Exhibit 10.1

REVOLVING CREDIT

AND

SECURITY AGREEMENT

PNC BANK, NATIONAL ASSOCIATION

(AS LENDER AND AS AGENT)

WITH

SOFTWARE BROKERS OF AMERICA, INC.,

ACCVENT LLC,

FORZA POWER TECHNOLOGIES LLC,

KLIP XTREME LLC

NEXXT SOLUTIONS LLC

(BORROWERS)

JULY 25, 2011

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TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS      1   

1.1

     Accounting Terms      1   

1.2.

     General Terms      1   

1.3.

     Uniform Commercial Code Terms      28   

1.4.

     Certain Matters of Construction      28    ARTICLE II ADVANCES, PAYMENTS   
  29   

2.1.

     Revolving Advances      29         (a)      Amount of Revolving Advances   
  29         (b)      Discretionary Rights      29   

2.2.

     Procedure for Revolving Advances Borrowing      30   

2.3.

     Disbursement of Advance Proceeds      32   

2.4.

     Reserved      32   

2.6.

     Repayment of Advances      32   

2.7.

     Repayment of Excess Advances      33   

2.8.

     Statement of Account      33   

2.9.

     Letters of Credit      33   

2.10.

     Issuance of Letters of Credit      34   

2.11.

     Requirements For Issuance of Letters of Credit      34   

2.12.

     Disbursements, Reimbursement      35   

2.13.

     Repayment of Participation Advances      36   

2.14.

     Documentation      37   

2.15.

     Determination to Honor Drawing Request      37   

2.16.

     Nature of Participation and Reimbursement Obligations      37   

2.17

     Indemnity      39   

2.18.

     Liability for Acts and Omissions      39   

2.19.

     Additional Payments      40   

2.20.

     Manner of Borrowing and Payment      40   

2.21.

     Mandatory Prepayments      42   

2.22.

     Use of Proceeds      42   

2.23.

     Defaulting Lender      43   

2.24.

     Removal of Lenders      44    ARTICLE III INTEREST AND FEES      45   

3.1.

     Interest      45   

3.2.

     Letter of Credit Fees      45   

3.3.

     Closing Fee and Facility Fee      46         (a)      Closing Fee      46
        (b)      Facility Fee      46   

3.4.

     Collateral Fees      46         (a)      Collateral Evaluation Fee      46
        (b)      Collateral Monitoring Fee      47   

3.5.

     Computation of Interest and Fees      47   

3.6.

     Maximum Charges      47   

3.7.

     Increased Costs      47   

 

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3.8.

     Basis For Determining Interest Rate Inadequate or Unfair      48   

3.9.

     Capital Adequacy      49   

3.10.

     Gross Up for Taxes      49   

3.11.

     Withholding Tax Exemption      50   

3.12.

     Survival of Obligations      51    ARTICLE IV COLLATERAL: GENERAL TERMS   
  51   

4.1.

     Security Interest in the Collateral      51   

4.2.

     Perfection of Security Interest      51   

4.3.

     Disposition of Collateral      52   

4.4.

     Preservation of Collateral      52   

4.5.

     Ownership of Collateral      52   

4.6.

     Defense of Agent’s and Lenders’ Interests      53   

4.7.

     Books and Records      54   

4.8.

     Financial Disclosure      54   

4.9.

     Compliance with Laws      54   

4.10.

     Inspection of Premises; Appraisals      54   

4.11.

     Insurance      55   

4.12.

     Failure to Pay Insurance      56   

4.13.

     Payment of Taxes      56   

4.14.

     Payment of Leasehold Obligations      56   

4.15.

     Receivables      56         (a)      Nature of Receivables      56        
(b)      Solvency of Customers      57         (c)      Location of Borrowers   
  57         (d)      Collection of Receivables      57         (e)     
Notification of Assignment of Receivables      57         (f)      Power of
Agent to Act on Borrowers’ Behalf      58         (g)      No Liability      58
        (h)      Establishment of a Cash Management System      59         (i)
     Adjustments      59   

4.16.

     Inventory      59   

4.17.

     Maintenance of Equipment      59   

4.18.

     Exculpation of Liability      60   

4.19.

     Environmental Matters      60   

4.20.

     Financing Statements      62   

4.21.

     Voting Rights in Respect of Subsidiary Stock      62   

4.22.

     Dividend and Distribution Rights in Respect of Subsidiary Shares      62   
ARTICLE V REPRESENTATIONS AND WARRANTIES      63   

5.1.

     Authority      63   

5.2.

     Formation and Qualification      64   

5.3.

     Survival of Representations and Warranties      64   

5.4.

     Tax Returns      64   

5.5.

     Financial Statements      65   

5.6.

     Entity Name and Locations      65   

5.7.

     O.S.H.A. and Environmental Compliance      66   

 

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5.8.

     Solvency; No Litigation, Violation, Indebtedness or Default      66   

5.9.

     Patents, Trademarks, Copyrights and Licenses      67   

5.10.

     Licenses and Permits      68   

5.11.

     Default of Indebtedness      68   

5.12.

     No Default      68   

5.13.

     No Burdensome Restrictions      68   

5.14.

     No Labor Disputes      69   

5.15.

     Margin Regulations      69   

5.16.

     Reserved      69   

5.17.

     Disclosure      69   

5.18.

     Swaps      69   

5.19.

     Conflicting Agreements      69   

5.20.

     Application of Certain Laws and Regulations      70   

5.21.

     Business and Property of Borrowers      70   

5.22.

     Section 20 Subsidiaries      70   

5.23.

     Anti-Terrorism Laws      70   

5.24.

     Trading with the Enemy      71   

5.25.

     Federal Securities Laws      71   

5.26.

     Commercial Tort Claims      71   

5.27.

     Partnership and Limited Liability Company Interests      71   

5.28.

     Material Contracts      71    ARTICLE VI AFFIRMATIVE COVENANTS      72   

6.1.

     Payment of Fees      72   

6.2.

     Conduct of Business and Maintenance of Existence and Assets      72   

6.3.

     Violations      72   

6.4.

     Government Receivables      72   

6.5.

     Fixed Charge Coverage Ratio and Guarantor Fixed Charge Coverage Ratio     
73   

6.6.

     Execution of Supplemental Instruments      73   

6.7.

     Payment of Indebtedness      73   

6.8.

     Standards of Financial Statements      73   

6.9.

     Federal Securities Laws      73   

6.10.

     Real Property      74    ARTICLE VII NEGATIVE COVENANTS      74   

7.1

     Merger, Consolidation, Acquisition and Sale of Assets      74   

7.2.

     Creation of Liens      75   

7.3.

     Guarantees      75   

7.4

     Investments      75   

7.5.

     Loans      75   

7.6.

     Capital Expenditures      76   

7.7.

     Dividends and Distributions; Other Payments      76   

7.8.

     Indebtedness      77   

7.9.

     Nature of Business      78   

7.10.

     Transactions with Affiliates      78   

7.11.

     Leases      78   

7.12.

     Subsidiaries      79   

 

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7.13.

     Fiscal Year and Accounting Changes      79   

7.14.

     Pledge of Credit      79   

7.15.

     Amendment of Organizational Documents      79   

7.16.

     Compliance with ERISA      79   

7.17.

     Prepayment of Indebtedness      80   

7.18.

     Anti-Terrorism Laws      80   

7.19.

     Membership/Partnership Interests      80   

7.20.

     Trading with the Enemy Act      81   

7.21.

     Other Agreements      81   

7.22.

     Additional Negative Pledges      81   

7.23.

     Additional Bank Accounts      81   

7.24.

     Issuance of Equity Interests      81    ARTICLE VIII CONDITIONS PRECEDENT
     82   

8.1.

     Conditions to Initial Advances      82         (a)      Loan Documents     
82         (b)      Filings, Registrations and Recordings      82         (c)
     Corporate or Company Proceedings of Borrowers      82         (d)     
Incumbency Certificates of Borrowers      82         (e)      Corporate
Proceedings of Guarantor      83         (f)      Incumbency Certificates of
Guarantor      83         (g)      Certificates      83         (h)      Good
Standing Certificates      83         (i)      Legal Opinion      83         (j)
     No Litigation      84         (k)      Financial Condition Certificates   
  84         (l)      Collateral Examination      84         (m)      Fee     
84         (n)      Pro Forma Financial Statements      84         (o)     
Subordination Agreement      84         (p)      Insurance      84         (q)
     Disbursement Agreement; Payment Instructions      85         (r)     
Blocked Accounts      85         (s)      Consents      85         (t)      No
Material Adverse Change      85         (u)      Leasehold Agreements      85   
     (v)      Guarantees and Other Documents      85         (w)      Contract
Review      85         (x)      Closing Certificate      85         (y)     
Borrowing Base      86         (z)      Undrawn Availability      86        
(aa)      Compliance with Laws      86         (bb)      Other      86   

8.2.

     Conditions to Each Advance      86         (a)      Representations and
Warranties      86         (b)      No Default      87         (c)      Maximum
Advances      87   

 

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ARTICLE IX INFORMATION AS TO BORROWERS      87   

9.1.

     Disclosure of Material Matters      87   

9.2

     Schedules      87   

9.3.

     Environmental Reports      88   

9.4.

     Litigation      88   

9.5.

     Material Occurrences      88   

9.6.

     Government Receivables      89   

9.7.

     Annual Financial Statements of Borrowers and Guarantor      89   

9.8.

     Quarterly Financial Statements of Guarantor      89   

9.9.

     Monthly Financial Statements of Borrowers      89   

9.10.

     Other Reports      90   

9.11.

     Additional Information      90   

9.12.

     Projected Operating Budget      90   

9.13.

     Variances From Operating Budget      90   

9.14.

     Notice of Suits, Adverse Events      90   

9.15.

     ERISA Notices and Requests      91   

9.16.

     Additional Documents      91    ARTICLE X EVENTS OF DEFAULT      92   

10.1.

     Nonpayment      92   

10.2.

     Breach of Representation      92   

10.3.

     Financial Information      92   

10.4.

     Judicial Actions      92   

10.5

     Noncompliance      92   

10.6.

     Judgments      93   

10.7.

     Bankruptcy      93   

10.8.

     Inability to Pay      93   

10.9.

     Reserved      93   

10.10.

     Material Adverse Effect      93   

10.11.

     Lien Priority      93   

10.12.

     Cross Default      94   

10.13.

     Breach of Guaranty      94   

10.14.

     Change of Ownership or Change of Control      94   

10.15.

     Invalidity      94   

10.16.

     Licenses      94   

10.17.

     Seizures      95   

10.18.

     Operations      95   

10.19.

     Pension Plans      95    ARTICLE XI LENDERS’ RIGHTS AND REMEDIES AFTER
DEFAULT      95   

11.1.

     Rights and Remedies      95   

11.2.

     Agent’s Discretion      97   

11.3.

     Setoff      97   

11.4.

     Rights and Remedies not Exclusive      97   

11.5.

     Allocation of Payments After Event of Default      97   

 

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ARTICLE XII WAIVERS AND JUDICIAL PROCEEDINGS      99   

12.1.

     Waiver of Notice      99   

12.2.

     Delay      99   

12.3.

     Jury Waiver      99    ARTICLE XIII EFFECTIVE DATE AND TERMINATION      100
  

13.1.

     Term      100   

13.2.

     Termination      100   

ARTICLE XIV REGARDING AGENT

     101   

14.1.

     Appointment      101   

14.2.

     Nature of Duties      101   

14.3.

     Lack of Reliance on Agent and Resignation      102   

14.4.

     Certain Rights of Agent      102   

14.5.

     Reliance      103   

14.6.

     Notice of Default      103   

14.7.

     Indemnification      103   

14.8.

     Agent in its Individual Capacity      103   

14.9.

     Delivery of Documents      104   

14.10.

     Borrowers’ Undertaking to Agent      104   

14.11.

     No Reliance on Agent’s Customer Identification Program      104   

14.12.

     Other Agreements      104    ARTICLE XV MISCELLANEOUS      105   

15.1.

     Governing Law      105   

15.2.

     Entire Understanding      105   

15.3.

     Successors and Assigns; Participations; New Lenders      108   

15.4.

     Application of Payments      110   

15.5.

     Indemnity      110   

15.6

     Notice      111   

15.7.

     Survival      112   

15.8.

     Severability      113   

15.9.

     Expenses      113   

15.10.

     Injunctive Relief      113   

15.11.

     Consequential Damages      113   

15.12.

     Captions      113   

15.13.

     Counterparts; Facsimile Signatures      114   

15.14.

     Construction      114   

15.16.

     Publicity      115   

15.17.

     Certifications From Banks and Participants; USA PATRIOT Act      115   

15.18.

     Concerning Joint and Several Liability of Borrowers      115   

15.19.

     Delegation of Authority      117   

 

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List of Exhibits and Schedules

Exhibits

 

Exhibit 1.2    Borrowing Base Certificate Exhibit 1.2(a)    Compliance
Certificate Exhibit 2.1(a)    Revolving Credit Note Exhibit 5.5(b)    Financial
Projections Exhibit 8.1(k)    Financial Condition Certificate Exhibit 15.3   
Commitment Transfer Supplement Schedules    Schedule 1.2    Permitted
Encumbrances Schedule 4.5    Equipment and Inventory Locations; Places of
Business;    Chief Executive Offices; Locations of Real Property
Schedule 4.15(h)    Deposit and Investment Accounts Schedule 5.1    Consents
Schedule 5.2(a)    States of Formation, Qualification and Good Standing
Schedule 5.2(b)    Subsidiaries; Ownership Schedule 5.4    Federal Tax
Identification Number Schedule 5.6    Other Names; Mergers, Acquisitions, Etc.
Schedule 5.8(d)    Plans Schedule 5.9    Intellectual Property; Source Code
Escrow Agreements;    Challenges to Use Schedule 5.14    Labor Disputes Schedule
5.28    Material Contracts Schedule 7.8    Indebtedness

 

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REVOLVING CREDIT

AND

SECURITY AGREEMENT

Revolving Credit and Security Agreement dated as of July 25, 2011 among SOFTWARE
BROKERS OF AMERICA, INC., a Florida corporation (the “Company”), and each of the
other Persons identified on the signature pages hereto as a Borrower and any
other Person which may become a Borrower hereunder pursuant to Section 7.12
(together with the Company, the “Borrowers” and each individually a “Borrower”),
the financial institutions which are now or which hereafter become a party
hereto (collectively, the “Lenders” and individually a “Lender”) and PNC BANK,
NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity, the
“Agent”).

IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrowers, Lenders and Agent hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Accounting Terms.

All accounting terms not specifically or completely defined herein shall be
construed in conformity with, and all financial data (including financial ratios
and other financial calculations) required to be submitted pursuant to this
Agreement shall be prepared in conformity with, GAAP applied on a consistent
basis, as in effect from time to time, except as otherwise specifically
prescribed herein. If at any time any change in GAAP would affect the
computation of any financial ratio or requirement set forth in this Agreement or
any Other Document, and either Borrowers or the Required Lenders shall so
request, Agent, Lenders and Borrowers shall negotiate in good faith to amend
such ratio or requirement to preserve the original intent thereof in light of
such change in GAAP (subject to the approval of the Required Lenders); provided
that, until so amended, (i) such ratio or requirement shall continue to be
computed in accordance with GAAP prior to such change therein and (ii) Borrowers
shall provide to Agent and the Lenders financial statements and other documents
required under this Agreement or any Other Document or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.

1.2. General Terms.

For purposes of this Agreement the following terms shall have the following
meanings:

“Accountants” shall have the meaning set forth in Section 9.7 hereof.

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“Advance Rates” shall mean, collectively, the Receivables Advance Rate and the
Inventory Advance Rate.

“Advances” shall mean and include the Revolving Advances and the Letters of
Credit.

“Affiliate” of any Person shall mean (a) any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director, managing member, general
partner or executive officer (i) of such Person, (ii) of any Subsidiary of such
Person or (iii) of any Person described in clause (a) above. For purposes of
this definition, control of a Person shall mean the power, direct or indirect,
(x) to vote 10% or more of the Equity Interests having ordinary voting power for
the election of directors of such Person or other Persons performing similar
functions for any such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by ownership of Equity Interests,
contract or otherwise.

“Agent” shall have the meaning set forth in the preamble to this Agreement and
shall include its successors and assigns.

“Agreement” shall mean this Revolving Credit and Security Agreement, as the same
may be amended, restated, supplemented or otherwise modified from time to time.

“Alternate Base Rate” shall mean, for any day, a rate per annum equal to the
highest of (i) the Base Rate in effect on such day, (ii) the Federal Funds Open
Rate in effect on such day plus 1/2 of 1% and (iii) the Daily LIBOR Rate plus
1%.

“Alternate Source” shall have the meaning set forth therefor in the definition
of Federal Funds Open Rate.

“Alternative Source” shall have the meaning set forth therefor in the definition
of Eurodollar Rate.

“Anti-Terrorism Laws” shall mean any Applicable Laws relating to terrorism or
money laundering, including Executive Order No.13224, the USA PATRIOT Act, the
Applicable Laws comprising or implementing the Bank Secrecy Act, and the
Applicable Laws administered by the United States Treasury Department’s Office
of Foreign Asset Control (as any of the foregoing Applicable Laws may from time
to time be amended, renewed, extended, or replaced).

“Applicable Law” shall mean all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant, Other Document or contract in question,
including all applicable common law and equitable principles; all provisions of
all applicable state, federal and foreign constitutions, statutes, rules,
regulations, treaties, directives and orders of any Governmental Body, and all
orders, judgments and decrees of all courts and arbitrators.

 

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“Applicable Margin” for Revolving Advances shall mean, as of the Closing Date
and thereafter until the first Adjustment Date, the applicable percentage
specified below:

 

APPLICABLE MARGINS FOR
DOMESTIC RATE LOANS

  APPLICABLE MARGINS FOR
EURODOLLAR RATE LOANS 0.50%   2.75%

Thereafter, effective as of the first Business Day following receipt by Agent of
the annual financial statements of Borrowers and the annual financial statements
of Guarantor for the fiscal year ending December 31, 2011 required under
Section 9.7, and thereafter upon receipt of the monthly or quarterly,
respectively, financial statements of Borrowers and Guarantor, respectively, at
the end of each fiscal quarter required by Section 9.9 or 9.8, respectively,
(each day of such delivery, an “Adjustment Date”), the Applicable Margin for
each type of Advance shall be adjusted, if necessary, to the applicable percent
per annum set forth in the pricing table set forth below corresponding to the
lower of the Fixed Charge Coverage Ratio and the Guarantor Fixed Charge Coverage
Ratio for the trailing twelve month period ending on the last day of the most
recently completed fiscal quarter prior to the applicable Adjustment Date (each
such period, a “Calculation Period”):

 

LOWER OF FIXED CHARGE
COVERAGE RATIO AND
GUARANTOR FIXED CHARGE
COVERAGE RATIO

  APPLICABLE MARGINS
FOR DOMESTIC RATE
LOANS   APPLICABLE MARGINS
FOR EURODOLLAR RATE
LOANS Less than 1.50 to 1.00   0.50%   2.75% Greater than or equal to 1.50 to
1.00 but less than 1.75 to 1.00   0.25%   2.50% Greater than or equal to 1.75 to
1.00   0%   2.25%

If Borrowers shall either fail to deliver Borrowers’ financial statements
certificates and/or other information required under Sections 9.7 or 9.9 (for
monthly financial statements at the end of each fiscal quarter only) or fail to
cause the delivery of Guarantor’s financial statements, certificates and/or
other information required under Sections 9.7 or 9.8 by the dates required
pursuant to Sections 9.7-9.9, each Applicable Margin shall be conclusively
presumed to equal the highest Applicable Margin specified in the pricing table
set forth above until the date of delivery of all such financial statements,
certificates and/or other information, at which time the rate will be adjusted
based upon the lower of the Fixed Charge Coverage Ratio and the Guarantor Fixed
Charge Coverage Ratio reflected in such statements.

If, as a result of any restatement of, or other adjustment to, the financial
statements of Borrowers or Guarantor or for any other reason other than as the
result of an error or omission by Agent, Agent determines that (a) the Fixed
Charge Coverage Ratio or the Guarantor Fixed Charge Coverage Ratio as previously
calculated as of any applicable date was inaccurate, and (b) a proper
calculation of the Fixed Charge Coverage Ratio and the Guarantor Fixed Charge

 

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Coverage Ratio would have resulted in different pricing for any period, then
(i) if the proper calculation of the Fixed Charge Coverage Ratio and the
Guarantor Fixed Charge Coverage Ratio would have resulted in higher pricing for
such period, Borrowers shall automatically and retroactively be deemed to pay to
Agent, promptly upon demand by Agent, an amount equal to the excess of the
amount of interest that should have been paid for such period (not to exceed the
amount of interest for sixty (60) days) over the amount of interest actually
paid for such period; and (ii) if the proper calculation of the Fixed Charge
Coverage Ratio and the Guarantor Fixed Charge Coverage Ratio would have resulted
in lower pricing for such period, Lenders shall have no obligation to repay
interest to Borrowers unless Borrowers provide written notice within thirty (30)
days of the restatement of or adjustment to the financial statements that a
lower interest should have been charged and Agent verifies that the lower
interest rate should have been in effect then Lenders will repay up to
sixty (60) days excess interest to Borrowers; provided, that, if as a result of
any restatement or other event a proper calculation of the Fixed Charge Coverage
Ratio and the Guarantor Fixed Charge Coverage Ratio would have resulted in
higher pricing for one or more periods and lower pricing for one or more other
periods (due to the shifting of income or expenses from one period to another
period or any similar reason), then the amount payable by Borrowers pursuant to
clause (i) above shall be based upon the excess, if any, of the amount of
interest that should have been paid for all applicable periods over the amounts
of interest actually paid for such periods.

“Authority” shall have the meaning set forth in Section 4.19(d).

“Base Rate” shall mean the base commercial lending rate of PNC as publicly
announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.

“Blocked Accounts” shall have the meaning set forth in Section 4.15(h).

“Blocked Account Bank” shall have the meaning set forth in Section 4.15(h).

“Blocked Person” shall have the meaning set forth in Section 5.23(b) hereof.

“Borrower” or “Borrowers” shall have the meaning set forth in the preamble to
this Agreement and shall extend to all permitted successors and assigns of such
Person.

“Borrowers’ Account” shall have the meaning set forth in Section 2.8.

“Borrowing Base Certificate” shall mean a certificate in substantially the form
of Exhibit 1.2 duly executed by the President, Chief Financial Officer or
Controller of Borrowers and delivered to Agent, appropriately completed, by
which such officer shall certify to Agent the Formula Amount and calculation
thereof as of the date of such certificate.

“Business Day” shall mean any day other than Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed
for business in East Brunswick, New Jersey and, if the applicable Business Day
relates to any Eurodollar Rate Loans, such day must also be a day on which
dealings are carried on in the London interbank market.

 

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“Capital Expenditures” shall mean expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements, replacements, substitutions
or additions thereto which have a useful life of more than one year, including
the total principal portion of Capitalized Lease Obligations, which in
accordance with GAAP, would be classified as capital expenditures.

“Capital Stock” shall mean (i) in the case of a corporation, capital stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability company,
membership interests and (v) any other equity interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.

“Capitalized Lease Obligation” shall mean any Indebtedness of any Borrower
represented by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.

“Cash Management Products” shall mean any one or more of the following types of
services or facilities extended to any of Borrowers by Agent, any Lender or any
Affiliate of Agent or a Lender in reliance on Agent’s or such Lender’s agreement
to indemnify such Affiliate: (i) Automated Clearing House (ACH) transactions and
other similar money transfer services; (ii) cash management, including
controlled disbursement and lockbox services; (iii) establishing and maintaining
deposit accounts; and (iv) credit cards or stored value cards.

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.

“Change of Control” shall mean (a) the occurrence of any event (whether in one
or more transactions) which results in a transfer of control of any Borrower to
a Person who is not an Original Owner or (b) any merger or consolidation of or
with any Borrower (other than a merger or consolidation permitted under
Section 7.1(a)) or sale of all or substantially all of the property or assets of
any Borrower (other than a sale permitted under Section 7.1(a)). For purposes of
this definition, “control of any Borrower” shall mean the power, direct or
indirect (x) to vote 50% or more of the Equity Interests having ordinary voting
power for the election of directors (or the individuals performing similar
functions) of any Borrower or (y) to direct or cause the direction of the
management and policies of any Borrower by contract or otherwise.

“Change of Ownership” shall mean (a) 50% or more of the Equity Interests of any
Borrower is no longer owned or controlled by (including for the purposes of the
calculation of percentage ownership, any Equity Interests into which any Equity
Interests of any Borrower held by any of the Original Owners are convertible or
for which any such Equity Interests of any Borrower or of any other Person may
be exchanged and any Equity Interests issuable to such Original Owners upon
exercise of any warrants, options or similar rights which may at the time

 

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of calculation be held by such Original Owners) Persons who are Original Owners
or (b) any merger, consolidation or sale of substantially all of the property or
assets of any Borrower (other than any merger or consolidation with or sale
permitted under Section 7.1(a)).

“Charges” shall mean all taxes, charges, fees, imposts, levies or other
assessments, including all net income, gross income, gross receipts, sales, use,
ad valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation and property taxes, custom duties, fees,
assessments, liens, claims and charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts, imposed by
any taxing or other authority, domestic or foreign (including the Pension
Benefit Guaranty Corporation or any environmental agency or superfund), upon the
Collateral, any Borrower or any of its Affiliates.

“Closing Date” shall mean July 25, 2011 or such other date as may be agreed to
by the parties hereto.

“Code” shall mean the Internal Revenue Code of 1986, as the same may be amended
or supplemented from time to time, and any successor statute of similar import,
and the rules and regulations thereunder, as from time to time in effect.

“Collateral” shall mean and include:

(a) all Receivables;

(b) all Equipment;

(c) all General Intangibles;

(d) all Inventory;

(e) all Investment Property;

(f) all Subsidiary Stock;

(g) all of each Borrower’s right, title and interest in and to, whether now
owned or hereafter acquired and wherever located, (i) its respective goods and
other property including, but not limited to, all merchandise returned or
rejected by Customers, relating to or securing any of the Receivables; (ii) all
of each Borrower’s rights as a consignor, a consignee, an unpaid vendor,
mechanic, artisan, or other lienor, including stoppage in transit, setoff,
detinue, replevin, reclamation and repurchase; (iii) all additional amounts due
to each Borrower from any Customer relating to the Receivables; (iv) other
property, including warranty claims, relating to any goods securing the
Obligations; (v) all of each Borrower’s contract rights, rights of payment which
have been earned under a contract right, instruments (including promissory
notes), documents, chattel paper (including electronic chattel paper), warehouse
receipts, deposit accounts, letters of credit and money; (vi) each commercial
tort claim in existence as of the date

 

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hereof and in which a security interest is hereafter granted to Agent by a
Borrower pursuant to the provision of Section 4.1 or otherwise; (vii) if and
when obtained by any Borrower, all real and personal property of third parties
in which any Borrower has been granted a lien or security interest as security
for the payment or enforcement of Receivables; (viii) all letter of credit
rights (whether or not the respective letter of credit is evidenced by a
writing); (ix) all supporting obligations; and (x) any other goods, personal
property or real property now owned or hereafter acquired in which any Borrower
has expressly granted a security interest or may in the future grant a security
interest to Agent hereunder, or in any amendment or supplement hereto or
thereto, or under any other agreement between Agent and any Borrower;

(h) all of each Borrower’s ledger sheets, ledger cards, files, correspondence,
records, books of account, business papers, computers, computer software (owned
by such Borrower or in which it has an interest), computer programs, tapes,
disks and documents relating to (a), (b), (c), (d), (e), (f) or (g) of this
Paragraph;

(i) all of each Borrower’s cash and cash equivalents;

(j) all proceeds and products of (a), (b), (c), (d), (e), (f), (g), (h) and
(i) in whatever form, including, but not limited to: cash, deposit accounts
(whether or not comprised solely of proceeds), certificates of deposit,
insurance proceeds (including hazard, flood and credit insurance), negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements, documents, eminent domain proceeds, condemnation proceeds
and tort claim proceeds. and

(k) all other tangible and intangible property that is described as being part
of the Collateral pursuant to one or more Riders to Credit Agreement that may be
delivered in connection herewith, including the Riders to Credit
Agreement-Trademarks.

“Commitment Percentage” shall mean for any Lender party to this Agreement on the
Closing Date, the percentage set forth below such Lender’s name on the signature
page hereof as same may be adjusted upon any assignment by a Lender pursuant to
Section 15.3(c) or (d) hereof, and for any Lender that becomes a party to this
Agreement pursuant to a Commitment Transfer Supplement or a Modified Commitment
Transfer Supplement, the percentage set forth in Schedule 1 to such Commitment
Transfer Supplement or Modified Commitment Transfer Supplement, as applicable.

“Commitment Transfer Supplement” shall mean a document in the form of
Exhibit 15.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.

“Company” shall have the meaning set forth in the preamble to this Agreement.

“Compliance Certificate” shall mean a compliance certificate substantially in
the form of Exhibit 1.2(a) to be signed by the President, Chief Financial
Officer or Controller of the

 

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Company, which shall state that, based on an examination sufficient to permit
such officer to make an informed statement, (i) no Default or Event of Default
exists, or if such is not the case, specifying such Default or Event of Default,
its nature, when it occurred, whether it is continuing and the steps being taken
by Borrowers with respect to such default and, such certificate shall have
appended thereto calculations which set forth Borrowers’ compliance with the
requirements or restrictions imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8
and 7.11, and (ii) that to the best of such officer’s knowledge, Borrowers are
in compliance in all material respects with all federal, state and local
Environmental Laws, or if such is not the case, specifying all areas of
non-compliance and the proposed action Borrowers will implement in order to
achieve full compliance.

“Consents” shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Bodies and
other third parties, domestic or foreign, necessary to carry on Borrowers’
business or necessary (including to avoid a conflict or breach under any
agreement, instrument, other document, license, permit or other authorization)
for the execution, delivery or performance of this Agreement, the Other
Documents, including any Consents required under all applicable federal, state
or other Applicable Law.

“Consigned Inventory” shall mean Inventory of any Borrower that is in the
possession of another Person on a consignment, sale or return, or other basis
that does not constitute a final sale and acceptance of such Inventory.

“Consolidated” or “consolidated” with reference to any term defined herein,
shall mean that term as applied to the accounts of the Relevant Parties,
consolidated in accordance with GAAP.

“Consolidated EBITDA” shall mean, for any period, for the Relevant Parties, the
sum of (i) Consolidated Net Income for such period, plus (ii) all Consolidated
Interest Expense for such period, plus (iii) all accrued charges against income
for such period for federal, state and local taxes, plus (iv) depreciation
expenses for such period, plus (v) amortization expenses for such period, plus
(vi) any extraordinary, unusual or non-recurring non-cash expenses or losses
(including non-cash losses on sales of assets outside of the Ordinary Course of
Business) during such period, plus (vii) any non-cash expenses consisting of the
write-off of IPO costs, restricted stock and option expense, bad debt expense
and inventory obsolescence, plus (viii) foreign currency translation losses
recorded during such period, minus (ix) any extraordinary, unusual or
non-recurring non-cash income or gains (including gains on the sales of assets
outside of the Ordinary Course of Business) during such period, minus (x) any
non-cash income, minus (xi) foreign currency translation gains recorded during
such period, in each case, only to the extent included in the statement of
Consolidated Net Income for such period.

“Consolidated Interest Expense” shall mean for any period interest expense, net
of cash interest income, in each case of the Relevant Parties for such period,
as determined in accordance with GAAP.

 

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“Consolidated Net Income” shall mean for any period, the consolidated net income
(or loss) of the Relevant Parties, determined on a consolidated basis in
accordance with GAAP; provided, that there shall be excluded (a) the income (or
deficit) of any Person accrued prior to the date it becomes a Subsidiary of the
Relevant Parties or is merged into or consolidated with the Relevant Parties or
any of their Subsidiaries, (b) the net income (or deficit) of any Person (other
than a Subsidiary of the Relevant Parties) in which any Relevant Party has an
ownership interest, except to the extent that any such income is actually
received by the Relevant Parties in the form of dividends or similar
distributions and (c) the undistributed earnings of any Subsidiary of any
Relevant Party to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is at the time prohibited by the terms
of any agreement to which such Person is a party or by which it or any of its
property is bound, any of such Person’s organizational documents or other legal
proceedings binding upon such Person or any of its property or to which such
Person or any of its property is subject.

“Contract Rate” has the meaning set forth in Section 3.1.

“Controlled Group” shall mean, at any time, as to each Borrower and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control and all other entities which, together
with such Borrower, are treated as a single employer under Section 414 of the
Code.

“Customer” shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Borrower,
pursuant to which such Borrower is to deliver any personal property or perform
any services.

“Customs” shall have the meaning set forth in Section 2.11(b) hereof.

“Daily LIBOR Rate” shall mean, for any day, the rate per annum determined by
Agent by dividing (x) the Published Rate by (y) a number equal to 1.00 minus the
percentage prescribed by the Federal Reserve for determining the maximum reserve
requirements with respect to any eurocurrency funding by banks on such day.

“Default” shall mean an event, circumstance or condition which, with the giving
of notice or passage of time or both, would constitute an Event of Default.

“Default Rate” shall have the meaning set forth in Section 3.1 hereof.

“Defaulting Lender” shall have the meaning set forth in Section 2.23(a) hereof.

“Depository Accounts” shall have the meaning set forth in Section 4.15(h)
hereof.

“Designated Lender” shall have the meaning set forth in Section 15.2(b) hereof.

“Documents” shall have the meaning set forth in Section 8.1(c) hereof.

 

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“Dollar” and the sign “$” shall mean lawful money of the United States of
America.

“Domestic Rate Loan” shall mean any Advance that bears interest based upon the
Alternate Base Rate.

“Domestic Subsidiaries” shall mean, with respect to any Person, any Subsidiary
of such Person which is incorporated or organized under the laws of any state of
the United States or the District of Columbia.

“Drawing Date” shall have the meaning set forth in Section 2.12(b) hereof.

“Early Termination Date” shall have the meaning set forth in Section 13.1
hereof.

“Eligible Inventory” shall mean and include Inventory, excluding work in
process, valued at the lower of cost or market value, determined on a
first-in-first-out basis, which is not, in Agent’s opinion, obsolete, slow
moving or unmerchantable and which Agent, in its reasonable credit judgment
exercised in good faith, shall not deem ineligible Inventory, based on such
considerations as Agent may from time to time deem appropriate including whether
the Inventory is subject to a perfected, first priority security interest in
favor of Agent and no other Lien (other than a Permitted Encumbrance). In
addition, Inventory shall not be Eligible Inventory if it (i) does not conform
to all standards imposed by any Governmental Body which has regulatory authority
over such goods or the use or sale thereof; (ii) is located outside the
continental United States (except in-transit Inventory in compliance with this
Agreement) or at a location that is not otherwise in compliance with this
Agreement; (iii) constitutes Consigned Inventory; (iv) is the subject of an
Intellectual Property Claim; (v) is subject to a License Agreement or other
agreement that limits, conditions or restricts any Borrower’s or Agent’s right
to sell or otherwise dispose of such Inventory, unless Agent is a party to a
Licensor/Agent Agreement with the Licensor under such License Agreement; or
(vi) is situated at a location not owned by any Borrower unless the owner or
occupier of such location has executed in favor of Agent a Lien Waiver
Agreement. Eligible Inventory shall include all Inventory in-transit for which
title has passed to any Borrower, which is insured to the full value thereof and
for which Agent shall have in its possession (a) all negotiable bills of lading
properly endorsed and (b) all non-negotiable bills of lading issued in Agent’s
name.

