES

87

14.6.

INSTRUMENT FOR THE PAYMENT OF MONEY

87

14.7.

CONTINUING GUARANTEE

88

14.8.

GENERAL LIMITATION ON AMOUNT OF OBLIGATIONS GUARANTEED

88

 

iii

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14.9.

JOINT ENTERPRISE

88

14.10.

SUBORDINATION

88

14.11.

CONFLICTS WITH CANADIAN GUARANTY OR UK GUARANTY

88

 

 

SECTION 15. MISCELLANEOUS

88

 

 

15.1.

CONSENTS, AMENDMENTS AND WAIVERS

88

15.2.

INDEMNITY

89

15.3.

NOTICES AND COMMUNICATIONS

90

15.4.

PERFORMANCE OF OBLIGORS’ OBLIGATIONS

91

15.5.

CREDIT INQUIRIES

91

15.6.

SEVERABILITY

91

15.7.

CUMULATIVE EFFECT; CONFLICT OF TERMS

91

15.8.

COUNTERPARTS

91

15.9.

ENTIRE AGREEMENT

91

15.10.

RELATIONSHIP WITH LENDERS

91

15.11.

NO ADVISORY OR FIDUCIARY RESPONSIBILITY

91

15.12.

CONFIDENTIALITY

92

15.13.

GOVERNING LAW

92

15.14.

CONSENT TO FORUM

92

15.15.

WAIVERS BY OBLIGORS

93

15.16.

PATRIOT ACT NOTICE

93

15.17.

CONTINUED EFFECTIVENESS; NO NOVATION

93

 

iv

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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 1.1(c)

 

Specified Inventory

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 10.2.1

 

Existing Debt

Schedule 10.2.2

 

Permitted Liens

Schedule 10.2.17

 

Existing Affiliate Transactions

 

v

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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated as of April 21, 2015
(this “Agreement”), 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”) amends and restates in its entirety that certain Loan and Security
Agreement dated as of February 28, 2013 (as amended prior to the date hereof,
the “Existing Credit Agreement”) among the Borrowers, the guarantors party
thereto, the lenders party thereto, Bank of America, N.A. as agent and Merrill
Lynch, Pierce, Fenner & Smith Incorporated as sole lead arranger and sole
bookrunner.

 

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,

 

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environmental engineers or consultants, turnaround consultants, and other
professionals and experts retained by Agent.

 

Agreement Currency: as defined in Section 1.5.

 

Allocable Amount: as defined in Section 5.11.3.

 

Amazon Companies:  collectively, Amazon.com, Inc. and its Affiliates.

 

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.

 

Aggregate FILO Commitment Amount:  for each applicable period set forth below
the applicable amount set forth below:

 

Applicable Period

 

Aggregate FILO
Commitment Amount

 

Restatement Date — October 20, 2016

 

$

5,000,000

 

October 21, 2016 — April 20, 2017

 

$

3,750,000

 

April 21, 2017 — October 20, 2017

 

$

2,500,000

 

October 21, 2017 — April 20, 2018

 

$

1,250,000

 

April 21, 2018 and thereafter

 

$

0

 

 

Applicable FILO Account Advance Percentage:  the applicable percentage advance
rate set forth below during the applicable period set forth below:

 

Applicable Period

 

Applicable FILO Account
Advance Percentage

 

Restatement Date — October 20, 2016

 

7.5

%

October 21, 2016 — April 20, 2017

 

5.625

%

April 21, 2017 — October 20, 2017

 

3.75

%

October 21, 2017 — April 20, 2018

 

1.875

%

April 21, 2018 and thereafter

 

0.0

%

 

Applicable FILO Inventory Advance Percentage: the applicable percentage advance
rate set forth below during the applicable period set forth below:

 

Applicable Period

 

Applicable FILO Account
Advance Percentage

 

Restatement Date — October 20, 2016

 

10.0

%

October 21, 2016 — April 20, 2017

 

7.5

%

April 21, 2017 — October 20, 2017

 

5.0

%

October 21, 2017 — April 20, 2018

 

2.5

%

April 21, 2018 and thereafter

 

0.0

%

 

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.

 

2

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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

 

Base Rate
FILO
Loans

 

LIBOR
FILO
Loans

 

Base Rate
Term
Loans

 

LIBOR
Term
Loans

 

I

 

> $22,000,000

 

0.25

%

1.75

%

2.50

%

4.00

%

2.50

%

4.00

%

II

 

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

 

0.50

%

2.00

%

2.50

%

4.00

%

2.50

%

4.00

%

III

 

< $16,000,000

 

0.75

%

2.25

%

2.50

%

4.00

%

2.50

%

4.00

%

 

Until October 3, 2015, margins for Revolver Loans shall be determined as if
Level III were applicable.  Thereafter, the margins for Revolver Loans 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 for Revolver Loans shall
be determined as if Level III were applicable, from such day until the first day
of the calendar month following actual receipt.

 

Notwithstanding the foregoing, in the event that the Leverage Ratio as of the
end of any Fiscal Quarter (commencing with the Fiscal Quarter Ending October 3,
2015) is less than or equal to 3.50 to 1.00, as demonstrated by the Compliance
Certificate delivered to Agent pursuant to Section 10.1.2(d) with respect to
such Fiscal Quarter, then during the period commencing on the fifth Business Day
after Agent’s receipt of such certificate and continuing until the fifth
Business Day after Agent’s receipt of a Compliance Certificate in respect of any
subsequent Fiscal Quarter demonstrating that the Leverage Ratio is greater than
3.50 to 1.00, the margins for Base Rate Revolver Loans and LIBOR Revolver Loans
shall each be reduced by 25 basis points from the amounts set forth in the table
above; provided that the foregoing reduction shall cease to be in effect if any
Event of Default has occurred and is continuing; provided, further that if any
calculation of Leverage Ratio is at any time restated or otherwise revised or if
the information set forth in any Compliance Certificate otherwise proves to be
false or incorrect such that the Applicable Margin would have been higher than
was otherwise in effect during any period, without constituting a waiver of any
Default or Event of Default, arising as a result thereof, interest due under
this Agreement shall be immediately recalculated at such higher rate for any
such applicable periods and shall be due and payable on demand.

 

Applicable Percentage:  with respect to any Lender, (a) with respect to Revolver
Loans, LC Obligations, Revolver Overadvance Loans, Protective Advances or
Swingline Loans, a percentage equal to a fraction the numerator of which is such
Lender’s Revolver Commitment and the denominator of which is the aggregate
Revolver Commitments (provided, that if the Revolver Commitments have terminated
or expired, each Lender’s Applicable Percentage shall be determined based upon
such Lender’s share of the aggregate Revolver Exposure at such time), (b) with
respect to FILO Loans, a percentage equal to a fraction the numerator of which
is such Lender’s FILO Commitment and the denominator of which is the aggregate
FILO Commitments (provided, that if the FILO Commitments have terminated or
expired, each Lender’s Applicable Percentage shall be determined based upon such
Lender’s share of the aggregate FILO Exposure at such time) and (c) with respect
to the Term Loans, a percentage equal to a fraction the numerator of which is
the aggregate outstanding principal amount of the Term Loans of such Lender and
the denominator of which is the aggregate outstanding principal amount of the
Term Loans of all Term Lenders.

 

3

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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 aggregate Revolver
Commitments at such time and (ii) the Revolver 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; (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 FILO Loan: a FILO Loan that bears interest based on the Base Rate.

 

4

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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.

 

Base Rate Term Loan: a Term 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: Revolver Borrowing Base information, FILO 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.

 

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 Certificate: a certificate, in form and substance satisfactory to
Agent, by which Borrowers certify calculation of the FILO Borrowing Base and the
Revolver 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 dated as of
the Original Closing Date made by the Canadian Guarantor, as may be amended,
restated, confirmed, supplemented 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.

 

5

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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 Revolver 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
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 Original Closing Date, in form and substance reasonably acceptable to Agent,
executed by the Canadian Guarantors in favor of Agent, as the same may be
amended, restated, confirmed, supplemented or otherwise modified from time to
time, and (b) any other Canadian security agreement required to be executed by
any Obligor in favor of Agent after the Original Closing Date, in each case, as
the same may be amended, restated, confirmed, supplemented or otherwise modified
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

 

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amounts relating to such Obligations.  “Cash Collateralization” has a
correlative meaning.

 

Cash Dominion Period: the period (a) commencing on the day that a 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 10% of the lesser of (A) the
aggregate Revolver Commitments and (B) the Revolver 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 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 a Lender 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 for 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

 

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

 

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

 

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.

 

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, the aggregate amount of such Lender’s Revolver
Commitment, FILO Commitment and Term Loan Commitment.  “Commitments” means the
aggregate amount of all Revolver Commitments, FILO Commitments and Term Loan
Commitments.

 

Commodity Exchange Act: the Commodity Exchange Act (7 U.S.C. § 1 et seq.).

 

Company:  as defined in the Preamble hereto.

 

Compliance Certificate: a certificate, in form and substance satisfactory to
Agent, by which Borrowers certify (a) compliance with Sections 10.2.3 and 10.3
and (b) solely with respect to any such

 

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certificate required to be delivered concurrently with the financial statements
described in Section 10.1.2(a) for any Fiscal Year, a written calculation of
Excess Cash Flow for such Fiscal Year.

 

Connection Income Taxes: Other Connection Taxes that are imposed on or measured
by net income (however denominated), or are franchise or branch profits Taxes

 

Consolidated EBITDA: shall have the same meaning as “EBITDA”, as such term is
defined herein.

 

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.

 

Current Asset Collateral:  that portion of the Collateral comprised of Accounts,
Chattel Paper, Commercial Tort Claims,
Documents, Instruments, Inventory, Investment Property, Letters of Credit (which
for the purpose of this definition only, shall have the meaning given to such
term in the UCC), Letter-of-Credit Rights, Supporting Obligations and General
Intangibles (to the extent such General Intangibles arise or relate to any of
the foregoing, but excluding Intellectual Property), and all products and
proceed thereof (including, without limitation, cash proceeds, Cash Collateral,
cash held in Deposit Accounts (other than cash held in Deposit Accounts which is
clearly identifiable as proceeds of Equipment, Real Estate, fixtures or
Intellectual Property), and proceeds of insurance with respect to any of the
foregoing).

 

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

 

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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 (including reorganization, liquidation, or appointment of a
receiver, custodian, administrator or similar Person by the Federal Deposit
Insurance Corporation or any other regulatory authority); 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 unless the ownership provides immunity for such Lender from
jurisdiction of courts within the United States or from enforcement of judgments
or writs of attachment on its assets, or permits such Lender or Governmental
Authority to repudiate or otherwise to reject such Lender’s agreements.

 

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 Obligations.

 

Designated Jurisdiction: a country or territory that is the subject of a
Sanction.

 

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, for
each period of twelve consecutive months, equal to the aggregate of (a) net
income for such period, 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

 

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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); (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; (xvi) losses arising from the sale of fixed or capital
assets; (xvii) actual cash losses, which shall not exceed $2,000,000 in the
aggregate, incurred by the Company during the period commencing on the
Restatement Date and ending on the last day of the Company’s Fiscal Year ending
January 2, 2016 in connection with the Specified Inventory Disposition; and
(xviii) fees and expenses incurred in connection with the negotiation, execution
and delivery of this Agreement and the Loan Documents executed and delivered on
or about the Restatement Date, to the extent that (A) such fees and expenses do
not exceed $750,000 in the aggregate for all such fees and expenses and (B) such
fees and expenses are disclosed to Agent and incurred at any time prior to the
last day of the Fiscal Quarter ending July 4, 2015; minus the sum (without
duplication) of the following: (i) non-cash income or gains resulting from 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); and (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 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 that,
only the amount of Accounts in excess of the percentage set forth in this clause
(c) (or such higher percentage as Agent may establish with respect to any
Account Debtor in accordance with this clause(c)) shall be deemed ineligible
under this clause (c)), provided, further, that this clause (c) shall not apply
to the following Account Debtors: (i) the Toys “R” Us Companies, (ii) the Amazon
Companies, (iii) the Wal-Mart Companies, or (iv) 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 (provided further, that only the amount of
Accounts in excess of the percentage set forth in this clause (d) (or such lower
percentage as shall be specified by Agent in accordance with the foregoing
proviso) shall be deemed ineligible under this clause (d)); (e) with respect to
any Account owing by the Amazon Companies, when aggregated with other Accounts
owing by Amazon.com, Inc., it exceeds 25% of the aggregate Eligible Accounts,
provided, however, that if, at any time, the corporate credit rating of
Amazon.com, Inc. falls below “BBB-” (by S&P or Fitch) or “Baa3” (by Moody’s),
the Agent shall have the right, in its sole discretion to decrease such maximum
percentage (provided further, that only the amount of Accounts in excess of the
percentage set forth in this clause (e) (or such lower percentage as shall be
specified by Agent in accordance with the foregoing proviso) shall be deemed
ineligible under this clause (e)); (f) 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 (provided, that
only the amount

 

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of Accounts in excess of the percentage set forth in this clause (f) shall be
deemed ineligible under this clause (f)); (g) 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 (provided, that
only the amount of Accounts in excess of the percentage set forth in this clause
(g) shall be deemed ineligible under this clause (g)); (h) it does not conform
with a covenant or representation herein; (i) 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); (j) 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 Sanction or on any specially designated nationals list maintained by
OFAC; or the Borrower is not able to bring suit or enforce remedies against the
Account Debtor through judicial process; (k) 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 (k)(ii) does not exceed $1,000,000 at any time; (l) 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;
(m) it is not subject to a duly perfected, first priority Lien in favor of
Agent, or is subject to any other Lien; (n) the goods giving rise to it have not
been delivered to the Account Debtor, or it otherwise does not represent a final
sale; (o) it is evidenced by Chattel Paper or an Instrument of any kind, or has
been reduced to judgment; (p) its payment has been extended or the Account
Debtor has made a partial payment; (q) 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; (r) 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 (s) 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 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

 

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such inventory is delivered to the common carrier; (e) is shipped by a common
carrier that is not affiliated with the vendor and is not subject to any
Sanction or on any specially designated nationals list maintained by OFAC; 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, has not been acquired from a Person subject to any
Sanction or on any specially designated nationals list maintained by OFAC, 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; (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.

 

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

 

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(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; (e) the determination that
any Pension 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; (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; or (h) failure by an Obligor or ERISA Affiliate
to meet all applicable requirements under the Pension Funding Rules in respect
of a Pension Plan, whether or not waived, or to make a required contribution to
a Multiemployer Plan.

 

Event of Default: as defined in Section 11.

 

Excess Cash Flow: for any Fiscal Year, an amount, determined on a consolidated
basis for Company and its Subsidiaries equal to the excess, if any, of (a) the
sum, without duplication, of (i) net income for such Fiscal Year, (ii) the
amount of all non-cash charges (including depreciation and amortization)
deducted in determining such net income, and (iii) the aggregate net amount of
non-cash loss on the disposition of property by Company and its Subsidiaries
during such Fiscal Year (other than sales of inventory in the ordinary course of
business), to the extent deducted in arriving at such net income, minus (b) the
sum, without duplication, of (i) the amount of all non-cash credits included in
arriving at such net income, (ii) the aggregate amount actually paid by Company
and its Subsidiaries in cash during such fiscal year on account of Capital
Expenditures (excluding the principal amount of Debt incurred in connection with
such expenditures and any such expenditures financed with the proceeds of asset
dispositions that have not yet been used to pay down the Loans), (iii) the
aggregate amount of (x) all prepayments of Revolver Loans during such fiscal
year to the extent accompanied by permanent voluntary reductions of the Revolver
Commitments, (y) all prepayments of FILO Loans during such fiscal year to the
extent accompanied by permanent mandatory or voluntary reductions of the FILO
Commitments, and (z) all voluntary prepayments of the Term Loans during such
Fiscal Year, (iv) the aggregate amount of all regularly scheduled principal
payments of Borrowed Money (including the Term Loans) of Company and its
Subsidiaries made during such Fiscal Year (and excluding payments of Revolver
Loans, FILO Loans or loans under any other revolving credit facility to the
extent there is not an equivalent permanent reduction in the Revolver
Commitments, the FILO Commitments or such other revolving credit facility
commitment, respectively), (v) the aggregate net amount of non-cash gain on the
disposition of property by Company and its Subsidiaries during such Fiscal Year
(other than sales of inventory in the ordinary course of business), to the
extent included in determining such net income, and (vi) the aggregate amount of
any cash Distributions actually made by Company during such Fiscal Year, to the
extent permitted to be made under Section 10.2.4.

 

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

 

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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 Swap Obligation: with respect to an Obligor, each Swap Obligation as to
which, and only to the extent that, such Obligor’s guaranty of or grant of a
Lien as security for such Swap Obligation is or becomes illegal under the
Commodity Exchange Act because the Obligor does not constitute an “eligible
contract participant” as defined in the act (determined after giving effect to
any keepwell, support or other agreement for the benefit of such Obligor and all
guarantees of Swap Obligations by other Obligors) when such guaranty or grant of
Lien becomes effective with respect to the Swap Obligation.  If a Hedging
Agreement governs more than one Swap Obligation, only the Swap Obligation(s) or
portions thereof described in the foregoing sentence shall be Excluded Swap
Obligation(s) for the applicable Obligor

 

Excluded Taxes: (a) Taxes imposed on or measured by a Recipient’s net income
(however denominated), franchise Taxes and branch profits Taxes (i) as a result
of such Recipient being organized under the laws of, or having its principal
office or applicable Lending Office located in, the jurisdiction imposing such
Tax, or (ii) constituting Other Connection Taxes; (b) U.S. federal withholding
Taxes imposed on amounts payable to or for the account of a Lender with respect
to its interest in a Loan or Commitment pursuant to a law in effect when the
Lender acquires such interest (except pursuant to an assignment request by
Borrower Agent under Section 13.4) or changes its Lending Office, unless the
Taxes were payable to its assignor immediately prior to such assignment or to
the Lender immediately prior to its change in Lending Office; (c) Taxes
attributable to a Recipient’s failure to comply with Section 5.10; and (d) U.S.
federal withholding Taxes imposed pursuant to FATCA.  In no event shall
“Excluded Taxes” include any withholding Tax imposed on amounts paid by or on
behalf of a foreign Obligor to a Recipient that has complied with
Section 5.10.2.

 

Existing Credit Agreement: as defined in the preamble to this Agreement.

 

Extraordinary Expenses: all costs, expenses or advances that Agent, Issuing Bank
or Lenders 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.  “Extraordinary
Expenses” shall 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.

 

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Fair Salable Value: 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.

 

FATCA: Sections 1471 through 1474 of the Code (including any amended or
successor version if substantively comparable and not materially more onerous to
comply with), and any agreements entered into pursuant to Section 1471(b)(1) of
the Code.

 

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 amended and restated fee letter dated as of the
Restatement Date among Agent, Arranger and Company as amended from time to time.

 

FILO Borrowing Base: on any date of determination, an amount equal to the sum of
(a) the Applicable FILO Account Advance Percentage of the Value of Eligible
Accounts, plus (b) the Applicable FILO Inventory Advance Percentage of the Value
of Eligible Inventory (excluding Specified 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, and
provided further that (i) Eligible In-Transit Inventory shall in no event
contribute more than $1,000,000 (after giving effect to the percentage set forth
in clause (b) above) to the FILO 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 $500,000 (after giving effect to the
percentages set forth in clauses (a) and (b) above, respectively) to the FILO
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.

 

FILO Commitment: for any Lender, its obligation to make FILO Loans up to a
maximum principal amount equal to its Applicable FILO Percentage (as shown on
Schedule 1.1(a), as hereafter modified pursuant to an Assignment and Acceptance
to which it is a party, or pursuant to Section 2.1.4) of the Aggregate FILO
Commitment Amount at such time.

 

FILO Commitments: the aggregate FILO Commitments of all Lenders which, during
any applicable period, shall equal the Aggregate FILO Commitment Amount for such
period.

 

FILO Exposure:  at any time, the outstanding principal amount of FILO Loans at
such time.

 

FILO Loan: a loan made pursuant to Section 2.1.1(b)(i)

 

FILO Overadvance: as defined in Section 2.1.5.

 

FILO Termination Date: the earliest to occur of (a) April 21, 2018; (b) the date
on which Borrowers terminate the FILO Commitments pursuant to Section 2.1.4;
(c) the date on which the FILO Commitments are terminated pursuant to
Section 11.2; of (d) the Revolver Termination Date.

 

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

 

Fiscal Month:  any fiscal month of any Fiscal Year, which fiscal month shall
consist of either four or five weeks and generally end on the Saturday closest
to the last day of each calendar month in

 

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accordance with the fiscal accounting calendar of the Company and its
Subsidiaries.

 

Fiscal Quarter: any fiscal quarter of any Fiscal Year, which fiscal quarter
shall consist of thirteen weeks divided into three Fiscal Months of four, four
and five weeks, which fiscal quarters shall generally end on the Saturday
closest to the last day of March, June, September and December of each Fiscal
Year in accordance with the fiscal accounting calendar of the Company and its
Subsidiaries.

 

Fiscal Year: the fiscal year of Company and its Subsidiaries for accounting and
tax purposes, generally ending on the Saturday closest to the last day of
December of each year.

 

Fixed Charge Coverage Ratio: the ratio, determined on a consolidated basis for
Company and its Subsidiaries for the most recent period of twelve consecutive
months, of (a) EBITDA minus Capital Expenditures (except those financed with
(i) Borrowed Money other than FILO Loans or 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 Charges paid in cash
during such period.

 

Fixed Charges: the sum of interest expense (other than payment-in-kind),
principal payments made on Borrowed Money (including, without limitation, the
Term Loans, but excluding the Revolver Loans unless such principal payment of
the Revolver Loans is accompanied by a permanent reduction in the Revolver
Commitments and excluding the FILO Loans unless such principal payment of the
FILO Loans is accompanied by a permanent reduction in the FILO Commitments), and
Distributions made.

 

FLSA: the Fair Labor Standards Act of 1938.

 

Foreign Lender: any Lender that is not a U.S. Person.

 

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 Applicable Percentage 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.

 

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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 (including the
Financial Conduct Authority, the Prudential Regulation Authority and any
supra-national bodies such as the European Union or the European Central Bank).

 

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.

 

Indebtedness: shall have the same meaning as “Debt”, as such term is defined
herein.

 

Indemnified Taxes: Taxes other than Excluded Taxes, imposed on or relating to
any payment of an Obligation; and (b) to the extent not otherwise described in
clause (a), Other 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 or by
suit) 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.

 

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

 

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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.

 

IP Assignment: a collateral assignment or security agreement pursuant to which
an Obligor grants a Lien on its Intellectual Property to Agent, as security for
its Obligations.

 

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.

 

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 Revolver Overadvance or FILO Overadvance exists and, if no Revolver
Loans are outstanding, the LC Obligations do not exceed the Revolver 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.