“Eligible Receivables” shall mean and include with respect to each Borrower,
each Receivable of such Borrower arising in the Ordinary Course of Business and
which Agent, in its reasonable credit judgment exercised in good faith, shall
deem to be an Eligible Receivable, based on such considerations as Agent may
from time to time deem appropriate. A Receivable shall not be deemed eligible
unless such Receivable is subject to Agent’s first priority perfected security
interest and no other Lien (other than Permitted Encumbrances), and is evidenced
by an invoice or other documentary evidence satisfactory to Agent. In addition,
no Receivable shall be an Eligible Receivable if:

(a) it arises out of a sale made by any Borrower to an Affiliate of any Borrower
or to a Person controlled by an Affiliate of any Borrower;

 

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(b) it is due or unpaid more than one hundred twenty (120) days after the
original invoice date not to exceed sixty (60) days past due for domestic
Receivables;

(c) it is due or unpaid more than one hundred twenty (120) days after the
original invoice date not to exceed sixty (60) days past due for foreign
Receivables;

(d) fifty percent (50%) or more of all the Receivables from such Customer are
not deemed Eligible Receivables hereunder;

(e) any covenant, representation or warranty contained in this Agreement with
respect to such Receivable has been breached;

(f) the Customer shall (i) apply for, suffer, or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property or call a meeting of its
creditors, (ii) admit in writing its inability, or be generally unable, to pay
its debts as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vii) acquiesce to, or fail to have dismissed, any petition which is filed
against it in any involuntary case under such bankruptcy laws, or (viii) take
any action for the purpose of effecting any of the foregoing;

(g) the sale is to a Customer outside the continental United States of America
or Canada, unless the Receivable (or the portion thereof that is to be an
Eligible Receivable) is fully backed by satisfactory insurance coverage or the
sale is on letter of credit, Guaranty or acceptance terms, in each case
acceptable to Agent in its reasonable credit judgment exercised in good faith;

(h) the sale to the Customer is on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return
basis or is evidenced by chattel paper;

(i) the Customer is the United States of America, any state or any department,
agency or instrumentality of any of them, unless the applicable Borrower assigns
its right to payment of such Receivable to Agent pursuant to the Assignment of
Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and
41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other
applicable statutes or ordinances;

(j) the goods giving rise to such Receivable have not been delivered to and
accepted by the Customer or the services giving rise to such Receivable have not
been performed by the applicable Borrower and accepted by the Customer or the
Receivable otherwise does not represent a final sale;

 

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(k) the Receivables of the Customer exceed a credit limit determined by Agent,
in its sole credit judgment exercised in good faith, to the extent such
Receivable exceeds such limit;

(l) the Receivable is subject to any offset, deduction, defense, dispute, or
counterclaim (but only as to that portion of the Receivable subject to such
offset, deduction, defense, dispute or counterclaim), the Customer is also a
creditor or supplier of the applicable Borrower (but only as to that portion of
the Receivable that does not exceed the amount owed by the applicable Borrower
to such creditor or supplier) or the Receivable is contingent in any respect or
for any reason;

(m) the applicable Borrower has made any agreement with any Customer for any
deduction therefrom (but only as to the amount of any such deduction), except
for discounts or allowances made in the Ordinary Course of Business for prompt
payment, all of which discounts or allowances are reflected in the calculation
of the face value of each respective invoice related thereto;

(n) any return, rejection or repossession of the merchandise has occurred or the
rendition of services has been disputed;

(o) such Receivable is not payable to the applicable Borrower; or

(p) such Receivable is not otherwise satisfactory to Agent as determined in good
faith by Agent in the exercise of its discretion in its reasonable credit
judgment exercised in good faith.

“Environmental Complaint” shall have the meaning set forth in Section 4.19(d)
hereof.

“Environmental Laws” shall mean all federal, state and local environmental, land
use, zoning, health, chemical use, safety and sanitation laws, statutes,
ordinances and codes relating to the protection of the environment and/or
governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of federal, state and local governmental agencies and authorities
with respect thereto.

“Equipment” shall mean and include all of each Borrower’s goods (other than
Inventory) whether now owned or hereafter acquired and wherever located
including all equipment, machinery, apparatus, motor vehicles, fittings,
furniture, furnishings, fixtures, parts, accessories and all replacements and
substitutions therefor or accessions thereto.

“Equity Interests” of any Person shall mean any and all shares, rights to
purchase, options, warrants, general, limited or limited liability partnership
interests, member interests, participation or other equivalents of or interest
in (regardless of how designated) equity of such Person, whether voting or
nonvoting, including common stock, preferred stock, convertible securities or
any other “equity security” (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).

 

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“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.

“Eurodollar Rate” shall mean for any Eurodollar Rate Loan for the then current
Interest Period relating thereto the interest rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) determined by Agent by dividing
(i) the rate which appears on the Bloomberg Page BBAM1 (or on such other
substitute Bloomberg page that displays rates at which U.S. dollar deposits are
offered by leading banks in the London interbank deposit market), or the rate
which is quoted by another source selected by Agent which has been approved by
the British Bankers’ Association as an authorized information vendor for the
purpose of displaying rates at which U.S. dollar deposits are offered by leading
banks in the London interbank deposit market (an “Alternative Source”), at
approximately 11:00 a.m., London time two (2) Business Days prior to the first
day of such Interest Period (or if there shall at any time, for any reason, no
longer exist a Bloomberg Page BBAM1 (or any substitute page) or any Alternative
Source, a comparable replacement rate determined by Agent at such time (which
determination shall be conclusive absent manifest error)) for an amount
comparable to such Eurodollar Rate Loan and having a borrowing date and a
maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus
the Reserve Percentage.

The Eurodollar Rate shall be adjusted with respect to any Eurodollar Rate Loan
that is outstanding on the effective date of any change in the Reserve
Percentage as of such effective date. Agent shall give prompt notice to
Borrowers of the Eurodollar Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive absent manifest error.

“Eurodollar Rate Loan” shall mean an Advance at any time that bears interest
based on the Eurodollar Rate.

“Event of Default” shall have the meaning set forth in Article X hereof.

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

“Executive Order No. 13224” shall mean the Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001, as the same has been, or
shall hereafter be, renewed, extended, amended or replaced.

“Federal Funds Effective Rate” for any day shall mean the rate per annum (based
on a year of 360 days and actual days elapsed and rounded upward to the nearest
1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the “Federal Funds
Effective Rate” as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
“Federal Funds Effective Rate” for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.

 

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“Federal Funds Open Rate” for any day shall mean the rate per annum (based on a
year of 360 days and actual days elapsed) which is the daily federal funds open
rate as quoted by ICAP North America, Inc. (or any successor) as set forth on
the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such
other substitute Bloomberg Screen that displays such rate), or as set forth on
such other recognized electronic source used for the purpose of displaying such
rate as selected by PNC (an “Alternate Source”) (or if such rate for such day
does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on
any Alternate Source, or if there shall at any time, for any reason, no longer
exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate
Source, a comparable replacement rate determined by the PNC at such time (which
determination shall be conclusive absent manifest error); provided however, that
if such day is not a Business Day, the Federal Funds Open Rate for such day
shall be the “open” rate on the immediately preceding Business Day. If and when
the Federal Funds Open Rate changes, the rate of interest with respect to any
advance to which the Federal Funds Open Rate applies will change automatically
without notice to Borrowers, effective on the date of any such change.

“Fixed Charge Coverage Ratio” shall mean and include, with respect to any fiscal
period, the ratio of (a) Consolidated EBITDA for such period minus Unfinanced
Capital Expenditures made during such fiscal period minus cash taxes paid by
Borrowers during such fiscal period minus any cash dividends or distributions
made by Borrowers during such period to (b) all Senior Debt Payments.

“Foreign Subsidiary” of any Person, shall mean any Subsidiary of such Person
that is not organized or incorporated in the United States or any State or
territory thereof.

“Formula Amount” shall have the meaning set forth in Section 2.1(a).

“GAAP” shall mean generally accepted accounting principles in the United States
of America in effect from time to time.

“General Intangibles” shall mean and include all of each Borrower’s general
intangibles, whether now owned or hereafter acquired, including all payment
intangibles, all choses in action, causes of action, corporate or other business
records, inventions, designs, patents, patent applications, equipment
formulations, manufacturing procedures, quality control procedures, trademarks,
trademark applications, service marks, trade secrets, goodwill, copyrights,
design rights, software, computer information, source codes, codes, records and
updates, registrations, licenses, franchises, customer lists, tax refunds, tax
refund claims, computer programs, all claims under guaranties, security
interests or other security held by or granted to such Borrower to secure
payment of any of the Receivables by a Customer (other than to the extent
covered by Receivables) all rights of indemnification and all other intangible
property of every kind and nature (other than Receivables).

“Governmental Acts” shall have the meaning set forth in Section 2.17.

 

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“Governmental Body” shall mean any nation or government, any state or other
political subdivision thereof or any entity, authority, agency, division or
department exercising the legislative, judicial, regulatory or administrative
functions of or pertaining to a government.

“Guarantor” shall mean Intcomex, Intcomex Holdings, and any other Person who may
hereafter guarantee payment or performance of the whole or any part of the
Obligations and “Guarantors” means collectively all such Persons.

“Guarantor Fixed Charge Coverage Ratio” shall mean and include, with respect to
any fiscal period, the ratio of (a) Consolidated EBITDA for such period minus
Unfinanced Capital Expenditures made during such fiscal period minus cash taxes
paid by the Relevant Parties during such fiscal period minus any cash dividends
or distributions made by the Relevant Parties during such period minus
management fees paid by the Relevant Parties during such fiscal period to
(b) all Senior Debt Payments.

“Guarantor Security Agreement” shall mean any Security Agreement executed by any
Guarantor in favor of Agent securing the Guaranty of such Guarantor, in form and
substance satisfactory to Agent.

“Guaranty” shall mean any guaranty of the obligations of Borrowers executed by a
Guarantor in favor of Agent for its benefit and for the ratable benefit of
Lenders, in form and substance satisfactory to Agent.

“Hazardous Discharge” shall have the meaning set forth in Section 4.19(d)
hereof.

“Hazardous Substance” shall mean, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, Hazardous Wastes, hazardous or Toxic Substances or related materials
as defined in CERCLA, the Hazardous Materials Transportation Act, as amended
(49 U.S.C. Sections 1801, et seq.), RCRA or any other applicable Environmental
Law and in the regulations adopted pursuant thereto.

“Hazardous Wastes” shall mean all waste materials subject to regulation under
CERCLA, RCRA or applicable state law, and any other applicable Federal and state
laws now in force or hereafter enacted relating to hazardous waste disposal.

“Hedge Liabilities” shall have the meaning provided in the definition of
“Lender-Provided Interest Rate Hedge”.

“Increased Tax Burden” shall mean the additional federal, state or local taxes
assumed to be payable by a member of a Borrower as a result of such Borrower’s
status as a limited liability company as evidenced and substantiated by the tax
returns filed by such Borrower as a limited liability company, with such taxes
being calculated for all members at the highest marginal rate applicable to any
member.

 

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“Indebtedness” of a Person at a particular date shall mean all obligations of
such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
indebtedness, debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required prepayment
dates of such indebtedness, and all indebtedness secured by a Lien on assets
owned by such Person, whether or not such indebtedness actually shall have been
created, assumed or incurred by such Person. Any indebtedness of such Person
resulting from the acquisition by such Person of any assets subject to any Lien
shall be deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or not
actually so created, assumed or incurred.

“Indenture” shall mean the Indenture dated December 22, 2009 between the
Guarantor, the Borrowers as guarantors, and The Bank of New York Mellon, N.A.,
as trustee.

“Ineligible Security” shall mean any security which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of the
Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.

“Intcomex” shall mean Intcomex, Inc., a Delaware corporation.

“Intcomex Holdings” shall mean Intcomex Holdings, LLC, a Delaware limited
liability company.

“Intellectual Property” shall mean property constituting under any Applicable
Law a patent, patent application, copyright, trademark, service mark, trade
name, mask work, trade secret or license or other right to use any of the
foregoing.

“Intellectual Property Claim” shall mean the assertion by any Person of a claim
(whether asserted in writing, by action, suit or proceeding or otherwise) that
any Borrower’s ownership, use, marketing, sale or distribution of any Inventory,
Equipment, Intellectual Property or other property or asset is violative of any
ownership of or right to use any Intellectual Property of such Person.

“Interest Period” shall mean the period provided for any Eurodollar Rate Loan
pursuant to Section 2.2(b).

“Interest Rate Hedge” shall mean an interest rate exchange, collar, cap, swap,
adjustable strike cap, adjustable strike corridor or similar agreements entered
into by any Borrower or its Subsidiaries in order to provide protection to, or
minimize the impact upon, such Borrower, any Guarantor and/or their respective
Subsidiaries of increasing floating rates of interest applicable to
Indebtedness.

“Inventory” shall mean and include all of each Borrower’s now owned or hereafter
acquired goods, merchandise and other personal property, wherever located, to be
furnished under any consignment arrangement, contract of service or held for
sale or lease, all raw

 

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materials, work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or consumed in such
Borrower’s business or used in selling or furnishing such goods, merchandise and
other personal property, and all documents of title or other documents
representing them.

“Inventory Advance Rate” shall have the meaning set forth in
Section 2.1(a)(y)(ii) hereof.

“Investment Property” shall mean and include all of each Borrower’s now owned or
hereafter acquired securities (whether certificated or uncertificated),
securities entitlements, securities accounts, commodities contracts and
commodities accounts.

“Issuer” shall mean PNC in its capacity as issuer of Letters of Credit
hereunder, or any successor issuer of Letters of Credit hereunder.

“Lender” and “Lenders” shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.

“Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge which is
provided by any Lender and with respect to which Agent confirms meets the
following requirements: such Interest Rate Hedge (i) is documented in a standard
International Swap Dealer Association Agreement, (ii) provides for the method of
calculating the reimbursable amount of the provider’s credit exposure in a
reasonable and customary manner, and (iii) is entered into for hedging (rather
than speculative) purposes. The liabilities of any Borrower to the provider of
any Lender-Provided Interest Rate Hedge (the “Hedge Liabilities”) shall be
“Obligations” hereunder, guaranteed obligations under the Guaranty and otherwise
treated as Obligations for purposes of each of the Other Documents. The Liens
securing the Hedge Liabilities shall be pari passu with the Liens securing all
other Obligations under this Agreement and the Other Documents.

“Letter of Credit Documents” shall mean, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered in
connection therewith, any application therefor, and any agreements, instruments,
guarantees or other documents (whether general in application or applicable only
to such Letter of Credit) governing or providing for (i) the rights and
obligations of the parties concerned or at risk or (ii) any collateral security
for such obligations.

“Letter of Credit Sublimit” shall mean $3,000,000.

“Letters of Credit” shall mean any letter of credit issued hereunder. A Letter
of Credit may be a standby and/or a trade letter of credit.

“License Agreement” shall mean any agreement between any Borrower and a Licensor
pursuant to which such Borrower is authorized to use any Intellectual Property
in connection with the manufacturing, marketing, sale or other distribution of
any Inventory of such Borrower or otherwise in connection with such Borrower’s
business operations.

 

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“Licensor” shall mean any Person from whom any Borrower obtains the right to use
(whether on an exclusive or non-exclusive basis) any Intellectual Property in
connection with such Borrower’s manufacture, marketing, sale or other
distribution of any Inventory or otherwise in connection with such Borrower’s
business operations.

“Licensor/Agent Agreement” shall mean an agreement between Agent and a Licensor,
in form and content satisfactory to Agent, by which Agent is given the
unqualified right, vis-à-vis such Licensor, to enforce Agent’s Liens with
respect to and to dispose of the applicable Borrower’s Inventory with the
benefit of any Intellectual Property applicable thereto, irrespective of such
Borrower’s default under any License Agreement with such Licensor.

“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including any conditional sale or other title retention
agreement, any lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction.

“Lien Waiver Agreement” shall mean an agreement which is executed in favor of
Agent by a Person who owns or occupies premises at which any Collateral may be
located from time to time and by which such Person shall waive any Lien that
such Person may ever have with respect to any of the Collateral and shall
authorize Agent from time to time to enter upon the premises to inspect or
remove the Collateral from such premises or to use such premises to store or
dispose of such Collateral.

“Material Adverse Effect” shall mean a material adverse effect on (a) the
condition (financial or otherwise), results of operations, assets, business or
properties of the Company, the Borrowers taken as a whole or any Guarantor,
(b) any Borrower’s ability to duly and punctually pay or perform the Obligations
in accordance with the terms thereof, (c) the value of the Collateral, or
Agent’s Liens on the Collateral or the priority of any such Lien or (d) the
practical realization of the benefits of Agent’s and each Lender’s rights and
remedies under this Agreement and the Other Documents.

“Material Contract” shall mean any contract, agreement, permit or license,
written or oral, of a Borrower the failure to comply with which could reasonably
be expected to have a Material Adverse Effect.

“Maximum Face Amount” shall mean, with respect to any outstanding Letter of
Credit, the face amount of such Letter of Credit including all automatic
increases provided for in such Letter of Credit, whether or not any such
automatic increase has become effective.

“Maximum Revolving Advance Amount” shall mean $30,000,000.

 

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“Maximum Undrawn Amount” shall mean with respect to any outstanding Letter of
Credit, the amount of such Letter of Credit that is or may become available to
be drawn, including all automatic increases provided for in such Letter of
Credit, whether or not any such automatic increase has become effective.

“Modified Commitment Transfer Supplement” shall have the meaning set forth in
Section 15.3(d).

“Multiemployer Plan” shall mean a “multiemployer plan” as defined in
Sections 3(37) and 4001(a)(3) of ERISA.

“Multiple Employer Plan” shall mean a Plan which has two or more contributing
sponsors (including the applicable Borrower or any member of the Controlled
Group) at least two of whom are not under common control, as such a plan is
described in Section 4064 of ERISA.

“Note” shall mean the Revolving Credit Note.

“Obligations” shall mean and include any and all loans, advances, debts,
liabilities, obligations, covenants and duties owing by any Borrower to Lenders
or Agent or to any other direct or indirect subsidiary or affiliate of Agent or
any Lender of any kind or nature, present or future (including any interest or
other amounts accruing thereon after maturity, or after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding relating to any Borrower, whether or not a claim for post-filing
or post-petition interest or other amounts is allowed in such proceeding),
whether or not evidenced by any note, guaranty or other instrument, whether
arising under any agreement, instrument or document, (including this Agreement
and the Other Documents) whether or not for the payment of money, whether
arising by reason of an extension of credit, opening of a letter of credit,
loan, equipment lease or guarantee, under any interest or currency swap, future,
option or other similar agreement, or in any other manner, whether arising out
of overdrafts or deposit or other accounts or electronic funds transfers
(whether through automated clearing houses or otherwise) or out of Agent’s or
any Lenders non-receipt of or inability to collect funds or otherwise not being
made whole in connection with depository transfer check or other similar
arrangements, whether direct or indirect (including those acquired by assignment
or participation), absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising, contractual or tortious, liquidated or
unliquidated, regardless of how such indebtedness or liabilities arise or by
what agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument, including, but not limited to, any and all of any
Borrower’s Indebtedness and/or liabilities under this Agreement, the Other
Documents or under any other agreement between Agent or Lenders and any Borrower
and any amendments, extensions, renewals or increases and all costs and expenses
of Agent and any Lender incurred in the documentation, negotiation,
modification, enforcement, collection or otherwise in connection with any of the
foregoing, including but not limited to reasonable attorneys’ fees and expenses
and all obligations of any Borrower to Agent or Lenders to perform acts or
refrain from taking any action.

 

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“Ordinary Course of Business” shall mean the ordinary course of each Borrower’s
or Relevant Party’s, as applicable, business as conducted on the Closing Date.

“Original Owners” shall mean Intcomex Holdings with respect to the Company, and
the Company with respect to the other Borrowers.

“Other Documents” shall mean the Note, the Questionnaire, any Guaranty, any
Guarantor Security Agreement, any Lender-Provided Interest Rate Hedge, any
Letter of Credit Document and any and all other agreements, instruments and
documents, including guaranties, pledges, powers of attorney, consents, interest
or currency swap agreements or other similar agreements and all other writings
heretofore, now or hereafter executed by any Borrower or any Guarantor and/or
delivered to Agent or any Lender in respect of the transactions contemplated by
this Agreement.

“Out-of-Formula Loans” shall have the meaning set forth in Section 15.2(b).

“Parent” of any Person shall mean a corporation or other entity owning, directly
or indirectly at least 50% of the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the directors of the Person,
or other Persons performing similar functions for any such Person.

“Participant” shall mean each Person who shall be granted the right by any
Lender to participate in any of the Advances and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.

“Participation Advance” shall have the meaning set forth in Section 2.12(d).

“Participation Commitment” shall mean each Lender’s obligation to buy a
participation of the Letters of Credit issued hereunder.

“Payee” shall have the meaning set forth in Section 3.10.

“Payment Office” shall mean initially Two Tower Center Boulevard, East
Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrowers and to each Lender to be the
Payment Office.

“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA or any successor.

“Pension Benefit Plan” shall mean at any time any employee pension benefit Plan
(including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Code and either (i) is maintained by any member of the
Controlled Group for employees of any member of the Controlled Group; or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the Controlled Group for employees of
any entity which was at such time a member of the Controlled Group.

 

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“Permitted Encumbrances” shall mean:

(a) Liens in favor of Agent for the benefit of Agent and Lenders;

(b) Liens for Charges not delinquent or being Properly Contested;

(c) Liens disclosed in the financial statements referred to in Section 5.5, the
existence of which Agent has consented to in writing;

(d) deposits or pledges to secure obligations under worker’s compensation,
social security or similar laws, or under unemployment insurance;

(e) deposits or pledges to secure bids, tenders, contracts (other than contracts
for the payment of money), leases, statutory obligations, surety and appeal
bonds and other obligations of like nature arising in the Ordinary Course of
Business;

(f) Liens arising by virtue of the rendition, entry or issuance against any
Borrower or any Subsidiary, or any property of any Borrower or any Subsidiary,
of any judgment, writ, order, or decree for so long as each such Lien (i) is in
existence for less than forty-five (45) consecutive days after it first arises
or is being Properly Contested and (ii) is at all times junior in priority to
any Liens in favor of Agent unless a reserve satisfactory to Agent has been
established;

(g) mechanics’, workers’, materialmen’s, carriers’, repairmens’ or other like
Liens arising in the Ordinary Course of Business with respect to obligations
which are not due or which are being Properly Contested;

(h) Liens securing Permitted Purchase Money Indebtedness, provided that (i) such
Liens shall be created substantially simultaneously with the acquisition of the
asset acquired with such Indebtedness, (ii) such Liens do not at any time
encumber any property other than the property financed by such Indebtedness,
(iii) the amount of Indebtedness secured thereby is not increased and (iv) the
principal amount of Indebtedness secured by any such Lien shall at no time
exceed 100% of the original purchase price of such property;

(i) easements, rights-of-way, restrictions and other similar encumbrances or
Liens incurred in the Ordinary Course of Business which, in the aggregate, are
not substantial in amount and which do not in any case materially detract from
the value of the property subject thereto or materially interfere with the
ordinary conduct of the business on the property subject to such encumbrances;

(j) Liens incurred or deposits made in the Ordinary Course Business to secure
performance bonds, customs bonds and similar arrangements with customs brokers
in an amount not to exceed $200,000 in the aggregate;

(k) Liens of a bank, broker or securities intermediary on whose records a
deposit account or securities account is maintained securing the payment of
customary fees and commissions to such bank, brokers or securities intermediary
or, with respect to a deposit account, items deposited but returned unpaid; and

 

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(l) Liens disclosed on Schedule 1.2; provided that such Liens shall secure only
those obligations which they secure on the Closing Date (and extensions,
renewals and refinancings of such obligations permitted by Section 7.8) and
shall not subsequently apply to any other property or assets of Borrowers.

“Permitted Purchase Money Indebtedness” shall mean Purchase Money Indebtedness
of Borrowers which is incurred after the date of this Agreement and which is
secured by no Lien or only by a Purchase Money Lien; provided that (a) the
aggregate principal amount of such Purchase Money Indebtedness outstanding at
any time shall not exceed $100,000 (including any such Indebtedness on
Schedule 7.8), (b) such Indebtedness when incurred shall not exceed the purchase
price of the asset(s) financed, and (c) no such Indebtedness shall be refinanced
for a principal amount in excess of the principal balance outstanding thereon at
the time of such refinancing.

“Person” shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, limited liability
partnership, institution, public benefit corporation, joint venture, entity or
Governmental Body (whether federal, state, county, city, municipal or otherwise,
including any instrumentality, division, agency, body or department thereof).

“PNC” shall have the meaning set forth in the preamble to this Agreement and
shall extend to all of its successors and assigns.

“Pro Forma Balance Sheet” shall have the meaning set forth in Section 5.5(a)
hereof.

“Pro Forma Basis” means, in connection with the calculation, as of the date the
proposed payment is to be made, of the financial covenant set forth in
Section 6.5 in respect of such proposed payment pursuant to Section 7.7, the
making of such calculation after giving effect on a pro forma basis to the
proposed payment as if such payment had been made during the applicable Pro
Forma Calculation Period.

“Pro Forma Calculation Date” means the date of the applicable proposed payment
of management fees that gives rise to the requirement to calculate the financial
covenant set forth in Section 6.5 on a Pro Forma Basis.

“Pro Forma Calculation Period” means, in respect of any Pro Forma Calculation
Date, the period consisting of the four consecutive fiscal quarters of Borrowers
and Guarantor, respectively, ended as of the last day of the most recent fiscal
quarter of the Borrowers and Guarantor, respectively, preceding such Pro Forma
Calculation Date (whether or not such quarters are all within the same fiscal
year) for which Agent shall have received the required financial statements.

 

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“Pro Forma Financial Statements” shall have the meaning set forth in
Section 5.5(b) hereof.

“Projections” shall have the meaning set forth in Section 5.5(b) hereof.

“Properly Contested” shall mean, in the case of any Indebtedness or Lien, as
applicable, of any Person (including any taxes) that is not paid as and when due
or payable by reason of such Person’s bona fide dispute concerning its liability
to pay same or concerning the amount thereof, (i) such Indebtedness or Lien, as
applicable, is being properly contested in good faith by appropriate proceedings
promptly instituted and diligently conducted; (ii) such Person has established
appropriate reserves as shall be required in conformity with GAAP; (iii) the
non-payment of such Indebtedness will not have a Material Adverse Effect and
will not result in the forfeiture of any material assets of such Person as
determined by Agent in its reasonable discretion; (iv) no Lien is imposed upon
any of such Person’s assets with respect to such Indebtedness unless such Lien
is at all times junior and subordinate in priority to the Liens in favor of
Agent (except only with respect to property taxes that have priority as a matter
of applicable state law) and enforcement of such Lien is stayed during the
period prior to the final resolution or disposition of such dispute; (v) if such
Indebtedness or Lien, as applicable, results from, or is determined by the
entry, rendition or issuance against a Person or any of its assets of a
judgment, writ, order or decree, enforcement of such judgment, writ, order or
decree is stayed pending a timely appeal or other judicial review; and (vi) if
such contest is abandoned, settled or determined adversely (in whole or in part)
to such Person, such Person forthwith pays such Indebtedness and all penalties,
interest and other amounts due in connection therewith.

“Published Rate” shall mean the rate of interest published each Business Day in
The Wall Street Journal “Money Rates” listing under the caption “London
Interbank Offered Rates” for a one month period (or, if no such rate is
published therein for any reason, then the Published Rate shall be the
eurodollar rate for a one month period as published (which may include
electronic methods of “publication”) in another publication or source determined
by Agent.

“Purchase Money Indebtedness” shall mean and include (i) Indebtedness (other
than the Obligations) of any Borrower for the payment of all or any part of the
purchase price of any Equipment, (ii) any Indebtedness (other than the
Obligations) of any Borrower incurred at the time of or within thirty (30) days
prior to or one hundred twenty (120) days after the acquisition of any Equipment
for the purpose of financing all or any part of the purchase price thereof
(whether by means of a loan agreement, capitalized lease or otherwise), and
(iii) any renewals, extensions or refinancings (but not any increases in the
principal amounts) thereof outstanding at the time.

“Purchase Money Lien” shall mean a Lien upon Equipment which secures Purchase
Money Indebtedness, but only if such Lien shall at all times be confined solely
to the fixed assets acquired through the incurrence of the Purchase Money
Indebtedness secured by such Lien and shall not encumber any other property of
Borrowers, and such Lien constitutes a purchase money security interest under
the Uniform Commercial Code.

“Purchasing CLO” shall have the meaning set forth in Section 15.3(d) hereof.

 

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“Purchasing Lender” shall have the meaning set forth in Section 15.3(c) hereof.

“Questionnaire” shall mean the Documentation Information Questionnaire and the
responses thereto provided by Borrowers and delivered to Agent.

“RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901
et seq., as same may be amended from time to time.

“Real Property” shall mean all real property owned or leased by any of Borrowers
and identified on Schedule 4.5 hereto or which is hereafter owned or leased by
any of Borrowers.

“Receivables” shall mean and include, as to each Borrower, all of such
Borrower’s accounts, contract rights, instruments (including those evidencing
indebtedness owed to such Borrower by its Affiliates), documents, chattel paper
(including electronic chattel paper), general intangibles relating to accounts,
drafts and acceptances, credit card receivables and all other forms of
obligations owing to such Borrower arising out of or in connection with the sale
or lease of Inventory or the rendition of services, all supporting obligations,
guarantees and other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or assigned
to Agent hereunder.

“Receivables Advance Rate” shall have the meaning set forth in
Section 2.1(a)(y)(i) hereof.

“Register” shall have the meaning set forth in Section 15.3(e) hereof.

“Reimbursement Obligation” shall have the meaning set forth in Section 2.12(b)
hereof.

“Release” shall have the meaning set forth in Section 5.7(c)(i) hereof.

“Relevant Parties” shall mean the Company and its consolidated Subsidiaries,
except in the calculation of the Guarantor Fixed Charged Coverage Ratio and
matters related thereto as the context requires in which case, it shall mean
Intcomex and its consolidated Subsidiaries.

“Reportable Event” shall mean a reportable event described in Section 4043(b) of
ERISA or the regulations promulgated thereunder.

“Required Lenders” shall mean Lenders holding more than fifty percent (50%) of
the Advances and if no Advances are outstanding shall mean Lenders holding more
than fifty percent (50%) of the Commitment Percentage; provided, however, if
there are fewer than three (3) Lenders (including any Defaulting Lender),
Required Lenders shall mean all Lenders (other than any Defaulting Lender).

“Reserve Percentage” shall mean as of any day the maximum percentage in effect
on such day as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the reserve requirements (including
supplemental, marginal and emergency reserve requirements) with respect to
eurocurrency funding (currently referred to as “Eurocurrency Liabilities”).

 

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“Revolving Advances” shall mean Advances made other than Letters of Credit.

“Revolving Credit Note” shall mean the promissory note referred to in
Section 2.1(a) hereof.

“Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the
sum of the Alternate Base Rate plus the Applicable Margin with respect to
Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus the Applicable
Margin with respect to Eurodollar Rate Loans.

“SEC” shall mean the Securities and Exchange Commission or any successor
thereto.

“Section 20 Subsidiary” shall mean the Subsidiary of the bank holding company
controlling PNC, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Senior Debt Payments” shall mean and include all cash actually expended by the
Relevant Parties to make (a) interest payments on any Advances hereunder, plus
(b) payments for all fees, commissions and charges set forth herein and with
respect to any Advances, plus (c) capitalized lease payments, plus (c) payments
with respect to any other Indebtedness for borrowed money.

“Settlement Date” shall mean the Closing Date and thereafter Wednesday or
Thursday of each week or more frequently if Agent deems appropriate unless such
day is not a Business Day in which case it shall be the next succeeding Business
Day.

“Subordinated Debt” shall mean (i) any Indebtedness of Borrowers for borrowed
money under the Subordinated Debt Documents, (ii) other obligations under the
Subordinated Debt Documents and (iii) any other Indebtedness of Borrowers for
borrowed money which has been subordinated in right of payment and priority to
the Obligations, all on terms and conditions satisfactory to the Agent.

“Subordinated Debt Documents” shall mean and include any documents evidencing
any Subordinated Debt, in each case, as the same may be amended, modified,
supplemented or otherwise modified from time to time in compliance with the
terms of this Agreement.

“Subordination Agreement” shall mean the Lien Subordination Agreement dated
July 25, 2011 among Agent, Borrowers and The Bank of New York Mellon, N.A., in
its capacity as trustee.

 

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“Subsidiary” of any Person shall mean a corporation or other entity of whose
Equity Interests having ordinary voting power (other than Equity Interests
having such power only by reason of the happening of a contingency) to elect a
majority of the directors of such corporation, or other Persons performing
similar functions for such entity, are owned, directly or indirectly, by such
Person.

“Subsidiary Stock” shall mean:

(a) one hundred percent 100% of the issued and outstanding Equity Interests of
any Domestic Subsidiary of a Borrower, if any, representing such Equity
Interests, and all options and other rights, contractual or otherwise, with
respect thereto (collectively, the “Pledged Capital Stock”), including, but not
limited to, the following:

(y) subject to the percentage restrictions described above, all shares,
securities, membership interests or other equity interests representing a
dividend on any of the Pledged Capital Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Capital Stock, or resulting
from a stock split, revision, reclassification or other exchange therefor, and
any subscriptions, warrants, rights or options issued to the holder of, or
otherwise in respect of, the Pledged Capital Stock; and

(z) without affecting the obligations of Borrowers under any provision
prohibiting such action hereunder, in the event of any consolidation or merger
involving the issuer of any Pledged Capital Stock and in which such issuer is
not the surviving entity, all shares of each class of the Equity Interests of
the successor entity formed by or resulting from such consolidation or merger;

(b) Subject to the percentage restrictions described above, any and all other
Capital Stock owned by any Borrower in any Domestic Subsidiary; and

(c) All proceeds and products of the foregoing, however and whenever acquired
and in whatever form.

“Term” shall have the meaning set forth in Section 13.1 hereof.

“Termination Event” shall mean (i) a Reportable Event with respect to any
Pension Benefit Plan or Multiemployer Plan (other than those events as to which
the 30-day notice has been waived); (ii) the withdrawal of any Borrower or any
member of the Controlled Group from a Pension Benefit Plan or Multiemployer Plan
during a Plan year in which such entity was a “substantial employer” as defined
in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Pension Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to
terminate a Pension Benefit Plan or Multiemployer Plan; (v) any event or
condition (a) which would reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Benefit Plan or Multiemployer Plan, or (b) that may
result in termination of a Multiemployer Plan pursuant to Section 4041A of
ERISA; or (vi) the partial or complete withdrawal within the meaning of
Sections 4203 and 4205 of ERISA, of any Borrower or any member of the Controlled
Group from a Multiemployer Plan.

 

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“Toxic Substance” shall mean and include any material present on the Real
Property or Leasehold Interests which has been shown to have significant adverse
effect on human health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., applicable state law,
or any other applicable Federal or state laws now in force or hereafter enacted
relating to toxic substances. “Toxic Substance” includes but is not limited to
asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.

“Trading with the Enemy Act” shall mean the foreign assets control regulations
of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) and any enabling legislation or executive order relating thereto.

“Transactions” shall have the meaning set forth in Section 5.5 hereof.

“Transferee” shall have the meaning set forth in Section 15.3(d) hereof.

“Undrawn Availability” at a date shall mean an amount equal to (a) the lesser of
(i) the Formula Amount or (ii) the Maximum Revolving Advance Amount, minus
(b) the sum of (i) the outstanding amount of Advances plus (ii) all amounts due
and owing to each Borrower’s trade creditors which are outstanding more than
sixty (60) days after their due date, plus (iii) fees and expenses for which
Borrowers are liable under this Agreement but which have not been paid or
charged to Borrowers’ Account.

“Unfinanced Capital Expenditures” shall mean all Capital Expenditures of any
Relevant Party, other than those made utilizing financing provided by the
applicable seller or third party lenders. For the avoidance of doubt, Capital
Expenditures made by a Relevant Party utilizing Revolving Advances shall be
deemed Unfinanced Capital Expenditures.

“Uniform Commercial Code” shall have the meaning set forth in Section 1.3
hereof.

“USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.

“Voting Stock” shall mean, with respect to any Person, Capital Stock issued by
such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to vote
has been suspended by the happening of such a contingency.

“Week” shall mean the time period commencing with the opening of business on a
Wednesday and ending on the end of business the following Tuesday.

 

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1.3. Uniform Commercial Code Terms.

All terms used herein and defined in the Uniform Commercial Code as adopted in
the State of Florida from time to time (the “Uniform Commercial Code”) shall
have the meaning given therein unless otherwise defined herein. Without limiting
the foregoing, the terms “accounts”, “chattel paper”, “commercial tort claims”,
“instruments”, “general intangibles”, “goods”, “payment intangibles”,
“proceeds”, “supporting obligations”, “securities”, “investment property”,
“documents”, “deposit accounts”, “software”, “letter of credit rights”,
“inventory”, “equipment” and “fixtures”, as and when used in the description of
Collateral shall have the meanings given to such terms in Articles 8 or 9 of the
Uniform Commercial Code. To the extent the definition of any category or type of
collateral is expanded by any amendment, modification or revision to the Uniform
Commercial Code, such expanded definition will apply automatically as of the
date of such amendment, modification or revision.

1.4. Certain Matters of Construction.

The terms “herein”, “hereof” and “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular section, paragraph
or subdivision. All references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement. Any pronoun used shall be deemed to cover all
genders. Wherever appropriate in the context, terms used herein in the singular
also include the plural and vice versa. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. Unless otherwise provided, all references to any instruments or
agreements to which Agent is a party, including references to any of the Other
Documents, shall include any and all modifications or amendments thereto and any
and all extensions or renewals thereof. All references herein to the time of day
shall mean the time in New York, New York. Unless otherwise provided, all
financial calculations shall be performed with Inventory valued on a first-in,
first-out basis. Whenever the words “including” or “include” shall be used, such
words shall be understood to mean “including, without limitation” or “include,
without limitation”. A Default or Event of Default shall be deemed to exist at
all times during the period commencing on the date that such Default or Event of
Default occurs to the date on which such Default or Event of Default is waived
in writing pursuant to this Agreement or, in the case of a Default, is cured
within any period of cure expressly provided for in this Agreement; and an Event
of Default shall “continue” or be “continuing” until such Event of Default has
been waived in writing by the Required Lenders. Any Lien referred to in this
Agreement or any of the Other Documents as having been created in favor of
Agent, any agreement entered into by Agent pursuant to this Agreement or any of
the Other Documents, any payment made by or to or funds received by Agent
pursuant to or as contemplated by this Agreement or any of the Other Documents,
or any act taken or omitted to be taken by Agent, shall, unless otherwise
expressly provided, be created, entered into, made or received, or taken or
omitted, for the benefit or account of Agent and Lenders. Wherever the phrase
“to the best of Borrowers’ knowledge” or words of similar import relating to the
knowledge or the awareness of any Borrower are used in this Agreement or Other
Documents, such phrase shall mean and refer to (i) the actual knowledge of a
senior officer of any Borrower or (ii) the knowledge that a senior officer would
have obtained if he had engaged in good faith and diligent performance of
his/her duties,

 

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including the making of such reasonably specific inquiries as may be necessary
of the employees or agents of any Borrower and a good faith attempt to ascertain
the existence or accuracy of the matter to which such phrase relates.

ARTICLE II

ADVANCES, PAYMENTS

2.1. Revolving Advances.

(a) Amount of Revolving Advances.

Subject to the terms and conditions set forth in this Agreement including
Section 2.1(b), each Lender, severally and not jointly, will make Revolving
Advances to Borrowers in aggregate amounts outstanding at any time equal to such
Lender’s Commitment Percentage of the lesser of (x) the Maximum Revolving
Advance Amount less the aggregate Maximum Undrawn Amount of all outstanding
Letters of Credit or (y) an amount equal to the sum of:

(i) up to 85%, subject to the provisions of Section 2.1(b) hereof (“Receivables
Advance Rate”), of Eligible Receivables, plus

(ii) up to the lesser of (A) 60%, subject to the provisions of Section 2.1(b)
hereof, of the value of the Eligible Inventory (“Inventory Advance Rate” and
together with the Receivables Advance Rate, collectively, the “Advance Rates”),
(B) 90% of the appraised net orderly liquidation value of Eligible Inventory (as
evidenced by an Inventory appraisal satisfactory to Agent in its reasonable
discretion exercised in good faith to be updated on an annual basis) or
(C) $16,500,000 in the aggregate at any one time of which no more than
$2,000,000 shall constitute in-transit inventory, minus

(iii) the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit,
minus

(iv) such reserves as Agent may reasonably deem proper and necessary from time
to time.

The amount derived from the sum of (w) Sections 2.1(a)(y)(i) and (ii) minus
(z) Section 2.1(a)(y)(iii) and (iv) at any time and from time to time shall be
referred to as the “Formula Amount”. The Revolving Advances shall be evidenced
by one or more secured promissory notes (collectively, the “Revolving Credit
Note”) substantially in the form attached hereto as Exhibit 2.1(a).

(b) Discretionary Rights.

The Advance Rates may be increased or decreased by Agent at any time and from
time to time in its sole judgment exercised in good faith. Borrowers consent to
any such increases or

 

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decreases and acknowledges that decreasing the Advance Rates or increasing or
imposing reserves may limit or restrict Advances requested by Borrowers. The
rights of Agent under this subsection are subject to the provisions of
Section 15.2(b).

2.2. Procedure for Revolving Advances Borrowing.

(a) Borrowers may notify Agent prior to 10:00 a.m. (New York time) on a Business
Day of Borrowers’ request to incur, on that day, a Revolving Advance hereunder.
Should any amount required to be paid as interest hereunder, or as fees or other
charges under this Agreement or any other agreement with Agent or Lenders, or
with respect to any other Obligation, become due, same shall be deemed a request
for a Revolving Advance maintained as a Domestic Rate Loan as of the date such
payment is due, in the amount required to pay in full such interest, fee, charge
or Obligation under this Agreement or any other agreement with Agent or Lenders,
and such request shall be irrevocable.

(b) Notwithstanding the provisions of subsection (a) above, in the event
Borrowers desire to obtain a Eurodollar Rate Loan, Borrowers shall give Agent
written notice by no later than 10:00 a.m. on the day which is three (3)
Business Days prior to the date such Eurodollar Rate Loan is to be borrowed,
specifying (i) the date of the proposed borrowing (which shall be a Business
Day), (ii) the type of borrowing and the amount on the date of such Advance to
be borrowed, which amount shall be in an aggregate principal amount that is not
less than $1,000,000 and integral multiples of $100,000 in excess thereof, and
(iii) the duration of the first Interest Period therefor. Interest Periods for
Eurodollar Rate Loans shall be for one, two or three months; provided, if an
Interest Period would end on a day that is not a Business Day, it shall end on
the next succeeding Business Day unless such day falls in the next succeeding
calendar month in which case the Interest Period shall end on the next preceding
Business Day. No Eurodollar Rate Loan shall be made available to Borrowers
during the continuance of a Default or an Event of Default. After giving effect
to each requested Eurodollar Rate Loan, including those which are converted from
a Domestic Rate Loan under Section 2.2(d), there shall not be outstanding more
than three (3) Eurodollar Rate Loans, in the aggregate.

(c) Each Interest Period of a Eurodollar Rate Loan shall commence on the date
such Eurodollar Rate Loan is made and shall end on such date as Borrowers may
elect as set forth in subsection (b)(iii) above provided that the exact length
of each Interest Period shall be determined in accordance with the practice of
the interbank market for offshore Dollar deposits and no Interest Period shall
end after the last day of the Term.

Borrowers shall elect the initial Interest Period applicable to a Eurodollar
Rate Loan by their notice of borrowing given to Agent pursuant to Section 2.2(b)
or by its notice of conversion given to Agent pursuant to Section 2.2(d), as the
case may be. Borrowers shall elect the duration of each succeeding Interest
Period by giving irrevocable written notice to Agent of such duration not later
than 10:00 a.m. (New York time) on the day which is three (3) Business Days
prior to the last day of the then current Interest Period applicable to such
Eurodollar Rate Loan. If Agent does not receive timely notice of the Interest
Period elected by Borrowers, Borrowers shall be deemed to have elected to
convert to a Domestic Rate Loan subject to Section 2.2(d) hereinbelow.

 

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(d) Provided that no Event of Default shall have occurred and be continuing, on
the last Business Day of the then current Interest Period applicable to any
outstanding Eurodollar Rate Loan, or on any Business Day with respect to
Domestic Rate Loans, Borrowers may convert any such loan into a loan of another
type in the same aggregate principal amount provided that any conversion of a
Eurodollar Rate Loan shall be made only on the last Business Day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Borrowers
desire to convert a loan, Borrowers shall give Agent written notice by no later
than 10:00 a.m. (New York time) (i) on the day which is three (3) Business Days’
prior to the date on which such conversion is to occur with respect to a
conversion from a Domestic Rate Loan to a Eurodollar Rate Loan, or (ii) on the
day which is one (1) Business Day prior to the date on which such conversion is
to occur with respect to a conversion from a Eurodollar Rate Loan to a Domestic
Rate Loan, specifying, in each case, the date of such conversion, the loans to
be converted and if the conversion is from a Domestic Rate Loan to any other
type of loan, the duration of the first Interest Period therefor.

(e) At their option and upon written notice given prior to 10:00 a.m. (New York
time) at least three (3) Business Days’ prior to the date of such prepayment,
Borrowers may prepay the Eurodollar Rate Loans in whole at any time or in part
from time to time with accrued interest on the principal being prepaid to the
date of such repayment. Borrowers shall specify the date of prepayment of
Advances which are Eurodollar Rate Loans and the amount of such prepayment. In
the event that any prepayment of a Eurodollar Rate Loan is required or permitted
on a date other than the last Business Day of the then current Interest Period
with respect thereto, Borrowers shall indemnify Agent and Lenders therefor in
accordance with Section 2.2(f) hereof.

(f) Borrowers shall indemnify Agent and Lenders and hold Agent and Lenders
harmless from and against any and all losses or expenses that Agent and Lenders
may sustain or incur as a consequence of any prepayment, conversion of or any
default by Borrowers in the payment of the principal of or interest on any
Eurodollar Rate Loan or failure by Borrowers to complete a borrowing of, a
prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof
has been given, including, but not limited to, any interest payable by Agent or
Lenders to lenders of funds obtained by it in order to make or maintain its
Eurodollar Rate Loans hereunder. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Agent or any Lender to
Borrowers shall be conclusive absent manifest error.

(g) Notwithstanding any other provision hereof, if any Applicable Law or any
change therein or in the interpretation or application thereof, shall make it
unlawful for any Lender (for purposes of this subsection (g), the term “Lender”
shall include any Lender and the office or branch where any Lender or any
corporation or bank controlling such Lender makes or maintains any Eurodollar
Rate Loans) to make or maintain its Eurodollar Rate Loans, the obligation of
Lenders to make Eurodollar Rate Loans hereunder shall forthwith be cancelled and
Borrowers shall, if any affected Eurodollar Rate Loans are then outstanding,
promptly upon request from Agent, either pay all such affected Eurodollar Rate
Loans or convert such affected Eurodollar Rate Loans into loans of another type.
If any such payment or conversion of any Eurodollar Rate Loan is made on a day
that is not the last day of the Interest Period applicable to such Eurodollar
Rate Loan, Borrowers shall pay Agent, upon Agent’s request, such amount or
amounts as may be

 

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necessary to compensate Lenders for any loss or expense sustained or incurred by
Lenders in respect of such Eurodollar Rate Loan as a result of such payment or
conversion, including (but not limited to) any interest or other amounts payable
by Lenders to lenders of funds obtained by Lenders in order to make or maintain
such Eurodollar Rate Loan. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Lenders to Borrowers shall be
conclusive absent manifest error.

(h) Borrowers’ obligations and the indemnifications under this Section 2.2 shall
survive the termination of this Agreement.

2.3. Disbursement of Advance Proceeds.

All Advances shall be disbursed from whichever office or other place Agent may
designate from time to time and, together with any and all other Obligations of
Borrowers to Agent or Lenders, shall be charged to Borrowers’ Account on Agent’s
books. During the Term, Borrowers may use the Revolving Advances by borrowing,
prepaying and reborrowing, all in accordance with the terms and conditions
hereof. The proceeds of each Revolving Advance requested by Borrowers or deemed
to have been requested by Borrowers under Section 2.2(a) hereof shall, with
respect to requested Revolving Advances to the extent Lenders make such
Revolving Advances, be made available to Borrowers on the day so requested by
way of credit to Borrowers’ operating account at PNC, or such other bank as
Borrowers may designate following notification to Agent, in immediately
available federal funds or other immediately available funds or, with respect to
Revolving Advances deemed to have been requested by Borrowers, be disbursed to
Agent to be applied to the outstanding Obligations giving rise to such deemed
request.

2.4. Reserved.

2.5 Maximum Advances.

Subject to Section 15.2, the aggregate balance of Advances outstanding at any
time shall not exceed the lesser of (a) the Maximum Revolving Advance Amount or
(b) the Formula Amount less, in each case, the aggregate Maximum Undrawn Amount
of all issued and outstanding Letters of Credit.

2.6. Repayment of Advances.

(a) The Advances shall be due and payable in full on the last day of the Term
subject to earlier prepayment as herein provided.

(b) Borrowers recognize that the amounts evidenced by checks, notes, drafts or
any other items of payment relating to and/or proceeds of Collateral may not be
collectible by Agent on the date received. In consideration of Agent’s agreement
to conditionally credit Borrowers’ Account as of the next Business Day following
Agent’s receipt of those items of payment, Borrowers agree that, in computing
the charges under this Agreement, all items of payment shall be deemed applied
by Agent on account of the Obligations one (1) Business Day after (i) the

 

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Business Day Agent receives such payments via wire transfer or electronic
depository check or (ii) in the case of payments received by Agent in any other
form, the Business Day such payment constitutes good funds in Agent’s account.
Agent is not, however, required to credit Borrowers’ Account for the amount of
any item of payment which is unsatisfactory to Agent and Agent may charge
Borrowers’ Account for the amount of any item of payment which is returned to
Agent unpaid.

(c) All payments of principal, interest and other amounts payable hereunder, or
under any of the Other Documents shall be made to Agent at the Payment Office
not later than 1:00 P.M. (New York time) on the due date therefor in lawful
money of the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all Obligations due and owing hereunder by charging Borrowers’
Account or by making Advances as provided in Section 2.2 hereof.

(d) Borrowers shall pay principal, interest, and all other amounts payable
hereunder, or under any related agreement, without any deduction whatsoever,
including, but not limited to, any deduction for any setoff or counterclaim.

2.7. Repayment of Excess Advances.

The aggregate balance of Advances outstanding at any time in excess of the
maximum amount of Advances permitted hereunder (subject to Section 15.2) shall
be immediately due and payable without the necessity of any demand, at the
Payment Office, whether or not a Default or Event of Default has occurred.

2.8. Statement of Account.

Agent shall maintain, in accordance with its customary procedures, a loan
account (“Borrowers’ Account”) in the name of Borrowers in which shall be
recorded the date and amount of each Advance made by Agent and the date and
amount of each payment in respect thereof; provided, however, the failure by
Agent to record the date and amount of any Advance shall not adversely affect
Agent or any Lender. Each month, Agent shall send to Borrowers a statement
showing the accounting for the Advances made, payments made or credited in
respect thereof, and other transactions among Agent and Borrowers, during such
month. The monthly statements shall be deemed correct and binding upon Borrowers
in the absence of manifest error and shall constitute an account stated between
Lenders and Borrowers unless Agent receives a written statement of Borrowers’
specific exceptions thereto within thirty (30) days after such statement is
received by Borrowers. The records of Agent with respect to the loan account
shall be conclusive evidence absent manifest error of the amounts of Advances
and other charges thereto and of payments applicable thereto.

2.9. Letters of Credit.

Subject to the terms and conditions hereof, Agent shall issue or cause the
issuance of standby and/or trade letters of credit for the account of Borrowers;
provided, however, that Agent will not be required to issue or cause to be
issued any Letters of Credit to the extent that the

 

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issuance thereof would then cause the sum of (i) the outstanding Revolving
Advances plus (ii) the Maximum Undrawn Amount of all outstanding Letters of
Credit to exceed the lesser of (x) the Maximum Revolving Advance Amount or
(y) the Formula Amount. The Maximum Undrawn Amount of all outstanding Letters of
Credit shall not exceed in the aggregate at any time the Letter of Credit
Sublimit. All disbursements or payments related to Letters of Credit shall be
deemed to be Domestic Rate Loans and shall bear interest at the Revolving
Interest Rate for Domestic Rate Loans.

2.10. Issuance of Letters of Credit.

(a) Borrowers may request Agent to issue or cause the issuance of a Letter of
Credit by delivering to Agent, at the Payment Office, prior to 10:00 a.m. (New
York time), at least five (5) Business Days’ prior to the proposed date of
issuance, Agent’s form of Letter of Credit Application (the “Letter of Credit
Application”) completed to the satisfaction of Agent; and, such other
certificates, documents and other papers and information as Agent may reasonably
request. Borrowers also have the right to give instructions and make agreements
with respect to any application, any applicable letter of credit and security
agreement, any applicable letter of credit reimbursement agreement and/or any
other applicable agreement, any letter of credit and the disposition of
documents, disposition of any unutilized funds, and to agree with Agent upon any
amendment, extension or renewal of any Letter of Credit.

(b) Each Letter of Credit shall, among other things, (i) provide for the payment
of sight drafts, other written demands for payment, or acceptances of usance
drafts when presented for honor thereunder in accordance with the terms thereof
and when accompanied by the documents described therein and (ii) have an expiry
date not later than twelve (12) months after such Letter of Credit’s date of
issuance and in no event later than the last day of the Term. Each standby
Letter of Credit shall be subject either to the Uniform Customs and Practice for
Documentary Credits as most recently published by the International Chamber of
Commerce at the time a Letter of Credit is issued (the “UCP”) or the
International Standby Practices (ISP98-International Chamber of Commerce
Publication Number 590) (the “ISP98 Rules”) and any subsequent revisions thereof
at the time a standby Letter of Credit is issued, as determined by Agent, and
each trade Letter of Credit shall be subject to the UCP.

(c) Agent shall use its reasonable efforts to notify Lenders of the request by
Borrowers for a Letter of Credit hereunder.

2.11. Requirements For Issuance of Letters of Credit.

(a) Borrowers hereby authorize and direct any Issuer to name Borrowers as the
“Applicant” or “Account Party” of each Letter of Credit. If Agent is not the
Issuer of any Letter of Credit, Borrowers hereby authorize and direct the Issuer
to deliver to Agent all instruments, documents, and other writings and property
received by the Issuer pursuant to the Letter of Credit and to accept and rely
upon Agent’s instructions and agreements with respect to all matters arising in
connection with the Letter of Credit, or any application therefor.

 

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(b) In connection with all Letters of Credit issued or caused to be issued by
Agent under this Agreement, each Borrower hereby appoints Agent, or its
designee, as its attorney, with full power and authority if an Event of Default
shall have occurred, (i) to sign and/or endorse such Borrower’s name upon any
warehouse or other receipts, letter of credit applications and acceptances,
(ii) to sign such Borrower’s name on bills of lading; (iii) to clear Inventory
through the United States of America Customs Department (“Customs”) in the name
of such Borrower or Agent or Agent’s designee, and to sign and deliver to
Customs officials powers of attorney in the name of such Borrower for such
purpose; and (iv) to complete in such Borrower’s name or Agent’s, or in the name
of Agent’s designee, any order, sale or transaction, obtain the necessary
documents in connection therewith, and collect the proceeds thereof. Neither
Agent nor its attorneys will be liable for any acts or omissions nor for any
error of judgment or mistakes of fact or law, except for Agent’s or its
attorney’s willful misconduct. This power, being coupled with an interest, is
irrevocable as long as any Letters of Credit remain outstanding.

2.12. Disbursements, Reimbursement.

(a) Immediately upon the issuance of each Letter of Credit, each Lender shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase from
Agent a participation in such Letter of Credit and each drawing thereunder in an
amount equal to such Lender’s Commitment Percentage of the Maximum Face Amount
of such Letter of Credit and the amount of such drawing, respectively.

(b) In the event of any request for a drawing under a Letter of Credit by the
beneficiary or transferee thereof, Agent will promptly notify Borrowers.
Provided that it shall have received such notice, Borrowers shall reimburse
(such obligation to reimburse Agent shall sometimes be referred to as a
“Reimbursement Obligation”) Agent prior to 12:00 Noon, New York time on each
date that an amount is paid by Agent under any Letter of Credit (each such date,
a “Drawing Date”) in an amount equal to the amount so paid by Agent. In the
event Borrowers fail to reimburse Agent for the full amount of any drawing under
any Letter of Credit by 12:00 Noon, New York time, on the Drawing Date, Agent
will promptly notify each Lender thereof, and Borrowers shall be deemed to have
requested that a Domestic Rate Loan be made by the Lenders to be disbursed on
the Drawing Date under such Letter of Credit, subject to the amount of the
unutilized portion of the lesser of the Maximum Revolving Advance Amount or the
Formula Amount and subject to Section 8.2 hereof. Any notice given by Agent
pursuant to this Section 2.12(b) may be oral if immediately confirmed in
writing; provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.

(c) Each Lender shall upon any notice pursuant to Section 2.12(b) make available
to Agent an amount in immediately available funds equal to its Commitment
Percentage of the amount of the drawing, whereupon the participating Lenders
shall (subject to Section 2.12(d)) each be deemed to have made a Domestic Rate
Loan to Borrowers in that amount. If any Lender so notified fails to make
available to Agent the amount of such Lender’s Commitment Percentage of such
amount by no later than 2:00 p.m., New York time on the Drawing Date, then
interest shall accrue on such Lender’s obligation to make such payment, from the
Drawing Date to the date on which such Lender makes such payment (i) at a rate
per annum equal to the

 

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Federal Funds Effective Rate during the first three (3) days following the
Drawing Date and (ii) at a rate per annum equal to the rate applicable to
Domestic Rate Loans on and after the fourth day following the Drawing Date.
Agent will promptly give notice of the occurrence of the Drawing Date, but
failure of Agent to give any such notice on the Drawing Date or in sufficient
time to enable any Lender to effect such payment on such date shall not relieve
such Lender from its obligation under this Section 2.12(c), provided that such
Lender shall not be obligated to pay interest as provided in Section 2.12(c)
(i) and (ii) until and commencing from the date of receipt of notice from Agent
of a drawing.

(d) With respect to any unreimbursed drawing that is not converted into a
Revolving Advance maintained as a Domestic Rate Loan to Borrowers in whole or in
part as contemplated by Section 2.12(b), because of Borrowers’ failure to
satisfy the conditions set forth in Section 8.2 (other than any notice
requirements) or for any other reason, Borrowers shall be deemed to have
incurred from Agent a borrowing (each a “Letter of Credit Borrowing”) in the
amount of such drawing. Such Letter of Credit Borrowing shall be due and payable
on demand (together with interest) and shall bear interest at the rate per annum
applicable to a Domestic Rate Loan. Each Lender’s payment to Agent pursuant to
Section 2.12(c) shall be deemed to be a payment in respect of its participation
in such Letter of Credit Borrowing and shall constitute a “Participation
Advance” from such Lender in satisfaction of its Participation Commitment under
this Section 2.12.

(e) Each Lender’s Participation Commitment shall continue until the last to
occur of any of the following events: (x) Agent ceases to be obligated to issue
or cause to be issued Letters of Credit hereunder; (y) no Letter of Credit
issued or created hereunder remains outstanding and uncancelled and (z) all
Persons (other than Borrowers) have been fully reimbursed for all payments made
under or relating to Letters of Credit.

2.13. Repayment of Participation Advances.

(a) Upon (and only upon) receipt by Agent for its account of immediately
available funds from Borrowers (i) in reimbursement of any payment made by Agent
under the Letter of Credit with respect to which any Lender has made a
Participation Advance to Agent, or (ii) in payment of interest on such a payment
made by Agent under such a Letter of Credit, Agent will pay to each Lender, in
the same funds as those received by Agent, the amount of such Lender’s
Commitment Percentage of such funds, except Agent shall retain the amount of the
Commitment Percentage of such funds of any Lender that did not make a
Participation Advance in respect of such payment by Agent.

(b) If Agent is required at any time to return to Borrowers, or to a trustee,
receiver, liquidator, custodian, or any official in any insolvency proceeding,
any portion of the payments made by Borrowers to Agent pursuant to
Section 2.13(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Lender shall, on demand of Agent, forthwith return
to Agent the amount of its Commitment Percentage of any amounts so returned by
Agent plus interest at the Federal Funds Effective Rate.

 

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2.14. Documentation.

Borrowers agree to be bound by the terms of the Letter of Credit Application and
by Agent’s interpretations of any Letter of Credit issued for Borrowers’ account
and by Agent’s written regulations and customary practices relating to letters
of credit, though Agent’s interpretations may be different from Borrowers’ own.
In the event of a conflict between the Letter of Credit Application and this
Agreement, this Agreement shall govern. It is understood and agreed that, except
in the case of gross negligence or willful misconduct (as determined by a court
of competent jurisdiction in a final non-appealable judgment), Agent shall not
be liable for any error, negligence and/or mistakes, whether of omission or
commission, in following Borrowers’ instructions or those contained in the
Letters of Credit or any modifications, amendments or supplements thereto.

2.15. Determination to Honor Drawing Request.

In determining whether to honor any request for drawing under any Letter of
Credit by the beneficiary thereof, Agent shall be responsible only to determine
that the documents and certificates required to be delivered under such Letter
of Credit have been delivered and that they comply on their face with the
requirements of such Letter of Credit and that any other drawing condition
appearing on the face of such Letter of Credit has been satisfied in the manner
so set forth.

2.16. Nature of Participation and Reimbursement Obligations.

Each Lender’s obligation in accordance with this Agreement to make the Revolving
Advances or Participation Advances as a result of a drawing under a Letter of
Credit, and the obligations of Borrowers to reimburse Agent upon a draw under a
Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Section 2.16 under all
circumstances, including the following circumstances:

(i) any set-off, counterclaim, recoupment, defense or other right which such
Lender may have against Agent, any Borrower or any other Person for any reason
whatsoever;

(ii) the failure of any Borrower or any other Person to comply, in connection
with a Letter of Credit Borrowing, with the conditions set forth in this
Agreement for the making of a Revolving Advance, it being acknowledged that such
conditions are not required for the making of a Letter of Credit Borrowing and
the obligation of the Lenders to make Participation Advances under Section 2.12;

(iii) any lack of validity or enforceability of any Letter of Credit;

(iv) any claim of breach of warranty that might be made by any Borrower or any
Lender against the beneficiary of a Letter of Credit, or the existence of any
claim, set-off, recoupment, counterclaim, cross claim, defense or other right
which any Borrower or any Lender may have at any time against a beneficiary, any
successor

 

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beneficiary or any transferee of any Letter of Credit or the proceeds thereof
(or any Persons for whom any such transferee may be acting), Agent or any Lender
or any other Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any underlying
transaction between any Borrower or any Subsidiaries of any Borrower and the
beneficiary for which any Letter of Credit was procured);

(v) the lack of power or authority of any signer of (or any defect in or forgery
of any signature or endorsement on) or the form of or lack of validity,
sufficiency, accuracy, enforceability or genuineness of any draft, demand,
instrument, certificate or other document presented under or in connection with
any Letter of Credit, or any fraud or alleged fraud in connection with any
Letter of Credit, or the transport of any property or provisions of services
relating to a Letter of Credit, in each case even if Agent or any of Agent’s
Affiliates has been notified thereof;

(vi) payment by Agent under any Letter of Credit against presentation of a
demand, draft or certificate or other document which does not comply with the
terms of such Letter of Credit;

(vii) the solvency of, or any acts or omissions by, any beneficiary of any
Letter of Credit, or any other Person having a role in any transaction or
obligation relating to a Letter of Credit, or the existence, nature, quality,
quantity, condition, value or other characteristic of any property or services
relating to a Letter of Credit;

(viii) any failure by Agent or any of Agent’s Affiliates to issue any Letter of
Credit in the form requested by Borrowers, unless Agent has received written
notice from Borrowers of such failure within three (3) Business Days after Agent
shall have furnished Borrowers a copy of such Letter of Credit and such error is
material and no drawing has been made thereon prior to receipt of such notice;

(ix) any Material Adverse Effect on any Borrower or any Guarantor;

(x) any breach of this Agreement or any Other Document by any party thereto;

(xi) the occurrence or continuance of an insolvency proceeding with respect to
any Borrower or any Guarantor;

(xii) the fact that a Default or Event of Default shall have occurred and be
continuing;

(xiii) the fact that the Term shall have expired or this Agreement or the
Obligations hereunder shall have been terminated; and

(xiv) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing.

 

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2.17 Indemnity.

In addition to amounts payable as provided in Section 15.5, Borrowers hereby
agree to protect, indemnify, pay and save harmless Agent and any of Agent’s
Affiliates that have issued a Letter of Credit from and against any and all
claims, demands, liabilities, damages, taxes, penalties, interest, judgments,
losses, costs, charges and expenses (including reasonable fees, expenses and
disbursements of counsel and allocated costs of internal counsel) which Agent or
any of Agent’s Affiliates may incur or be subject to as a consequence, direct or
indirect, of the issuance of any Letter of Credit, other than as a result of
(a) the gross negligence or willful misconduct of Agent as determined by a final
and non-appealable judgment of a court of competent jurisdiction or (b) the
wrongful dishonor by Agent or any of Agent’s Affiliates of a proper demand for
payment made under any Letter of Credit, except if such dishonor resulted from
any act or omission, whether rightful or wrongful, of any present or future de
jure or de facto Governmental Body (all such acts or omissions herein called
“Governmental Acts”). The foregoing obligations and the indemnifications
hereunder shall survive the termination of this Agreement.

2.18. Liability for Acts and Omissions.

As between Borrowers and Agent and Lenders, Borrowers assume all risks of the
acts and omissions of, or misuse of the Letters of Credit by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the respective foregoing, Agent shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for an issuance of any
such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged (even if Agent
shall have been notified thereof); (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (iii) the failure of the beneficiary of any such Letter of Credit, or
any other party to which such Letter of Credit may be transferred, to comply
fully with any conditions required in order to draw upon such Letter of Credit
(except for compliance with any such conditions expressly stated in the terms of
the Letter of Credit), or any other claim of any Borrower against any
beneficiary of such Letter of Credit, or any such transferee, or any dispute
between or among Borrowers and any beneficiary of any Letter of Credit or any
such transferee; (iv) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, facsimile or otherwise, whether or
not they be in cipher; (v) errors in interpretation of technical terms; (vi) any
loss or delay in the transmission or otherwise of any document required in order
to make a drawing under any such Letter of Credit or of the proceeds thereof;
(vii) the misapplication by the beneficiary of any such Letter of Credit of the
proceeds of any drawing under such Letter of Credit; or (viii) any consequences
arising from causes beyond the control of Agent, including any governmental
acts, and none of the above shall affect or impair, or prevent the vesting of,
any of Agent’s rights or powers hereunder. Nothing in the preceding sentence
shall relieve Agent from liability for Agent’s gross negligence or willful
misconduct (as determined by a court of competent jurisdiction in a final
non-appealable judgment) in connection with actions or omissions

 

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described in such clauses (i) through (viii) of such sentence. In no event shall
Agent or Agent’s Affiliates be liable to Borrowers for any indirect,
consequential, incidental, punitive, exemplary or special damages or expenses
(including without limitation attorneys’ fees), or for any damages resulting
from any change in the value of any property relating to a Letter of Credit,
except for any such damages that may be awarded against Borrowers in a
third-party claim.

Without limiting the generality of the foregoing, Agent and each of its
Affiliates (i) may rely on any oral or other communication believed in good
faith by Agent or such Affiliate to have been authorized or given by or on
behalf of the applicant for a Letter of Credit, (ii) may honor any presentation
if the documents presented appear on their face substantially to comply with the
terms and conditions of the relevant Letter of Credit; (iii) may honor a
previously dishonored presentation under a Letter of Credit, whether such
dishonor was pursuant to a court order, to settle or compromise any claim of
wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the
same extent as if such presentation had initially been honored, together with
any interest paid by Agent or its Affiliates; (iv) may honor any drawing that is
payable upon presentation of a statement advising negotiation or payment, upon
receipt of such statement (even if such statement indicates that a draft or
other document is being delivered separately), and shall not be liable for any
failure of any such draft or other document to arrive, or to conform in any way
with the relevant Letter of Credit; (v) may pay any paying or negotiating bank
claiming that it rightfully honored under the laws or practices of the place
where such bank is located; and (vi) may settle or adjust any claim or demand
made on Agent or its Affiliate in any way related to any order issued at the
applicant’s request to an air carrier, a letter of guarantee or of indemnity
issued to a carrier or any similar document (each an “Order”) and honor any
drawing in connection with any Letter of Credit that is the subject of such
Order, notwithstanding that any drafts or other documents presented in
connection with such Letter of Credit fail to conform in any way with such
Letter of Credit.

In furtherance and extension and not in limitation of the specific provisions
set forth above, any action taken or omitted by Agent under or in connection
with the Letters of Credit issued by it or any documents and certificates
delivered thereunder, if taken or omitted in good faith and without gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final non-appealable judgment), shall not put Agent under any
resulting liability to Borrowers or any Lender.

2.19. Additional Payments.

Any sums expended by Agent or any Lender due to any Borrower’s failure to
perform or comply with its obligations under this Agreement or any Other
Document including Borrowers’ obligations under Sections 4.2, 4.4, 4.12, 4.13,
4.14 and 6.1 hereof, may be charged to Borrowers’ Account as a Revolving Advance
and added to the Obligations.

2.20. Manner of Borrowing and Payment.

(a) Each borrowing of Revolving Advances shall be advanced according to the
applicable Commitment Percentages of Lenders.

 

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(b) Each payment (including each prepayment) by Borrowers on account of the
principal of and interest on the Revolving Advances, shall be applied to the
Revolving Advances pro rata according to the applicable Commitment Percentages
of Lenders. Except as expressly provided herein, all payments (including
prepayments) to be made by Borrowers on account of principal, interest and fees
shall be made without set off or counterclaim and shall be made to Agent on
behalf of the Lenders to the Payment Office, in each case on or prior to
1:00 P.M., New York time, in Dollars and in immediately available funds.