 

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Lender Indemnitees: Lenders and Secured Bank Product Providers 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, including any
Lending Office of the foregoing.

 

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.

 

Leverage Ratio: the ratio, determined as of the end of any Fiscal Quarter, of
(a) Borrowed Money as of the last day of such quarter to (b) EBITDA for the four
Fiscal Quarters then ending.

 

LIBOR: the per annum rate of interest (rounded up to the nearest 1/8th of 1% and
in no event less than zero) determined by Agent at or about 11:00 a.m. (London
time) two Business Days prior to an interest period, for a term equivalent to
such period, equal to the London Interbank Offered Rate, or comparable or
successor rate approved by Agent, as published on the applicable Reuters screen
page (or other commercially available source designated by Agent from time to
time); provided, that any comparable or successor rate shall be applied by
Agent, if administratively feasible, in a manner consistent with market
practice.

 

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

 

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

 

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

 

LIBOR Term Loan: a Term 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

 

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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, a FILO Loan or a Term Loan.

 

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

 

Loan Year: each 12 month period commencing on the Restatement Date and on each
anniversary of the Restatement 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, or financial condition of 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 material
portion of the Collateral; (b) that could materially impair the ability of the
Borrowers or the Guarantors to perform 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
material portion of the 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 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 (or, if applicable, FILO Loans), in form
satisfactory to Agent.

 

Notice of Conversion/Continuation: a Notice of Conversion/Continuation to be
provided by

 

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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;
provided, that Obligations of an Obligor shall not include its Excluded Swap
Obligations.

 

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.

 

OFAC: Office of Foreign Assets Control of the U.S. Treasury Department.

 

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.

 

Original Closing Date: February 28, 2013, the effective date of the Existing
Credit Agreement.

 

OSHA: the Occupational Safety and Hazard Act of 1970.

 

Other Agreement: each LC Document, fee letter, Lien Waiver, Borrowing Base
Certificate, Compliance Certificate, Borrower Materials, or other note,
document, 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 Collateral:  that portion of the Collateral not comprised of Current Asset
Collateral.  The Other Collateral shall include, among other things, Equipment,
Real Estate, fixtures and Intellectual Property.

 

Other Connection Taxes: Taxes imposed on a Recipient due to a present or former
connection between it and the taxing jurisdiction (other than connections
arising from the Recipient having executed, delivered, become party to,
performed obligations or received payments under, received or perfected a Lien
or engaged in any other transaction pursuant to, enforced, or sold or assigned
an interest in, any Loan or Loan Document).

 

Other Taxes: all present or future stamp, court, documentary, intangible,
recording, filing or similar Taxes that arise from any payment made under, from
the execution, delivery, performance, enforcement or registration of, from the
receipt or perfection of a Lien under, or otherwise with respect to, any Loan
Document, except Other Connection Taxes imposed with respect to an assignment
(other than an assignment made pursuant to Section 13.4(c)).

 

Participant: as defined in Section 13.2.

 

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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 Funding Rules: Code and ERISA rules regarding minimum required
contributions (including installment payments) to Pension Plans set forth in,
for plan years ending prior to the Pension Protection Act of 2006 effective
date, Section 412 of the Code and Section 302 of ERISA, both as in effect prior
to such act, and thereafter, Sections 412, 430, 431, 432 and 436 of the Code and
Sections 302, 303, 304 and 305 of ERISA

 

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 aggregate Revolver Commitments 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: 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; (ii) a disposition of
Equipment that, in the aggregate during any 12 month period, has a fair market
or net book value (whichever is more) of $750,000 or less; (iii) a disposition
of Inventory that is obsolete, unmerchantable or otherwise unsalable in the
Ordinary Course of Business; (iv) the Specified Inventory Disposition;
(v) 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
(vi) 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

 

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Agreements permitted hereunder; (c) existing on the Restatement 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 10.2.1(c).

 

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.

 

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

 

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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.

 

Qualified ECP: an Obligor with total assets exceeding $10,000,000, or that
constitutes an “eligible contract participant” under the Commodity Exchange Act
and can cause another Person to qualify as an “eligible contract participant”
under Section 1a(18)(A)(v)(II) of such act.

 

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.

 

Recipient: Agent, Issuing Bank, any Lender or any other recipient of a payment
to be made by an Obligor under a Loan Document or on account of an Obligation.

 

Refinancing Conditions: the following conditions for Refinancing 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.

 

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.

 

Reporting Frequency Increase Trigger Amount:  an amount equal to 12.5% of the
lesser of (A) the aggregate Revolver Commitments and (B) the Revolver Borrowing
Base.

 

Required Lenders: Lenders (subject to Section 4.2) having (a) Revolver
Commitments, FILO Commitments and Term Loans in excess of 662/3% of the
aggregate Revolver Commitments, FILO Commitments and Term Loans; and (b) if the
Revolver Commitments and FILO Commitments have terminated, Loans in excess of
662/3% of all outstanding Loans; provided, however, that (i) if at any time
there shall be two or more Lenders, “Required Lenders” shall mean at least two
Lenders (subject to Section 4.2) having Revolver Commitments, FILO Commitments
and Term Loans in excess of 662/3% of the aggregate Revolver Commitments, FILO
Commitments and Term Loans (or, if Revolver Commitments and FILO Commitments
have terminated, having Loans in excess of 662/3% of all outstanding Loans), and
(ii) the Revolver Commitments, FILO 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.

 

Restatement Date: as defined in Section 6.1.

 

Restricted Investment: any Investment by a Borrower or Subsidiary, other than
(a) Investments in Subsidiaries to the extent existing on the Restatement 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, (e) subject
to the restrictions on intercompany loans set forth in
Section 10.2.7(d), Investments in Obligors, and (f) Investments in Foreign
Subsidiaries in an aggregate amount not to exceed $500,000 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 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 Revolver 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
Revolver 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.

 

Revolver 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.

 

Revolver Commitments: the aggregate Revolver Commitments of all Lenders.

 

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

 

Revolver Loan: a loan made pursuant to Section 2.1.1(b)(ii), and any Swingline
Loan, Revolver Overadvance Loan or Protective Advance.

 

Revolver Overadvance: as defined in Section 2.1.5.

 

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

 

Revolver Termination Date: the earliest to occur of (a) April 21, 2020; (b) the
date on which Borrowers terminate the Revolver Commitments pursuant to
Section 2.1.4; or (c) the date on which the Revolver Commitments are terminated
pursuant to Section 11.2.

 

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.

 

Sanction: any sanction administered or enforced by the U.S. Government
(including OFAC), United Nations Security Council, European Union, Her Majesty’s
Treasury or other sanctions authority

 

Secured Bank Product Obligations: Debt, obligations and other liabilities with
respect to Bank Products owing by a Borrower or an Affiliate of a Borrower to a
Secured Bank Product Provider; provided, that Secured Bank Product Obligations
of an Obligor shall not include its Excluded Swap Obligations.

 

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 Restatement
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 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 in
accordance with their Applicable Percentages of the Revolver 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.

 

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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 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.

 

Specified Inventory: items of Inventory of the type described on Schedule
1.1(c) attached hereto.

 

Specified Inventory Disposition: the sale by Borrowers of the Specified
Inventory at prices below the cost of such Specified Inventory.

 

Specified Obligor: an Obligor that is not then an “eligible contract
participant” under the Commodity Exchange Act (determined prior to giving effect
to Section 5.11).

 

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.

 

Stated Amount: the outstanding amount of a Letter of Credit, including any
automatic increase or tolerance (whether or not then in effect) provided by the
Letter of Credit or related LC Documents

 

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).

 

Swap Obligations: with respect to an Obligor, its obligations under a Hedging
Agreement that constitutes a “swap” within the meaning of Section 1a(47) of the
Commodity Exchange Act

 

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

 

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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.

 

Term Loan Commitment: for any Lender, the obligation of such Lender to make a
Term Loan hereunder, up to the principal amount shown on Schedule 1.1(a).

 

Term Loan Commitments: the aggregate Term Loan Commitments of all Lenders.

 

Term Loan: a loan made pursuant to Section 2.2.

 

Term Loan Maturity Date: the earlier of (a) April 21, 2020 and (b) the Revolver
Termination Date.

 

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 dated on or around the Restatement Date
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

 

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hereafter upon delivery to the Agent of an acceptable waiver.

 

UK Security Agreements:  (a) the Debenture dated on or around the Restatement
Date, 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 on, around or after the
Restatement 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%.

 

U.S. Person: “United States Person” as defined in Section 7701(a)(30) of the
Code.

 

U.S. Tax Compliance Certificate: as defined in Section 5.10.2(b)(iii).

 

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 Restatement 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

 

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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 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 the FILO Borrowing Base, the Revolver
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. 
FILO Borrowing Base and Revolver 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, FILO Borrowing Base
components, Revolver 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, other FILO Borrowing
Base components and other Revolver 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

 

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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).

 

SECTION 2.                                           CREDIT FACILITIES

 

2.1.                            FILO and Revolver Commitments.

 

2.1.1.                        Loans Outstanding Under Existing Credit Agreement;
FILO and Revolver Loans.

 

(a)                                 (i)                                     A
portion of the Loans made and outstanding under (and as defined in) the Existing
Credit Agreement as of the Restatement Date equal to the lesser of (x) the
aggregate FILO Commitments and (y) the FILO Borrowing Base, shall remain
outstanding on the Restatement Date and shall be automatically, and without any
action on the part of any Person, deemed to be converted into and constitute
“FILO Loans” hereunder and the Lenders shall automatically, and without the
requirement for additional documentation on the Restatement Date, acquire such
“FILO Loans” in accordance with their Applicable Percentages of the aggregate
FILO Commitments.

 

(ii)                                  The portion of the Loans made and
outstanding under (and as defined in) the Existing Credit Agreement as of the
Restatement Date that are not automatically converted into FILO Loans on the
Restatement Date pursuant to clause (i) above, shall remain outstanding on the
Restatement Date and shall be automatically, and without any action on the part
of any Person, deemed to constitute “Revolver Loans” hereunder and the Lenders
shall automatically, and without the requirement for additional documentation on
the Restatement Date, acquire such “Revolver Loans” in accordance with their
Applicable Percentages of the aggregate Revolver Commitments.

 

(b)                                 (i)                                     Each
Lender agrees severally, up to its FILO Commitment and on the terms set forth
herein, to make FILO Loans to Borrowers from time to time from the Restatement
Date to but not including the FILO Termination Date.  FILO Loans may be repaid
and reborrowed as provided herein.  In no event shall Lenders have any
obligation to honor a request for a FILO Loan if (x) the sum of (A) the FILO
Exposure plus (B) the requested FILO Loan would exceed (y) the lesser of (A) the
FILO Borrowing Base and (B) the Aggregate FILO Commitment Amount at such time.

 

(ii)                                  Each Lender agrees severally, up to its
Revolver Commitment and on the terms set forth herein, to make Revolver Loans to
Borrowers from time to time from the Restatement Date to but not including the
Revolver Termination Date.  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 (x) the sum of (A) the Revolver Exposure plus
(B) the requested Revolver Loan would exceed (y) the lesser of (A) the Revolver
Borrowing Base and (B) the aggregate Revolver Commitments at such time.