(c) (i) Notwithstanding anything to the contrary contained in Sections 2.20(a)
and (b) hereof, commencing with the first Business Day following the Closing
Date, each borrowing of Revolving Advances shall be advanced by Agent and each
payment by Borrowers on account of Revolving Advances shall be applied first to
those Revolving Advances advanced by Agent. On or before 1:00 P.M., New York
time, on each Settlement Date commencing with the first Settlement Date
following the Closing Date, Agent and Lenders shall make certain payments as
follows: (I) if the aggregate amount of new Revolving Advances made by Agent
during the preceding Week (if any) exceeds the aggregate amount of repayments
applied to outstanding Revolving Advances during such preceding Week, then each
Lender shall provide Agent with funds in an amount equal to its applicable
Commitment Percentage of the difference between (w) such Revolving Advances and
(x) such repayments and (II) if the aggregate amount of repayments applied to
outstanding Revolving Advances during such Week exceeds the aggregate amount of
new Revolving Advances made during such Week, then Agent shall provide each
Lender with funds in an amount equal to its applicable Commitment Percentage of
the difference between (y) such repayments and (z) such Revolving Advances.

(ii) Each Lender shall be entitled to earn interest at the applicable Revolving
Interest Rate on outstanding Advances which it has funded.

(iii) Promptly following each Settlement Date, Agent shall submit to each Lender
a certificate with respect to payments received and Advances made during the
Week immediately preceding such Settlement Date. Such certificate of Agent shall
be conclusive in the absence of manifest error.

(d) If any Lender or Participant (a “benefited Lender”) shall at any time
receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender’s
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such benefited Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other Lender’s Advances, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the other Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the

 

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extent of such recovery, but without interest. Each Lender so purchasing a
portion of another Lender’s Advances may exercise all rights of payment
(including rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.

(e) Unless Agent shall have been notified by telephone, confirmed in writing, by
any Lender that such Lender will not make the amount which would constitute its
applicable Commitment Percentage of the Advances available to Agent, Agent may
(but shall not be obligated to) assume that such Lender shall make such amount
available to Agent on the next Settlement Date and, in reliance upon such
assumption, make available to Borrowers a corresponding amount. Agent will
promptly notify Borrowers of its receipt of any such notice from a Lender. If
such amount is made available to Agent on a date after such next Settlement
Date, such Lender shall pay to Agent on demand an amount equal to the product of
(i) the daily average Federal Funds Rate (computed on the basis of a year of 360
days) during such period as quoted by Agent, times (ii) such amount, times
(iii) the number of days from and including such Settlement Date to the date on
which such amount becomes immediately available to Agent. A certificate of Agent
submitted to any Lender with respect to any amounts owing under this
paragraph (e) shall be conclusive, in the absence of manifest error. If such
amount is not in fact made available to Agent by such Lender within three (3)
Business Days after such Settlement Date, Agent shall be entitled to recover
such an amount, with interest thereon at the rate per annum then applicable to
such Revolving Advances hereunder, on demand from Borrowers; provided, however,
that Agent’s right to such recovery shall not prejudice or otherwise adversely
affect Borrowers’ rights (if any) against such Lender.

2.21. Mandatory Prepayments.

Subject to Section 4.3 hereof, when any Borrower sells or otherwise disposes of
any Collateral other than Inventory in the Ordinary Course of Business,
Borrowers shall repay the Advances in an amount equal to the net proceeds of
such sale (i.e., gross proceeds less the reasonable costs of such sales or other
dispositions), such repayments to be made promptly but in no event more than
one (1) Business Day following receipt of such net proceeds, and until the date
of payment, such proceeds shall be held in trust for Agent. The foregoing shall
not be deemed to be implied consent to any such sale otherwise prohibited by the
terms and conditions hereof. Such repayments shall be applied to the Advances in
such order as Agent may determine, subject to Borrowers’ ability to reborrow
Revolving Advances in accordance with the terms hereof.

2.22. Use of Proceeds.

(a) Borrowers shall apply the proceeds of Advances to (i) repay existing
Indebtedness of Borrowers, (ii) pay fees and expenses relating to this
transaction, (iii) provide for their working capital needs and reimburse
drawings under Letters of Credit, (iv) subject to the provisions of Section 7.5,
to make loans to Intcomex in such amounts so as to allow Intcomex to make the
required interest payments under the Indenture and the mandatory redemptions
pursuant to Section 3.8(b) of the Indenture, and (iv) for other general
corporate purposes of Borrowers.

 

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(b) Without limiting the generality of Section 2.22(a) above, neither Borrowers,
the Guarantors nor any other Person which may in the future become party to this
Agreement or the Other Documents as Borrower or Guarantor, intends to use nor
shall they use any portion of the proceeds of the Advances, directly or
indirectly, for any purpose in violation of the Trading with the Enemy Act.

2.23. Defaulting Lender.

(a) Notwithstanding anything to the contrary contained herein, in the event any
Lender (x) has refused (which refusal constitutes a breach by such Lender of its
obligations under this Agreement) to make available its portion of any Advance
or (y) notifies either Agent or Borrowers that it does not intend to make
available its portion of any Advance (if the actual refusal would constitute a
breach by such Lender of its obligations under this Agreement) (each, a “Lender
Default”), all rights and obligations hereunder of such Lender (a “Defaulting
Lender”) as to which a Lender Default is in effect and of the other parties
hereto shall be modified to the extent of the express provisions of this
Section 2.23 while such Lender Default remains in effect.

(b) Advances shall be incurred pro rata from Lenders (the “Non-Defaulting
Lenders”) which are not Defaulting Lenders based on their respective Commitment
Percentages, and no Commitment Percentage of any Lender or any pro rata share of
any Advances required to be advanced by any Lender shall be increased as a
result of such Lender Default. Amounts received in respect of principal of any
type of Advances shall be applied to reduce the applicable Advances of each
Lender (other than any Defaulting Lender) pro rata based on the aggregate of the
outstanding Advances of that type of all Lenders at the time of such
application; provided, that, Agent shall not be obligated to transfer to a
Defaulting Lender any payments received by Agent for the Defaulting Lender’s
benefit, nor shall a Defaulting Lender be entitled to the sharing of any
payments hereunder (including any principal, interest or fees). Amounts payable
to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may
hold and, in its discretion, re-lend to Borrower the amount of such payments
received or retained by it for the account of such Defaulting Lender.

(c) A Defaulting Lender shall not be entitled to give instructions to Agent or
to approve, disapprove, consent to or vote on any matters relating to this
Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of “Required
Lenders”, a Defaulting Lender shall be deemed not to be a Lender and not to have
either Advances outstanding or a Commitment Percentage.

(d) Other than as expressly set forth in this Section 2.23, the rights and
obligations of a Defaulting Lender (including the obligation to indemnify Agent)
and the other parties hereto shall remain unchanged. Nothing in this
Section 2.23 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.

 

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(e) In the event a Defaulting Lender retroactively cures to the satisfaction of
Agent the breach which caused a Lender to become a Defaulting Lender, such
Defaulting Lender shall no longer be a Defaulting Lender and shall be treated as
a Lender under this Agreement.

2.24. Removal of Lenders.

Borrowers shall be permitted (with the consent of Agent) to replace with a
replacement financial institution (i) any Lender that requests reimbursement for
amounts owing or payments of additional amounts pursuant to Section 3.7 or 3.10;
(ii) any Defaulting Lender; or (iii) any Lender (other than PNC Bank, National
Association) that fails to consent to any proposed amendment, modification,
termination, waiver or consent with respect to any provision hereof or of any
Other Document that requires the unanimous approval of all of the Lenders, the
approval of all of the Lenders affected thereby or the approval of a class of
Lenders, in each case in accordance with the terms of Section 15.2, so long as
the consent of the Required Lenders shall have been obtained with respect to
such amendment, modification, termination, waiver or consent; provided that
(A) such replacement does not conflict with any applicable law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Body, (B) except with respect to clause (iii) above, no Event of Default shall
have occurred and be continuing at the time of such replacement, (C) the
replacement financial institution shall purchase, at par, all Advances and other
amounts owing to such replaced Lender on or prior to the date of replacement,
(D) with respect to clause (iii) above, the replacement financial institution
shall approve the proposed amendment, modification, termination, waiver or
consent, (E) Borrowers shall be liable to such replaced Lender under Section 2.2
and 2.4 if any Eurodollar Rate Loan owing to such replaced Lender shall be
purchased other than on the last day of the Interest Period relating thereto,
(F) the replaced Lender shall be obligated to make such replacement in
accordance with the provisions of Section 15.3(c) (provided that Borrowers shall
be obligated to pay the registration and processing fee referred to therein),
(G) until such time as such replacement shall be consummated, Borrowers shall
pay to the replaced Lender all additional amounts (if any) required pursuant to
Sections 3.7 or 3.10, as the case may be, (H) in the case of clause (iii) above,
Borrowers provide at least three (3) Business Days’ prior notice to such
replaced Lender, and (I) any such replacement shall not be deemed to be a waiver
of any rights that Borrowers, Agent or any other Lender shall have against the
replaced Lender. In the event any replaced Lender fails to execute the
agreements required under Section 15.3 in connection with an assignment pursuant
to this Section 2.24, Borrowers may, upon two (2) Business Days’ prior notice to
such replaced Lender, execute such agreements on behalf of such replaced Lender.
A Lender shall not be required to be replaced if, prior thereto, as a result of
a waiver by such Lender or otherwise, the circumstances entitling Borrowers to
require such replacement cease to apply.

 

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ARTICLE III

INTEREST AND FEES

3.1. Interest.

Interest on Advances shall be payable in arrears on the first day of each month
with respect to Domestic Rate Loans and, with respect to Eurodollar Rate Loans,
at the end of each Interest Period. Interest charges shall be computed on the
actual principal amount of Advances outstanding during the month at a rate per
annum equal to with respect to Revolving Advances, the applicable Revolving
Interest Rate. Whenever, subsequent to the date of this Agreement, the Alternate
Base Rate is increased or decreased, the applicable Revolving Interest Rate for
Domestic Rate Loans shall be similarly changed without notice or demand of any
kind by an amount equal to the amount of such change in the Alternate Base Rate
during the time such change or changes remain in effect. The Eurodollar Rate
shall be adjusted with respect to Eurodollar Rate Loans without notice or demand
of any kind on the effective date of any change in the Reserve Percentage as of
such effective date. Upon and after the occurrence of an Event of Default, and
during the continuation thereof, at the option of Agent or at the direction of
Required Lenders, the Obligations shall bear interest at the applicable
Revolving Interest Rate plus two (2%) percent per annum (as applicable, the
“Default Rate”).

3.2. Letter of Credit Fees.

(a) Borrowers shall pay (x) to Agent, for the ratable benefit of Lenders, fees
for each Letter of Credit for the period from and excluding the date of issuance
of same to and including the date of expiration or termination, equal to the
average daily face amount of each outstanding Letter of Credit multiplied by the
Applicable Margin for Eurodollar Rate Loans per annum, which is 2.75% as of the
Closing Date, such fees to be calculated on the basis of a 360-day year for the
actual number of days elapsed and to be payable quarterly in arrears on the
first day of each fiscal quarter and on the last day of the Term, and (y) to the
Issuer, a fronting fee of one quarter of one percent (0.25%) per annum, together
with any and all administrative, issuance, amendment, payment and negotiation
charges with respect to Letters of Credit and all fees and expenses as agreed
upon by the Issuer and Borrowers in connection with any Letter of Credit,
including in connection with the opening, amendment or renewal of any such
Letter of Credit and any acceptances created thereunder and shall reimburse
Agent for any and all fees and expenses, if any, paid by Agent to the Issuer
(all of the foregoing fees, the “Letter of Credit Fees”). All such charges shall
be deemed earned in full on the date when the same are due and payable hereunder
and shall not be subject to rebate or pro-ration upon the termination of this
Agreement for any reason. Any such charge in effect at the time of a particular
transaction shall be the charge for that transaction, notwithstanding any
subsequent change in the Issuer’s prevailing charges for that type of
transaction. All Letter of Credit Fees payable hereunder shall be deemed earned
in full on the date when the same are due and payable hereunder and shall not be
subject to rebate or pro-ration upon the termination of this Agreement for any
reason. Upon and after the occurrence of an Event of Default, and during the
continuation thereof, at the option of Agent or at the direction of Required
Lenders, the Letter of Credit Fees described in clause (x) of this
Section 3.2(a) shall be increased by an additional two percent (2%) per annum.

 

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(b) If an Event of Default shall have occurred and be continuing or in the event
a Letter of Credit remains outstanding following the end of the Term, Borrowers
will cause cash to be deposited and maintained in an account with Agent, as cash
collateral, in an amount equal to one hundred and five percent (105%) of the
Maximum Undrawn Amount of all outstanding Letters of Credit, and Borrowers
hereby irrevocably authorizes Agent, in its discretion, on Borrowers’ behalf and
in Borrowers’ names, to open such an account and to make and maintain deposits
therein, or in an account opened by Borrowers, in the amounts required to be
made by Borrowers, out of the proceeds of Receivables or other Collateral or out
of any other funds of Borrowers coming into any Lender’s possession at any time.
Agent will invest such cash collateral (less applicable reserves) in such
short-term money-market items as to which Agent and Borrowers mutually agree and
the net return on such investments shall be credited to such account and
constitute additional cash collateral. Borrowers may not withdraw amounts
credited to any such account except upon the occurrence of all of the following:
(x) payment and performance in full of all Obligations, (y) expiration of all
Letters of Credit and (z) the termination of this Agreement.

3.3. Closing Fee and Facility Fee.

(a) Closing Fee.

Upon the execution of this Agreement, Borrowers shall pay to Agent for the
ratable benefit of Lenders a closing fee of $150,000 less that portion of the
deposit fee of $70,000 heretofore paid by Borrowers to Agent remaining after
application of such fee to out of pocket expenses.

(b) Facility Fee.

Borrowers shall pay to Agent a fee for the ratable benefit of Lenders in an
amount equal to one-quarter of one percent (0.25%) per annum multiplied by the
amount by which the Maximum Revolving Advance Amount exceeds the average daily
unpaid balance of the Revolving Advances plus the aggregate amount of any
outstanding Letters of Credit that are available to be drawn during each
calendar quarter. Such fee shall be payable to Agent in arrears on the first day
of each calendar quarter with respect to the previous calendar quarter.

3.4. Collateral Fees.

(a) Collateral Evaluation Fee.

Borrowers shall pay Agent a collateral evaluation fee equal to $700 per month
commencing on the first day of the month following the Closing Date and on the
first day of each month thereafter during the Term. The collateral evaluation
fee shall be deemed earned in full on the date when same is due and payable
hereunder and shall not be subject to rebate or proration upon termination of
this Agreement for any reason.

 

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(b) Collateral Monitoring Fee.

Borrowers shall pay to Agent on the first day of each month following any month
in which Agent performs any collateral monitoring - namely any field
examination, collateral analysis or other business analysis, the need for which
is to be determined by Agent and which monitoring is undertaken by Agent or for
Agent’s benefit - a collateral monitoring fee in an amount equal to $850 per day
for each person employed to perform such monitoring plus all customary costs and
disbursements incurred by Agent in the performance of such examination or
analysis.

3.5. Computation of Interest and Fees.

Interest and fees hereunder shall be computed on the basis of a year of 360 days
and for the actual number of days elapsed. If any payment to be made hereunder
becomes due and payable on a day other than a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and interest thereon shall
be payable at the Interest Rate for Domestic Rate Loans during such extension.

3.6. Maximum Charges.

In no event whatsoever shall interest and other charges charged hereunder exceed
the highest rate permissible under law. In the event interest and other charges
as computed hereunder would otherwise exceed the highest rate permitted under
law, such excess amount shall be first applied to any unpaid principal balance
owed by Borrowers, and if the then remaining excess amount is greater than the
previously unpaid principal balance, Lenders shall promptly refund such excess
amount to Borrowers and the provisions hereof shall be deemed amended to provide
for such permissible rate.

3.7. Increased Costs.

(a) In the event that any Applicable Law or any change therein, or in the
interpretation or application thereof, or compliance by any Lender (for purposes
of this Section 3.7, the term “Lender” shall include Agent or any Lender and any
corporation or bank controlling Agent or any Lender) and the office or branch
where Agent or any Lender (as so defined) makes or maintains any Eurodollar Rate
Loans with any request or directive (whether or not having the force of law)
from any central bank or other financial, monetary or other authority, shall:

(i) subject Agent or any Lender to any tax of any kind whatsoever with respect
to this Agreement or any Other Document or change the basis of taxation of
payments to Agent or any Lender of principal, fees, interest or any other amount
payable hereunder or under any Other Documents (except for changes in the rate
of tax on the overall net income of Agent or any Lender by the jurisdiction in
which it maintains its principal office);

 

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(ii) impose, modify or hold applicable any reserve, special deposit, assessment
or similar requirement against assets held by, or deposits in or for the account
of, advances or loans by, or other credit extended by, any office of Agent or
any Lender, including pursuant to Regulation D of the Board of Governors of the
Federal Reserve System; or

(iii) impose on Agent or any Lender or the London interbank Eurodollar market
any other condition with respect to this Agreement or any Other Document;

and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrowers shall promptly pay Agent or such Lender, upon its demand,
such additional amount as will compensate Agent or such Lender for such
additional cost or such reduction, as the case may be, provided that the
foregoing shall not apply to increased costs which are reflected in the
Eurodollar Rate, as the case may be. Agent or such Lender shall certify the
amount of such additional cost or reduced amount to Borrowers, and such
certification shall be conclusive absent manifest error.

(b) A certificate of a Lender setting forth the amount or amounts necessary to
compensate such Lender and delivered to Borrowers shall be conclusive absent
manifest error.

(c) Failure or delay on the part of any Lender to demand compensation pursuant
to the foregoing provisions of this Section 3.7 shall not constitute a waiver of
such Lender’s right to demand such compensation.

3.8. Basis For Determining Interest Rate Inadequate or Unfair.

In the event that Agent or any Lender shall have determined that:

(a) reasonable means do not exist for ascertaining the Eurodollar Rate
applicable pursuant to Section 2.2 hereof for any Interest Period; or

(b) Dollar deposits in the relevant amount and for the relevant maturity are not
available in the London interbank Eurodollar market, with respect to an
outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan, or a proposed
conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,

then Agent shall give Borrowers prompt written or telephonic notice of such
determination. If such notice is given, (i) any such requested Eurodollar Rate
Loan shall be made as a Domestic Rate Loan, unless Borrowers shall notify Agent
no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
date of such proposed borrowing, that its request for such borrowing shall be
cancelled or made as an unaffected type of Eurodollar Rate Loan, (ii) any
Domestic Rate Loan or Eurodollar Rate Loan which was to have been converted to
an affected type of Eurodollar Rate Loan shall be continued as or converted into
a Domestic Rate Loan, or,

 

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if Borrowers shall notify Agent, no later than 10:00 a.m. (New York City time)
two (2) Business Days prior to the proposed conversion, shall be maintained as
an unaffected type of Eurodollar Rate Loan, and (iii) any outstanding affected
Eurodollar Rate Loans shall be converted into a Domestic Rate Loan, or, if
Borrowers shall notify Agent, no later than 10:00 a.m. (New York City time)
two (2) Business Days prior to the last Business Day of the then current
Interest Period applicable to such affected Eurodollar Rate Loan, shall be
converted into an unaffected type of Eurodollar Rate Loan, on the last Business
Day of the then current Interest Period for such affected Eurodollar Rate Loans.
Until such notice has been withdrawn, Lenders shall have no obligation to make
an affected type of Eurodollar Rate Loan or maintain outstanding affected
Eurodollar Rate Loans and Borrowers shall not have the right to convert a
Domestic Rate Loan or an unaffected type of Eurodollar Rate Loan into an
affected type of Eurodollar Rate Loan.

3.9. Capital Adequacy.

(a) In the event that Agent or any Lender shall have determined that any
Applicable Law or guideline regarding capital adequacy, or any change therein,
or any change in the interpretation or administration thereof by any
Governmental Body, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Agent or any Lender
(for purposes of this Section 3.9, the term “Lender” shall include Agent or any
Lender and any corporation or bank controlling Agent or any Lender) and the
office or branch where Agent or any Lender (as so defined) makes or maintains
any Eurodollar Rate Loans with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on Agent or any Lender’s capital as a consequence of its obligations
hereunder to a level below that which Agent or such Lender could have achieved
but for such adoption, change or compliance (taking into consideration Agent’s
and each Lender’s policies with respect to capital adequacy) by an amount deemed
by Agent or any Lender to be material, then, from time to time, Borrowers shall
pay upon demand to Agent or such Lender such additional amount or amounts as
will compensate Agent or such Lender for such reduction. In determining such
amount or amounts, Agent or such Lender may use any reasonable averaging or
attribution methods. The protection of this Section 3.9 shall be available to
Agent and each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the Applicable Law or condition.

(b) A certificate of Agent or such Lender setting forth such amount or amounts
as shall be necessary to compensate Agent or such Lender with respect to
Section 3.9(a) hereof when delivered to Borrowers shall be conclusive absent
manifest error.

(c) Failure or delay on the part of any Lender to demand compensation pursuant
to the foregoing provisions of this Section 3.9 shall not constitute a waiver of
such Lender’s right to demand such compensation.

3.10. Gross Up for Taxes.

If Borrowers shall be required by Applicable Law to withhold or deduct any taxes
from or in respect of any sum payable under this Agreement or any of the Other
Documents to Agent,

 

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or any Lender, assignee of any Lender, or Participant (each, individually, a
“Payee” and collectively, the “Payees”), (a) the sum payable to such Payee or
Payees, as the case may be, shall be increased as may be necessary so that,
after making all required withholding or deductions, the applicable Payee or
Payees receives an amount equal to the sum it would have received had no such
withholding or deductions been made (the “Gross-Up Payment”), (b) Borrowers
shall make such withholding or deductions, and (c) Borrowers shall pay the full
amount withheld or deducted to the relevant taxation authority or other
authority in accordance with Applicable Law. Notwithstanding the foregoing,
Borrowers shall not be obligated to make any portion of the Gross-Up Payment
that is attributable to any withholding or deductions that would not have been
paid or claimed had the applicable Payee or Payees properly claimed a complete
exemption with respect thereto pursuant to Section 3.11 hereof.

3.11. Withholding Tax Exemption.

(a) Each Payee that is not incorporated under the Laws of the United States of
America or a state thereof (and, upon the written request of Agent, each other
Payee) agrees that it will deliver to Borrowers and Agent two (2) duly completed
appropriate valid Withholding Certificates (as defined under §1.1441-1(c)(16) of
the Income Tax Regulations (“Regulations”)) certifying its status (i.e., U.S. or
foreign person) and, if appropriate, making a claim of reduced, or exemption
from, U.S. withholding tax on the basis of an income tax treaty or an exemption
provided by the Code. The term “Withholding Certificate” means a Form W-9; a
Form W-8BEN; a Form W-8ECI; a Form W-8IMY and the related statements and
certifications as required under §1.1441-1(e)(2) and/or (3) of the Regulations;
a statement described in §1.871-14(c)(2)(v) of the Regulations; or any other
certificates under the Code or Regulations that certify or establish the status
of a payee or beneficial owner as a U.S. or foreign person.

(b) Each Payee required to deliver to Borrowers and Agent a valid Withholding
Certificate pursuant to Section 3.11(a) hereof shall deliver such valid
Withholding Certificate as follows: (A) each Payee which is a party hereto on
the Closing Date shall deliver such valid Withholding Certificate at least
five (5) Business Days prior to the first date on which any interest or fees are
payable by Borrowers hereunder for the account of such Payee; (B) each Payee
shall deliver such valid Withholding Certificate at least five (5) Business Days
before the effective date of such assignment or participation (unless Agent in
its sole discretion shall permit such Payee to deliver such Withholding
Certificate less than five (5) Business Days before such date in which case it
shall be due on the date specified by Agent). Each Payee which so delivers a
valid Withholding Certificate further undertakes to deliver to Borrowers and
Agent two (2) additional copies of such Withholding Certificate (or a successor
form) on or before the date that such Withholding Certificate expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent Withholding Certificate so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by Borrowers or
Agent.

(c) Notwithstanding the submission of a Withholding Certificate claiming a
reduced rate of or exemption from U.S. withholding tax required under
Section 3.11(b) hereof, Agent shall be entitled to withhold United States
federal income taxes at the full 30% withholding rate if in its reasonable
judgment it is required to do so under the due diligence requirements imposed

 

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upon a withholding agent under §1.1441-7(b) of the Regulations. Further, Agent
is indemnified under §1.1461-1(e) of the Regulations against any claims and
demands of any Payee for the amount of any tax it deducts and withholds in
accordance with regulations under §1441 of the Code.

3.12. Survival of Obligations.

Borrowers’ obligations and the indemnifications under this Article III shall
survive the termination of this Agreement.

ARTICLE IV

COLLATERAL: GENERAL TERMS

4.1. Security Interest in the Collateral.

To secure the prompt payment and performance to Agent and each Lender of the
Obligations, each Borrower hereby assigns, pledges and grants to Agent for its
benefit and for the ratable benefit of each Lender a continuing security
interest in and to and Lien on all of the Collateral, whether now owned or
existing or hereafter acquired or arising and wheresoever located. Each Borrower
shall mark its books and records as may be necessary or appropriate to evidence,
protect and perfect Agent’s security interest and shall cause its financial
statements to reflect such security interest. Each Borrower shall promptly
provide Agent with written notice of all commercial tort claims, such notice to
contain the case title together with the applicable court and a brief
description of the claim(s). Upon delivery of each such notice, each Borrower
shall be deemed to hereby grant to Agent a security interest and lien in and to
such commercial tort claims and all proceeds thereof.

4.2. Perfection of Security Interest.

Borrowers shall take all action that may be necessary or that Agent may request,
so as at all times to maintain the validity, perfection, enforceability and
priority of Agent’s security interest in and Lien on the Collateral or to enable
Agent to protect, exercise or enforce its rights hereunder and in the
Collateral, including, but not limited to, (i) immediately discharging all Liens
other than Permitted Encumbrances, (ii) obtaining Lien Waiver Agreements,
(iii) delivering to Agent, endorsed or accompanied by such instruments of
assignment as Agent may specify, and stamping or marking, in such manner as
Agent may specify, any and all chattel paper, instruments, letters of credits
and advices thereof and documents evidencing or forming a part of the
Collateral, (iv) entering into warehousing, lockbox and other custodial
arrangements satisfactory to Agent, and (v) executing and delivering financing
statements, control agreements, instruments of pledge, mortgages, notices and
assignments, in each case in form and substance satisfactory to Agent, relating
to the creation, validity, perfection, maintenance or continuation of Agent’s
security interest and Lien under the Uniform Commercial Code or other Applicable
Law. Agent is hereby authorized to file financing statements in accordance with
the Uniform Commercial Code as adopted in the State of Florida from time to
time. By its signature hereto,

 

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each Borrower hereby authorizes Agent to file against such Borrower one or more
financing continuation or amendment statements pursuant to the Uniform
Commercial Code in form and substance satisfactory to Agent (which statements
may have a description of collateral which is broader than that set forth herein
and which may describe the Collateral as “all assets” or “all personal
property”). All charges, expenses and fees Agent may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be charged to Borrowers’
Account as a Domestic Rate Loan and added to the Obligations, or, at Agent’s
option, shall be paid to Agent for its benefit and for the ratable benefit of
Lenders immediately upon demand.

4.3. Disposition of Collateral.

Borrowers will safeguard and protect all Collateral for Agent’s general account
and make no disposition thereof whether by sale, lease or otherwise except
(a) the sale of Inventory in the Ordinary Course of Business or the sale of
Receivables to Intcomex Latin America Finance Corporation provided the proceeds
of such sale are remitted to Agent to be applied pursuant to Section 2.21, and
(b) the disposition or transfer of obsolete and worn-out Equipment in the
Ordinary Course of Business during any fiscal year having an aggregate fair
market value of not more than $100,000 and only to the extent that (i) the
proceeds of any such disposition are used to acquire replacement Equipment which
is subject to Agent’s first priority security interest or (ii) the proceeds of
which are remitted to Agent to be applied pursuant to Section 2.21.

4.4. Preservation of Collateral.

Following the occurrence of an Event of Default and during the continuance of
such Event of Default in addition to the rights and remedies set forth in
Section 11.1 hereof, Agent: (a) may at any time take such steps as Agent deems
necessary to protect Agent’s interest in and to preserve the Collateral,
including the hiring of such security guards or the placing of other security
protection measures as Agent may deem appropriate; (b) may employ and maintain
at any of each Borrower’s premises a custodian who shall have full authority to
do all acts necessary to protect Agent’s interests in the Collateral; (c) may
lease warehouse facilities to which Agent may move all or part of the
Collateral; (d) may use any Borrower’s owned or leased lifts, hoists, trucks and
other facilities or equipment for handling or removing the Collateral; and
(e) shall have, and is hereby granted, a right of ingress and egress to the
places where the Collateral is located, and may proceed over and through any of
each Borrower’s owned or leased property. Borrowers shall cooperate fully with
all of Agent’s efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Agent may direct. All of Agent’s expenses of
preserving the Collateral, including any expenses relating to the bonding of a
custodian, shall be charged to Borrowers’ Account as a Revolving Advance
maintained as a Domestic Rate Loan and added to the Obligations.

4.5. Ownership of Collateral.

(a) With respect to the Collateral, at the time the Collateral becomes subject
to Agent’s security interest: (i) the applicable Borrower shall be (other than
with respect to any Purchase Money Lien) the sole owner of and fully authorized
and able to sell, transfer, pledge and/or grant a first priority security
interest in each and every item of the its respective Collateral

 

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to Agent; and, except for Permitted Encumbrances the Collateral shall be free
and clear of all Liens and encumbrances whatsoever; (ii) each document and
agreement executed by any Borrower or delivered to Agent or any Lender in
connection with this Agreement shall be true and correct in all respects;
(iii) all signatures and endorsements of such Borrower that appear on such
documents and agreements shall be genuine and such Borrower shall have full
capacity to execute same; and (iv) Borrowers’ Equipment and Inventory shall be
located as set forth on Schedule 4.5 and shall not be removed from such
location(s) without the prior written consent of Agent except with respect to
the sale of Inventory in the Ordinary Course of Business and Equipment to the
extent permitted in Section 4.3 hereof.

(b) (i) There is no location at which Borrowers have any Inventory (except for
Inventory in transit) or other Collateral other than those locations listed on
Schedule 4.5; (ii) Schedule 4.5 contains a correct and complete list, as of the
Closing Date, of the legal names and addresses of each warehouse at which
Inventory of any Borrowers is stored and each warehouseman, bailee or other
third party in possession of any of Borrowers’ Inventory or Equipment; none of
the receipts received by any Borrower from any warehouse states that the goods
covered thereby are to be delivered to bearer or to the order of a named Person
or to a named Person and such named Person’s assigns; (iii) Schedule 4.5 sets
forth a correct and complete list as of the Closing Date of (A) each place of
business of each Borrower and (B) the chief executive office of each Borrower;
and (iv) Schedule 4.5 sets forth a correct and complete list as of the Closing
Date of the location, by state and street address, of all Real Property owned or
leased by each Borrower, identifying which properties are owned and which are
leased, together with the names and addresses of any landlords.

4.6. Defense of Agent’s and Lenders’ Interests.

Until (a) payment and performance in full of all of the Obligations and
(b) termination of this Agreement, Agent’s interests in the Collateral shall
continue in full force and effect. During such period no Borrower shall, without
Agent’s prior written consent, pledge, sell (except Inventory in the Ordinary
Course of Business and Equipment to the extent permitted in Section 4.3 hereof),
assign, transfer, create or suffer to exist a Lien upon or encumber or allow or
suffer to be encumbered in any way except for Permitted Encumbrances, any part
of the Collateral. Borrowers shall defend Agent’s interests in the Collateral
against any and all Persons whatsoever. Following the occurrence of an Event of
Default and during the continuance of such Event of Default, at any time
following demand by Agent for payment of all Obligations, Agent shall have the
right to take possession of the indicia of the Collateral and the Collateral in
whatever physical form contained, including: labels, stationery, documents,
instruments and advertising materials. If Agent exercises this right to take
possession of the Collateral, Borrowers shall, upon demand, assemble it in the
best manner possible and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all Collateral, Agent and
Lenders shall be entitled to all of the rights and remedies set forth herein and
further provided by the Uniform Commercial Code or other Applicable Law.
Borrowers shall, and Agent may, at its option, instruct all suppliers, carriers,
forwarders, warehousers or others receiving or holding cash, checks, Inventory,
documents or instruments in which Agent holds a security interest to deliver
same to Agent and/or subject to Agent’s order and if they shall come into any
Borrower’s possession, they, and each of them, shall be held by such Borrower in
trust as Agent’s trustee, and such Borrower will immediately deliver them to
Agent in their original form together with any necessary endorsement.

 

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4.7. Books and Records.

Each Borrower shall (a) keep proper books of record and account in which full,
true and correct entries will be made of all dealings or transactions of or in
relation to its business and affairs which books and records shall be kept at
each Borrower’s principal place of business; (b) set up on its books accruals
with respect to all taxes, assessments, charges, levies and claims; and (c) on a
reasonably current basis set up on its books, from its earnings, allowances
against doubtful Receivables, advances and investments and all other proper
accruals (including by reason of enumeration, accruals for premiums, if any, due
on required payments and accruals for depreciation, obsolescence, or
amortization of properties), which should be set aside from such earnings in
connection with its business. All determinations pursuant to this subsection
shall be made in accordance with, or as required by, GAAP consistently applied
in the opinion of such independent public accountant as shall then be regularly
engaged by such Borrower.

4.8. Financial Disclosure.

Each Borrower hereby irrevocably authorizes and directs all accountants and
auditors employed by such Borrower at any time during the Term to exhibit and
deliver to Agent and each Lender copies of any of such Borrower’s financial
statements, trial balances or other accounting records of any sort in the
accountant’s or auditor’s possession, and to disclose to Agent and each Lender
any information such accountants may have concerning such Borrower’s financial
status and business operations. Each Borrower hereby authorizes all Governmental
Bodies to furnish to Agent and each Lender copies of reports or examinations
relating to such Borrower, whether made by such Borrower or otherwise; however,
Agent and each Lender will attempt to obtain such information or materials
directly from such Borrower prior to obtaining such information or materials
from such accountants or Governmental Bodies.

4.9. Compliance with Laws.

Each Borrower shall comply in all material respects with all Applicable Laws
with respect to the Collateral or any part thereof or to the operation of such
Borrower’s business the non-compliance with which could reasonably be expected
to have a Material Adverse Effect.

4.10. Inspection of Premises; Appraisals.

At all reasonable times Agent and each Lender shall have full access to and the
right to audit, check, inspect and make abstracts and copies from each
Borrower’s books, records, audits, correspondence and all other papers relating
to the Collateral and the operation of such Borrower’s business. Agent, any
Lender and their agents may enter upon any of such Borrower’s premises at any
time during business hours and at any other reasonable time, and from time to
time, for the purpose of inspecting the Collateral and any and all records
pertaining thereto and the operation of such Borrower’s business and discussing
the affairs, finances and business of such Borrower with any officers and
directors of such Borrower or with the

 

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Accountants. At the sole cost of Borrowers, Agent will conduct no more than four
field examinations and one Inventory appraisal per year in the absence of a
Default or Event of Default, but reserves the right, in its reasonable credit
judgment exercised in good faith, to conduct additional field examinations and
appraisals (whether real estate appraisals, appraisals of Inventory or
appraisals of Equipment) at Borrowers’ expense upon reasonable notice to the
Company.

4.11. Insurance.

The assets and properties of each Borrower at all times shall be maintained in
accordance with the requirements of all insurance carriers which provide
insurance with respect to the assets and properties of such Borrower so that
such insurance shall remain in full force and effect. Borrowers shall bear the
full risk of any loss of any nature whatsoever with respect to the Collateral.
At Borrowers’ own cost and expense in amounts and with carriers acceptable to
Agent, Borrowers shall (a) keep all their insurable properties and properties in
which any Borrower has an interest insured against the hazards of fire, flood,
sprinkler leakage, those hazards covered by extended coverage insurance and such
other hazards, and for such amounts, as is customary in the case of companies
engaged in businesses similar to Borrowers’ including business interruption
insurance; (b) maintain a bond in such amounts as is customary in the case of
companies engaged in businesses similar to Borrowers insuring against larceny,
embezzlement or other criminal misappropriation of insured’s officers and
employees who may either singly or jointly with others at any time have access
to the assets or funds of any Borrower either directly or through authority to
draw upon such funds or to direct generally the disposition of such assets;
(c) maintain customary public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (d) maintain all
such worker’s compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which any Borrower is engaged in business;
(e) furnish Agent with (i) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof at least thirty (30) days
before any expiration date, and (ii) appropriate loss payable endorsements in
form and substance satisfactory to Agent, naming Agent as a lender loss payee as
its interests may appear with respect to all insurance coverage referred to in
clauses (a) and (c) above, and providing (A) that all proceeds thereunder shall
be payable to Agent, (B) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such policy, and
(C) that such policy and loss payable clauses may not be cancelled, amended or
terminated unless at least thirty (30) days’ prior written notice is given to
Agent. In the event of any loss thereunder, the carriers named therein hereby
are directed by Agent and Borrowers to make payment for such loss to Agent and
not to such Borrowers and Agent jointly and any such payments shall be applied
to the outstanding Obligations in such order as Agent may determine. If any
insurance losses are paid by check, draft or other instrument payable to
Borrowers and Agent jointly, Agent may endorse Borrowers’ names thereon and do
such other things as Agent may deem advisable to reduce the same to cash. If any
payment for such loss is made to a Borrower and not Agent, such Borrower shall
turn over such payment to Agent. Agent is hereby authorized to adjust and
compromise claims of $500,000 or more under insurance coverage referred to in
clauses (a) and (b) above. All loss recoveries received by Agent upon any such
insurance shall be applied to the Obligations, in such order as Agent in its
sole discretion shall determine. Any surplus shall be paid by Agent to Borrowers
or applied as may be otherwise required by law. Any deficiency thereon shall be
paid by Borrowers to Agent, on demand.

 

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4.12. Failure to Pay Insurance.

If Borrowers fail to obtain insurance as hereinabove provided, or to keep the
same in force, Agent, if Agent so elects, may obtain such insurance and pay the
premium therefor on behalf of Borrowers, and charge Borrowers’ Account therefor
as a Revolving Advance of a Domestic Rate Loan and such expenses so paid shall
be part of the Obligations.

4.13. Payment of Taxes.

Borrowers will pay, when due, all taxes, assessments and other Charges lawfully
levied or assessed upon any Borrower or any of the Collateral including real and
personal property taxes, assessments and charges and all franchise, income,
employment, social security benefits, withholding, and sales taxes except to the
extent that any applicable Borrower has Properly Contested any such taxes,
assessments or charges. If any tax by any Governmental Body is or may be imposed
on or as a result of any transaction between any Borrower and Agent or any
Lender which Agent or any Lender may be required to withhold or pay or if any
taxes, assessments, or other Charges remain unpaid after the date fixed for
their payment, or if any claim shall be made which, in Agent’s or any Lender’s
opinion, may possibly create a valid Lien on the Collateral, Agent may without
notice to Borrowers pay the taxes, assessments or other Charges and Borrowers
hereby indemnify and hold Agent and each Lender harmless in respect thereof. The
amount of any payment by Agent under this Section 4.13 shall be charged to
Borrowers’ Account as a Revolving Advance maintained as a Domestic Rate Loan and
added to the Obligations and, until Borrowers shall furnish Agent with an
indemnity therefor (or supply Agent with evidence satisfactory to Agent that due
provision for the payment thereof has been made or, or in the absence of a tax
Lien, a reserve is established in an amount satisfactory to Agent), Agent may
hold without interest any balance standing to Borrowers’ credit and Agent shall
retain its security interest in and Lien on any and all Collateral held by
Agent.

4.14. Payment of Leasehold Obligations.

Each Borrower shall at all times pay, when and as due, its rental obligations
under all leases under which it is a tenant, and shall otherwise comply, in all
material respects, with all other terms of such leases and keep them in full
force and effect and, at Agent’s request will provide evidence of having done
so.

4.15. Receivables.

(a) Nature of Receivables.

Each of the Receivables shall be a bona fide and valid account representing a
bona fide indebtedness incurred by the Customer therein named, for a fixed sum
as set forth in the invoice relating thereto (provided immaterial or
unintentional invoice errors shall not be deemed to be a breach hereof) with
respect to an absolute sale or lease and delivery of goods upon stated terms

 

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of the applicable Borrower, or work, labor or services theretofore rendered by
such Borrower as of the date each Receivable is created. Same shall be due and
owing in accordance with such Borrower’s standard terms of sale without dispute,
setoff or counterclaim except as may be stated on the accounts receivable
schedules delivered by such Borrower to Agent.

(b) Solvency of Customers.

Each Customer, to the best of the applicable Borrower’s knowledge, as of the
date each Receivable is created, is and will be solvent and able to pay all
Receivables on which the Customer is obligated in full when due or with respect
to such Customers of such Borrower who is not solvent such Borrower has set up
on its books and in its financial records bad debt reserves adequate to cover
such Receivables.

(c) Location of Borrowers.

Each Borrower’s chief executive office is located at the address set forth on
Schedule 4.5. Until written notice is given to Agent by the applicable Borrower
of any other office at which such Borrower keeps its records pertaining to
Receivables, all such records shall be kept at such executive office.

(d) Collection of Receivables.

Until Borrowers’ authority to do so is terminated by Agent (which notice Agent
may give at any time following the occurrence of an Event of Default and during
the continuance of such Event of Default), Borrowers will, at Borrowers’ sole
cost and expense, but on Agent’s behalf and for Agent’s account, collect as
Agent’s property and in trust for Agent all amounts received on Receivables, and
shall not commingle such collections with any Borrowers’ fund or use the same
except to pay Obligations. Borrowers shall deposit in the Blocked Account or,
upon request by Agent, deliver to Agent, in original form and on the date of
receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and
other evidences of Indebtedness for borrowed money.

(e) Notification of Assignment of Receivables.

At any time following the occurrence of an Event of Default and during the
continuance of an Event of Default, Agent shall have the right to send notice of
the assignment of, and Agent’s security interest in and Lien on, the Receivables
to any and all Customers or any third party holding or otherwise concerned with
any of the Collateral. Thereafter, Agent shall have the sole right to collect
the Receivables, take possession of the Collateral, or both. Agent’s actual
collection expenses, including, but not limited to, stationery and postage,
telephone and facsimile, secretarial and clerical expenses and the salaries of
any collection personnel used for collection, may be charged to Borrowers’
Account and added to the Obligations.

 

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(f) Power of Agent to Act on Borrowers’ Behalf.

At any time following the occurrence of an Event of Default and during the
continuance of such Event of Default, Agent shall have the right to receive,
endorse, assign and/or deliver in the name of Agent or any Borrower any and all
checks, drafts and other instruments for the payment of money relating to the
Receivables, and each Borrower hereby waives notice of presentment, protest and
non-payment of any instrument so endorsed. Each Borrower hereby constitutes
Agent or Agent’s designee as such Borrower’s attorney at any time following the
occurrence of an Event of Default and during the continuance of such Event of
Default, with power (i) to endorse such Borrower’s name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) to sign such Borrower’s name on any invoice or bill of lading
relating to any of the Receivables, drafts against Customers, assignments and
verifications of Receivables; (iii) to send verifications of Receivables to any
Customer; (iv) to sign such Borrower’s name on all documents or instruments
deemed necessary or appropriate by Agent to preserve, protect, or perfect
Agent’s interest in the Collateral and to file same; (v) to demand payment of
the Receivables; (vi) to enforce payment of the Receivables by legal proceedings
or otherwise; (vii) to exercise all of such Borrowers’ rights and remedies with
respect to the collection of the Receivables and any other Collateral; (viii) to
settle, adjust, compromise, extend or renew the Receivables; (ix) to settle,
adjust or compromise any legal proceedings brought to collect Receivables;
(x) to prepare, file and sign such Borrower’s name on a proof of claim in
bankruptcy or similar document against any Customer; (xi) to prepare, file and
sign such Borrower’s name on any notice of Lien, assignment or satisfaction of
Lien or similar document in connection with the Receivables; and (xii) to do all
other acts and things necessary to carry out this Agreement. All acts of said
attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts of omission or commission nor for any
error of judgment or mistake of fact or of law, unless done maliciously or with
gross (not mere) negligence (as determined by a court of competent jurisdiction
in a final non-appealable judgment); this power being coupled with an interest
is irrevocable while any of the Obligations remain unpaid. Agent shall have the
right at any time following the occurrence of an Event of Default and during the
continuance of such Event of Default, to change the address for delivery of mail
addressed to any Borrower to such address as Agent may designate and to receive,
open and dispose of all mail addressed to such Borrower.

(g) No Liability.

Neither Agent nor any Lender shall, under any circumstances or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any of the Receivables or
any instrument received in payment thereof, or for any damage resulting
therefrom. Agent is authorized and empowered to accept following the occurrence
of an Event of Default and during the continuance of such Event of Default the
return of the goods represented by any of the Receivables, without notice to or
consent by Borrowers, all without discharging or in any way affecting Borrowers’
liability hereunder.

 

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(h) Establishment of a Cash Management System.

All proceeds of Collateral shall be deposited by Borrowers into either (i) a
lockbox account, dominion account or such other “blocked account” (“Blocked
Accounts”) established at a bank or banks (each such bank, a “Blocked Account
Bank”) pursuant to an arrangement with such Blocked Account Bank as may be
selected by Borrowers and be acceptable to Agent or (ii) depository accounts
(“Depository Accounts”) established at Agent for the deposit of such proceeds.
Borrowers, Agent and each Blocked Account Bank shall enter into a deposit
account control agreement in form and substance satisfactory to Agent directing
such Blocked Account Bank to transfer such funds so deposited to Agent, either
to any account maintained by Agent at said Blocked Account Bank or by wire
transfer to appropriate account(s) of Agent. All funds deposited in such Blocked
Accounts shall immediately become the property of Agent and Borrowers shall
obtain the agreement by such Blocked Account Bank to waive any offset rights
against the funds so deposited. Neither Agent nor any Lender assumes any
responsibility for such blocked account arrangement, including any claim of
accord and satisfaction or release with respect to deposits accepted by any
Blocked Account Bank thereunder. Notwithstanding the foregoing Agent shall not
require a deposit account control agreement for Bank of America Cash Account
#898006376241 provided that at no time shall the amount in the account exceed
$150,000. All deposit accounts and investment accounts of any Borrower and its
Subsidiaries are set forth on Schedule 4.15(h).

(i) Adjustments.

Borrowers will not, without Agent’s consent, compromise or adjust any material
amount of the Receivables (or extend the time for payment thereof) or accept any
material returns of merchandise or grant any additional discounts, allowances or
credits thereon except for those compromises, adjustments, returns, discounts,
credits and allowances as have been heretofore customary in the business of
Borrowers.

4.16. Inventory.

To the extent Inventory held for sale or lease has been produced by any
Borrower, it has been and will be produced by such Borrower in accordance with
the Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations and orders thereunder.

4.17. Maintenance of Equipment.

The Equipment shall be maintained in good operating condition and repair
(reasonable wear and tear excepted) and all necessary replacements of and
repairs thereto shall be made so that the value and operating efficiency of the
Equipment shall be maintained and preserved. Borrowers shall not use or operate
the Equipment in violation of any law, statute, ordinance, code, rule or
regulation. Borrowers shall have the right to sell Equipment to the extent set
forth in Section 4.3 hereof.

 

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4.18. Exculpation of Liability.

Nothing herein contained shall be construed to constitute Agent or any Lender as
any Borrower’s agent for any purpose whatsoever, nor shall Agent or any Lender
be responsible or liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof. Neither Agent nor any Lender, whether by
anything herein or in any assignment or otherwise, assume any of any Borrower’s
obligations under any contract or agreement assigned to Agent or such Lender,
and neither Agent nor any Lender shall be responsible in any way for the
performance by any Borrower of any of the terms and conditions thereof.

4.19. Environmental Matters.

(a) Borrowers shall ensure that the Real Property owned or leased by Borrower
remains in compliance with all Environmental Laws and they shall not place or
permit to be placed any Hazardous Substances on any Real Property except as
permitted by Applicable Law or appropriate governmental authorities.

(b) Borrowers shall establish and maintain a system to assure and monitor
continued compliance with all applicable Environmental Laws which system shall
include periodic reviews of such compliance.

(c) Borrowers shall (i) to the extent customary for businesses of the same type
as such Borrower operating in a similar location, employ in connection with the
use of the Real Property appropriate technology necessary to maintain compliance
with any applicable Environmental Laws and (ii) dispose of any and all Hazardous
Waste generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall use their best efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by any Borrower in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.

(d) In the event any Borrower obtains, gives or receives notice of any Release
or threat of Release of a reportable quantity of any Hazardous Substances at the
Real Property (any such event being hereinafter referred to as a “Hazardous
Discharge”) or receives any notice of violation, request for information or
notification that it is potentially responsible for investigation or cleanup of
environmental conditions at the Real Property, demand letter or complaint,
order, citation, or other written notice with regard to any Hazardous Discharge
or violation of Environmental Laws affecting the Real Property or such
Borrower’s interest therein (any of the foregoing is referred to herein as an
“Environmental Complaint”) from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the “Authority”), then such
Borrower shall, within five (5) Business Days, give written notice of same to
Agent detailing facts and circumstances of which such Borrower is aware giving
rise to the Hazardous Discharge or Environmental Complaint. Such information is
to be provided to allow Agent to protect its security interest in and Lien on
the Real Property and the Collateral and is not intended to create nor shall it
create any obligation upon Agent or any Lender with respect thereto.

 

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(e) Each Borrower shall promptly forward to Agent copies of any request for
information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Substances at any other site owned, operated or used by such Borrower
to dispose of Hazardous Substances and shall continue to forward copies of
correspondence between such Borrower and the Authority regarding such claims to
Agent until the claim is settled. Each Borrower shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that such Borrower is required to file under any Environmental Laws.
Such information is to be provided solely to allow Agent to protect Agent’s
security interest in and Lien on the Real Property and the Collateral.

(f) Borrowers shall respond promptly to any Hazardous Discharge or Environmental
Complaint and take all necessary action in order to safeguard the health of any
Person and to avoid subjecting the Collateral or Real Property to any Lien. If
Borrowers shall fail to respond promptly to any Hazardous Discharge or
Environmental Complaint or Borrowers shall fail to comply with any of the
requirements of any Environmental Laws, Agent on behalf of Lenders may, but
without the obligation to do so, for the sole purpose of protecting Agent’s
interest in the Collateral: (A) give such notices or (B) enter onto the Real
Property (or authorize third parties to enter onto the Real Property) and take
such actions as Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans shall be paid upon demand by Borrowers,
and until paid shall be added to and become a part of the Obligations secured by
the Liens created by the terms of this Agreement or any other agreement between
Agent, any Lender and any Borrower.

(g) Promptly upon the written request of Agent from time to time following the
occurrence of an event that could reasonably be expected to result in Hazardous
Discharge or if required by Applicable Law or if an Event of Default exists,
Borrowers shall provide Agent, at Borrowers’ expense, with an environmental site
assessment or environmental audit report prepared by an environmental
engineering firm acceptable in the reasonable opinion of Agent, to assess with a
reasonable degree of certainty the existence of a Hazardous Discharge and the
potential costs in connection with abatement, cleanup and removal of any
Hazardous Substances found on, under, at or within the Real Property. Any report
or investigation of such Hazardous Discharge proposed and acceptable to an
appropriate Authority that is charged to oversee the clean-up of such Hazardous
Discharge shall be acceptable to Agent. If such estimates, individually or in
the aggregate, exceed $100,000, Agent shall have the right to require Borrowers
to post a bond, letter of credit or other security reasonably satisfactory to
Agent to secure payment of these costs and expenses.

 

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(h) Borrowers shall defend and indemnify Agent and Lenders and hold Agent,
Lenders and their respective employees, agents, directors and officers harmless
from and against all loss, liability, damage and expense, claims, costs, fines
and penalties, including attorney’s fees, suffered or incurred by Agent or
Lenders under or on account of any Environmental Laws, including the assertion
of any Lien thereunder, with respect to any Hazardous Discharge, the presence of
any Hazardous Substances affecting the Real Property, whether or not the same
originates or emerges from the Real Property or any contiguous real estate,
including any loss of value of the Real Property as a result of the foregoing
except to the extent such loss, liability, damage and expense is attributable to
any Hazardous Discharge resulting from actions on the part of Agent or any
Lender. Borrowers’ obligations under this Section 4.19 shall arise upon the
discovery of the presence of any Hazardous Substances at the Real Property,
whether or not any federal, state, or local environmental agency has taken or
threatened any action in connection with the presence of any Hazardous
Substances. Borrowers’ obligation and the indemnifications hereunder shall
survive the termination of this Agreement.

(i) For purposes of Section 4.19 and 5.7, all references to Real Property shall
be deemed to include all of any Borrower’s right, title and interest in and to
its owned and leased premises.

4.20. Financing Statements.

Except as respects the financing statements filed by Agent and the financing
statements described on Schedule 1.2, no financing statement covering any of the
Collateral or any proceeds thereof is on file in any public office.

4.21. Voting Rights in Respect of Subsidiary Stock.

(a) So long as no Event of Default shall have occurred and be continuing, to the
extent permitted by law, each Borrower may exercise any and all voting and other
consensual rights pertaining to the Subsidiary Stock of such Borrower or any
part thereof for any purpose not inconsistent with the terms of this Agreement;
and

(b) Upon the occurrence and during the continuance of an Event of Default and
following written notice by Agent, all rights of a Borrower to exercise the
voting and other consensual rights which it would otherwise be entitled to
exercise pursuant to paragraph (a) of this Section shall cease and all such
rights shall thereupon become vested in Agent which shall then have the sole
right to exercise such voting and other consensual rights.

4.22. Dividend and Distribution Rights in Respect of Subsidiary Shares.

(a) So long as no Event of Default shall have occurred and be continuing, each
Borrower may receive and retain any and all dividends (other than stock or
ownership interest dividends and other dividends constituting Subsidiary Stock
which are addressed herein), distributions or interest paid in respect of the
Subsidiary Stock to the extent they are allowed under this Agreement.

 

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(b) Upon the occurrence and during the continuation of an Event of Default:

(A) all rights of a Borrower to receive the dividends, distributions and
interest payments which it would otherwise be authorized to receive and retain
pursuant to paragraph (a) of this Section shall cease and all such rights shall
thereupon be vested in Agent which shall then have the sole right to receive and
hold as Subsidiary Stock such dividends, distributions and interest payments;
and

(B) all dividends, distributions and interest payments which are received by a
Borrower contrary to the provisions of clause (A) of this paragraph (b) shall be
received in trust for the benefit of Agent, shall be segregated from other
property or funds of such Borrower, and shall be forthwith paid over to Agent as
Subsidiary Stock in the exact form received, to be held by Agent as Subsidiary
Stock and as further collateral security for the Obligations.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Borrowers represent and warrant as follows:

5.1. Authority.

Borrowers have full power, authority and legal right to enter into this
Agreement and the Other Documents and to perform all their respective
Obligations hereunder and thereunder. This Agreement, the Subordination
Agreement and the Other Documents have been duly executed and delivered by
Borrowers, and this Agreement, the Subordination Agreement and the Other
Documents constitute the legal, valid and binding obligation of Borrowers
enforceable in accordance with their terms, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors’ rights generally. The execution, delivery and performance
of this Agreement and of the Other Documents (a) are within each Borrower’s
corporate or limited liability company powers, as applicable, have been duly
authorized by all necessary corporate or company action, are not in
contravention of law or the terms of each Borrower’s by-laws, certificate of
incorporation, operating agreement, certificate of formation or other governing
documents, as applicable, relating to each Borrower’s formation or to the
conduct of each Borrower’s business or of any material agreement or undertaking
to which each Borrower is a party or by which each Borrower is bound, (b) will
not conflict with or violate any law or regulation, or any judgment, order or
decree of any Governmental Body, (c) will not require the Consent of any
Governmental Body or any other Person, except those Consents set forth on
Schedule 5.1 hereto, all of which will have been duly obtained, made or compiled
prior to the Closing Date and which are in full force and effect and (d) will
not conflict with, nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of any Borrower under the provisions of
any agreement, charter document, instrument, by-law, operating agreement or
other instrument to which such Borrower is a party or by which it or its
property is a party or by which it may be bound.

 

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5.2. Formation and Qualification.

(a) Borrowers are duly incorporated and/or formed and in good standing under the
laws of the states indicated on Schedule 5.2(a) and are qualified to do business
and are in good standing in the states indicated on Schedule 5.2(a) which
constitute all states in which qualification and good standing are necessary for
Borrowers to conduct their business and own their property and where the failure
to so qualify could reasonably be expected to have a Material Adverse Effect.
Borrowers have delivered to Agent true and complete copies of their certificate
of incorporation and by law, and certificate of formation and operating
agreement (as applicable) and will promptly notify Agent of any amendment or
changes thereto.

(b) As of the Closing Date, the only Subsidiaries of the Company are listed on
Schedule 5.2(b). As of the Closing Date, the Persons identified on
Schedule 5.2(b) are the record and beneficial owners of all of the shares of
Capital Stock of each of the Persons listed on Schedule 5.2(b) as being owned by
thereby, there are no proxies, irrevocable or otherwise, with respect to such
shares, and no equity securities of any of such Persons are or may become
required to be issued by reason of any options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of any Capital
Stock of any such Person, and there are no contracts, commitments,
understandings or arrangements by which any such Person is or may become bound
to issue additional shares of its Capital Stock or securities convertible into
or exchangeable for such shares. All of the shares owned by Borrowers are owned
free and clear of any Liens other than Permitted Encumbrances.

5.3. Survival of Representations and Warranties.

All representations and warranties of each Borrower contained in this Agreement
and the Other Documents shall be true at the time of such Borrower’s execution
of this Agreement and the Other Documents, and shall survive the execution,
delivery and acceptance thereof by the parties thereto and the closing of the
transactions described therein or related thereto.

5.4. Tax Returns.

Each Borrower’s federal tax identification number is set forth on Schedule 5.4.
Borrowers have filed all federal, state and local tax returns and other reports
they are required by law to file and has paid all taxes, assessments, fees and
other governmental charges that are due and payable. The provision for taxes on
the books of Borrowers are adequate for all years not closed by applicable
statutes, and for its current fiscal year, and Borrowers have no knowledge of
any deficiency or additional assessment in connection therewith not provided for
on its books.

 

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5.5. Financial Statements.

(a) The pro forma balance sheet of Borrowers (the “Pro Forma Balance Sheet”)
furnished to Agent on the Closing Date reflects the consummation of the
transactions contemplated under this Agreement (collectively, the
“Transactions”) and is accurate, complete and correct and fairly reflects the
financial condition of Borrowers as of the Closing Date after giving effect to
the Transactions, and has been prepared in accordance with GAAP, consistently
applied. The Pro Forma Balance Sheet has been certified as accurate, complete
and correct in all material respects by the President and Chief Financial
Officer of Borrowers. All financial statements referred to in this subsection
5.5(a), including the related schedules and notes thereto, have been prepared,
in accordance with GAAP, consistently applied, except as may be disclosed in
such financial statements.

(b) The twelve-month cash flow projections of Borrowers and their projected
balance sheets as of the Closing Date (and income statements), copies of which
are annexed hereto as Exhibit 5.5(b) (the “Projections”) were prepared by the
Chief Financial Officer of Borrowers, are based on underlying assumptions which
provide a reasonable basis for the projections contained therein and reflect
Borrowers’ judgment based on present circumstances of the reasonably expected
set of conditions and course of action for the projected period. The cash flow
Projections together with the Pro Forma Balance Sheet, are referred to as the
“Pro Forma Financial Statements”.

(c) The consolidated and consolidating balance sheets of Borrowers, their
Subsidiaries and such other Persons described therein (including the accounts of
all Subsidiaries for the respective periods during which a subsidiary
relationship existed) as of March 31, 2011 and the related statements of income,
changes in stockholder’s equity, and changes in cash flow for the period ended
on such date, all accompanied by reports thereon containing opinions without
qualification by independent certified public accountants, copies of which have
been delivered to Agent, have been prepared in accordance with GAAP,
consistently applied (except for changes in application in which such
accountants concur) and present fairly the financial position of Borrowers and
their Subsidiaries at such date and the results of their operations for such
period. Since March 31, 2011 there has been no change in the condition,
financial or otherwise, of Borrowers or their Subsidiaries as shown on the
consolidated balance sheet as of such date and no change in the aggregate value
of machinery, equipment and Real Property owned by Borrowers and their
Subsidiaries, except, in each case, changes in the Ordinary Course of Business,
none of which individually or in the aggregate has been materially adverse.

5.6. Entity Name and Locations.

No Borrower has been known by any other corporate name in the past five years
and does not sell Inventory under any other name except as set forth on
Schedule 5.6, nor has any Borrower been the surviving corporation or company, as
applicable, of a merger or consolidation or acquired all or substantially all of
the assets of any Person during the preceding five (5) years.

 

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5.7. O.S.H.A. and Environmental Compliance.

(a) Borrowers have duly complied in all material respects with, and their
facilities, business, assets, property, leaseholds, Real Property and Equipment
are in compliance in all material respects with, the provisions of the Federal
Occupational Safety and Health Act, the Environmental Protection Act, RCRA and
all other Environmental Laws; there have been no outstanding citations, notices
or orders of non-compliance issued to any Borrower or relating to its business,
assets, property, leaseholds or Equipment under any such laws, rules or
regulations.

(b) Borrowers have been issued all required federal, state and local licenses,
certificates or permits relating to all applicable Environmental Law other than
those the absence of which would not reasonably be likely to have a Material
Adverse Effect.

(c) (i) The Borrowers are not aware of any releases, spills, discharges, leaks
or disposal (collectively referred to as “Releases”) of Hazardous Substances at,
upon, under or within any Real Property or any premises leased by any Borrower;
(ii) to the knowledge of Borrowers there are no underground storage tanks or
polychlorinated biphenyls on the Real Property or any premises leased by any
Borrower; (iii) to the knowledge of Borrowers neither the Real Property nor any
premises leased by any Borrower has ever been used as a treatment, storage or
disposal facility of Hazardous Waste; and (iv) no Hazardous Substances are
present on the Real Property or any premises leased by any Borrower, excepting
such quantities as are handled in accordance with all applicable manufacturer’s
instructions and governmental regulations and in proper storage containers and
as are necessary for the operation of the commercial business of any Borrower or
of its tenants.

5.8. Solvency; No Litigation, Violation, Indebtedness or Default.

(a) Each Borrower is solvent, able to pay its debts as they mature, has capital
sufficient to carry on its business and all businesses in which it is about to
engage, and (i) as of the Closing Date, the fair present saleable value of its
assets, calculated on a going concern basis, is in excess of the amount of its
liabilities and (ii) subsequent to the Closing Date, the fair saleable value of
its assets (calculated on a going concern basis) will be in excess of the amount
of its liabilities.

(b) Borrower has no (i) pending or threatened litigation, arbitration, actions
or proceedings which could reasonably be expected to have a Material Adverse
Effect, and (ii) liabilities or indebtedness for borrowed money other than the
Obligations.

(c) No Borrower is in violation of any applicable statute, law, rule, regulation
or ordinance in any respect which could reasonably be expected to have a
Material Adverse Effect, nor is any Borrower in violation of any order of any
court, Governmental Body or arbitration board or tribunal.

(d) No Borrower or any member of the Controlled Group maintains or contributes
to any Pension Benefit Plan or Multiemployer Plan other than as of the Closing
Date, those listed on Schedule 5.8(d) hereto and thereafter, as permitted under
this Agreement. (i) No Pension

 

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Benefit Plan has incurred any “accumulated funding deficiency,” as defined in
Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or not
waived, and each Borrower and each member of the Controlled Group has met all
applicable minimum funding requirements under Section 302 of ERISA in respect of
each Pension Benefit Plan; (ii) each Pension Benefit Plan which is intended to
be a qualified Plan under Section 401(a) of the Code as currently in effect has
been determined by the Internal Revenue Service to be qualified under
Section 401(a) of the Code and the trust related thereto is exempt from federal
income tax under Section 501(a) of the Code; (iii) no Borrower or any member of
the Controlled Group has incurred any liability to the PBGC other than for the
payment of premiums, and there are no premium payments which have become due
which are unpaid; (iv) no Pension Benefit Plan has been terminated by the Plan
administrator thereof nor by the PBGC, and there is no occurrence which would
cause the PBGC to institute proceedings under Title IV of ERISA to terminate any
Pension Benefit Plan; (v) at this time, the current value of the assets of each
Pension Benefit Plan exceeds the present value of the accrued benefits and other
liabilities of such Pension Benefit Plan and no Borrower or any member of the
Controlled Group knows of any facts or circumstances which would materially
change the value of such assets and accrued benefits and other liabilities;
(vi) no Borrower or any member of the Controlled Group has breached any of the
responsibilities, obligations or duties imposed on it by ERISA with respect to
any Pension Benefit Plan; (vii) no Borrower or any member of a Controlled Group
has incurred any liability for any excise tax arising under Section 4972 or
4980B of the Code, and no fact exists which would reasonably be expected to give
rise to any such liability; (viii) no Borrower or any member of the Controlled
Group nor any fiduciary of, nor any trustee to, any Pension Benefit Plan, has
engaged in a “prohibited transaction” described in Section 406 of the ERISA or
Section 4975 of the Code nor taken any action which would constitute or result
in a Termination Event with respect to any such Pension Benefit Plan which is
subject to ERISA; (ix) each Borrower and each member of the Controlled Group has
made all contributions due and payable with respect to each Pension Benefit
Plan; (x) there exists no event described in Section 4043(b) of ERISA, for which
the thirty (30) day notice period has not been waived; (xi) no Borrower or any
member of the Controlled Group has any fiduciary responsibility for investments
with respect to any plan existing for the benefit of persons other than
employees or former employees of any Borrower and any member of the Controlled
Group; (xii) no Borrower or any member of the Controlled Group maintains or
contributes to any Pension Benefit Plan which provides health, accident or life
insurance benefits to former employees, their spouses or dependents, other than
in accordance with Section 4980B of the Code; (xiii) no Borrower nor any member
of the Controlled Group has withdrawn, completely or partially, from any
Multiemployer Plan so as to incur liability under the Multiemployer Pension Plan
Amendments Act of 1980 and there exists no fact which would reasonably be
expected to result in any such liability; and (xiv) no Pension Benefit Plan
fiduciary (as defined in Section 3(221) of ERISA) has any liability for breach
of fiduciary duty or for any failure in connection with the administration or
investment of the assets of a Pension Benefit Plan.

5.9. Patents, Trademarks, Copyrights and Licenses.

All issued patents and filed patent applications, registered trademarks and
filed trademark applications, registered service marks and filed service mark
applications, registered copyrights and filed copyright applications owned or
utilized by any Borrower are set forth on Schedule 5.9,

 

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are (with respect to any such intellectual property which is licensed by any
Borrower, to the knowledge of Borrowers) valid and have been duly registered or
filed with all appropriate Governmental Bodies. To the knowledge of Borrowers,
Borrowers have sufficient rights to all intellectual property necessary to the
operation of the business; there is no objection to or pending challenge to the
validity of any such patent, trademark or copyright and no Borrower is aware of
any grounds for any challenge, except as set forth in Schedule 5.9 hereto. Each
patent, patent application, patent license, trademark, trademark application,
trademark license, service mark, service mark application, service mark license,
design rights, copyright, copyright application and copyright license owned or
held (other than those licensed by any Borrower) by the applicable Borrower and
all trade secrets used by such Borrower consist of original material or property
developed by such Borrower or was lawfully acquired by such Borrower from the
proper and lawful owner thereof. No Borrower is an owner of any proprietary
software.

5.10. Licenses and Permits.

Each Borrower (a) is in material compliance (unless strict compliance is
required for the maintenance of such license or permit) with and (b) has
procured and is now in possession of, all material licenses or permits required
by any applicable federal, state or local law, rule or regulation for the
operation of its business in each jurisdiction wherein it is now conducting or
propose to conduct business and where the failure to procure such licenses or
permits could have a Material Adverse Effect.

5.11. Default of Indebtedness.

No Borrower is in default in the payment of the principal of or interest on any
Indebtedness for borrowed money (whether direct or guaranteed) or under any
instrument or agreement under or subject to which any Indebtedness for borrowed
money (whether direct or guaranteed) has been issued and no event has occurred
under the provisions of any such instrument or agreement which with or without
the lapse of time or the giving of notice, or both, constitutes or would
constitute an event of default thereunder.

5.12. No Default.

No Borrower is in default in the payment or performance of any of its material
contractual obligations which would have a Material Adverse Effect and no
Default has occurred.

5.13. No Burdensome Restrictions.

No Borrower is a party to any contract or agreement the performance of which
could have a Material Adverse Effect. Borrowers have heretofore delivered to
Agent true and complete copies of all material contracts to which any of them
are a party or to which any of them or any of their properties is subject. No
Borrower has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien which is not a Permitted
Encumbrance.

 

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5.14. No Labor Disputes.

No Borrower is involved in any labor dispute; there are no strikes or walkouts
or union organization of any Borrower’s employees to the knowledge of Borrowers
threatened or in existence and no labor contract is scheduled to expire during
the Term other than as set forth on Schedule 5.14 hereto.

5.15. Margin Regulations.

No Borrower is engaged, nor will it engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
“purchasing” or “carrying” any “margin stock” within the respective meanings of
each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect. No part
of the proceeds of any Advance will be used for “purchasing” or “carrying”
“margin stock” as defined in Regulation U of such Board of Governors.

5.16. Reserved.

5.17. Disclosure.

No representation or warranty made by any Borrower in this Agreement, or in any
financial statement, report, certificate or any other document furnished in
connection herewith contains any untrue statement of a material fact or omits to
state any material fact necessary to make the statements herein or therein not
misleading. There is no fact known to any Borrower or which reasonably should be
known to any Borrower which such Borrower has not disclosed to Agent in writing
with respect to the transactions contemplated by this Agreement which could
reasonably be expected to have a Material Adverse Effect.

5.18. Swaps.

No Borrower is a party to, nor will it be a party to, any swap agreement whereby
such Borrower has agreed or will agree to swap interest rates or currencies
unless same provides that damages upon termination following an event of default
thereunder are payable on an unlimited “two-way basis” without regard to fault
on the part of either party.

5.19. Conflicting Agreements.

No provision of any mortgage, indenture, contract, agreement, judgment, decree
or order binding on any Borrower or affecting the Collateral conflicts with, or
requires any Consent which has not already been obtained to, or would in any way
prevent the execution, delivery or performance of, the terms of this Agreement
or the Other Documents.

 

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5.20. Application of Certain Laws and Regulations.

None of Borrowers, any Person in possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of any
Borrower (whether through the ability to exercise voting power, by contract or
otherwise), or any Subsidiary of any Borrower is or is required to be registered
as an “investment company” under the Investment Company Act of 1940.

5.21. Business and Property of Borrowers.

Upon and after the Closing Date, none of Borrowers proposes to engage in any
business other than that engaged in by them immediately prior to and on the
Closing Date.

5.22. Section 20 Subsidiaries.

Borrowers do not intend to use and shall not use any portion of the proceeds of
the Advances, directly or indirectly, to purchase during the underwriting
period, or for thirty (30) days thereafter, Ineligible Securities being
underwritten by a Section 20 Subsidiary.