 

(iii)                               Notwithstanding anything to the contrary set
forth herein, it is the intention and agreement of the parties that so long as
the FILO Commitments shall not have been terminated: (x) at any time that any
Loans (other than Term Loans) shall be outstanding, such outstanding Loans
(A) first, shall be deemed to be FILO Loans up to the amount that causes the
FILO Exposure to equal but not exceed the lesser of (1) the FILO Borrowing Base
and (2) the Aggregate FILO Commitment Amount at such time, and (B) second, to
Revolver Loans; and (y) at any time the Borrowers shall make any request for any
Loans (other than Term Loans), such request shall be deemed to constitute
(A) first, a request for the funding of FILO Loans up to the amount that causes
the FILO Exposure (after giving effect to the funding of such requested

 

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Loans) to equal but not exceed the lesser of (1) the FILO Borrowing Base and
(2) the Aggregate FILO Commitment Amount at such time, and (B) second, a request
for the funding of Revolver Loans.

 

2.1.2.                  FILO Notes and Revolver Notes

 

(a)                                       The FILO 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 such Lender’s FILO Loans.

 

(b)                                       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 such Lender’s Revolver Loans.

 

2.1.3.                  Use of Proceeds.  The proceeds of the FILO Loans and
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; and
(d) for lawful corporate purposes of Borrowers, including working capital. 
Borrowers shall not, directly or indirectly, use any Letter of Credit or Loan
proceeds, nor use, lend, contribute or otherwise make available any Letter of
Credit or Loan proceeds to any Subsidiary, joint venture partner or other
Person, (i) to fund any activities of or business with any Person, or in any
Designated Jurisdiction, that, at the time of issuance of the Letter of Credit
or funding of the Loan, is the subject of any Sanction; or (ii) in any manner
that would result in a violation of a Sanction by any Person (including any
Secured Party or other individual or entity participating in a transaction).

 

2.1.4.                  Termination and Reduction of FILO and Revolver
Commitments.

 

(a)                                 The FILO Commitments shall terminate on the
FILO Termination Date, unless sooner terminated in accordance with this
Agreement.  Upon at least 30 days prior written notice to Agent at any time
after the first Loan Year, Borrowers may, at their option, terminate the FILO
Commitments.  Any notice of termination of the FILO Commitments given by
Borrowers shall be irrevocable; provided, that a notice of termination of the
credit facilities (including a termination of the FILO Commitments) delivered by
Borrowers may state that such notice is conditioned upon the effectiveness of
other credit facilities, in which case such notice may be revoked by Borrowers
(by notice to Agent on or prior to the specified effective date of such
termination) if such condition is not satisfied.  On the FILO Termination Date,
Borrowers shall make Full Payment of all Obligations in respect of the FILO
Loans.

 

(b)                                 The Revolver Commitments shall terminate on
the Revolver Termination Date, unless sooner terminated in accordance with this
Agreement.  Upon at least 30 days prior written notice to Agent at any time
after the first Loan Year, Borrowers may, at their option, terminate the
Revolver Commitments and this credit facility.  Any notice of termination given
by Borrowers shall be irrevocable; provided, that a notice of termination of the
credit facilities (including a termination of the Revolver Commitments)
delivered by Borrowers may state that such notice is conditioned upon the
effectiveness of other credit facilities, in which case such notice may be
revoked by Borrowers (by notice to Agent on or prior to the specified effective
date of such termination) if such condition is not satisfied.  On the
termination date, Borrowers shall make Full Payment of all Obligations.

 

(c)                                  The aggregate FILO Commitments shall be
automatically reduced on each date that the Aggregate FILO Commitment Amount is
reduced as provided in the definition of “Aggregate FILO Commitment Amount” in
Section 1.1 such that the total amount of the FILO Commitments does not, at any
time, exceed the Aggregate FILO Commitment Amount at such time.

 

(d)                                 Borrowers may permanently reduce the
Aggregate FILO Commitment Amount

 

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(and the corresponding total amount of the FILO Commitments, on a pro rata basis
in accordance with each Lender’s Applicable Percentage of the Aggregate FILO
Commitment Amount), upon at least 30 days prior written notice to Agent, which
notice shall specify the aggregate amount of the reduction and shall be
irrevocable once given.  The aggregate amount of each reduction shall be in a
minimum amount of $500,000, or an increment of $100,000 in excess thereof.

 

(e)                                  Borrowers may permanently reduce the
aggregate Revolver Commitments, in accordance with each Lender’s Applicable
Percentage of the Revolver Commitments, upon at least 30 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.

 

(a)                                 If the FILO Exposure exceeds the lesser of
(i) the Aggregate FILO Commitment Amount and (ii) the FILO Borrowing Base (a
“FILO Overadvance”) at any time, the excess amount shall be immediately due and
payable by Borrowers, without any action by Agent or notice of any kind, but all
FILO Loans and FILO Overadvances shall nevertheless constitute Obligations
secured by the Collateral and entitled to all benefits of the Loan Documents. 
Any sufferance of a FILO Overadvance for any period of time shall not constitute
a waiver by Agent or Lenders of the Event of Default caused thereby.

 

(b)                                 If the aggregate Revolver Loans exceed the
Revolver Borrowing Base (a “Revolver 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 Revolver Overadvance Loans and to forbear from requiring
Borrowers to cure a Revolver Overadvance, as long as (a) the Revolver
Overadvance does not continue for more than 30 consecutive days (and no Revolver
Overadvance may exist for at least five consecutive days thereafter before
further Revolver Overadvance Loans are required), and (b) the aggregate Revolver
Overadvances are not known by Agent to exceed $8,000,000.  In no event shall
Revolver Overadvance Loans be required that would cause the outstanding Revolver
Loans and LC Obligations to exceed the aggregate Revolver Commitments.  Any
funding of a Revolver Overadvance Loan or sufferance of a Revolver 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. 
Required Lenders may at any time revoke Agent’s authority to make further
Revolver Overadvance Loans by written notice to Agent.

 

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
Revolver 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 in accordance with such
Lender’s Applicable Percentage of the Revolver Commitments.  Required Lenders
may at any time revoke Agent’s authority to make further Protective Advances
under clause (a) by written notice to Agent.  Absent such revocation, Agent’s
determination that funding of a Protective Advance is appropriate shall be
conclusive.

 

2.1.7.                  Increase in Aggregate Revolver Commitments.  Borrowers
may request an increase in the aggregate Revolver Commitments from time to time
upon notice to Agent, as long as (a) the requested increase is in a minimum
amount of $5,000,000 and is offered on the same terms as the existing Revolver
Commitments (other than fees required to be paid by Borrowers in connection with
any

 

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such increase, which fees shall be mutually agreed upon by Borrowers, Agent and
Lenders participating in such increase), (b) increases under this Section do not
exceed $15,000,000 in the aggregate and no more than three increases and shall
be requested during the term of this Agreement, and (c) no reduction in the
aggregate Revolver Commitments pursuant to Section 2.1.4 shall have occurred
prior to the requested increase.  Agent shall promptly notify Lenders of the
requested increase and, within 10 Business Days thereafter, each Lender shall
notify Agent if and to what extent such Lender commits to increase its Revolver
Commitment.  Any Lender not responding within such period shall be deemed to
have declined an increase.  If Lenders fail to commit to the full requested
increase, Eligible Assignees may issue additional Revolver Commitments and
become Lenders hereunder.  Agent may allocate, in its discretion, the increased
Revolver Commitments among committing Lenders and, if necessary, Eligible
Assignees.  Provided the conditions set forth in Section 6.2 are satisfied, the
aggregate Revolver Commitments shall be increased by the requested amount (or
such lesser amount committed by Lenders and Eligible Assignees) on a date agreed
upon by Agent and Borrower Agent, but no later than 45 days following Borrowers’
increase request.  Agent, Borrowers, and new and existing Lenders shall execute
and deliver such documents and agreements as Agent deems appropriate to evidence
the increase in and allocations of the aggregate Revolver Commitments.  On the
effective date of an increase, all outstanding Revolver Loans, LC Obligations
and other exposures under the aggregate Revolver Commitments shall be
reallocated among Lenders, and settled by Agent if necessary,  in accordance
with each Lender’s adjusted Applicable Percentage.

 

2.2.                            Term Loan Commitment.

 

2.2.1.                  Term Loans.  Each Lender agrees severally, up to its
Term Loan Commitment and on the terms set forth herein, to make a Term Loan to
Borrowers.  The Term Loans shall be funded by Lenders on the Restatement Date. 
The Term Loan Commitment of each Lender shall expire upon the funding by Lenders
of the Term Loans.

 

2.2.2.                  Term Notes.  The Term Loan 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 Term Loan.

 

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 Revolver 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.

 

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(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 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 Applicable Percentage of
such Borrowing whether or not the Revolver Commitments have terminated, a
Revolver 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 interest and
participation in all LC Obligations relating to the Letter of Credit, in
accordance with such Lender’s Applicable Percentage.  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

 

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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, or (c) within
10 Business Days prior to the 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 Revolver Commitments
have terminated, a Revolver 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.

 

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(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 Revolver
Termination Date, FILO Termination Date or Term Loan Maturity Date, as
applicable.  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, 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.  Agent does not warrant or
accept responsibility for, nor shall it have any liability with respect to,
administration, submission or any other matter related to any rate described in
the definition of LIBOR.

 

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, FILO Termination Date or Term Loan Maturity Date, as
applicable; and no Interest Period for a LIBOR Term

 

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Loan may be established that would require repayment before the end of an
Interest Period in order to make any scheduled principal payment on the Term
Loans or any mandatory payment in connection with a scheduled reduction of the
Aggregate FILO Commitment Amount.

 

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 (based upon each Lender’s Applicable Percentage of
the aggregate Revolver Commitments), a fee equal to the Unused Line Fee Rate
times the amount by which the aggregate Revolver 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 Revolver Termination Date.

 

3.2.2.                  LC Facility Fees.  Obligors shall pay (a) to Agent, for
the pro rata benefit of Lenders (based upon each Lender’s Applicable Percentage
of the aggregate Revolver Commitments), 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.

 

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.

 

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3.4.                            Reimbursement Obligations.  Borrowers shall
reimburse Agent, Issuing Bank and Lenders 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
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 Recipient to Taxes (other than
(i) Indemnified Taxes, (ii) Taxes described in clauses (b) through (d) of the
definition of Excluded Taxes, and (iii) Connection Income Taxes) with respect to
any Loan, Letter of Credit, Commitment or other obligations, or its deposits,

 

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reserves, other liabilities or capital attributable thereto; 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 or liquidity 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.      LIBOR Loan Reserves.  If any Lender is required to maintain reserves
with respect to liabilities or assets consisting of or including Eurocurrency
funds or deposits, Borrowers shall pay additional interest to such Lender on
each LIBOR Loan equal to the costs of such reserves allocated to the Loan by the
Lender (as determined by it in good faith, which determination shall be
conclusive).  The additional interest shall be due and payable on each interest
payment date for the Loan; provided, however, that if the Lender notifies
Borrowers (with a copy to Agent) of the additional interest less than 10 days
prior to the interest payment date, then such interest shall be payable 10 days
after Borrowers’ receipt of the notice.

 

3.7.4.      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).

 

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 any
Indemnified Taxes or 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.

 

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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 of FILO Loans and Revolver Loans.

 

4.1.1.      Notice of Borrowing.

 

(a)           Whenever Borrowers desire funding of a Borrowing of Revolver Loans
(or, if applicable, FILO 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 (or, if applicable, Base Rate FILO Loans); on the due date, in the amount
of such Obligations.  The proceeds of such Revolver Loans (or FILO 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 (or, if applicable, a Base Rate FILO Loan) in the date of
such presentation, in the amount of the Payment Item.  The proceeds of such
Revolver Loan (or FILO Loan) may be disbursed directly to the disbursement
account.

 

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4.1.2.      Fundings by Lenders.  Each Lender shall timely honor its Commitments
by funding its Applicable Percentage of each Borrowing 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 Applicable Percentage 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
Applicable Percentage 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 each
Borrowing 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 Applicable Percentage 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.  A Lender or Issuing Bank may fulfill its
obligations under Loan Documents through one or more Lending Offices, and this
shall not affect any obligation of Obligors under the Loan Documents or with
respect to any Obligations.

 

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 $6,000,000, 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 Revolver
Commitments have terminated, a Revolver 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
participation in such Loan (based upon such Lender’s Applicable Percentage
thereof) 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 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.

 

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4.2.         Defaulting Lender.

 

4.2.1.      Reallocation of Applicable Percentage; Amendments.  For purposes of
determining Lenders’ obligations to fund or participate in Loans or Letters of
Credit, Agent may exclude the Revolver Commitments and FILO Commitments and
Loans of any Defaulting Lender(s) from the calculation of Applicable
Percentages.  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 Revolver
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, Applicable Percentages
shall be reallocated without exclusion of such Lender’s Commitments and Loans,
and all outstanding Revolver Loans, FILO Loans, LC Obligations and other
exposures under the Revolver Commitments and FILO Commitments shall be
reallocated among Lenders and settled by Agent (with appropriate payments by the
reinstated Lender) in accordance with the readjusted Applicable Percentages. 
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 Certificates 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 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.

 

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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 each
Secured Bank Product Provider 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 FILO Loans and Revolver Loans; Specified Inventory
Disposition.

 

(a)           FILO Loans shall be due and payable in full on the FILO
Termination Date, unless payment is sooner required hereunder.  FILO Loans may
be prepaid from time to time, without penalty or premium; provided that
Borrowers shall not prepay FILO Loans at any time that Revolver Loans are
outstanding unless (i) a FILO Overadvance shall exist, in which case Borrowers
shall, on the sooner of Agent’s demand or the first Business Day after any
Borrower has knowledge of the existence of such FILO Overadvance, repay FILO
Loans in an amount sufficient to cause the FILO Exposure to equal but not exceed
the lesser of (A) the Aggregate FILO Commitment Amount and (B) the FILO
Borrowing Base, or (ii) such prepayment of the FILO Loan is accompanied by a
permanent dollar for dollar reduction in the Aggregate FILO Commitment Amount
such that, after giving effect to such prepayment and reduction, the FILO
Exposure is equal to but does not exceed the lesser of (A) the Aggregate FILO
Commitment Amount and (B) the FILO Borrowing Base.

 

(b)           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 the Net
Proceeds of such Asset Disposition (minus any Net Proceeds required to prepay
FILO Loans pursuant to clause (a) above) in an amount equal to the greater of
(a) the net book value of such Accounts and Inventory, or (b) the reduction in
the Revolver Borrowing Base upon giving effect to such disposition, shall be
applied to the Revolver Loans.  Notwithstanding anything herein to the contrary,
if a Revolver 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.

 

(c)           Notwithstanding anything to the contrary herein, the Borrowers and
Agent agree

 

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that all Net Proceeds from the Specified Inventory Disposition shall be remitted
to Agent and applied to the Obligations as follows:  (i) first, to the extent
any Revolver Overadvance shall exist after giving effect to the Specified
Inventory Disposition, a portion of such Net Proceeds equal to the amount of
such Revolver Overadvance shall be applied to repay outstanding Revolver Loans;
(ii) second, to the extent any FILO Overadvance shall exist after giving effect
to the Specified Inventory Disposition, a portion of such Net Proceeds equal to
the amount of such FILO Overadvance shall be applied to repay outstanding FILO
Loans; and (iii) last, any remaining Net Proceeds shall be applied to repay
outstanding Revolver Loans (without any corresponding reduction of the Revolver
Commitments).

 

5.3.         Repayment of Term Loans.

 

5.3.1.      Payment of Principal.  The principal amount of the Term Loans shall
be repaid on the first day of each calendar quarter in consecutive quarterly
installments of $500,000, commencing on July 1, 2015 and continuing until the
Term Loan Maturity Date, on which date all principal, interest and other amounts
owing with respect to the Term Loans shall be due and payable in full.  Each
installment shall be paid to Agent for the pro rata benefit of Lenders, in
accordance with each Lender’s Applicable Percentage of the Term Loans.  Once
repaid, whether such repayment is voluntary or required, Term Loans may not be
reborrowed.

 

5.3.2.      Mandatory Prepayments.

 

(a)           Following the end of each Fiscal Year, commencing with the Fiscal
Year ending January 2, 2016, the Borrowers shall prepay the Term Loans in an
amount equal to 50% of Excess Cash Flow for such Fiscal Year.  Each prepayment
pursuant to this Section 5.3.2(a) shall be made within five (5) days after the
date on which financial statements and the Compliance Certificate are required
to be delivered (or if earlier, the date on which such financial statements and
Compliance Certificate are delivered) pursuant to Section 10.1.2(a) and
Section 10.1.2(d), respectively, with respect to the Fiscal Year for which
Excess Cash is being calculated (and, in any event, within 95 days after the end
of such Fiscal Year).

 

(b)           Concurrently with any Permitted Asset Disposition of Equipment or
Real Estate, Borrowers shall prepay Term Loans in an amount equal to the Net
Proceeds of such disposition; provided, that, so long as no Default or Event of
Default has occurred and is continuing, Net Proceeds from any single such Asset
Disposition in an amount not in excess of $2,000,000 shall not be required to be
so applied to the extent Borrowers deliver to Agent a certificate stating that
Obligors intend to use such Net Proceeds to acquire assets that are used or
useful in the business of Obligors within 180 days of the receipt of such Net
Proceeds, it being expressly agreed that all such Net Proceeds not so reinvested
shall be immediately applied to prepay the Loans upon the expiration of such 180
day period.

 

(c)           Concurrently with the receipt of any proceeds of insurance or
condemnation awards paid in respect of any Equipment or Real Estate, Borrowers
shall prepay Term Loans in an amount equal to such proceeds, subject to
Section 8.6.2.

 

(e)           Concurrently with any incurrence of Debt by an Obligor (other than
Debt permitted under Section 10.2.1), Borrower shall prepay Term Loans in an
amount equal to the net proceeds of such incurrence of Debt.

 

(f)            On the Revolver Termination Date, Borrowers shall prepay all Term
Loans (unless sooner repaid hereunder).

 

(g)           Optional Prepayments.  Borrowers may, at their option from time to
time, prepay the Term Loans, without penalty or premium, which prepayment must
be at least $500,000, plus any increment of $100,000 in excess thereof. 
Borrower shall give written notice to Agent of an intended

 

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prepayment of Term Loans not later than 3 Business Days prior to the date of
such prepayment, which notice shall specify the amount of the prepayment and be
irrevocable once given; provided, that if a notice of prepayment is given in
connection with a conditional notice of termination of the Commitments as
contemplated by Section 2.1.4(a), then such notice of prepayment may be revoked
if such notice of termination is revoked in accordance with Section 2.1.4(a).

 

5.3.3.      Application of Prepayments.  Each prepayment of Term Loans shall be
accompanied by all interest accrued thereon and shall be applied to principal in
inverse order of maturity.

 

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 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 (provided
that, if at the time of any such payments any Revolver Loans are outstanding,
such payment shall be applied first to the Revolver Loans and second to the FILO
Loans, unless, after giving effect to such payment, the FILO Exposure shall
exceed the lesser of (i) the Aggregate FILO Commitment Amount and (ii) the FILO
Borrowing Base); 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 the
Collateral, setoff or otherwise, shall be allocated as follows:

 

(a)           To the extent such monies constitute Current Asset Collateral or
proceeds of Current Asset Collateral, such monies shall be applied as follows:

 

(i)            first, to all Extraordinary Expenses owing to Agent, Issuing Bank
and Lenders, and to all other costs and expenses owing to Agent;

 

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

 

(iii)          third, to Issuing Bank in respect of amounts owing by Borrowers
for (x) any unreimbursed drawings made under Letters of Credit and (y) fees,
costs, expenses and indemnities owing to Issuing Bank in respect of Letters of
Credit;

 

(iv)          fourth, to all Obligations constituting fees owing or related to
the Revolver Loans;

 

(v)           fifth, to all Obligations constituting interest in respect of the
Revolver Loans;

 

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

 

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

 

(viii)        eighth, to all Obligations constituting fees owing or related to
the FILO Loans;

 

(ix)          ninth, to all Obligations constituting interest in respect of the
FILO Loans;

 

(x)          tenth, to all FILO Loans,

 

(xi)         eleventh, to all Obligations constituting fees owing or related to
the Term Loans;

 

(xii)         twelfth, to all Obligations constituting interest in respect of
the Term Loans;

 

(xiii)        thirteenth, to the Term Loans;

 

(xiv)        fourteenth, to Secured Bank Product Obligations exceeding the
amount of Reserves existing therefor; and

 

(xv)         last, to all remaining Obligations.

 

(b)           To the extent such monies constitute Other Collateral or proceeds
of Other Collateral, such monies shall be applied as follows:

 

(i)            first, to all Extraordinary Expenses owing to Agent, Issuing Bank
and Lenders, and to all other costs and expenses owing to Agent;

 

(ii)           second, to all Obligations constituting fees owing or related to
the Term Loans;

 

(iii)          third, to all Obligations constituting interest in respect of the
Term Loans;

 

(iv)          fourth, to the Term Loans;

 

(v)           fifth, to all amounts owing to Agent on Swingline Loans;

 

(vi)          sixth, to Issuing Bank in respect of amounts owing by Borrowers
for (x) any unreimbursed drawings made under Letters of Credit and (y) fees,
costs, expenses and indemnities owing to Issuing Bank in respect of Letters of
Credit;

 

(vii)         seventh, to all Obligations constituting fees owing or related to
the Revolver Loans;

 

(viii)        eighth, to all Obligations constituting interest in respect of the
Revolver Loans;

 

(ix)          ninth, to Cash Collateralization of LC Obligations;

 

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

 

(xi)          eleventh, to all Obligations constituting fees owing or related to
the FILO Loans;

 

(xii)         twelfth, to all Obligations constituting interest in respect of
the FILO Loans;

 

(xiii)       thirteenth, to all FILO Loans,

 

(xiv)        fourteenth, to Secured Bank Product Obligations exceeding the
amount of Reserves therefor; and

 

(xv)         last, to all remaining Obligations.

 

(c)           Subject to the priorities set forth in clauses (a) and (b) above,
amounts shall be applied to payment of each category of Obligations only after
Full Payment of amounts payable from time to time under all preceding
categories.  If amounts are insufficient to satisfy a category, they shall be
paid ratably among outstanding Obligations in the category.  Monies and proceeds
obtained from an Obligor shall not be applied to its Excluded Swap Obligations,
but appropriate adjustments shall be made with respect to amounts obtained from
other Obligors to preserve the allocations in any applicable category.  Agent
shall have no obligation to calculate the amount of any Secured Bank Product
Obligation and may request a reasonably detailed calculation thereof from a
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 5.6.2 are solely to determine the rights
and priorities among Secured Parties, and may be changed by agreement of the
affected Secured Parties, 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 5.6.2.

 

(d)           Notwithstanding the order of application of proceeds of Collateral
set forth in this Section 5.6.2, the Collateral shall secure all Obligations,
regardless of whether such Obligations are in respect of Revolver Loans, FILO
Loans, Term Loans or otherwise.

 

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 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

 

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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; Obligation to Withhold; Tax Payment.