5.23. Anti-Terrorism Laws.

(a) General. No Borrower or any Affiliate of any Borrower is in violation of any
Anti-Terrorism Law or engages in or conspires to engage in any transaction that
evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in any Anti-Terrorism Law.

(b) Executive Order No. 13224. No Borrower or any Affiliate of any Borrower or
its respective agents acting or benefiting in any capacity in connection with
the Advances or other transactions hereunder, is any of the following (each a
“Blocked Person”):

(i) a Person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order No. 13224;

(ii) a Person owned or controlled by, or acting for or on behalf of, any Person
that is listed in the annex to, or is otherwise subject to the provisions of,
the Executive Order No. 13224;

(iii) a Person or entity with which any Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law;

(iv) to the knowledge of Borrowers, a Person or entity that commits, threatens
or conspires to commit or supports “terrorism” as defined in the Executive Order
No. 13224;

(v) a Person or entity that is named as a “specially designated national” on the
most current list published by the U.S. Treasury Department Office of Foreign
Asset Control at its official website or any replacement website or other
replacement official publication of such list, or

 

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(vi) a Person or entity who is affiliated or associated with a Person or entity
listed above.

No Borrower or to the knowledge of any Borrower, any of its agents acting in any
capacity in connection with the Advances or other transactions hereunder
(i) conducts any business or engages in making or receiving any contribution of
funds, goods or services to or for the benefit of any Blocked Person, or
(ii) deals in, or otherwise engages in any transaction relating to, any property
or interests in property blocked pursuant to the Executive Order No. 13224.

5.24. Trading with the Enemy.

Borrowers have not engaged, nor do they intend to engage, in any business or
activity prohibited by the Trading with the Enemy Act.

5.25. Federal Securities Laws.

No Borrower or any of its Subsidiaries (i) is required to file periodic reports
under the Exchange Act, (ii) has any securities registered under the Exchange
Act or (iii) has filed a registration statement that has not yet become
effective under the Securities Act.

5.26. Commercial Tort Claims.

None of Borrowers has any known commercial tort claims as of the Closing Date.

5.27. Partnership and Limited Liability Company Interests.

Except as previously disclosed in writing to Agent, none of the Subsidiary Stock
consisting of partnership or limited liability company interests (i) is dealt in
or traded on a securities exchange or in a securities market, (ii) by its terms
expressly provides that it is a security governed by Article 8 of the Uniform
Commercial Code, (iii) is an investment company security, (iv) is held in a
securities account or (v) constitutes a “security” or a “financial asset” as
such terms are defined in Article 8 of the Uniform Commercial Code.

5.28. Material Contracts.

Set forth on Schedule 5.28, as updated from time to time, is a complete and
accurate list of all Material Contracts of each Borrower and their Subsidiaries.
All of the Material Contracts are in full force and effect, and no material
defaults currently exist thereunder.

 

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ARTICLE VI

AFFIRMATIVE COVENANTS

Borrowers and Guarantor shall, until payment in full of the Obligations and
termination of this Agreement:

6.1. Payment of Fees.

Pay to Agent on demand all usual and customary fees and expenses which Agent
incurs in connection with (a) the forwarding of Advance proceeds and (b) the
establishment and maintenance of any Blocked Accounts or Depository Accounts as
provided for in Section 4.15(h). Agent may, without making demand, charge
Borrowers’ Account for all such fees and expenses.

6.2. Conduct of Business and Maintenance of Existence and Assets.

(a) Conduct continuously and operate actively their business according to good
business practices and maintain all of their properties useful or necessary in
their business in good working order and condition (reasonable wear and tear
excepted and except as may be disposed of in accordance with the terms of this
Agreement), including all licenses, patents, copyrights, design rights,
tradenames, trade secrets and trademarks and take all actions necessary to
enforce and protect the validity of any intellectual property right material to
Borrowers or other material right included in the Collateral; (b) keep in full
force and effect their existence and comply in all material respects with the
laws and regulations governing the conduct of its business where the failure to
do so could reasonably be expected to have a Material Adverse Effect; and
(c) make all such reports and pay all such franchise and other taxes and license
fees and do all such other acts and things as may be lawfully required to
maintain their rights, licenses, leases, powers and franchises under the laws of
the United States or any political subdivision thereof where the failure to do
so could reasonably be expected to have a Material Adverse Effect.

6.3. Violations.

Promptly notify Agent in writing of any violation of any law, statute,
regulation or ordinance of any Governmental Body, or of any agency thereof,
applicable to any Borrower or Guarantor which could reasonably be expected to
have a Material Adverse Effect.

6.4. Government Receivables.

Take all steps necessary to protect Agent’s interest in the Collateral under the
Federal Assignment of Claims Act, the Uniform Commercial Code and all other
applicable state or local statutes or ordinances and deliver to Agent
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between any Borrower and the United States,
any state or any department, agency or instrumentality of any of them.

 

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6.5. Fixed Charge Coverage Ratio and Guarantor Fixed Charge Coverage Ratio.

(a) Cause to be maintained a Fixed Charge Coverage Ratio of not less than 1.10
to 1.0 for (i) the three quarter period of Borrowers ending as of September 30,
2011 and (ii) the four quarter period of Borrowers ending as of December 31,
2011 and as of the end of each fiscal quarter of Borrowers thereafter.

(b) Cause to be maintained a Guarantor Fixed Charge Coverage Ratio of not less
than 1.0 to 1.0 for (i) the three quarter period of Guarantor ending as of
September 30, 2011 and (ii) the four quarter period of Guarantor ending as of
December 31, 2011 and as of the end of each fiscal quarter of Guarantor
thereafter.

6.6. Execution of Supplemental Instruments.

Execute and deliver to Agent from time to time, upon demand, such supplemental
agreements, statements, assignments and transfers, or instructions or documents
relating to the Collateral, and such other instruments as Agent may request, in
order that the full intent of this Agreement may be carried into effect.

6.7. Payment of Indebtedness.

Pay, discharge or otherwise satisfy at or before maturity (subject, where
applicable, to specified grace periods and, in the case of the trade payables,
to normal payment practices) all their obligations and liabilities of whatever
nature, except when the failure to do so could not reasonably be expected to
have a Material Adverse Effect or when the amount or validity thereof is
currently being Properly Contested.

6.8. Standards of Financial Statements.

Cause all financial statements referred to in Sections 9.7, 9.9, 9.10, 9.11,
9.12 and 9.13 as to which GAAP is applicable to be complete and correct in all
material respects (subject, in the case of interim financial statements, to
normal year-end audit adjustments) and to be prepared in reasonable detail and
in accordance with GAAP applied consistently throughout the periods reflected
therein (except as concurred in by such reporting accountants or officer, as the
case may be, and disclosed therein).

6.9. Federal Securities Laws.

Promptly notify Agent in writing if Guarantor, any Borrower or any of their
Subsidiaries (i) is required to file periodic reports under the Exchange Act
(provided that Agent and Lenders acknowledge that Guarantor is currently
voluntarily filing periodic reports under the Exchange Act), (ii) registers any
securities under the Exchange Act or (iii) files a registration statement under
the Securities Act (provided that Agent and Lenders acknowledge that Guarantor
has filed a registration statement under the Securities Act).

 

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6.10. Real Property.

If any Borrower shall acquire at any time or times hereafter any fee simple
interest in real property with a value in excess of $50,000, then within
ninety (90) days of the acquisition thereof such Borrower shall execute and
deliver to Agent, as additional security and Collateral for the Obligations,
deeds of trust, security deeds, mortgages or other collateral assignments
reasonably satisfactory in form and substance to Agent and its counsel (herein
collectively referred to as “New Mortgages”) covering such real property. The
New Mortgages shall be duly recorded (at Borrowers’ expense) in each office
where such recording is required to constitute a valid lien on the real property
covered thereby. In respect of any New Mortgage, Borrowers shall deliver to
Agent, at Borrowers’ expense, mortgagee title insurance policies issued by a
title insurance company reasonably satisfactory to Agent, which policies shall
be in form and substance reasonably satisfactory to Agent and shall insure a
valid lien in favor of Agent on the property covered thereby, subject only to
Permitted Encumbrances and those other exceptions reasonably acceptable to Agent
and its counsel. Borrowers shall also deliver to Agent such other usual and
customary documents, including, without limitation, ALTA surveys of the real
property described in the New Mortgages, as Agent and its counsel may reasonably
request relating to the real property subject to the New Mortgages.

ARTICLE VII

NEGATIVE COVENANTS

Borrowers shall not, until satisfaction in full of the Obligations and
termination of this Agreement:

7.1 Merger, Consolidation, Acquisition and Sale of Assets.

(a) Enter into any merger, consolidation or other reorganization with or into
any other Person or acquire all or a substantial portion of the assets or Equity
Interests of any Person or permit any other Person to consolidate with or merge
with any of them; provided, however, that (i) the Relevant Parties and their
Subsidiaries may merge or consolidate with and into each other so long as (A) if
such merger or consolidation involves the Company, the Company is the survivor,
(B) if such merger or consolidation involves a Domestic Subsidiary and a Foreign
Subsidiary, the Domestic Subsidiary is the survivor, (C) if such merger or
consolidation involves a Subsidiary of the Company that is a Borrower and a
Subsidiary of the Company which is not a Borrower, the Subsidiary that is a
Borrower is the survivor, (D) if such merger or consolidation involves a
Subsidiary of any Relevant Party that is a Guarantor and a Subsidiary of any
Relevant Party which is not a Guarantor, the Subsidiary that is a Guarantor is
the survivor; and (E) the Company shall have provided to Agent prior written
notice of such merger, consolidation or reorganization, and (ii) any Borrower
may acquire all or a substantial portion of the assets or Equity Interests of
another Borrower other than the Company.

(b) Sell, lease, transfer or otherwise dispose of any of their properties or
assets, except (i) dispositions of Inventory and Equipment to the extent
expressly permitted by

 

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Section 4.3, (ii) sales or dispositions among Borrowers, (iii) the sale of
Receivables to Intcomex Latin America Finance Corporation and (iv) any other
sales or dispositions expressly permitted by this Agreement.

7.2. Creation of Liens.

Create or suffer to exist any Lien or transfer upon or against any of their
property or assets now owned or hereafter acquired, except Permitted
Encumbrances.

7.3. Guarantees.

Become liable upon the obligations or liabilities of any Person by assumption,
endorsement or Guaranty thereof or otherwise (other than to Lenders) except
(a) guarantees made in the Ordinary Course of Business up to an aggregate amount
of $100,000 and (b) the endorsement of checks in the Ordinary Course of
Business.

7.4 Investments.

Purchase or acquire obligations or Equity Interests of, or any other interest
in, any Person, or make other investments, except (a) obligations issued or
guaranteed by the United States of America or any agency thereof, (b) commercial
paper with maturities of not more than one hundred eighty (180) days and a
published rating of not less than A-1 or P-1 (or the equivalent rating),
(c) certificates of time deposit and bankers’ acceptances having maturities of
not more than one hundred eighty (180) days and repurchase agreements backed by
United States government securities of a commercial bank if (i) such bank has a
combined capital and surplus of at least $500,000,000, or (ii) its debt
obligations, or those of a holding company of which it is a Subsidiary, are
rated not less than A (or the equivalent rating) by a nationally recognized
investment rating agency, (d) U.S. money market funds that invest solely in
obligations issued or guaranteed by the United States of America or an agency
thereof, (e) investments in respect of Interest Rate Hedges, (f) extensions of
trade credit in the Ordinary Course of Business, (g) loan and advances to
officers and employees made in compliance with Section 7.5, and (h) advances,
loans or extensions of credit between Borrowers or made by Borrowers to
Guarantor, in each case, made in compliance with Section 7.5.

7.5. Loans.

Make advances, loans or extensions of credit to any Person, including any
Parent, Subsidiary or Affiliate except with respect to (a) the extension of
commercial trade credit in connection with the sale of Inventory in the Ordinary
Course of Business, (b) loans to its employees in the Ordinary Course of
Business not to exceed the aggregate amount of $50,000 at any time outstanding,
(c) advances, loans or extensions of credit between Borrowers, provided that at
the time any such advance, loan or extension of credit is made (before and after
giving effect thereto) no Default or Event of Default has occurred and is
continuing and (d) advances, loans or extensions of credit to Guarantor,
provided (i) no Default or Event of Default shall then exist or would result
from the making thereof, (ii) Borrowers deliver to Agent evidence satisfactory
to Agent of compliance with the Fixed Charge Coverage Ratio and the Guarantor

 

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Fixed Charge Coverage Ratio on a Pro Forma Basis and (iii) immediately after
giving effect to such payment, dividend or distribution, Borrowers would have
Undrawn Availability not less than $3,000,000 after accounting for such
advances, loans or extensions of credit.

7.6. Capital Expenditures.

Contract for, purchase or make any expenditure or commitments for Capital
Expenditures in any fiscal year in an aggregate amount in excess of $500,000.

7.7. Dividends and Distributions; Other Payments.

(a) Except as provided in Section 7.7(c), for each Borrower which is a
corporation, (i) declare, pay or make any dividend or distribution on any shares
of the common stock or preferred stock of any Borrower (other than (A) dividends
or distributions payable in its stock, or split-ups or reclassifications of its
stock, (B) dividends or distributions paid to another Borrower) or (ii) apply
any of its funds, property or assets to the purchase, redemption or other
retirement of any common or preferred stock, or of any options to purchase or
acquire any such shares of common or preferred stock of any Borrower.

(b) Except as provided in Section 7.7(c), for each Borrower which is a limited
liability company, pay or make any distribution on any membership interests of
any Borrower (other than distributions paid to another Borrower) or apply any of
its funds, property or assets to the purchase, redemption or other retirement of
any membership interests, or of any options to purchase or acquire any such
membership interests of such Borrower or Guarantor except that so long as (a) a
notice of termination with regard to this Agreement shall not be outstanding,
and (b) no Event of Default or Default shall have occurred, and (c) the purpose
for such purchase, redemption or distribution shall be as set forth in writing
to Agent at least ten (10) days prior to such purchase, redemption or
distribution and such purchase, redemption or distribution shall in fact be used
for such purpose any Borrower shall be permitted to make distributions to its
members in an aggregate amount equal to the Increased Tax Burden of its members.
Payments to members shall be made so as to be available when the tax is due,
including in respect of estimated tax payments. In the event (x) the actual
distribution to members made pursuant to this Section 7.7 exceeds the actual
income tax liability of any member due to any Borrower’s status as a limited
liability company, or (y) if any Borrower was a subchapter C corporation, such
Borrower would be entitled to a refund of income taxes previously paid as a
result of a tax loss during a year in which such Borrower is a limited liability
company, then the members shall repay such Borrower the amount of such excess or
refund, as the case may be, no later than the date the annual tax return must be
filed by such Borrower (without giving effect to any filing extensions). In the
event such amounts are not repaid in a timely manner by any member, then such
Borrower shall not pay or make any distribution with respect to, or purchase,
redeem or retire, any membership interest of such Borrower held or controlled
by, directly or indirectly, such member until such payment has been made.

(c) Make any payment, dividend or distribution to Guarantor unless (i) no
Default or Event of Default shall then exist or would result from the making
thereof, (ii) Borrowers deliver to Agent evidence satisfactory to Agent of
compliance with the Fixed Charge Coverage Ratio

 

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and the Guarantor Fixed Charge Coverage Ratio on a Pro Forma Basis and
(iii) immediately after giving effect to such payment, dividend or distribution,
Borrowers would have Undrawn Availability not less than $3,000,000 after
accounting for such proposed payment, dividend or distribution.

7.8. Indebtedness.

Create, incur, assume or suffer to exist any Indebtedness (exclusive of trade
debt, accounts payable, accrued payroll and benefits, accrued expenses, income
taxes payable and other accrued taxes, deferred tax liabilities, due to related
parties, unearned revenue, customer deposits and warranty liability) except in
respect of:

(a) Indebtedness to Lenders under this Agreement and the Other Documents;

(b) Indebtedness incurred for Capital Expenditures permitted under Section 7.6
hereof;

(c) Permitted Purchase Money Indebtedness;

(d) Indebtedness described on Schedule 7.8 and any refinancings of such
Indebtedness, provided that the aggregate principal amount of such Indebtedness
is not increased, the scheduled maturity dates of such Indebtedness are not
shortened and such refinancing is on terms and conditions no more restrictive
than the terms and conditions of the Indebtedness being refinanced;

(e) Indebtedness under any Interest Rate Hedge;

(f) Indebtedness of Guarantor pursuant to the Indenture and any refinancings of
the Indenture, provided, in all cases: (i) the aggregate principal amount of
such Indebtedness is not increased, (ii) the scheduled maturity date of such
Indebtedness is not shortened, (iii) the covenants or defaults are not
materially more restrictive or more onerous than analogous provisions in the
Indenture in effect on the Closing Date, and (iv) an intercreditor agreement in
form and substance satisfactory to Agent and the Required Lenders shall have
been executed and delivered to Agent prior to the consummation of such
refinancing;

(g) Indebtedness owed to another Borrower, but only to the extent permitted
under the other applicable terms and limitations of this Agreement, including
but not limited to Section 7.5;

(h) guarantees of Indebtedness of another Borrower which Indebtedness is
otherwise permitted under this Section 7.8;

(i) Subordinated Debt;

 

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(j) Indebtedness arising from judgments or decrees not deemed to be an Event of
Default under Section 10.5;

(k) the guaranty by Borrowers of payment of notes as set forth in the Indenture;

(l) any Indebtedness of Borrowers incurred to finance the acquisition of fixed
or capital assets, whether pursuant to a loan or a Capitalized Lease Obligation
provided that both at the time of and immediately after giving effect to the
incurrence thereof (x) no Default or Event of Default shall have occurred and be
continuing, and (y) the aggregate amount of all such Indebtedness at any one
time outstanding shall not exceed $1,000,000 and any renewals or refinancings of
such Indebtedness shall be on terms substantially the same or better than those
in effect as the time of the original incurrence of such Indebtedness; and

(m) additional unsecured Indebtedness not otherwise described above, provided
that both at the time of and immediately after giving effect to the incurrence
thereof (i) no Default or Event of Default shall have occurred and be continuing
or result therefrom and (ii) the aggregate amount of all such Indebtedness shall
not exceed $500,000 at any one time outstanding.

7.9. Nature of Business.

Substantially change the nature of the business in which they are presently
engaged, nor except as specifically permitted hereby purchase or invest,
directly or indirectly, in any assets or property other than in the Ordinary
Course of Business for assets or property which are useful in, necessary for and
are to be used in its business as presently conducted.

7.10. Transactions with Affiliates.

Directly or indirectly, purchase, acquire or lease any property from, or sell,
transfer or lease any property to, make any payment to, or enter into any
transaction or arrangement with, or otherwise deal with, any Affiliate, except
transactions disclosed to Agent, which are in the Ordinary Course of Business,
on an arm’s-length basis on terms and conditions no less favorable than terms
and conditions which would have been obtainable from a Person other than an
Affiliate.

7.11. Leases.

Enter as lessee into any lease arrangement for real or personal property (unless
capitalized and permitted under Section 7.6 hereof) if after giving effect
thereto, aggregate annual rental payments for all leased property would exceed
$2,500,000 in any one fiscal year in the aggregate for Borrowers.

 

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7.12. Subsidiaries.

(a) Form or acquire any Subsidiary unless (i) such Subsidiary is a Domestic
Subsidiary (ii) such Subsidiary expressly joins in this Agreement as a Borrower
and becomes jointly and severally liable for the obligations of Borrowers
hereunder, under the Note, and under any other agreement among Borrowers and
Lenders and (iii) Agent shall have received all documents, including, without
limitation, legal opinions and appraisals, it may reasonably require in
connection therewith.

(b) Enter into any partnership, joint venture or similar arrangement.

7.13. Fiscal Year and Accounting Changes.

Change their fiscal year from December 31 or make any change (i) in accounting
treatment and reporting practices except as required by GAAP or (ii) in tax
reporting treatment except as required by law.

7.14. Pledge of Credit.

Now or hereafter pledge Agent’s or any Lender’s credit on any purchases or for
any purpose whatsoever or use any portion of any Advance in or for any business
other than Borrowers’ business as conducted on the date of this Agreement.

7.15. Amendment of Organizational Documents.

Amend, modify or waive any material term or provision of its Articles of
Incorporation or By-Laws, Certificate of Formation or Operating Agreement, as
applicable, or other organizational documents or adopt any resolution which
would have the effect of diminishing the rights of Agent or the Lenders under
this Agreement or any Other Document, unless required by law.

7.16. Compliance with ERISA.

(i) (x) Maintain, or permit any member of the Controlled Group to maintain, or
(y) become obligated to contribute, or permit any member of the Controlled Group
to become obligated to contribute, to any Pension Benefit Plan, other than those
Pension Benefit Plans disclosed on Schedule 5.8(d) or any other Pension Benefit
Plan for which Agent has provided its prior written consent, (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
“prohibited transaction”, as that term is defined in section 406 of ERISA and
Section 4975 of the Code, (iii) incur, or permit any member of the Controlled
Group to incur, any “accumulated funding deficiency”, as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Pension Benefit Plan where such
event would reasonably be expected to result in any material liability of any
Borrower, Guarantor or any member of the Controlled Group or the imposition of a
lien on the property of any Borrower, Guarantor or any member of the Controlled
Group pursuant to Section 4068 of ERISA, (v) assume, or permit any member of the
Controlled

 

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Group to assume, any obligation to contribute to any Multiemployer Plan not
disclosed on Schedule 5.8(d), (vi) incur, or permit any member of the Controlled
Group to incur, any withdrawal liability to any Multiemployer Plan; (vii) fail
promptly to notify Agent of the occurrence of any Termination Event, (viii) fail
to materially comply, or permit a member of the Controlled Group to fail to
materially comply, with the requirements of ERISA or the Code or other
Applicable Laws in respect of any Plan, (ix) fail to meet, or permit any member
of the Controlled Group to fail to meet, all minimum funding requirements under
ERISA or the Code or postpone or delay or allow any member of the Controlled
Group to postpone or delay any funding requirement with respect of any Pension
Benefit Plan.

7.17. Prepayment of Indebtedness.

At any time, prepay, repurchase, redeem, retire or otherwise acquire, or make
any payment on account of any principal of, interest on or premium payable in
connection with the prepayment or redemption of any Indebtedness for borrowed
money (other than Indebtedness owed to the Lender under this Agreement or the
Other Documents), except (i) any such prepayment, repurchase, redemption,
retirement or acquisition expressly permitted in the Subordination Agreement or
(ii) in connection with any refinancing of Indebtedness in compliance with
Section 7.8(d).

7.18. Anti-Terrorism Laws.

No Borrower or Guarantor shall, until satisfaction in full of the Obligations
and termination of this Agreement, nor shall it permit any Affiliate or agent
to:

(a) Conduct any business or engage in any transaction or dealing with any
Blocked Person, including the making or receiving any contribution of funds,
goods or services to or for the benefit of any Blocked Person.

(b) Deal in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to the Executive Order No. 13224.

(c) Engage in or conspire to engage in any transaction that evades or avoids, or
has the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in the Executive Order No. 13224, the USA PATRIOT Act or
any other Anti-Terrorism Law. Borrowers and Guarantor shall deliver to Lenders
any certification or other evidence requested from time to time by any Lender in
its sole discretion, confirming Borrowers’ and Guarantor’s compliance with this
Section.

7.19. Membership/Partnership Interests.

Elect to treat or permit any of its Subsidiaries to (x) treat its limited
liability company membership interests or partnership interests, as the case may
be, as securities as contemplated by the definition of “security” in
Section 8-102(15) and by Section 8-103 of Article 8 of Uniform Commercial Code
or (y) certificate its limited liability company membership interests or
partnership interests, as the case may be.

 

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7.20. Trading with the Enemy Act.

Engage in any business or activity in violation of the Trading with the Enemy
Act.

7.21. Other Agreements.

Enter into any material amendment, waiver or modification of any Material
Contract other than in the Ordinary Course of Business, including without
limitation with respect to any vendor contracts.

7.22. Additional Negative Pledges.

Except as set forth in the Indenture, create or otherwise cause or suffer to
exist or become effective, directly or indirectly, (i) any prohibition or
restriction (including any agreement to provide equal and ratable security to
any other Person in the event a Lien is granted to or for the benefit of Agent
and the Lenders) on the creation or existence of any Lien upon the assets of any
Borrower or any Guarantor, other than Permitted Encumbrances or (ii) any
contractual obligation which may restrict or inhibit Agent’s rights or ability
to sell or otherwise dispose of the Collateral or any part thereof after the
occurrence of an Event of Default.

7.23. Additional Bank Accounts.

Open, maintain or otherwise have any checking, savings or other accounts at any
bank or other financial institution, or any other account where money is or may
be deposited or maintained with any Person, other than (a) the accounts set
forth on Schedule 4.15(h), each of which shall be subject to a blocked account
arrangement with the depository institution, except to the extent otherwise
determined by Agent (b) deposit accounts established after the Closing Date that
are subject to a blocked account arrangement with the depository institution in
form and substance satisfactory to Agent, (c) other deposit accounts established
after the Closing Date solely as payroll and other zero balance accounts and
(d) other deposit accounts established after the Closing Date, so long as at any
time the balance in any such account does not exceed $10,000 and the aggregate
balance in all such accounts does not exceed $50,000.

7.24. Issuance of Equity Interests.

Sell or permit any of their Subsidiaries to sell or issue any Equity Interests
having a preference over the common stock of such Person if the issuer of such
Equity Interests could be required to redeem such Equity Interests or to pay
cash dividends thereon.

 

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ARTICLE VIII

CONDITIONS PRECEDENT

8.1. Conditions to Initial Advances.

The agreement of Lenders to make the initial Advances requested to be made on
the Closing Date is subject to the satisfaction, or waiver by Agent, immediately
prior to or concurrently with the making of such Advances, of the following
conditions precedent:

(a) Loan Documents.

Agent shall have received this Agreement, the Notes and each Other Document duly
executed and delivered by an authorized officer of Borrowers;

(b) Filings, Registrations and Recordings.

Each document (including any Uniform Commercial Code financing statement)
required by this Agreement, any related agreement or under law or reasonably
requested by Agent to be filed, registered or recorded in order to create, in
favor of Agent, a perfected security interest in or lien upon the Collateral
shall have been properly filed, registered or recorded in each jurisdiction in
which the filing, registration or recordation thereof is so required or
requested, and Agent shall have received an acknowledgment copy, or other
evidence satisfactory to it, of each such filing, registration or recordation
and satisfactory evidence of the payment of any necessary fee, tax or expense
relating thereto;

(c) Corporate or Company Proceedings of Borrowers.

Agent shall have received a copy of the resolutions in form and substance
reasonably satisfactory to Agent, of the Board of Directors, Board of Managers
or other similar managing body of each Borrower authorizing (i) the execution,
delivery and performance of this Agreement, each of the Other Documents
(collectively, the “Documents”) and (ii) the granting by each Borrower of the
security interests in and liens upon the Collateral in each case certified by
the Secretary or an Assistant Secretary of such Borrower as of the Closing Date;
and, such certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded as of the date of such
certificate;

(d) Incumbency Certificates of Borrowers.

Agent shall have received a certificate of the Secretary or an Assistant
Secretary of each Borrower, dated the Closing Date, as to the incumbency and
signature of the officers of such Borrower executing this Agreement, the Other
Documents, any certificate or other documents to be delivered by it pursuant
hereto, together with evidence of the incumbency of such Secretary or Assistant
Secretary;

 

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(e) Corporate Proceedings of Guarantor.

Agent shall have received a copy of the resolutions in form and substance
reasonably satisfactory to Agent, of the Board of Directors of Guarantor
authorizing the execution, delivery and performance of the Guaranty and each
Other Document to which it is a party certified by the Secretary or an Assistant
Secretary of Guarantor as of the Closing Date; and, such certificate shall state
that the resolutions thereby certified have not been amended, modified, revoked
or rescinded as of the date of such certificate;

(f) Incumbency Certificates of Guarantor.

Agent shall have received a certificate of the Secretary or an Assistant
Secretary of Guarantor, dated the Closing Date, as to the incumbency and
signature of the officers of Guarantor executing this Agreement, any certificate
or other documents to be delivered by it pursuant hereto, together with evidence
of the incumbency of such Secretary or Assistant Secretary;

(g) Certificates.

Agent shall have received a copy of the Articles or Certificate of Incorporation
or Formation of each Borrower and each Guarantor, and all amendments thereto,
certified by the Secretary of State or other appropriate official of its
jurisdiction of incorporation or formation, as applicable, together with copies
of the By-Laws or Operating Agreement, as applicable, of each Borrower and each
Guarantor and all agreements of each Borrower’s and each Guarantor’s
shareholders or members, as applicable, certified as accurate and complete by
the Secretary of each Borrower and such Guarantor;

(h) Good Standing Certificates.

Agent shall have received good standing certificates for each Borrower and each
Guarantor dated not more than thirty (30) days prior to the Closing Date, issued
by the Secretary of State or other appropriate official of each Borrower’s and
each Guarantor’s jurisdiction of organization and each jurisdiction where the
conduct of each Borrower’s and each Guarantor’s business activities or the
ownership of its properties necessitates qualification;

(i) Legal Opinion.

Agent shall have received the executed legal opinion of counsel to Borrowers and
each Guarantor in form and substance satisfactory to Agent which shall cover
such matters incident to the transactions contemplated by this Agreement, the
Note, the Other Documents, the Guaranty, the Subordination Agreement and related
agreements as Agent may reasonably require and Borrowers hereby authorize and
direct such counsel to deliver such opinions to Agent and Lenders;

 

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(j) No Litigation.

(i) No litigation, investigation or proceeding before or by any arbitrator or
Governmental Body shall be continuing or, to the knowledge of any Borrower,
threatened against any Borrower or against the officers or directors of any
Borrower (A) in connection with this Agreement, the Other Documents, the
Subordinated Loan Documents or any of the transactions contemplated thereby and
which, in the reasonable opinion of Agent, is deemed material or (B) which
could, in the reasonable opinion of Agent, have a Material Adverse Effect; and
(ii) no injunction, writ, restraining order or other order of any nature
materially adverse to any Borrower or the conduct of its business or
inconsistent with the due consummation of the Transactions shall have been
issued by any Governmental Body;

(k) Financial Condition Certificates.

Agent shall have received an executed Financial Condition Certificate in the
form of Exhibit 8.1(k);

(l) Collateral Examination.

Agent shall have completed Collateral examinations and received appraisals, the
results of which shall be satisfactory in form and substance to Lenders, of the
Receivables, Inventory, General Intangibles, Real Property and Equipment of
Borrowers and all books and records in connection therewith;

(m) Fee.

Agent shall have received all fees payable to Agent and Lenders on or prior to
the Closing Date hereunder, including pursuant to Article III hereof;

(n) Pro Forma Financial Statements.

Agent shall have received a copy of the Pro Forma Financial Statements which
shall be satisfactory in all respects to Lenders;

(o) Subordination Agreement.

Agent shall have entered into the Subordination Agreement;

(p) Insurance.

Agent shall have received in form and substance reasonably satisfactory to
Agent, copies of Borrowers’ casualty insurance policies, together with loss
payable endorsements on Agent’s standard form of lender loss payee endorsement
naming Agent as lender loss payee, and certified copies of Borrowers’ liability
insurance policies, together with endorsements naming Agent as a co-insured;

 

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(q) Disbursement Agreement; Payment Instructions.

Agent shall have received written instructions from Borrowers directing the
application of proceeds of the initial Advances made pursuant to this Agreement;

(r) Blocked Accounts.

Agent shall have received duly executed agreements establishing the Blocked
Accounts or Depository Accounts with financial institutions acceptable to Agent
for the collection or servicing of the Receivables and proceeds of the
Collateral;

(s) Consents.

Agent shall have received any and all Consents necessary to permit the
effectuation of the transactions contemplated by this Agreement and the Other
Documents; and, Agent shall have received such Consents and waivers of such
third parties as might assert claims with respect to the Collateral, as Agent
and its counsel shall deem necessary;

(t) No Material Adverse Change.

(i) Since March 31, 2011 there shall not have occurred any event, condition or
state of facts which could reasonably be expected to have a Material Adverse
Effect and (ii) no representations made or information supplied to Agent or
Lenders shall have been proven to be inaccurate or misleading in any material
respect;

(u) Leasehold Agreements.

Agent shall have received landlord, mortgagee or warehouseman agreements
satisfactory to Agent with respect to all premises leased by any Borrower at
which Inventory and books and records are located;

(v) Guarantees and Other Documents.

Agent shall have received the executed Guaranty,

(w) Contract Review.

Agent shall have reviewed copies of all material contracts of Borrowers
requested by Agent, including leases, union contracts, labor contracts, vendor
supply contracts, license agreements, purchase and sale agreements and
distributorship agreements and such contracts and agreements shall be
satisfactory in all respects to Agent;

(x) Closing Certificate.

Agent shall have received a closing certificate signed by the Chief Financial
Officer of the Company dated as of the date hereof, stating, among other
matters, that (i) all representations

 

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and warranties set forth in this Agreement and the Other Documents are true and
correct on and as of such date, (ii) each Borrower is on such date in compliance
with all the terms and provisions set forth in this Agreement and the Other
Documents and (iii) on such date no Default or Event of Default has occurred or
is continuing;

(y) Borrowing Base.

Agent shall have received evidence from Borrowers that the aggregate amount of
Eligible Receivables and Eligible Inventory is sufficient in value and amount to
support Advances in the amount requested by Borrowers on the Closing Date;

(z) Undrawn Availability.

After giving effect to the initial Advances hereunder, Borrowers shall have
Undrawn Availability of at least $3,000,000.

(aa) Compliance with Laws.

Agent shall be reasonably satisfied that Borrowers are in compliance with all
pertinent federal, state, local or territorial regulations, including those with
respect to the Federal Occupational Safety and Health Act, the Environmental
Protection Act, ERISA and the Trading with the Enemy Act; and

(bb) Other.

All corporate and other proceedings, and all documents, instruments and other
legal matters in connection with the Transactions shall be satisfactory in form
and substance to Agent and its counsel.

8.2. Conditions to Each Advance.

The agreement of Lenders to make any Advance requested to be made on any date
(including the initial Advance), is subject to the satisfaction of the following
conditions precedent as of the date such Advance is made:

(a) Representations and Warranties.

Each of the representations and warranties made by each Borrower in or pursuant
to this Agreement, the Other Documents and any related agreements to which it is
a party, and each of the representations and warranties contained in any
certificate, document or financial or other statement furnished at any time
under or in connection with this Agreement, the Other Documents or any related
agreement shall be true and correct in all material respects on and as of such
date as if made on and as of such date (other than any representation or
warranty that expressly speaks only as of a different date);

 

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(b) No Default.

No Event of Default or Default shall have occurred and be continuing on such
date, or would exist after giving effect to the Advances requested to be made,
on such date; provided, however that Agent, in its sole discretion, may continue
to make Advances notwithstanding the existence of an Event of Default or Default
and that any Advances so made shall not be deemed a waiver of any such Event of
Default or Default; and

(c) Maximum Advances.

In the case of any type of Advance requested to be made, after giving effect
thereto, the aggregate amount of such type of Advance shall not exceed the
maximum amount of such type of Advance permitted under this Agreement.

Each request for an Advance by Borrowers hereunder shall constitute a
representation and warranty by Borrowers as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.

ARTICLE IX

INFORMATION AS TO BORROWERS

Borrowers shall, until satisfaction in full of the Obligations and the
termination of this Agreement:

9.1. Disclosure of Material Matters.

Promptly upon learning thereof, report to Agent all matters materially affecting
the value, enforceability or collectibility of any portion of the Collateral,
including any Borrower’s reclamation or repossession of, or the return to any
Borrower of, a material amount of goods or claims or disputes asserted by any
Customer or other obligor.

9.2 Schedules.

Deliver to Agent on or before the fifteenth (15th) day of each month as and for
the prior month (a) accounts receivable ageings inclusive of reconciliations to
the general ledger, (b) accounts payable schedules inclusive of reconciliations
to the general ledger, (c) Inventory reports, including without limitation a
report separating the in-transit Inventory and (d) a Borrowing Base Certificate
in form and substance satisfactory to Agent (which shall be calculated as of the
last day of the prior month and which shall not be binding upon Agent or
restrictive of Agent’s rights under this Agreement). In addition, Borrowers will
deliver to Agent (i) a weekly Borrowing Base Certificate in form and substance
satisfactory to Agent, (ii) a weekly inventory report, including without
limitation a report separating the in-transit Inventory and (iii) at such
intervals as Agent may require: (a) confirmatory assignment schedules,
(b) copies of Customer’s invoices, (c) evidence of shipment or delivery, and
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schedules, documents and/or information regarding the Collateral as Agent may
reasonably require including trial balances and test verifications. Agent shall
have the right to confirm and verify all Receivables by any manner and through
any medium it considers advisable and do whatever it may deem reasonably
necessary to protect its interests hereunder. The items to be provided under
this Section are to be in form satisfactory to Agent and executed by Borrowers
and delivered to Agent from time to time solely for Agent’s convenience in
maintaining records of the Collateral, and Borrowers’ failure to deliver any of
such items to Agent shall not affect, terminate, modify or otherwise limit
Agent’s Lien with respect to the Collateral.

9.3. Environmental Reports.

Furnish Agent, concurrently with the delivery of the financial statements
referred to in Sections 9.7 and 9.9 (for the end of each quarter only), a
Compliance Certificate signed by the President (or such other officer permitted
to execute the Compliance Certificate) of each Borrower stating, to the best of
his/her knowledge, that such Borrower is in compliance in all material respects
with all federal, state and local Environmental Laws. To the extent any Borrower
is not in compliance with the foregoing laws, the Compliance Certificate shall
set forth with specificity all areas of non compliance and the proposed action
Borrowers will implement in order to achieve full compliance.

9.4. Litigation.

Promptly notify Agent in writing of any claim, litigation, suit or
administrative proceeding affecting any Borrower or any Guarantor, whether or
not the claim is covered by insurance, and of any litigation, suit or
administrative proceeding, which in any such case affects the Collateral or
which could reasonably be expected to have a Material Adverse Effect.

9.5. Material Occurrences.

Promptly notify Agent in writing upon the occurrence of (a) any Event of Default
or Default; (b) any event, development or circumstance whereby any financial
statements or other reports furnished to Agent fail in any material respect to
present fairly, in accordance with GAAP consistently applied, the financial
condition or operating results of Borrowers on a consolidated basis as of the
date of such statements; (c) any accumulated retirement plan funding deficiency
which, if such deficiency continued for two plan years and was not corrected as
provided in Section 4971 of the Code, could subject any Borrower to a tax
imposed by Section 4971 of the Code; (d) each and every default by any Borrower
which might result in the acceleration of the maturity of any Indebtedness,
including the names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
and (e) any other development in the business or affairs of any Borrower or any
Guarantor, which could reasonably be expected to have a Material Adverse Effect;
in each case describing the nature thereof and the action such Borrower propose
to take with respect thereto.

 

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9.6. Government Receivables.

Notify Agent immediately if any of its Receivables arise out of contracts
between any Borrower and the United States, any state, or any department, agency
or instrumentality of any of them.

9.7. Annual Financial Statements of Borrowers and Guarantor.

Furnish Agent within ninety (90) days after the end of each fiscal year of
Borrowers and Guarantor, audited, consolidated and consolidating financial
statements of Borrowers and separate audited, consolidated and consolidating
financial statements of Guarantor, each on a consolidating and consolidated
basis including, but not limited to, statements of income and stockholders’
equity and cash flow from the beginning of the current fiscal year to the end of
such fiscal year and the balance sheet as at the end of such fiscal year, all
prepared in accordance with GAAP applied on a basis consistent with prior
practices, respectively, and each in reasonable detail and accompanied by a
report and opinion (which report and opinion shall be prepared in accordance
with generally accepted auditing standards and shall not be subject to any
“going concern” or like assumption, qualification or exception as to the scope
of the audit) of an independent certified public accounting firm selected by
Borrowers or Guarantors, respectively, and, in each case, satisfactory to Agent
(the “Accountants”), it being acknowledged and agreed that BDO USA, LLP is
satisfactory to Agent. The report of the Accountants shall be accompanied by a
statement of the Accountants in the form set forth in Borrowers’ audited
December 31, 2010 financial statements. In addition, the reports shall be
accompanied by Compliance Certificates from Borrowers and Guarantor,
respectively.

9.8. Quarterly Financial Statements of Guarantor.

Furnish Agent within forty-five (45) days after the end of each of the first
three (3) fiscal quarters of Borrowers, an unaudited consolidated balance sheet
of Guarantor on a consolidated and consolidating basis and unaudited
consolidated statements of income and stockholders’ equity and cash flow of
Guarantor on a consolidated and consolidating basis reflecting results of
operations from the beginning of the fiscal year to the end of such quarter and
for such quarter, prepared on a basis consistent with prior practices and
complete and correct in all material respects, subject to normal and recurring
year end adjustments that individually and in the aggregate are not material to
Guarantor’s business. The reports shall be accompanied by a Compliance
Certificate.

9.9. Monthly Financial Statements of Borrowers.

Furnish Agent within thirty (30) days after the end of each month, an unaudited
consolidated balance sheet of Borrowers on a consolidated and consolidating
basis and unaudited consolidated statements of income and stockholders’ equity
and cash flow of Borrowers on a consolidated and consolidating basis reflecting
results of operations from the beginning of the fiscal year to the end of such
month and for such month, prepared on a basis consistent with prior practices
and complete and correct in all material respects, subject to normal and
recurring year end adjustments that individually and in the aggregate are not
material to Borrowers’ business. The reports for the last month of each quarter
shall be accompanied by a Compliance Certificate regarding the quarter then
ended.

 

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9.10. Other Reports.

Furnish Agent as soon as available, but in any event within ten (10) days after
the issuance thereof, with copies of such financial statements, reports and
returns as Borrowers shall send to their stockholders or members, as applicable.

9.11. Additional Information.

Furnish Agent with such additional information as Agent shall reasonably request
in order to enable Agent to determine whether the terms, covenants, provisions
and conditions of this Agreement and the Note have been complied with by
Borrowers including, without the necessity of any request by Agent, (a) copies
of all environmental audits and reviews, (b) at least ten (10) days prior
thereto, notice of any Borrower’s opening of any new office or place of business
or any Borrower’s closing of any existing office or place of business, and
(c) promptly upon any Borrower’s learning thereof, notice of any labor dispute
to which such Borrower may become a party, any strikes or walkouts relating to
any of its plants or other facilities, and the expiration of any labor contract
to which such Borrower is a party or by which such Borrower is bound.

9.12. Projected Operating Budget.

Furnish Agent, no later than forty-five (45) days prior to the beginning of
Borrowers’ fiscal years commencing with fiscal year 2012, a month by month
projected operating budget and cash flow of Borrowers on a consolidated and
consolidating basis for such fiscal year (including an income statement for each
month and a balance sheet as at the end of the last month in each fiscal
quarter), such projections to be accompanied by a certificate signed by the
President or Chief Financial Officer of each Borrower to the effect that such
projections have been prepared on the basis of reasonable financial planning
practice consistent with past budgets and financial statements and that such
officer has no reason to question the reasonableness of any material assumptions
on which such projections were prepared.

9.13. Variances From Operating Budget.

Furnish Agent, concurrently with the delivery of the financial statements
referred to in Section 9.7 and each quarterly report, a written report
summarizing all material variances from budgets submitted by Borrowers pursuant
to Section 9.12 and a discussion and analysis by management with respect to such
variances.

9.14. Notice of Suits, Adverse Events.

Furnish Agent with prompt written notice of (i) any lapse or other termination
of any Consent issued to any Borrower by any Governmental Body or any other
Person that is material to the operation of such Borrower’s business, (ii) any
refusal by any Governmental Body or any

 

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other Person to renew or extend any such Consent; and (iii) copies of any
periodic or special reports filed by such Borrower or any Guarantor with any
Governmental Body or Person, if such reports indicate any material change in the
business, operations, affairs or condition of such Borrower or any Guarantor, or
if copies thereof are requested by Lender, and (iv) copies of any material
notices and other communications from any Governmental Body or Person which
specifically relate to any Borrower or any Guarantor.

9.15. ERISA Notices and Requests.

Furnish Agent with immediate written notice in the event that (i) any Borrower
or any member of the Controlled Group knows or has reason to know that a
Termination Event has occurred, together with a written statement describing
such Termination Event and the action, if any, which any Borrower or any member
of the Controlled Group has taken, is taking, or proposes to take with respect
thereto and, when known, any action taken or threatened by the Internal Revenue
Service, Department of Labor or PBGC with respect thereto, (ii) any Borrower or
any member of the Controlled Group knows or has reason to know that a prohibited
transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has
occurred together with a written statement describing such transaction and the
action which any Borrower or any member of the Controlled Group has taken, is
taking or proposes to take with respect thereto, (iii) a funding waiver request
has been filed with respect to any Pension Benefit Plan together with all
communications received by any Borrower or any member of the Controlled Group
with respect to such request, (iv) any increase in the benefits of any existing
Pension Benefit Plan or the establishment of any new Pension Benefit Plan or the
commencement of contributions to any Pension Benefit Plan to which any Borrower
or any member of the Controlled Group was not previously contributing shall
occur, (v) any Borrower or any member of the Controlled Group shall receive from
the PBGC a notice of intention to terminate a Pension Benefit Plan or to have a
trustee appointed to administer a Pension Benefit Plan, together with copies of
each such notice, (vi) any Borrower or any member of the Controlled Group shall
receive any favorable or unfavorable determination letter from the Internal
Revenue Service regarding the qualification of a Pension Benefit Plan under
Section 401(a) of the Code, together with copies of each such letter; (vii) any
Borrower or any member of the Controlled Group shall receive a notice regarding
the imposition of withdrawal liability, together with copies of each such
notice; (viii) any Borrower or any member of the Controlled Group shall fail to
make a required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or payment; or (ix) any
Borrower or any member of the Controlled Group knows that (a) a Multiemployer
Plan has been terminated, (b) the administrator or Plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.

9.16. Additional Documents.

Execute and deliver to Agent, upon request, such documents and agreements as
Agent may, from time to time, reasonably request to carry out the purposes,
terms or conditions of this Agreement.

 

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ARTICLE X

EVENTS OF DEFAULT

The occurrence of any one or more of the following events shall constitute an
“Event of Default”:

10.1. Nonpayment.

Failure by Borrowers to pay any principal or interest on the Obligations when
due, whether at maturity or by reason of acceleration pursuant to the terms of
this Agreement or by notice of intention to prepay, or by required prepayment or
failure to pay when due any other liabilities or make any other payment, fee or
charge provided for herein when due or in any Other Document (violations of or
related to the Formula Amount and/or the Borrowing Base Certificate shall be
deemed to be a default under this Section 10.1);

10.2. Breach of Representation.

Any representation or warranty made or deemed made by any Borrower or any
Guarantor in this Agreement, any Other Document or any related agreement or in
any certificate, document or financial or other statement furnished at any time
in connection herewith or therewith shall prove to have been misleading in any
material respect on the date when made or deemed to have been made;

10.3. Financial Information.

Failure by any Borrower to (i)(x) furnish financial information when due or
(y) when requested which is unremedied for a period of fifteen (15) days of such
request, or (ii) permit the inspection of its books or records in accordance
with this Agreement;

10.4. Judicial Actions.

Issuance of a notice of Lien, levy, assessment, injunction or attachment against
any Borrower’s Inventory or Receivables or against a material portion of any
Borrower’s other property which is not stayed or lifted within thirty (30) days;

10.5 Noncompliance.

Except as provided for in Section 10.1 or 10.3:

(a) failure or neglect of any Borrower or any Guarantor to perform, keep or
observe any term, provision, condition, or covenant, contained in Sections 4.10,
6.2(b), 6.5 or 6.6 or in Article 7 or 9 hereof, or

(b) failure or neglect of any Borrower to perform, keep or observe any term,
provision, condition or covenant contained herein or any Other Document that, if
such

 

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term, provision, condition or covenant is capable of cure, is not cured within
thirty (30) days from the earlier to occur of (A) receipt by a Borrower of
written notice thereof from Agent or any Lender and (B) the date upon which any
Borrower obtains knowledge thereof, or within such reasonably longer period as
may be required to cure same (so long as cure is commenced within the thirty-day
period and thereafter is prosecuted to completion with reasonable diligence);

10.6. Judgments.

Any judgment or judgments are rendered against any Borrower or any Guarantor for
an aggregate amount in excess of $250,000 and (i) enforcement proceedings shall
have been commenced by a creditor upon such judgment, (ii) there shall be any
period of forty (40) consecutive days during which a stay of enforcement of such
judgment, by reason of a pending appeal or otherwise, shall not be in effect, or
(iii) any such judgment results in the creation of a Lien upon any of the
Collateral (other than a Permitted Encumbrance) which Lien is not being Properly
Contested;

10.7. Bankruptcy.

Any Borrower or any Guarantor or any Subsidiary of a Borrower shall (i) apply
for, consent to or suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of itself or of
all or a substantial part of its property, (ii) make a general assignment for
the benefit of creditors, (iii) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a
bankrupt or insolvent, (v) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vi) acquiesce to, or fail to
have dismissed, within forty-five (45) days, any petition filed against it in
any involuntary case under such bankruptcy laws, or (vii) take any action for
the purpose of effecting any of the foregoing;

10.8. Inability to Pay.

Any Borrower or any Guarantor or any Subsidiary of a Borrower shall admit in
writing its inability, or be generally unable, to pay its debts as they become
due or cease operations of its present business;

10.9. Reserved.

10.10. Material Adverse Effect.

Any change in any Borrower’s or any Guarantor’s results of operations or
condition (financial or otherwise) which has a Material Adverse Effect;

10.11. Lien Priority.

Any Lien created hereunder or under any Other Document or provided for hereby or
thereby or under any related agreement for any reason ceases to be or is not a
valid and perfected Lien having a first priority interest or any Borrower or any
other Person acting on its behalf shall so claim;

 

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10.12. Cross Default.

A default of the obligations of any Borrower under any other agreement to which
it is a party shall occur that could reasonably be expected to result in a
Material Adverse Effect, which default is not cured within any applicable grace
period, if any; or any default, which is not cured within any applicable grace
period, if any, or any event of default shall occur pursuant to the Indenture or
any documents related thereto;

10.13. Breach of Guaranty.

Termination or breach of any Guaranty or Guaranty Security Agreement or similar
agreement executed and delivered to Agent in connection with the Obligations of
any Borrower, or if any Guarantor attempts to terminate, challenges the validity
of, or its liability under, any such Guaranty or Guaranty Security Agreement or
similar agreement;

10.14. Change of Ownership or Change of Control.

Any Change of Ownership or Change of Control shall occur;

10.15. Invalidity.

Any material provision of this Agreement or any Other Document shall, for any
reason, cease to be valid and binding on any Borrower or any Guarantor, or any
Borrower or any Guarantor or any Person acting on their behalf shall so claim;

10.16. Licenses.

(i) Any Governmental Body shall (A) revoke, terminate, suspend or adversely
modify any material license, permit, patent trademark or tradename of any
Borrower or any Guarantor, the continuation of which is material to the
continuation of any Borrower’s or such Guarantor’s business, or (B) commence
proceedings to suspend, revoke, terminate or adversely modify any such license,
permit, trademark, tradename or patent and such proceedings shall not be
dismissed or discharged within sixty (60) days, or (c) schedule or conduct a
hearing on the renewal of any material license, permit, trademark, tradename or
patent necessary for the continuation of any Borrower’s or any Guarantor’s
business and the staff of such Governmental Body issues a report recommending
the termination, revocation, suspension or material, adverse modification of
such license, permit, trademark, tradename or patent; (ii) any agreement which
is necessary or material to the operation of any Borrower’s or any Guarantor’s
business shall be revoked or terminated and not replaced by a substitute
acceptable to Agent within thirty (30) days after the date of such revocation or
termination, and such revocation or termination and non-replacement would
reasonably be expected to have a Material Adverse Effect;

 

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10.17. Seizures.

Any portion of the Collateral having a value in excess of $100,000 in the
aggregate shall be seized or taken by a Governmental Body, or any Borrower or
the title and rights of any Borrower or any Original Owner which is the owner of
any material portion of the Collateral shall have become the subject matter of
claim, litigation, suit or other proceeding which might, in the opinion of
Agent, upon final determination, result in impairment or loss of the security
provided by this Agreement or the Other Documents;

10.18. Operations.

The operations of any Borrower’s facility are interrupted at any time for more
than fourteen (14) consecutive days, unless such Borrower shall (i) be entitled
to receive for such period of interruption, proceeds of business interruption
insurance sufficient to assure that its per diem cash needs during such period
is at least equal to its average per diem cash needs for the consecutive three
month period immediately preceding the initial date of interruption and
(ii) receive such proceeds in the amount described in clause (i) preceding not
later than thirty (30) days following the initial date of any such interruption;
provided, however, that notwithstanding the provisions of clauses (i) and
(ii) of this section, an Event of Default shall be deemed to have occurred if
any Borrower shall be receiving the proceeds of business interruption insurance
for a period of thirty (30) consecutive days; or

10.19. Pension Plans.

An event or condition specified in Sections 7.16 or 9.15 hereof shall occur or
exist with respect to any Pension Benefit Plan and, as a result of such event or
condition, together with all other such events or conditions, any Borrower or
any member of the Controlled Group shall incur, is reasonably likely to incur, a
liability to a Pension Benefit Plan or the PBGC (or both) which would reasonably
be expected to have a Material Adverse Effect.

ARTICLE XI

LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT

11.1. Rights and Remedies.

(a) Upon the occurrence of (i) an Event of Default pursuant to Section 10.7 all
Obligations shall be immediately due and payable and this Agreement and the
obligation of Lenders to make Advances shall be deemed terminated; and, (ii) any
of the other Events of Default and at any time thereafter (such default not
having previously been cured), at the option of Required Lenders all Obligations
shall be immediately due and payable and Lenders shall have the right to
terminate this Agreement and to terminate the obligation of Lenders to make
Advances and (iii) a filing of a petition against any Borrower in any
involuntary case under any state or federal bankruptcy laws, all Obligations
shall be immediately due and payable and the obligation of Lenders to make
Advances hereunder shall be terminated other than as may be

 

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required by an appropriate order of the bankruptcy court having jurisdiction
over such Borrower. Upon the occurrence of any Event of Default, Agent shall
have the right to exercise any and all rights and remedies provided for herein,
under the Other Documents, under the Uniform Commercial Code and at law or
equity generally, including the right to foreclose the security interests
granted herein and to realize upon any Collateral by any available judicial
procedure and/or to take possession of and sell any or all of the Collateral
with or without judicial process. Agent may enter any of any Borrower’s premises
or other premises without legal process and without incurring liability to any
Borrower therefor, and Agent may thereupon, or at any time thereafter, in its
discretion without notice or demand, take the Collateral and remove the same to
such place as Agent may deem advisable and Agent may require Borrowers to make
the Collateral available to Agent at a convenient place. With or without having
the Collateral at the time or place of sale, Agent may sell the Collateral, or
any part thereof, at public or private sale, at any time or place, in one or
more sales, at such price or prices, and upon such terms, either for cash,
credit or future delivery, as Agent may elect. Except as to that part of the
Collateral which is perishable or threatens to decline speedily in value or is
of a type customarily sold on a recognized market, Agent shall give Borrowers
reasonable notification of such sale or sales, it being agreed that in all
events written notice mailed to Borrowers at least ten (10) days prior to such
sale or sales is reasonable notification. At any public sale Agent or any Lender
may bid for and become the purchaser, and Agent, any Lender or any other
purchaser at any such sale thereafter shall hold the Collateral sold absolutely
free from any claim or right of whatsoever kind, including any equity of
redemption and all such claims, rights and equities are hereby expressly waived
and released by Borrowers. In connection with the exercise of the foregoing
remedies, including the sale of Inventory, Agent is granted a perpetual
nonrevocable, royalty free, nonexclusive license and Agent is granted permission
to use all of each Borrower’s (a) trademarks, trade styles, trade names,
patents, patent applications, copyrights, service marks, licenses, franchises
and other proprietary rights which are used or useful in connection with
Inventory for the purpose of marketing, advertising for sale and selling or
otherwise disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The cash proceeds realized from
the sale of any Collateral shall be applied to the Obligations in the order set
forth in Section 11.5 hereof. Noncash proceeds will only be applied to the
Obligations as they are converted into cash. If any deficiency shall arise,
Borrowers shall remain liable to Agent and Lenders therefor.

(b) To the extent that Applicable Law imposes duties on Agent to exercise
remedies in a commercially reasonable manner, Borrowers acknowledge and agree
that it is not commercially unreasonable for Agent (i) to fail to incur expenses
reasonably deemed significant by Agent to prepare Collateral for disposition or
otherwise to complete raw material or work in process into finished goods or
other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain governmental or third party consents
for the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against Customers or other Persons
obligated on Collateral or to remove Liens on or any adverse claims against
Collateral, (iv) to exercise collection remedies against Customers and other
Persons obligated on Collateral directly or through the use of collection
agencies and other collection specialists, (v) to advertise dispositions of
Collateral through publications or media of general circulation, whether or not
the Collateral is of a specialized nature, (vi) to contact other Persons,

 

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whether or not in the same business as Borrowers, for expressions of interest in
acquiring all or any portion of such Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure Agent against risks of loss, collection or disposition of
Collateral or to provide to Agent a guaranteed return from the collection or
disposition of Collateral, or (xii) to the extent deemed appropriate by Agent,
to obtain the services of other brokers, investment bankers, consultants and
other professionals to assist Agent in the collection or disposition of any of
the Collateral. Borrowers acknowledge that the purpose of this Section 11.1(b)
is to provide non-exhaustive indications of what actions or omissions by Agent
would not be commercially unreasonable in Agent’s exercise of remedies against
the Collateral and that other actions or omissions by Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section 11.1(b). Without limitation upon the foregoing, nothing contained in
this Section11.1(b) shall be construed to grant any rights to Borrowers or to
impose any duties on Agent that would not have been granted or imposed by this
Agreement or by Applicable Law in the absence of this Section 11.1(b).

11.2. Agent’s Discretion.

Agent shall have the right in its sole discretion to determine which rights,
Liens, security interests or remedies Agent may at any time pursue, relinquish,
subordinate, or modify or to take any other action with respect thereto and such
determination will not in any way modify or affect any of Agent’s or Lenders’
rights hereunder.

11.3. Setoff.

Subject to Section 14.12, in addition to any other rights which Agent or any
Lender may have under Applicable Law, upon the occurrence of an Event of Default
hereunder, Agent and such Lender shall have a right, immediately and without
notice of any kind, to apply any Borrower’s property held by Agent and such
Lender to reduce the Obligations.

11.4. Rights and Remedies not Exclusive.

The enumeration of the foregoing rights and remedies is not intended to be
exhaustive and the exercise of any rights or remedy shall not preclude the
exercise of any other right or remedies provided for herein or otherwise
provided by law, all of which shall be cumulative and not alternative.

11.5. Allocation of Payments After Event of Default.

Notwithstanding any other provisions of this Agreement to the contrary, after
the occurrence and during the continuance of an Event of Default, all amounts
collected or received by Agent on account of the Obligations or any other
amounts outstanding under any of the Other Documents or in respect of the
Collateral may, at Agent’s discretion, be paid over or delivered as follows:

FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of Agent in connection with enforcing its
rights and the rights of the Lenders under this Agreement and the Other
Documents and any protective advances made by Agent with respect to the
Collateral under or pursuant to the terms of this Agreement;

 

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SECOND, to payment of any fees owed to Agent;

THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of each of the Lenders to the extent in
owing to such Lender pursuant to the terms of this Agreement;

FOURTH, to the payment of all of the Obligations consisting of accrued fees and
interest;

FIFTH, to the payment of the outstanding principal amount of the Obligations
(including the payment or cash collateralization of any outstanding Letters of
Credit), to breakage, termination or other payments, and any interest accrued
thereon, due under any Lender-Provided Interest Rate Hedge, to the extent such
Lender-Provided Interest Rate Hedge is permitted by Section 7.8, and to amounts
due under any Cash Management Products;

SIXTH, to all other Obligations and other obligations which shall have become
due and payable under the Other Documents or otherwise and not repaid pursuant
to clauses “FIRST” through “FIFTH” above; and

SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.

In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses “FOURTH”, “FIFTH” and “SIXTH” above; and (iii) to the extent that any
amounts available for distribution pursuant to clause “FIFTH” above are
attributable to the issued but undrawn amount of outstanding Letters of Credit,
such amounts shall be held by Agent in a cash collateral account and applied
(A) first, to reimburse the Issuer from time to time for any drawings under such
Letters of Credit and (B) then, following the expiration of all Letters of
Credit, to all other obligations of the types described in clauses “FIFTH” and
“SIXTH” above in the manner provided in this Section 11.5.

 

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ARTICLE XII

WAIVERS AND JUDICIAL PROCEEDINGS

12.1. Waiver of Notice.

Each Borrower hereby waives notice of non-payment of any of the Receivables,
demand, presentment, protest and notice thereof with respect to any and all
instruments, notice of acceptance hereof, notice of loans or advances made,
credit extended, Collateral received or delivered, or any other action taken in
reliance hereon, and all other demands and notices of any description, except
such as are expressly provided for herein.

12.2. Delay.

No delay or omission on Agent’s or any Lender’s part in exercising any right,
remedy or option shall operate as a waiver of such or any other right, remedy or
option or of any Default or Event of Default. No Out-of-Formula Loan or
protective advance made during the existence of a Default or an Event of Default
shall operate as a waiver of any such Default or Event of Default.

12.3. Jury Waiver.

EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND
THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

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ARTICLE XIII

EFFECTIVE DATE AND TERMINATION

13.1. Term.

This Agreement, which shall inure to the benefit of and shall be binding upon
the respective successors and permitted assigns of each Borrower, Agent and each
Lender, shall become effective on the date hereof and shall continue in full
force and effect until July 25 2014 (the “Term”) unless sooner terminated as
herein provided. Borrowers may terminate this Agreement at any time upon
forty-five (45) days’ prior written notice upon payment in full of the
Obligations. In the event the Obligations are prepaid in full prior to the last
day of the Term and the Borrowers have terminated this Agreement pursuant to the
immediately preceding sentence (the date of such prepayment hereinafter referred
to as the “Early Termination Date”), Borrowers shall pay to Agent for the
benefit of Lenders an early termination fee in an amount equal to (x) one
percent (1.0%) of the Maximum Revolving Advance Amount if the Early Termination
Date occurs on or after the Closing Date to and including the date immediately
preceding the first anniversary of the Closing Date, (y) one-half of one
percent (0.50%) of the Maximum Revolving Advance Amount if the Early Termination
Date occurs on or after the first anniversary of the Closing Date to and
including the date immediately preceding the second anniversary of the Closing
Date, and (z) one-quarter of one percent (0.25%) if the Early Termination Date
occurs on or after the second anniversary of the Closing Date to and including
the date immediately preceding the third anniversary of the Closing Date.

13.2. Termination.

The termination of the Agreement shall not affect any Borrower’s, Agent’s or any
Lender’s rights, or any of the Obligations having their inception prior to the
effective date of such termination, and the provisions hereof shall continue to
be fully operative until all transactions entered into, rights or interests
created or Obligations (other than contingent indemnity claims not yet asserted
or threatened) have been fully and indefeasibly paid, disposed of, concluded or
liquidated. The security interests, Liens and rights granted to Agent and
Lenders hereunder and the financing statements filed hereunder shall continue in
full force and effect, notwithstanding the termination of this Agreement or the
fact that Borrowers’ Account may from time to time be temporarily in a zero or
credit position, until all of the Obligations (other than contingent indemnity
claims not yet asserted or threatened) of Borrowers have been indefeasibly paid
and performed in full after the termination of this Agreement or Borrowers have
furnished Agent and Lenders with an indemnification satisfactory to Agent and
Lenders with respect thereto. Accordingly, each Borrower waives any rights which
it may have under the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and Agent shall not be
required to send such termination statements to such Borrower, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations (other than
contingent indemnity claims not yet asserted or threatened) have been
indefeasibly paid in full in immediately available funds. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until all Obligations (other than contingent indemnity claims
not yet asserted or threatened) are indefeasibly paid and performed in full.

 

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ARTICLE XIV

REGARDING AGENT

14.1. Appointment.

Each Lender hereby designates PNC to act as Agent for such Lender under this
Agreement and the Other Documents. Each Lender hereby irrevocably authorizes
Agent to take such action on its behalf under the provisions of this Agreement
and the Other Documents and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of Agent
by the terms hereof and thereof and such other powers as are reasonably
incidental thereto and Agent shall hold all Collateral, payments of principal
and interest, fees (except the fees set forth in Sections 3.3(a) and 3.4),
charges and collections (without giving effect to any collection days) received
pursuant to this Agreement, for the ratable benefit of Lenders. Agent may
perform any of its duties hereunder by or through its agents or employees. As to
any matters not expressly provided for by this Agreement (including collection
of the Note) Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding; provided, however,
that Agent shall not be required to take any action which exposes Agent to
liability or which is contrary to this Agreement or the Other Documents or
Applicable Law unless Agent is furnished with an indemnification reasonably
satisfactory to Agent with respect thereto.

14.2. Nature of Duties.

Agent shall have no duties or responsibilities except those expressly set forth
in this Agreement and the Other Documents. Neither Agent nor any of its
officers, directors, employees or agents shall be (i) liable for any action
taken or omitted by them as such hereunder or in connection herewith, unless
caused by their gross (not mere) negligence or willful misconduct (as determined
by a court of competent jurisdiction in a final non-appealable judgment), or
(ii) responsible in any manner for any recitals, statements, representations or
warranties made by any Borrower or any officer thereof contained in this
Agreement, or in any of the Other Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any of the Other Documents or for
the value, validity, effectiveness, genuineness, due execution, enforceability
or sufficiency of this Agreement, or any of the Other Documents or for any
failure of any Borrower to perform its obligations hereunder. Agent shall not be
under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any of the Other Documents, or to inspect the properties,
books or records of any Borrower. The duties of Agent as respects the Advances
to Borrowers shall be mechanical and administrative in nature; Agent shall not
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by reason of this Agreement a fiduciary relationship in respect of any Lender;
and nothing in this Agreement, expressed or implied, is intended to or shall be
so construed as to impose upon Agent any obligations in respect of this
Agreement except as expressly set forth herein.

14.3. Lack of Reliance on Agent and Resignation.

Independently and without reliance upon Agent or any other Lender, each Lender
has made and shall continue to make (i) its own independent investigation of the
financial condition and affairs of each Borrower and each Guarantor in
connection with the making and the continuance of the Advances hereunder and the
taking or not taking of any action in connection herewith, and (ii) its own
appraisal of the creditworthiness of each Borrower and each Guarantor. Agent
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before making of the Advances or at any time
or times thereafter except as shall be provided by Borrowers pursuant to the
terms hereof. Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial condition of any Borrower or any Guarantor, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, the Note, the Other Documents or the
financial condition of any Borrower, or the existence of any Event of Default or
any Default.

Agent may resign on sixty (60) days’ written notice to each of Lenders and
Borrowers and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrowers.

Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term “Agent” shall mean such successor agent effective upon its
appointment, and the former Agent’s rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent’s resignation as Agent, the provisions of this
Article XIV shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.

14.4. Certain Rights of Agent.

If Agent shall request instructions from Lenders with respect to any act or
action (including failure to act) in connection with this Agreement or any Other
Document, Agent shall be entitled to refrain from such act or taking such action
unless and until Agent shall have received instructions from the Required
Lenders; and Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, Lenders shall not have any right of
action whatsoever against Agent as a result of its acting or refraining from
acting hereunder in accordance with the instructions of the Required Lenders.

 

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14.5. Reliance.

Agent shall be entitled to rely, and shall be fully protected in relying, upon
any note, writing, resolution, notice, statement, certificate, facsimile,
electronic message, email, order or other document or telephone message believed
by it to be genuine and correct and to have been signed, sent or made by the
proper person or entity, and, with respect to all legal matters pertaining to
this Agreement and the Other Documents and its duties hereunder, upon advice of
counsel selected by it. Agent may employ agents and attorneys-in-fact and shall
not be liable for the default or misconduct of any such agents or
attorneys-in-fact selected by Agent with reasonable care.

14.6. Notice of Default.

Agent shall not be deemed to have knowledge or notice of the occurrence of any
Default or Event of Default hereunder or under the Other Documents, unless Agent
has received notice from a Lender or a Borrower referring to this Agreement or
the Other Documents, describing such Default or Event of Default and stating
that such notice is a “notice of default”. In the event that Agent receives such
a notice, Agent shall give notice thereof to Lenders. Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided, that, unless and until Agent shall
have received such directions, Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of Lenders.

14.7. Indemnification.

To the extent Agent is not reimbursed and indemnified by Borrowers, each Lender
will reimburse and indemnify Agent in proportion to its respective portion of
the Advances (or, if no Advances are outstanding, according to its Commitment
Percentage), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against Agent in performing its duties hereunder, or in any way
relating to or arising out of this Agreement or any Other Document; provided
that, Lenders shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from Agent’s gross (not mere) negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final non-appealable judgment).

14.8. Agent in its Individual Capacity.

With respect to the obligation of Agent to lend under this Agreement, the
Advances made by it shall have the same rights and powers hereunder as any other
Lender and as if it were not performing the duties as Agent specified herein;
and the term “Lender” or any similar term shall, unless the context clearly
otherwise indicates, include Agent in its individual capacity as a Lender. Agent
may engage in business with Borrowers as if it were not performing the duties
specified herein, and may accept fees and other consideration from any Borrower
for services in connection with this Agreement or otherwise without having to
account for the same to Lenders.

 

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14.9. Delivery of Documents.

To the extent Agent receives financial statements required under Sections 9.7,
9.9, 9.12 and 9.13 or Borrowing Base Certificates from Borrowers pursuant to the
terms of this Agreement which Borrowers are not obligated to deliver to each
Lender, Agent will promptly furnish such documents and information to Lenders.

14.10. Borrowers’ Undertaking to Agent.

Without prejudice to its obligations to Lenders under the other provisions of
this Agreement, Borrowers hereby undertake with Agent to pay to Agent from time
to time on demand all amounts from time to time due and payable by it for the
account of Agent or Lenders or any of them pursuant to this Agreement to the
extent not already paid. Any payment made pursuant to any such demand shall pro
tanto satisfy the relevant Borrowers’ obligations to make payments for the
account of Lenders or the relevant one or more of them pursuant to this
Agreement.

14.11. No Reliance on Agent’s Customer Identification Program.

Each Lender acknowledges and agrees that neither such Lender, nor any of its
Affiliates, participants or assignees, may rely on Agent to carry out such
Lender’s, Affiliate’s, participant’s or assignee’s customer identification
program, or other obligations required or imposed under or pursuant to the USA
PATRIOT Act or the regulations thereunder, including the regulations contained
in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or
any other Anti-Terrorism Law, including any programs involving any of the
following items relating to or in connection with Borrowers, their Affiliates or
their agents, this Agreement, the Other Documents or the transactions hereunder
or contemplated hereby: (1) any identity verification procedures, (2) any
record-keeping, (3) comparisons with government lists, (4) customer notices or
(5) other procedures required under the CIP Regulations or such other laws.