 

(a)           All payments of Obligations by Obligors shall be made without
deduction or withholding for any Taxes, except as required by Applicable Law. 
If Applicable Law (as determined by Agent in its discretion) requires the
deduction or withholding of any Tax from any such payment by Agent or an
Obligor, then Agent or such Obligor shall be entitled to make such deduction or
withholding based on information and documentation provided pursuant to
Section 5.10.

 

(b)           If Agent or any Obligor is required by the Code to withhold or
deduct Taxes, including backup withholding and withholding taxes, from any
payment, then (i) Agent shall pay the full amount that it determines is to be
withheld or deducted to the relevant Governmental Authority pursuant to the
Code, and (ii) to the extent the withholding or deduction is made on account of
Indemnified Taxes, the sum payable by the applicable Obligor shall be increased
as necessary so that the Recipient receives an amount equal to the sum it would
have received had no such withholding or deduction been made.

 

(c)           If Agent or any Obligor is required by any Applicable Law other
than the Code to withhold or deduct Taxes from any payment, then (i) Agent or
such Obligor, to the extent required by Applicable Law, shall timely pay the
full amount to be withheld or deducted to the relevant Governmental Authority,
and (ii) to the extent the withholding or deduction is made on account of
Indemnified Taxes, the sum payable by the applicable Obligor shall be increased
as necessary so that the Recipient receives an amount equal to the sum it would
have received had no such withholding or deduction been made.

 

5.9.2.      Payment of Other Taxes.  Without limiting the foregoing, Borrowers
shall timely pay to the relevant Governmental Authority in accordance with
Applicable Law, or at Agent’s option, timely reimburse Agent for payment of, any
Other Taxes.

 

5.9.3.      Tax Indemnification.

 

(a)           Each Borrower shall indemnify and hold harmless, on a joint and
several basis, each Recipient against any Indemnified Taxes (including those
imposed or asserted on or attributable to amounts payable under this Section)
payable or paid by a Recipient or required to be withheld or deducted from a
payment to a Recipient, and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority.  Each Borrower shall indemnify and hold harmless Agent against any
amount that a Lender or Issuing Bank fails for any reason to pay indefeasibly to
Agent as required pursuant to this Section.  Each Borrower shall make payment
within 10 days after demand for any amount or liability payable under this
Section.  A certificate as to the amount of such payment or liability delivered
to Borrowers by a Lender or Issuing Bank (with a copy to Agent), or by Agent on
its own behalf or on behalf of any Recipient, shall be conclusive absent
manifest error.

 

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(b)                                 Each Lender and Issuing Bank shall indemnify
and hold harmless, on a several basis, (i) Agent against any Indemnified Taxes
attributable to such Lender or Issuing Bank (but only to the extent Borrowers
have not already paid or reimbursed Agent therefor and without limiting
Borrowers’ obligation to do so), (ii) Agent and Obligors, as applicable, against
any Taxes attributable to such Lender’s failure to maintain a Participant
register as required hereunder, and (iii) Agent and Obligors, as applicable,
against any Excluded Taxes attributable to such Lender or Issuing Bank, in each
case, that are payable or paid by Agent or an Obligor in connection with any
Obligations, and any reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes were correctly or legally imposed
or asserted by the relevant Governmental Authority.  Each Lender and Issuing
Bank shall make payment within 10 days after demand for any amount or liability
payable under this Section.  A certificate as to the amount of such payment or
liability delivered to any Lender or Issuing Bank by Agent shall be conclusive
absent manifest error.

 

5.9.4.                  Evidence of Payments.  If Agent or an Obligor pays any
Taxes pursuant to this Section, then upon request, Agent shall deliver to
Borrower Agent or Borrower Agent shall deliver to Agent, respectively, a copy of
a receipt issued by the appropriate Governmental Authority evidencing the
payment, a copy of any return required by Applicable Law to report the payment,
or other evidence of payment reasonably satisfactory to Agent or Borrower Agent,
as applicable.

 

5.9.5.                  Treatment of Certain Refunds.  Unless required by
Applicable Law, at no time shall Agent have any obligation to file for or
otherwise pursue on behalf of a Lender or Issuing Bank, nor have any obligation
to pay to any Lender or Issuing Bank, any refund of Taxes withheld or deducted
from funds paid for the account of a Lender or Issuing Bank.  If a Recipient
determines in its discretion that it has received a refund of any Taxes as to
which it has been indemnified by Borrowers or with respect to which a Borrower
has paid additional amounts pursuant to this Section, it shall pay Borrowers an
amount equal to such refund (but only to the extent of indemnity payments made,
or additional amounts paid, by Borrowers with respect to the Taxes giving rise
to such refund), net of all out-of-pocket expenses (including Taxes) incurred by
such Recipient, and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund), provided that
Borrowers agree, upon request by the Recipient, to repay the amount paid over to
Borrowers (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to the Recipient if the Recipient is required to repay
such refund to the Governmental Authority.  Notwithstanding anything herein to
the contrary, no Recipient shall be required to pay any amount to Borrowers if
such payment would place the Recipient in a less favorable net after-Tax
position than it would have been in if the Tax subject to indemnification and
giving rise to such refund had not been deducted, withheld or otherwise imposed
and the indemnification payments or additional amounts with respect to such Tax
had never been paid.  In no event shall Agent or any Recipient be required to
make its tax returns (or any other information relating to its taxes that it
deems confidential) available to any Obligor or other Person.

 

5.9.6.                  Survival.  Each party’s obligations under Sections 5.9
and 5.10 shall survive the resignation or replacement of Agent or any assignment
of rights by or replacement of a Lender or Issuing Bank, the termination of the
Commitments, and the repayment, satisfaction, discharge or Full Payment of any
Obligations.

 

5.10.                     Lender Tax Information.

 

5.10.1.           Status of Lenders.  Any Lender that is entitled to an
exemption from or reduction of withholding Tax with respect to payments of
Obligations shall deliver to Borrowers and Agent properly completed and executed
documentation reasonably requested by Borrowers or Agent as will permit such
payments to be made without or at a reduced rate of withholding.  In addition,
any Lender, if reasonably requested by Borrowers or Agent, shall deliver such
other documentation prescribed by Applicable Law or reasonably requested by
Borrowers or Agent to enable them to determine whether such Lender is subject to
backup withholding or information reporting requirements.  Notwithstanding the

 

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foregoing, such documentation (other than documentation described in Sections
5.10.2(a), (b) and (d)) shall not be required if a Lender reasonably believes
delivery of the documentation would subject it to any material unreimbursed cost
or expense or would materially prejudice its legal or commercial position.

 

5.10.2.           Documentation.  Without limiting the foregoing, if any
Borrower is a U.S. Person,

 

(a)                                 Any Lender that is a U.S. Person shall
deliver to Borrowers and Agent on or prior to the date on which such Lender
becomes a Lender hereunder (and from time to time thereafter upon reasonable
request of Borrowers or Agent), executed originals of IRS Form W-0, certifying
that such Lender is exempt from U.S. federal backup withholding Tax;

 

(b)                                 Any Foreign Lender shall, to the extent it
is legally entitled to do so, deliver to Borrowers and Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender hereunder (and from time to time thereafter
upon reasonable request of Borrowers or Agent), whichever of the following is
applicable:

 

(i)                                     in the case of a Foreign Lender claiming
the benefits of an income tax treaty to which the United States is a party,
(x) with respect to payments of interest under any Loan Document, executed
originals of IRS Form W-8BEN-E establishing an exemption from or reduction of
U.S. federal withholding Tax pursuant to the “interest” article of such tax
treaty, and (y) with respect to other payments under the Loan Documents, IRS
Form W-8BEN-E establishing an exemption from or reduction of U.S. federal
withholding Tax pursuant to the “business profits” or “other income” article of
such tax treaty;

 

(ii)                                  executed originals of IRS Form W-8ECI;

 

(iii)                               in the case of a Foreign Lender claiming the
benefits of the exemption for portfolio interest under Section 881(c) of the
Code, (x) a certificate in form satisfactory to Agent to the effect that such
Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the
Code, a “10 percent shareholder” of a Borrower within the meaning of
Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation”
described in Section 881(c)(3)(C) of the Code (“U.S. Tax Compliance
Certificate”), and (y) executed originals of IRS Form W-8BEN-E; or

 

(iv)                              to the extent a Foreign Lender is not the
beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS
Form W-8ECI, IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate in form
satisfactory to Agent, IRS Form W-9, and/or other certification documents from
each beneficial owner, as applicable; provided that if the Foreign Lender is a
partnership and one or more direct or indirect partners of such Foreign Lender
are claiming the portfolio interest exemption, such Foreign Lender may provide a
U.S. Tax Compliance Certificate on behalf of each such direct and indirect
partner;

 

(c)                                  any Foreign Lender shall, to the extent it
is legally entitled to do so, deliver to Borrowers and Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender hereunder (and from time to time thereafter
upon the reasonable request of Borrowers or Agent), executed originals of any
other form prescribed by Applicable Law as a basis for claiming exemption from
or a reduction in U.S. federal withholding Tax, duly completed, together with
such supplementary documentation as may be prescribed by Applicable Law to
permit Borrowers or Agent to determine the withholding or deduction required to
be made; and

 

(d)                                 if payment of an Obligation to a Lender
would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender
were to fail to comply with the applicable reporting requirements of FATCA
(including those contained in Section 1471(b) or 1472(b) of the Code), such

 

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Lender shall deliver to Borrowers and Agent at the time(s) prescribed by law and
otherwise as reasonably requested by Borrowers or Agent such documentation
prescribed by Applicable Law (including Section 1471(b)(3)(C)(i) of the Code)
and such additional documentation reasonably requested by Borrowers or Agent as
may be necessary for them to comply with their obligations under FATCA and to
determine that such Lender has complied with its obligations under FATCA or to
determine the amount to deduct and withhold from such payment.  Solely for
purposes of this clause (d), “FATCA” shall include any amendments made to FATCA
after the date hereof.

 

5.10.3.           Redelivery of Documentation.  If any form or certification
previously delivered by a Lender pursuant to this Section expires or becomes
obsolete or inaccurate in any respect, such Lender shall promptly update the
form or certification or notify Borrowers and Agent in writing of its inability
to do so.

 

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,
except its Excluded Swap Obligations.  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 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

 

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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 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 its
business, Secured Bank Product Obligations incurred to supports its 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.

 

(d)                                 Each Obligor that is a Qualified ECP when
its guaranty of or grant of Lien as security for a Swap Obligation becomes
effective hereby jointly and severally, absolutely, unconditionally and
irrevocably undertakes to provide funds or other support to each Specified
Obligor with respect to such Swap Obligation as may be needed by such Specified
Obligor from time to time to honor all of its obligations under the Loan
Documents in respect of such Swap Obligation (but, in each case, only up to

 

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the maximum amount of such liability that can be hereby incurred without
rendering such Qualified ECP’s obligations and undertakings under this
Section 5.11 voidable under any applicable fraudulent transfer or conveyance
act).  The obligations and undertakings of each Qualified ECP under this
Section shall remain in full force and effect until Full Payment of all
Obligations.  Each Obligor intends this Section to constitute, and this
Section shall be deemed to constitute, a guarantee of the obligations of, and a
“keepwell, support or other agreement” for the benefit of, each Obligor for all
purposes of the Commodity Exchange Act.

 

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 (“Restatement 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.

 

(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.

 

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(f)                                   Agent shall have received a written
opinion of (i) Greenberg Traurig LLP, US counsel to the Obligors, (ii) Stewart
McKelvey, special New Brunswick counsel to the Canadian Guarantor, and
(iii) Locke Lord 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, 2014.

 

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

 

(k)                                 Agent shall have received a Borrowing Base
Certificate prepared as of April 4, 2015.  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 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
Restatement Date with the proceeds of the initial Loans hereunder on the
Restatement Date and any and all Liens securing such indebtedness will be
terminated and released on the Restatement 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.

 

(n)                                 Agent shall have received (i) audited
financial statements of the Company and its Subsidiaries for the fiscal year
ended January 3, 2015 and (ii) the internally prepared monthly divisional
financial statements of the Company and its Subsidiaries for the months ended
January 31, 2015 and February 28, 2015.

 

(o)                                 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.

 

(p)                                 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

 

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Loans and the transactions contemplated by this Agreement.

 

(q)                                 Agent shall have received an appraisal of
the “Summer Infant,” “Born Free” and “SwaddleMe” trade names, in form and
substance satisfactory to Agent, from an appraiser satisfactory to Agent, which
appraisal shall establish that the fair market value of such trade name, as of
the Restatement Date, is equal to or greater than $30,000,000.

 

(r)                                    Agent shall have received a fully
executed Assignment and Assumption between JPMorgan Chase Bank, N.A., as
“Assignor” and Bank of America, N.A., as “Assignee”, providing for the sale and
assignment by JPMorgan Chase Bank, N.A. to Bank of America, N.A. of all rights
and interests of JPMorgan Chase Bank, N.A. in and to the loans and commitments
of JPMorgan Chase Bank, N.A. outstanding under the Existing Credit Agreement,
which sale and assignment shall become effective immediately prior to the
effectiveness of 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;

 

(d)                                 all Deposit Accounts;

 

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(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.

 

In no event shall the grant of the security interest in this Agreement or in any
other Loan Document attach to, or the term “Collateral” be deemed to include,
(a) any of the outstanding Equity Interests in a Foreign Subsidiary (i) in
excess of 65% of the voting power of all classes of equity interests of such
Foreign Subsidiary entitled to vote in the election of directors or other
similar body of such Foreign Subsidiary or (ii) to the extent that the pledge
thereof is prohibited by the laws of the jurisdiction of such foreign
subsidiary’s organization; (b) any equity interest in any Foreign Subsidiary
that is not a first-tier subsidiary of an Borrower; (c) any lease, license,
contract, property rights or agreement to which Debtor is a party or any of such
Debtor’s rights or interests thereunder, if, and for so long as and to the
extent that, the grant of the security interest would constitute or result in
(i) the abandonment, invalidation or unenforceability of any material right,
title or interest of such Debtor therein or (ii) a breach or termination
pursuant to the terms of, or a default under, any such lease, license, contract,
property rights or agreement (other than to the extent that any such breach,
termination or default would be rendered ineffective pursuant to Section 9-406,
9-407, 9-408 or 9-409 of the Uniform Commercial Code of the applicable
jurisdiction (or any successor provision or provisions), any other applicable
law or principles of equity), provided, however, that the security interest
(x) shall attach immediately when the condition causing such abandonment,
invalidation or unenforceability is remedied, (y) shall attach immediately to
any severable term of such lease, license, contract, property rights or
agreement to the extent that such attachment does not result in any of the
consequences specified in (i) or (ii) above and (z) shall attach immediately to
any such lease, license, contract, property rights or agreement to which the
account debtor or such Obligor’s counterparty has consented to such attachment;
(d) any equity interest acquired after the date hereof that is an equity
interest in an entity other than a subsidiary of an Obligor, if the terms of the
organizational documents of the issuer of such equity interests do not permit
the grant of the security interest in such equity interests by the owner thereof
or Obligor; and (e) any application to register any trademark or service mark
prior to the filing under applicable law of a verified statement of use (or the
equivalent) for such trademark or service mark to the extent the creation of a
security interest therein or the grant of a mortgage thereon would void or
invalidate such trademark or service mark (collectively, the “Excluded
Property”); provided, however, that any Collateral (or any portion thereof) that
ceases to satisfy the criteria for Excluded Property (whether as a result of an
Obligor obtaining any necessary consent, any change in any rule of law, statute
or regulation or otherwise) shall no longer be Excluded

 

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Property and the security interest shall attach immediately to such Collateral
(or portion thereof) at such time.

 

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.

 

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.

 

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 Restatement 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.  In no event shall the grant of any Lien
under any Loan Document secure an Excluded Swap Obligation of the granting
Obligor.

 

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

 

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personal property” of such Obligor, or words to similar effect, and ratifies any
action taken by Agent before the Restatement 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 Revolver
Borrowing Base, the FILO Borrowing Base, the Revolver Exposure, the FILO
Exposure and Availability as of the most recently ended Fiscal Month, and
(ii) at any time Availability falls below the Reporting Frequency Increase
Trigger, by Wednesday of each week, an updated Borrowing Base Certificate (which
updated Borrowing Base Certificate shall include updated calculations of the
Revolver Borrowing Base, FILO 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 Fiscal 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 month, a detailed aged trial balance of all Accounts as of the end
of the most recent Fiscal 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.  On or prior to the Restatement Date, 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

 

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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 at all times from
and after the Restatement Date, 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 the most
recently ended Fiscal 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, Revolver Overadvance or FILO Overadvance exists or
would result therefrom; (c) Agent is promptly notified if the aggregate Value of
all Inventory returned in any month exceeds $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).

 

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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
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.

 

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 insurance
proceeds or condemnation awards that relate to Inventory shall be applied first,
to payment of any Revolver Overadvance and any FILO Overadvance, second, to
payment of the Revolver Loans, third, to payment of the FILO Loans, fourth to
payment of the Term Loans, and then, to the payment of any other Obligations
outstanding.  Subject to clause (c) below, any insurance proceeds or
condemnation awards that relate to Equipment or Real Estate shall be applied
first, to payment of the Term Loans, second, to payment of any Revolver
Overadvance and any FILO Overadvance, third, to payment of the Revolver Loans,
fourth, to payment of the FILO Loans, and then, to the payment of any other
Obligations outstanding.

 

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(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
reasonably 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 $2,000,000.

 

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:

 

(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.

 

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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 Restatement
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
Obligor has good title to its Equity Interests in its Subsidiaries, subject only
to Liens in favor of Agent, and all such Equity Interests are duly issued, fully
paid and non-assessable.  Except for the Equity Interests issued under the
Company’s 2006 Performance Equity Plan, the Company’s 2012 Incentive
Compensation Plan, and inducement grants to new employees approved by the
Compensation Committee of the Company’s Board of Directors, 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

 

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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), 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 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, 2014, there has been no
change in the business, assets, Properties, liabilities, operations or financial
condition 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

 

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Obligor and Subsidiary is adequate for all years not closed by applicable
statutes, and for its current Fiscal Year.

 

9.1.10.           Brokers.  Except as disclosed on Schedule 9.1.10, 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.  Except as disclosed
on Schedule 9.1.11, 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, 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 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.

 

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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 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

 

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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 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 Original 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 Original 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.

 

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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.

 

9.1.24.           OFAC.  No Borrower, Subsidiary or any director, officer,
employee, agent, affiliate or representative thereof, is or is owned or
controlled by any individual or entity that is currently the subject or target
of any Sanction or is located, organized or resident in a Designated
Jurisdiction.

 

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 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
aggregate Revolver Commitments for a period of thirty (30) consecutive days, 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 reasonable and documented
charges of any third party used for such purposes.  No calculation of the
Revolver Borrowing Base or FILO Borrowing Base shall include Collateral acquired
in a Permitted Acquisition or otherwise outside the Ordinary Course of Business
until completion of applicable field examinations and appraisals reasonably
satisfactory to Agent.

 

(c)                                  Reimburse Agent for all reasonable charges,
costs and expenses of Agent in connection with appraisals relating to the value
of Borrower’s trade name as Agent deems necessary or appropriate, up to three
times per each period of five Loan Years; provided, however, that if an
appraisal is initiated during a Default or Event of Default, all charges, costs
and expenses therefor shall be reimbursed by Borrowers without regard to such
limit.  Obligors agree to pay Agent’s then standard

 

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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 the most recent Fiscal Month and the related statements of income and
cash flow for such Fiscal 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 thirty (30) days after the
last day of each Fiscal Year, projections of Borrowers’ consolidated balance
sheets, results of operations, cash flow and Availability for such Fiscal Year,
on a Fiscal Month by Fiscal Month basis;

 

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

 

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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) 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; (m) 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 (n) 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 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

 

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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;

 

(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 listed on Schedule 10.2.1
(other than the Obligations, Subordinated Debt and Permitted Purchase Money
Debt), but only to the extent outstanding on the Restatement Date and not
satisfied with proceeds of Loans funded on the Restatement Date;

 

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

 

(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

 

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(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
$1,000,000 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)                                 intentionally omitted;

 

(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 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.

 

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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, under Applicable Law
or in effect on the Restatement 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 $1,000,000 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 $500,000 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 Original
Closing Date (or as amended thereafter with the consent of Agent).

 

10.2.9.           Fundamental Changes.  (a) 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, without, in the
case of any such change described in this clause (a), providing not less than
ten (10) days prior written notice to Agent, (b) liquidate, wind up its affairs
or dissolve itself; or (c) merge, combine or consolidate with any Person,
whether in a single transaction or in a series of related transactions, except
for (i) mergers or consolidations of a wholly-owned Subsidiary with another
wholly-owned Subsidiary or into a Borrower; or (ii) Permitted Acquisitions.

 

10.2.10.    Subsidiaries.  Form or acquire any Subsidiary after the Restatement
Date, 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 in any manner adverse to the Lenders, 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.

 

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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 Restatement Date;
(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 Restatement Date and activities
incidental or supplemental thereto, and (ii) businesses similar to the business
conducted by the Obligors on the Original 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 Restatement 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 Restatement
Date.

 

10.2.19.    Amendments to Subordinated Debt.  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.

 

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

 

10.3.1.           Fixed Charge Coverage Ratio.  As of the end of each Fiscal
Month, maintain a Fixed Charge Coverage Ratio of at least 1.0 to 1.0 for the
period of twelve consecutive Fiscal Months most recently ended.

 

10.3.2.           Maximum Leverage Ratio.  As of the end of each Fiscal Quarter,
maintain a Leverage Ratio of not greater than the ratio set forth below opposite
such Fiscal Quarter:

 

Four Fiscal Quarters Ending

 

Maximum Leverage Ratio

 

July 4, 2015

 

5.75 to 1.00

 

October 3, 2015

 

5.50 to 1.00

 

January 2, 2016

 

5.00 to 1.00

 

April 2, 2016

 

5.00 to 1.00

 

July 2, 2016

 

4.75 to 1.00

 

October 1, 2016

 

4.50 to 1.00

 

December 31, 2016 through September 30, 2017

 

4.00 to 1.00

 

December 30, 2017 and thereafter

 

3.75 to 1.00

 

 

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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, 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 granting to Agent for the benefit of Lenders,
security interests in and Liens upon its assets pursuant to the Security
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 Restatement
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.

 

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);

 

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(f)                                   Any (i) breach or default of an Obligor
occurs under 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 $3,000,000, 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,
$2,000,000 (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
$2,000,000;

 

(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 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;

 

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(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 constituting Inventory which: (i) is unsaleable or unable to be repaired
and has an aggregate Value in excess of $2,000,000, (ii) results in, or could
reasonably be expected to result in, the Obligors expending in excess of
$2,000,000 in connection with the recall, repair, remediation or replacement of
such Inventory, or (iii) results in, or could reasonably be expected to result
in, the Obligors incurring claims, losses, liabilities or damages in excess of
$5,000,000 in the aggregate (net of insurance coverage therefor that has not
been denied by the insurer).