14.12. Other Agreements.

Each of the Lenders agrees that it shall not, without the express consent of
Agent, and that it shall, to the extent it is lawfully entitled to do so, upon
the request of Agent, set off against the Obligations, any amounts owing by such
Lender to any Borrower or any deposit accounts of any Borrower now or hereafter
maintained with such Lender. Anything in this Agreement to the contrary
notwithstanding, each of the Lenders further agrees that it shall not, unless
specifically requested to do so by Agent, take any action to protect or enforce
its rights arising out of this Agreement or the Other Documents, it being the
intent of Lenders that any such action to protect or enforce rights under this
Agreement and the Other Documents shall be taken in concert and at the direction
or with the consent of Agent or Required Lenders.

 

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ARTICLE XV

MISCELLANEOUS

15.1. Governing Law.

This Agreement shall be governed by and construed in accordance with the laws of
the State of Florida applied to contracts to be performed wholly within the
State of Florida. Any judicial proceeding brought by or against any Borrower
with respect to any of the Obligations, this Agreement, the Other Documents or
any related agreement may be brought in any court of competent jurisdiction in
the State of Florida, United States of America, and, by execution and delivery
of this Agreement, each Borrower accepts for itself and in connection with its
properties, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement. Each Borrower hereby waives personal
service of any and all process upon it and consents that all such service of
process may be made by registered mail (return receipt requested) directed to
such Borrower at its address set forth in Section 15.6 and service so made shall
be deemed completed five (5) days after the same shall have been so deposited in
the mails of the United States of America. Nothing herein shall affect the right
to serve process in any manner permitted by law or shall limit the right of
Agent or any Lender to bring proceedings against any Borrower in the courts of
any other jurisdiction. Each Borrower waives any objection to jurisdiction and
venue of any action instituted hereunder and shall not assert any defense based
on lack of jurisdiction or venue or based upon forum non conveniens. Each
Borrower waives the right to remove any judicial proceeding brought against such
Borrower in any state court to any federal court. Any judicial proceeding by any
Borrower against Agent or any Lender involving, directly or indirectly, any
matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or state
court located in the County of Miami-Dade, State of Florida.

15.2. Entire Understanding.

(a) This Agreement and the documents executed concurrently herewith contain the
entire understanding among Borrowers, Agent and each Lender and supersedes all
prior agreements and understandings, if any, relating to the subject matter
hereof. Any promises, representations, warranties or guarantees not herein
contained and hereinafter made shall have no force and effect unless in writing,
signed by Borrowers’, Agent’s and each Lender’s respective officers. Neither
this Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an agreement in writing,
signed by the party to be charged. Each Borrower acknowledges that it has been
advised by counsel in connection with the execution of this Agreement and Other
Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.

(b) The Required Lenders, Agent with the consent in writing of the Required
Lenders, and Borrowers may, subject to the provisions of this Section 15.2 (b),
from time to time enter into written supplemental agreements to this Agreement
or the Other Documents executed

 

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by Borrowers, for the purpose of adding or deleting any provisions or otherwise
changing, varying or waiving in any manner the rights of Lenders, Agent or
Borrowers thereunder or the conditions, provisions or terms thereof of waiving
any Event of Default thereunder, but only to the extent specified in such
written agreements; provided, however, that no such supplemental agreement
shall, without the consent of all Lenders:

(i) increase the Commitment Percentage or the maximum dollar commitment of any
Lender or the Maximum Revolving Advance Amount;

(ii) extend the maturity of any Note or the due date for any amount payable
hereunder (excluding any mandatory prepayment), or decrease the rate of interest
or reduce any fee payable by Borrowers to Lenders pursuant to this Agreement;

(iii) alter the definition of the term Required Lenders or alter, amend or
modify this Section 15.2(b);

(iv) release any Collateral during any calendar year (other than in accordance
with the provisions of this Agreement) having an aggregate value in excess of
$300,000;

(v) change the rights and duties of Agent;

(vi) permit any Revolving Advance to be made if after giving effect thereto the
total of Revolving Advances outstanding hereunder would exceed the Formula
Amount for more than sixty (60) consecutive Business Days or exceed one hundred
and ten percent (110%) of the Formula Amount;

(vii) increase the Advance Rates above the Advance Rates in effect on the
Closing Date; or

(viii) release any Guarantor.

Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.

In the event that Agent requests the consent of a Lender pursuant to this
Section 15.2 and such consent is denied, then PNC or the Company (with Agent’s
consent) may, at their option, require such Lender to assign its interest in the
Advances to PNC or to another Lender or to any other Person designated by Agent
or Company (with Agent’s consent and provided such other Person is reasonably
acceptable to Agent) (the “Designated Lender”), for a price equal to the then
outstanding principal amount thereof plus accrued and unpaid interest and fees
due such Lender, which interest and fees shall be paid when collected from
Borrowers. In the event PNC

 

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or the Company (with Agent’s consent) elects to require any Lender to assign its
interest to PNC or to the Designated Lender, PNC will so notify such Lender in
writing within forty-five (45) days following such Lender’s denial, and such
Lender will assign its interest to PNC or the Designated Lender no later than
five (5) days following receipt of such notice pursuant to a Commitment Transfer
Supplement executed by such Lender, PNC or the Designated Lender, as
appropriate, and Agent.

Notwithstanding (a) the existence of a Default or an Event of Default, (b) that
any of the other applicable conditions precedent set forth in Section 8.2 hereof
have not been satisfied or (c) any other provision of this Agreement, Agent may
at its discretion and without the consent of the Required Lenders, voluntarily
permit the outstanding Revolving Advances at any time to exceed the Formula
Amount by up to ten percent (10%) of the Formula Amount for up to sixty (60)
consecutive Business Days (the “Out-of-Formula Loans”); provided, that, such
outstanding Advances do not exceed the Maximum Revolving Advance Amount. If
Agent is willing in its sole and absolute discretion to make such Out-of-Formula
Loans, such Out-of-Formula Loans shall be payable on demand and shall bear
interest at the Default Rate for Domestic Rate Loans; provided that, if Lenders
do make Out-of-Formula Loans, neither Agent nor Lenders shall be deemed thereby
to have changed the limits of Section 2.1(a). For purposes of this paragraph,
the discretion granted to Agent hereunder shall not preclude involuntary
overadvances that may result from time to time due to the fact that the Formula
Amount was unintentionally exceeded for any reason, including, but not limited
to, Collateral previously deemed to be either “Eligible Receivables” or
“Eligible Inventory”, as applicable, becomes ineligible, collections of
Receivables applied to reduce outstanding Revolving Advances are thereafter
returned for insufficient funds or overadvances are made to protect or preserve
the Collateral. In the event Agent involuntarily permits the outstanding
Revolving Advances to exceed the Formula Amount by more than ten percent (10%),
Agent shall use its efforts to have Borrowers decrease such excess in as
expeditious a manner as is practicable under the circumstances and not
inconsistent with the reason for such excess. Revolving Advances made after
Agent has determined the existence of involuntary overadvances shall be deemed
to be involuntary overadvances and shall be decreased in accordance with the
preceding sentence.

In addition to (and not in substitution of) the discretionary Revolving Advances
permitted above in this Section 15.2, Agent is hereby authorized by Borrowers
and the Lenders, from time to time in Agent’s sole discretion, (A) after the
occurrence and during the continuation of a Default or an Event of Default, or
(B) at any time that any of the other applicable conditions precedent set forth
in Section 8.2 hereof have not been satisfied, to make Revolving Advances to
Borrowers on behalf of the Lenders which Agent, in its reasonable business
judgment, deems necessary or desirable (a) to preserve or protect the
Collateral, or any portion thereof, (b) to enhance the likelihood of, or
maximize the amount of, repayment of the Advances and other Obligations, or
(c) to pay any other amount chargeable to Borrowers pursuant to the terms of
this Agreement; provided, that at any time after giving effect to any such
Revolving Advances the outstanding Revolving Advances do not exceed one hundred
and ten percent (110%) of the Formula Amount.

 

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15.3. Successors and Assigns; Participations; New Lenders.

(a) This Agreement shall be binding upon and inure to the benefit of each
Borrower, Agent, each Lender, all future holders of the Obligations and their
respective successors and permitted assigns, except that Borrowers may not
assign or transfer any of their rights or obligations under this Agreement
without the prior written consent of Agent and each Lender.

(b) Borrowers acknowledge that in the regular course of commercial banking
business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other financial institutions (each
such transferee or purchaser of a participating interest, a
“Participant”);provided, that any such sale of participating interests must be
for a constant and non-varying interest in all Advances. Each Participant may
exercise all rights of payment (including rights of set-off) with respect to the
portion of such Advances held by it or other Obligations payable hereunder as
fully as if such Participant were the direct holder thereof provided that
Borrowers shall not be required to pay to any Participant more than the amount
which it would have been required to pay to Lender which granted an interest in
its Advances or other Obligations payable hereunder to such Participant had such
Lender retained such interest in the Advances hereunder or other Obligations
payable hereunder and in no event shall Borrowers be required to pay any such
amount arising from the same circumstances and with respect to the same Advances
or other Obligations payable hereunder to both such Lender and such Participant.
Borrowers hereby grant to any Participant a continuing security interest in any
deposits, moneys or other property actually or constructively held by such
Participant as security for the Participant’s interest in the Advances. No
Lenders shall transfer, grant, assign or sell any participation under which the
participant shall have rights to approve any amendment or waiver of this
Agreement except to the extent such amendment or waiver would (A) extend the
final maturity date or the date for the payments of any installment of fees or
principal or interest of any Advances or Letter of Credit reimbursement
obligations in which such participant is participating, (B) reduce the amount of
any installment of principal of the Advances or Letter of Credit reimbursement
obligations in which such participant is participating, (C) except as otherwise
expressly provided in this Agreement, reduce the interest rate applicable to the
Advances or Letter of Credit reimbursement obligations in which such participant
is participating, or (D) except as otherwise expressly provided in this
Agreement, reduce any fees payable hereunder.

(c) Any Lender, with the consent of Agent and, prior to an Event of Default, the
Company, which shall not be unreasonably withheld or delayed, may sell, assign
or transfer all or any part of its rights and obligations under or relating to
Revolving Advances under this Agreement and the Other Documents to one or more
additional banks or financial institutions and one or more additional banks or
financial institutions may commit to make Advances hereunder (each a “Purchasing
Lender”), in minimum amounts of not less than $5,000,000, pursuant to a
Commitment Transfer Supplement, executed by a Purchasing Lender, the transferor
Lender, and Agent and delivered to Agent for recording; provided, that any such
assignment of a portion must be for a constant and non-varying portion of such
Lender’s rights under this Agreement, the Other Documents, the Advances and
Commitment Percentage. Upon such execution, delivery, acceptance and recording,
from and after the transfer effective date determined pursuant to such
Commitment Transfer Supplement, (i) Purchasing Lender

 

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thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. Borrowers hereby consent to the addition of such Purchasing
Lender and the resulting adjustment of the Commitment Percentages arising from
the purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the Other
Documents. Borrowers shall execute and deliver such further documents and do
such further acts and things in order to effectuate the foregoing.

(d) Any Lender, with the consent of Agent and, prior to an Event of Default, the
Company, which shall not be unreasonably withheld or delayed, may directly or
indirectly sell, assign or transfer all or any portion of its rights and
obligations under or relating to Revolving Advances under this Agreement and the
Other Documents to an entity, whether a corporation, partnership, trust, limited
liability company or other entity that (i) is engaged in making, purchasing,
holding or otherwise investing in bank loans and similar extensions of credit in
the ordinary course of its business and (ii) is administered, serviced or
managed by the assigning Lender or an Affiliate of such Lender (a “Purchasing
CLO” and together with each Participant and Purchasing Lender, each a
“Transferee” and collectively the “Transferees”), pursuant to a Commitment
Transfer Supplement modified as appropriate to reflect the interest being
assigned (“Modified Commitment Transfer Supplement”), executed by any
intermediate purchaser, the Purchasing CLO, the transferor Lender, and Agent as
appropriate and delivered to Agent for recording. Upon such execution and
delivery, from and after the transfer effective date determined pursuant to such
Modified Commitment Transfer Supplement, (i) Purchasing CLO thereunder shall be
a party hereto and, to the extent provided in such Modified Commitment Transfer
Supplement, have the rights and obligations of a Lender thereunder and (ii) the
transferor Lender thereunder shall, to the extent provided in such Modified
Commitment Transfer Supplement, be released from its obligations under this
Agreement, the Modified Commitment Transfer Supplement creating a novation for
that purpose. Such Modified Commitment Transfer Supplement shall be deemed to
amend this Agreement to the extent, and only to the extent, necessary to reflect
the addition of such Purchasing CLO. Each Borrower hereby consents to the
addition of such Purchasing CLO. Borrowers shall execute and deliver such
further documents and do such further acts and things in order to effectuate the
foregoing

(e) Agent shall maintain at its address a copy of each Commitment Transfer
Supplement and Modified Commitment Transfer Supplement delivered to it and a
register (the “Register”) for the recordation of the names and addresses of each
Lender and the outstanding principal, accrued and unpaid interest and other fees
due hereunder. The entries in the Register shall be conclusive, in the absence
of manifest error, and each Borrower, Agent and Lenders may treat each Person
whose name is recorded in the Register as the owner of the Advance recorded

 

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therein for the purposes of this Agreement. The Register shall be available for
inspection by any Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice. Agent shall receive a fee in the amount of
$3,500 payable by the applicable Purchasing Lender and/or Purchasing CLO upon
the effective date of each transfer or assignment (other than to an intermediate
purchaser) to such Purchasing Lender and/or Purchasing CLO.

(f) Borrowers authorize each Lender to disclose to any Transferee and any
prospective Transferee any and all financial information in such Lender’s
possession concerning Borrowers which has been delivered to such Lender by or on
behalf of Borrowers pursuant to this Agreement or in connection with such
Lender’s credit evaluation of Borrowers.

15.4. Application of Payments.

Agent shall have the continuing and exclusive right to apply or reverse and
re-apply any payment and any and all proceeds of Collateral to any portion of
the Obligations. To the extent that any Borrower makes a payment or Agent or any
Lender receives any payment or proceeds of the Collateral for Borrowers’
benefit, which are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver, custodian or any other party under any bankruptcy law,
common law or equitable cause, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by Agent or such Lender.

15.5. Indemnity.

Borrowers shall indemnify Agent, each Lender and each of their respective
officers, directors, Affiliates, attorneys, employees and agents from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including fees and disbursements of counsel) which may be
imposed on, incurred by, or asserted against Agent or any Lender in any claim,
litigation, proceeding or investigation instituted or conducted by any
Governmental Body or instrumentality or any other Person with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement or the Other Documents, whether or not Agent or any
Lender is a party thereto, except to the extent that any of the foregoing arises
out of the willful misconduct of the party being indemnified (as determined by a
court of competent jurisdiction in a final and non-appealable judgment). Without
limiting the generality of the foregoing, this indemnity shall extend to any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever (including
fees and disbursements of counsel) asserted against or incurred by any of the
indemnitees described above in this Section 15.5 by any Person under any
Environmental Laws or similar laws by reason of any Borrower’s or any other
Person’s failure to comply with laws applicable to solid or hazardous waste
materials, including Hazardous Substances and Hazardous Waste, or other Toxic
Substances. Additionally, if any taxes (excluding taxes imposed upon or measured
solely by the net income of Agent and Lenders, but including any intangibles
taxes, stamp tax, recording tax or franchise tax) shall be payable by Agent,
Lenders or Borrowers on account of the execution or delivery of this

 

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Agreement, or the execution, delivery, issuance or recording of any of the Other
Documents, or the creation or repayment of any of the Obligations hereunder, by
reason of any Applicable Law now or hereafter in effect, Borrowers will pay (or
will promptly reimburse Agent and Lenders for payment of) all such taxes,
including interest and penalties thereon, and will indemnify and hold the
indemnitees described above in this Section 15.5 harmless from and against all
liability in connection therewith.

15.6 Notice.

Any notice or request hereunder may be given to Borrowers or to Agent or any
Lender at their respective addresses set forth below or at such other address as
may hereafter be specified in a notice designated as a notice of change of
address under this Section. Any notice, request, demand, direction or other
communication (for purposes of this Section 15.6 only, a “Notice”) to be given
to or made upon any party hereto under any provision of this Loan Agreement
shall be given or made by telephone or in writing (which includes by means of
electronic transmission (i.e., “e-mail”) or facsimile transmission or by setting
forth such Notice on a site on the World Wide Web (a “Website Posting”) if
Notice of such Website Posting (including the information necessary to access
such site) has previously been delivered to the applicable parties hereto by
another means set forth in this Section 15.6) in accordance with this
Section 15.6. Any such Notice must be delivered to the applicable parties hereto
at the addresses and numbers set forth under their respective names on
Section 15.6 hereof or in accordance with any subsequent unrevoked Notice from
any such party that is given in accordance with this Section 15.6. Any Notice
shall be effective:

(a) In the case of hand-delivery, when delivered;

(b) If given by mail, four (4) days after such Notice is deposited with the
United States Postal Service, with first-class postage prepaid, return receipt
requested;

(c) In the case of a telephonic Notice, when a party is contacted by telephone,
if delivery of such telephonic Notice is confirmed no later than the next
Business Day by hand delivery, a facsimile or electronic transmission, a Website
Posting or an overnight courier delivery of a confirmatory Notice (received at
or before noon on such next Business Day);

(d) In the case of a facsimile transmission, when sent to the applicable party’s
facsimile machine’s telephone number, if the party sending such Notice receives
confirmation of the delivery thereof from its own facsimile machine;

(e) In the case of electronic transmission, when actually received;

(f) In the case of a Website Posting, upon delivery of a Notice of such posting
(including the information necessary to access such site) by another means set
forth in this Section 15.6; and

 

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(g) If given by any other means (including by overnight courier), when actually
received.

Any Lender giving a Notice to Borrowers shall concurrently send a copy thereof
to Agent, and Agent shall promptly notify the other Lenders of its receipt of
such Notice.

 

(A)   

If to Agent or

PNC at:

   PNC Bank, National Association       205 Datura Street       3rd Floor      
West Palm Beach, Florida 33401-5603       Attention:   John Stanescki      
Telephone:   (561) 803-9759       Facsimile:   (561) 803-9426   
with an additional         copy to:    Moore & Van Allen PLLC       100 N. Tryon
Street, Floor 47       Charlotte, North Carolina 28202-4003       Attention:  
Lea Stromire Johnson       Telephone:   (704) 331-1068       Facsimile:   (704)
378-2068 (B)    If to a Lender other than Agent, as specified on the signature
pages hereof (C)    If to Borrowers:    Software Brokers of America, Inc.      
3505 NW 107th Avenue       Miami, Florida 33178       Attention:   Russell Olson
      Telephone:   (305) 477-6230       Facsimile:   (305) 477-5694    with a
copy to:    Morrison Cohen LLP       909 Third Avenue, 27th Floor       New
York, New York 10022       Attention:   David A. Scherl       Telephone:   (212)
735-8600       Telecopier:   (212) 735-8708

15.7. Survival.

The obligations of Borrowers under Sections 2.2(f), 3.7, 3.8, 3.9, 4.19(h), and
15.5 and the obligations of Lenders under Section 14.7, shall survive
termination of this Agreement and the Other Documents and payment in full of the
Obligations.

 

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15.8. Severability.

If any part of this Agreement is contrary to, prohibited by, or deemed invalid
under Applicable Laws, such provision shall be inapplicable and deemed omitted
to the extent so contrary, prohibited or invalid, but the remainder hereof shall
not be invalidated thereby and shall be given effect so far as possible.

15.9. Expenses.

All costs and expenses including reasonable attorneys’ fees (including the
allocated costs of in house counsel) and disbursements incurred by Agent on its
behalf or, without duplication, on behalf of Lenders and Lenders (a) in all
efforts made to enforce payment of any Obligation or effect collection of any
Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement, the Other Documents
or any consents or waivers hereunder or thereunder and all related agreements,
documents and instruments, or (c) in instituting, maintaining, preserving,
enforcing and foreclosing on Agent’s security interest in or Lien on any of the
Collateral, or maintaining, preserving or enforcing any of Agent’s or any
Lender’s rights hereunder, under the Subordination Agreement, the Other
Documents and under all related agreements, whether through judicial proceedings
or otherwise, or (d) in defending or prosecuting any actions or proceedings
arising out of or relating to Agent’s or any Lender’s transactions with any
Borrower or any Guarantor or (e) in connection with any advice given to Agent
with respect to its rights and obligations under this Agreement, the
Subordination Agreement, the Other Documents and all related agreements, may be
charged to Borrowers’ Account and shall be part of the Obligations.

15.10. Injunctive Relief.

Borrowers recognize that, in the event any Borrower fails to perform, observe or
discharge any of its obligations or liabilities under this Agreement, or
threatens to fail to perform, observe or discharge such obligations or
liabilities, any remedy at law may prove to be inadequate relief to Lenders;
therefore, Agent, if Agent so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
that actual damages are not an adequate remedy.

15.11. Consequential Damages.

Neither Agent nor any Lender, nor any agent or attorney for any of them, shall
be liable to any Borrower or any Guarantor (or any Affiliate of any such Person)
for indirect, punitive, exemplary or consequential damages arising from any
breach of contract, tort or other wrong relating to the establishment,
administration or collection of the Obligations or as a result of any
transaction contemplated under this Agreement or any Other Document.

15.12. Captions.

The captions at various places in this Agreement are intended for convenience
only and do not constitute and shall not be interpreted as part of this
Agreement.

 

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15.13. Counterparts; Facsimile Signatures.

This Agreement may be executed in any number of and by different parties hereto
on separate counterparts, all of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile or other form of electronic
transmission shall be deemed to be an original signature hereto.

15.14. Construction.

The parties acknowledge that each party and its counsel have reviewed this
Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments, schedules or exhibits
thereto.

15.15 Confidentiality; Sharing Information.

(a) Agent, each Lender and each Transferee shall hold all non-public information
obtained by Agent, such Lender or such Transferee pursuant to the requirements
of this Agreement in accordance with Agent’s, such Lender’s and such
Transferee’s customary procedures for handling confidential information of this
nature; provided, however, Agent, each Lender and each Transferee may disclose
such confidential information (a) to its examiners, Affiliates, outside
auditors, counsel and other professional advisors, (b) to Agent, any Lender or
to any prospective Transferees, and (c) as required or requested by any
Governmental Body or representative thereof or pursuant to legal process;
provided, further that (i) unless specifically prohibited by Applicable Law,
Agent, each Lender and each Transferee shall use its reasonable best efforts
prior to disclosure thereof, to notify Borrowers of the applicable request for
disclosure of such non-public information (A) by a Governmental Body or
representative thereof (other than any such request in connection with an
examination of the financial condition of a Lender or a Transferee by such
Governmental Body) or (B) pursuant to legal process and (ii) in no event shall
Agent, any Lender or any Transferee be obligated to return any materials
furnished by any Borrower other than those documents and instruments in
possession of Agent or any Lender in order to perfect its Lien on the Collateral
once the Obligations have been paid in full and this Agreement has been
terminated.

(b) Borrowers acknowledge that from time to time financial advisory, investment
banking and other services may be offered or provided to a Borrower or one or
more of its Affiliates (in connection with this Agreement or otherwise) by any
Lender or by one or more Subsidiaries or Affiliates of such Lender and Borrowers
hereby authorize each Lender to share any information delivered to such Lender
by such Borrower and their Subsidiaries pursuant to this Agreement, or in
connection with the decision of such Lender to enter into this Agreement, to any
such Subsidiary or Affiliate of such Lender, it being understood that any such
Subsidiary or Affiliate of any Lender receiving such information shall be bound
by the provisions of this Section 15.15 as if it were a Lender hereunder. Such
authorization shall survive the repayment of the other Obligations and the
termination of this Agreement.

 

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15.16. Publicity.

Borrowers and each Lender hereby authorizes Agent to make appropriate
announcements of the financial arrangement entered into among Borrowers, Agent
and Lenders, including announcements which are commonly known as tombstones, in
such publications and to such selected parties as Agent shall in its sole and
absolute discretion deem appropriate.

15.17. Certifications From Banks and Participants; USA PATRIOT Act.

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

15.18. Concerning Joint and Several Liability of Borrowers.

(a) Each of Borrowers is accepting joint and several liability hereunder in
consideration of the financial accommodations to be provided by the Lenders
under this Agreement, for the mutual benefit, directly and indirectly, of each
of Borrowers and in consideration of the undertakings of each of Borrowers to
accept joint and several liability for the obligations of each of them.

(b) Each of Borrowers jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrowers with respect to the payment and
performance of all of the Obligations, it being the intention of the parties
hereto that all the Obligations shall be the joint and several obligations of
each of Borrowers without preferences or distinction among them.

(c) If and to the extent that any of Borrowers shall fail to make any payment
with respect to any of the Obligations as and when due or to perform any of the
Obligations in accordance with the terms thereof, then in each such event, the
other Borrowers will make such payment with respect to, or perform, such
Obligation.

(d) The obligations of each Borrower under the provisions of this Section 15.18
constitute full recourse obligations of such Borrower, enforceable against it to
the full extent of its properties and assets, irrespective of the validity,
regularity or enforceability of this Agreement or any other circumstances
whatsoever.

 

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(e) Except as otherwise expressly provided herein, each Borrower hereby waives
notice of acceptance of its joint and several liability, notice of any Advance
made under this Agreement, notice of occurrence of any Event of Default, or of
any demand for any payment under this Agreement, notice of any action at any
time taken or omitted by any Lender under or in respect of any of the
Obligations, any requirement of diligence and, generally, all demands, notices
and other formalities of every kind in connection with this Agreement. Each
Borrower hereby assents to, and waives notice of, any extension or postponement
of the time for the payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
any Lender at any time or times in respect of any default by any Borrower in the
performance or satisfaction of any term, covenant, condition or provision of
this Agreement, any and all other indulgences whatsoever by any Lender in
respect of any of the Obligations, and the taking, addition, substitution or
release, in whole or in part, at any time or times, of any security for any of
the Obligations or in part, at any time or times, of any security for any of the
Obligations or the addition, substitution or release, in whole or in part, of
any Borrower. Without limiting the generality of the foregoing, each Borrower
assents to any other action or delay in acting or failure to act on the part of
any Lender, including, without limitation, any failure strictly or diligently to
assert any right or to pursue any remedy or to comply fully with the applicable
laws or regulations thereunder which might, but for the provisions of this
Section 15.18, afford grounds for terminating, discharging or relieving such
Borrower, in whole or in part, from any of its obligations under this
Section 15.18, it being the intention of each Borrower that, so long as any of
the Obligations remain unsatisfied, the obligations of such Borrower under this
Section 15.18 shall not be discharged except by performance and then only to the
extent of such performance. The Obligations of each Borrower under this
Section 15.18 shall not be diminished or rendered unenforceable by any winding
up, reorganization, arrangement, liquidation, reconstruction or similar
proceeding with respect to any Borrower or any Lender. The joint and several
liability of Borrowers hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, membership, constitution or place of formation of any
Borrower or any Lender.

(f) The provisions of this Section 15.18 are made for the benefit of the Lenders
and their respective successors and assigns, and may be enforced by any such
Person from time to time against any of Borrowers as often as occasion therefor
may arise and without requirement on the part of any Lender first to marshal any
of its claims or to exercise any of its rights against any of the other
Borrowers or to exhaust any remedies available to it against any of the other
Borrowers or to resort to any other source or means of obtaining payment of any
of the Obligations or to elect any other remedy. The provisions of this
Section 15.18 shall remain in effect until all the Obligations shall have been
paid in full or otherwise fully satisfied. If at any time, any payment, or any
part thereof, made in respect of any of the Obligations, is rescinded or must
otherwise be restored or returned by any Lender upon the insolvency, bankruptcy
or reorganization of any of Borrowers, or otherwise, the provisions of this
Section 15.18 will forthwith be reinstated in effect, as though such payment had
not been made.

(g) Notwithstanding any provision to the contrary contained herein or in any
other of the Other Documents, to the extent the joint obligations of a Borrower
shall be adjudicated to be invalid or unenforceable for any reason (including,
without limitation, because of any applicable

 

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state or federal law relating to fraudulent conveyances or transfers) then the
obligations of each Borrower hereunder shall be limited to the maximum amount
that is permissible under applicable law (whether federal or state and
including, without limitation, the federal Bankruptcy Code).

(h) Borrowers hereby agree, as among themselves, that if any Borrower shall
become an Excess Funding Borrower (as defined below), each other Borrower shall,
on demand of such Excess Funding Borrower (but subject to the next sentence
hereof and to subsection (B) below), pay to such Excess Funding Borrower an
amount equal to such Borrower’s Pro Rata Share (as defined below and determined,
for this purpose, without reference to the properties, assets, liabilities and
debts of such Excess Funding Borrower) of such Excess Payment (as defined
below). The payment obligation of any Borrower to any Excess Funding Borrower
under this Section 15.18(h) shall be subordinate and subject in right of payment
to the prior payment in full of the Obligations of such Borrower under the other
provisions of this Agreement, and such Excess Funding Borrower shall not
exercise any right or remedy with respect to such excess until payment and
satisfaction in full of all of such Obligations. For purposes hereof,
(i) “Excess Funding Borrower” shall mean, in respect of any Obligations arising
under the other provisions of this Agreement (hereafter, the “Joint
Obligations”), a Borrower that has paid an amount in excess of its Pro Rata
Share of the Joint Obligations; (ii) “Excess Payment” shall mean, in respect of
any Joint Obligations, the amount paid by an Excess Funding Borrower in excess
of its Pro Rata Share of such Joint Obligations; and (iii) “Pro Rata Share”, for
the purposes of this Section 15.18(h), shall mean, for any Borrower, the ratio
(expressed as a percentage) of (A) the amount by which the aggregate present
fair salable value of all of its assets and properties exceeds the amount of all
debts and liabilities of such Borrower (including contingent, subordinated,
unmatured, and unliquidated liabilities, but excluding the obligations of such
Borrower hereunder) to (B) the amount by which the aggregate present fair
salable value of all assets and other properties of such Borrower and all of the
other Borrowers exceeds the amount of all of the debts and liabilities
(including contingent, subordinated, unmatured, and unliquidated liabilities,
but excluding the obligations of such Borrower and the other Borrowers
hereunder) of such Borrower and all of the other Borrowers, all as of the
Closing Date (if any Borrower becomes a party hereto subsequent to the Closing
Date, then for the purposes of this Section 15.18(h) such subsequent Borrower
shall be deemed to have been a Borrower as of the Closing Date and the
information pertaining to, and only pertaining to, such Borrower as of the date
such Borrower became a Borrower shall be deemed true as of the Closing Date).

15.19. Delegation of Authority.

Each Borrower (other than the Company) hereby authorizes and appoints the
Company and each of the President and Chief Financial Officer of the Company, to
be its attorneys (“its Attorneys”) and in its name and on its behalf and as its
act and deed or otherwise to execute and deliver all documents and carry out all
such acts as are necessary or appropriate in connection with drawing Advances
and the making of other extensions of credit hereunder, the granting and
perfection of security interests under this Agreement and the Other Documents,
and complying with the terms and provisions hereof and the Other Documents. This
delegation of authority and appointment shall be valid for the duration of the
term of this Agreement; provided, however, that such delegation of authority and
appointment shall terminate automatically without any further act with respect
to any such officer of the Company if such officer is no longer an

 

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employee of the Company. Each Borrower (other than the Company) hereby
undertakes to ratify everything which any of its Attorneys shall do in
furtherance of this delegation of authority and appointment.

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

 

SOFTWARE BROKERS OF AMERICA, INC.

By:

 

/s/ Anthony Shalom

Name:

  Anthony Shalom

Title:

  President

ACCVENT LLC

By:

 

/s/ Naftali Mizrachi

Name:

  Naftali Mizrachi

Title:

  Manager

FORZA POWER TECHNOLOGIES LLC

By:

 

/s/ Naftali Mizrachi

Name:

  Naftali Mizrachi

Title:

  Manager

KLIP XTREME LLC

By:

 

/s/ Naftali Mizrachi

Name:

  Naftali Mizrachi

Title:

  Manager

NEXXT SOLUTIONS LLC

By:

 

/s/ Naftali Mizrachi

Name:

  Naftali Mizrachi

Title:

  Manager

Revolving Credit and Security Agreement

Software Brokers of America, Inc.

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

PNC BANK, NATIONAL ASSOCIATION,

as a Lender and as Agent

By:

 

/s/ Rocio de Ojeda

Name:

  Rocio de Ojeda

Title:

  Vice President Commitment Percentage: 100%

Revolving Credit and Security Agreement

Software Brokers of America, Inc.

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

STATE OF FLORIDA

   )       ) ss.   

COUNTY OF DADE

   )   

On this 25th day of July, 2011, before me personally came Anthony Shalom, to me
known, who, being by me duly sworn, did depose and say that he is the President
of SOFTWARE BROKERS OF AMERICA, INC., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the board of directors of said corporation.

 

/s/ Normal Iglesias

Notary Public

 

STATE OF FLORIDA

   )       ) ss.   

COUNTY OF DADE

   )   

On this 25th day of July, 2011, before me personally came Naftali Mizrachi, to
me known, who, being by me duly sworn, did depose and say that s/he is the
Manager of ACCVENT LLC, the limited liability company described in and which
executed the foregoing instrument; and that s/he signed her/his name thereto by
order of the management committee of said limited liability company.

 

/s/ Normal Iglesias

Notary Public

 

STATE OF FLORIDA

   )       ) ss.   

COUNTY OF DADE

   )   

On this 25th day of July, 2011, before me personally came Naftali Mizrachi, to
me known, who, being by me duly sworn, did depose and say that s/he is the
Manager of FORZA POWER TECHNOLOGIES LLC, the limited liability company described
in and which executed the foregoing instrument; and that s/he signed her/his
name thereto by order of the management committee of said limited liability
company.

 

/s/ Normal Iglesias

Notary Public

Revolving Credit and Security Agreement

Software Brokers of America, Inc.

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

STATE OF FLORIDA

   )       ) ss.   

COUNTY OF DADE

   )   

On this 25th day of July, 2011, before me personally came Naftali Mizrachi, to
me known, who, being by me duly sworn, did depose and say that s/he is the
Manager of KLIP XTREME LLC, the limited liability company described in and which
executed the foregoing instrument; and that s/he signed her/his name thereto by
order of the management committee of said limited liability company.

 

/s/ Normal Iglesias

Notary Public

 

STATE OF FLORIDA    )       ) ss.    COUNTY OF DADE    )   

On this 25th day of July, 2011, before me personally came Naftali Mizrachi, to
me known, who, being by me duly sworn, did depose and say that s/he is the
Manager of NEXXT SOLUTIONS LLC, the limited liability company described in and
which executed the foregoing instrument; and that s/he signed her/his name
thereto by order of the management committee of said limited liability company.

 

/s/ Normal Iglesias

Notary Public

 

STATE OF FLORIDA    )       ) ss.    COUNTY OF BROWARD    )   

On this 25th day of July, 2011, before me personally came Rocio de Ojeda, to me
known, who, being by me duly sworn, did depose and say that she is the Vice
President of PNC BANK, NATIONAL ASSOCIATION, and that she was authorized to sign
her name thereto.

 

/s/ Ina Swain

Notary Public

Revolving Credit and Security Agreement

Software Brokers of America, Inc.