 

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 Revolver Borrowing Base or FILO
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 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
a Revolver 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

 

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Obligations.

 

11.3.                     License.  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 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

 

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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. In
determining compliance with a condition for any action hereunder, including
satisfaction of any condition in Section 6, Agent may presume that the condition
is satisfactory to a Secured Party unless Agent has received notice to the
contrary from such Secured Party before Agent takes the action.  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, 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.

 

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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 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 in accordance with each Lender’s
Applicable Percentage of such Obligation (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 in accordance with each
Lender’s Applicable Percentage thereof (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.

 

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12.6.                     Indemnification.  EACH SECURED PARTY 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 Applicable
Percentage.  Notwithstanding anything to the contrary set forth herein, no
Indemnitee shall be entitled to indemnification from any Lender for a claim that
is directly and solely attributable to the gross negligence or willful
misconduct of such Indemnitee.

 

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 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

 

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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 FILO Loans.  In no event shall
Borrowers be entitled to 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 Applicable Percentage 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

 

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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 the
Loan Documents, including Sections 5.6, 14.3.3 and 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 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 Revolver

 

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Termination Date, the FILO 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.           Participant Register.  Each Lender that sells a participation
shall, acting as a non-fiduciary agent of Borrowers (solely for tax purposes),
maintain a register in which it enters the Participant’s name, address and
interest in Commitments, Loans (and stated interest) and LC Obligations. 
Entries in the register shall be conclusive, absent manifest error, and such
Lender shall treat each Person recorded in the register as the owner of the
participation for all purposes, notwithstanding any notice to the contrary.  No
Lender shall have an obligation to disclose any information in such register
except to the extent necessary to establish that a Participant’s interest is in
registered form under the Code.

 

13.2.4.           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.
Agent shall have no obligation to determine whether any assignee is permitted
under the Loan Documents.  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 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.

 

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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.  Agent may choose to show only one Borrower as the
borrower in the register, without any effect on the liability of any Obligor
with respect to the Obligations.  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 AGREEMENT OR
INSTRUMENT REFERRED TO HEREIN OR THEREIN SHALL BE DONE OR OMITTED;

 

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(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.

 

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

 

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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 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, the FILO Termination

 

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Date or the Term Loan Maturity Date applicable to such Lender’s Obligations; or
(iv) amend this clause (c);

 

(d)                                 without the prior written consent of all
Lenders having Revolver Commitments (or if the Revolver Commitments have
terminated, all Lenders having outstanding Revolver Loans), amend the definition
of the term “Revolver Borrowing Base” (or any defined term used in the
definition of “Revolver 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);

 

(e)                                  without the prior written consent of all
Lenders having FILO Commitments (or if the FILO Commitments have terminated, all
Lenders having outstanding FILO Loans), amend the definition of the term “FILO
Borrowing Base” (or any defined term used in the definition of “FILO Borrowing
Base”, provided that the Agent may in its Permitted Discretion, without the
necessity of obtaining the consent of any Lender, reduce the Applicable FILO
Account Advance Percentage and/or the Applicable FILO Inventory Advance
Percentage);

 

(f)                                   without the prior written consent of all
Lenders (except any Defaulting Lender), no modification shall be effective that
would (i) alter Sections 5.6.2, 7.1 (except to add Collateral) or 15.1.1;
(ii) amend the definitions of the terms “Applicable Percentage” or “Required
Lenders”; (iii) release all or substantially all of the Collateral;
(iv) subordinate the Liens in favor of Agent securing the Obligations to Liens
in favor of any other Person (other than (x) Purchase Money Liens securing
Permitted Purchase Money Debt, and (y) Liens securing obligations with respect
to Capital Leases permitted by Section 10.2.1(b), which Liens do not cover more
than the property subject to the applicable Capital Leases);  or (v) except in
connection with a merger, disposition or similar transaction expressly permitted
hereby, release any Obligor from liability for any Obligations; and

 

(g)                                  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, to all Lenders providing their consent, in
accordance with each such Lender’s Applicable Percentage.

 

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-

 

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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.

 

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 Restatement 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 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.

 

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.

 

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 Secured Parties 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, Secured Parties 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.

 

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.

 

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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 FILO 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 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.  Agent may (but shall have no obligation to) accept any
signature, contract formation or record-keeping through electronic means, which
shall have the same legal validity and enforceability as manual or paper-based
methods, to the fullest extent permitted by Applicable Law, including the
Federal Electronic Signatures in Global and National Commerce Act, the New York
State Electronic Signatures and Records Act, or any similar state law based on
the Uniform Electronic Transactions Act.

 

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

 

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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
(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 or to any swap, derivative or other
transaction under which payments are to be made by reference to an Obligor or
Obligor’s obligations; (g) 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 Borrowers; (h) on a confidential
basis to a provider of a Platform; or (i) with the consent of Borrower Agent. 
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 with this Section if such Person exercises a degree of
care similar to that which such Person 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

 

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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.  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.  Borrowers shall,
promptly upon request, provide all documentation and other information as
Agent, Issuing Bank or any Lender may request from time to time in order to
comply with any obligations under any “know your customer,” anti-money
laundering or other requirements of Applicable Law.

 

15.17.              Continued Effectiveness; No Novation.  Notwithstanding
anything contained herein, the terms of this Agreement are not intended to and
do not serve to effect a novation of the obligations, liabilities or
indebtedness of Obligors under the Existing Credit Agreement.  Instead, it is
the express intention of the parties hereto to reaffirm, amend and restate the
obligations, liabilities and indebtedness of Obligors created under or otherwise
evidenced by the Existing Credit Agreement.  All revolver loans outstanding
under, the Existing Credit Agreement as of the Restatement Date shall
automatically be deemed to constitute FILO Loans and, Revolver Loans under this
Agreement (as more fully described in Section 2.1.1).  Obligors acknowledge and
confirm that the liens and security interests granted by Obligors to Agent and
Lenders under the Existing Credit Agreement remain in full force and effect and
continue to secure all obligations, liabilities and indebtedness of Obligors
under this Agreement.  The term “Obligations” used in this Agreement and in the
other Loan Documents (or any other term used herein or therein to describe or
refer to the obligations, liabilities and indebtedness of the Obligors)
describes and refers to all obligations, liabilities and indebtedness of
Obligors under this Agreement and under the Existing Credit Agreement, as
amended and restated hereby, as the same had been previously amended, modified,
supplemented or restated prior to the date hereof and as the same may be further
amended, modified, supplemented or restated from time to time.  The Loan
Documents and all agreements, documents and instruments executed and delivered
in connection with any of the foregoing shall each be deemed to be amended to
the extent necessary to give effect to the provisions of this

 

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Agreement.  Cross-references in the Loan Documents to particular section or
subsection numbers in the Existing Credit Agreement shall be deemed to be
cross-references to the corresponding sections or subsections, as applicable, of
this Agreement.

 

[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/ William E. Mote, Jr.

 

Title:

Chief Financial Officer

 

Address:

 

 

1275 Park East Drive

 

 

Woonsocket, Rhode Island 02895

 

 

Attn: William E. Mote, Jr.

 

 

Telecopy:

 

 

Telephone: 401-671-6550

 

 

Email:

 

 

SUMMER INFANT (USA), INC.

 

 

 

 

 

 

 

By:

/s/ William E. Mote, Jr.

 

Title:

Chief Financial Officer

 

Address:

 

 

1275 Park East Drive

 

 

Woonsocket, Rhode Island 02895

 

 

Attn: William E. Mote, Jr.

 

 

Telecopy:

 

 

Telephone: 401-671-6550

 

 

Email:

 

[Signature Page to Amended and Restated Loan and Security Agreement]

 

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GUARANTORS:

 

 

 

 

SUMMER INFANT CANADA, LIMITED

 

 

 

 

 

 

 

By:

/s/ Carol E. Bramson

 

Title:

President and CEO

 

Address:

 

 

1275 Park East Drive

 

 

Woonsocket, Rhode Island 02895

 

 

Attn: William E. Mote, Jr.

 

 

Telecopy:                         

 

 

Telephone: 401-671-6550

 

 

Email:

 

 

 

 

SUMMER INFANT EUROPE LIMITED

 

 

 

 

 

By:

/s/ Carol E. Bramson

 

Title:

Director

 

Address:

 

 

1275 Park East Drive

 

 

Woonsocket, Rhode Island 02895

 

 

Attn: William E. Mote, Jr.

 

 

Telecopy:                          

 

 

Telephone: 401-671-6550

 

 

Email:

 

[Signature Page to Amended and Restated Loan and Security Agreement]

 

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AGENT:

 

 

 

 

BANK OF AMERICA, N.A., as Agent

 

 

 

 

 

 

 

By:

/s/ Cynthia Stannard

 

Title:

Sr. 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

 

 

Telecopy: 860-952-6830

 

 

Telephone: 860-952-6827

 

 

Email:

 

 

 

 

LENDERS:

 

 

 

BANK OF AMERICA, N.A., as Lender

 

 

 

 

 

By:

/s/ Cynthia Stannard

 

Title:

Sr. 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

 

 

Telecopy: 860-952-6830

 

 

Telephone: 860-952-6827

 

 

email:

 

[Signature Page to Amended and Restated Loan and Security Agreement]

 

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LENDERS:

 

 

 

 

FIRST NIAGARA COMMERCIAL FINANCE, INC., A WHOLLY-OWNED SUBSIDIARY OF FIRST
NIAGARA BANK, N.A., as Lender

 

 

 

 

 

 

By:

Danielle Prentis

 

Title:

Vice President-Portfolio Manager

 

Address:

 

 

First Niagara Commercial Finance, Inc.

 

 

 

 

 

 

 

 

 

 

 

Attn:

 

 

Telecopy:

 

 

Telephone:

 

 

email:

 

[Signature Page to Amended and Restated Loan and Security Agreement]

 

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Exhibit A

to

Amended and Restated Loan and Security Agreement

 

ASSIGNMENT AND ACCEPTANCE

 

Reference is made to the Amended and Restated Loan and Security Agreement dated
as of April 21, 2015, 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, b) the
amount of $                     of Assignor’s Revolver Commitment (which
represents         % of the total Revolver Commitments), (c) a principal amount
of $                 of Assignor’s outstanding FILO Loans, (d) the amount of
$                     of Assignor’s FILO Commitment (which represents         %
of the total FILO Commitments), and (e) a principal amount of 
$                     of Assignor’s outstanding Term Loan (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 Revolver Commitment
is $                    , the outstanding balance of its Revolver Loans and
participations in LC Obligations is $                    , its FILO Commitment
is $                    , the outstanding balance of its FILO Loans is
$                              , and the outstanding balance of its Term Loans
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;

 

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(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.

 

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:

 

A-3

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EXHIBIT B

to

Amended and Restated Loan and Security Agreement

 

ASSIGNMENT NOTICE

 

Reference is made to (1) the Amended and Restated Loan and Security Agreement
dated as of April 21, 2015, 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, (b) the
amount of $                     of Assignor’s Revolver Commitment (which
represents         % of the total Revolver Commitments), (c) a principal amount
of $                 of Assignor’s outstanding FILO Loans, (d) the amount of
$                     of Assignor’s FILO Commitment (which represents         %
of the total FILO Commitments), and (e) a principal amount of
$                     of Assignor’s outstanding Term Loan (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 Revolver
Commitment to be reduced by $                  , Assignee’s Revolver Commitment
to be increased by $                  , Assignor’s FILO Commitment to be reduced
by $                  , and Assignee’s FILO 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.

 

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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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