EXHIBIT 10.1

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AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

by and among

CELLSTAR CORPORATION

and

EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO

as Borrowers,

THE LENDERS THAT ARE SIGNATORIES HERETO

as the Lenders,

and

WELLS FARGO FOOTHILL, INC. (f/k/a Foothill Capital Corporation)

as the Arranger and Administrative Agent

Dated as of March 31, 2006

 

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TABLE OF CONTENTS

 

               Page 1.    DEFINITIONS AND CONSTRUCTION.    2    1.1   

Definitions

   2    1.2   

Accounting Terms

   29    1.3   

Code

   29    1.4   

Construction

   29    1.5   

Schedules and Exhibits

   29 2.    LOAN AND TERMS OF PAYMENT.    30    2.1   

Revolver Advances

   30    2.2   

Intentionally Omitted

   31    2.3   

Borrowing Procedures and Settlements

   31    2.4   

Payments

   38    2.5   

Overadvances

   40    2.6   

Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations

   40    2.7   

Cash Management

   42    2.8   

Crediting Payments; Float Charge

   43    2.9   

Designated Account

   43    2.10   

Maintenance of Loan Account; Statements of Obligations

   43    2.11   

Fees

   44    2.12   

Letters of Credit

   44    2.13   

LIBOR Option

   48    2.14   

Capital Requirements

   50    2.15   

Joint and Several Liability of Borrowers

   50 3.    CONDITIONS; TERM OF AGREEMENT.    53    3.1   

Conditions Precedent to the Initial Extension of Credit

   53    3.2   

Conditions Subsequent to the Initial Extension of Credit

   55    3.3   

Conditions Precedent to all Extensions of Credit.

   55    3.4   

Intentionally Omitted

   56    3.5   

Term

   56    3.6   

Effect of Termination

   56    3.7   

Early Termination by Borrowers

   56    3.8   

Effect of this Amendment and Restatement

   57

 

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               Page 4.    CREATION OF SECURITY INTEREST.    58    4.1   

Grant of Security Interest

   58    4.2   

Negotiable Collateral

   58    4.3   

Collection of Accounts, General Intangibles, and Negotiable Collateral

   58    4.4   

Delivery of Additional Documentation Required; Authorization to File UCC
Financing Statements

   59    4.5   

Power of Attorney

   59    4.6   

Right to Inspect

   60    4.7   

Control Agreements

   60 5.    REPRESENTATIONS AND WARRANTIES    60    5.1   

No Encumbrances

   60    5.2   

Eligible Accounts

   60    5.3   

Eligible Inventory

   61    5.4   

Equipment

   61    5.5   

Location of Inventory and Equipment

   61    5.6   

Inventory Records

   61    5.7   

Location of Chief Executive Office; FEIN

   61    5.8   

Due Organization and Qualification; Subsidiaries

   61    5.9   

Due Authorization; No Conflict.

   62    5.10   

Litigation

   62    5.11   

No Material Adverse Change

   62    5.12   

Fraudulent Transfer

   63    5.13   

Employee Benefits

   63    5.14   

Environmental Condition

   63    5.15   

Brokerage Fees

   63    5.16   

Intellectual Property

   63    5.17   

Leases

   64    5.18   

DDAs

   64

 

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               Page    5.19   

Complete Disclosure

   64    5.20   

Indebtedness

   64    5.21   

Management Agreements

   64 6.    AFFIRMATIVE COVENANTS.    64    6.1   

Accounting System

   64    6.2   

Collateral Reporting

   65    6.3   

Financial Statements, Reports, Certificates

   66    6.4   

Intentionally Omitted

   68    6.5   

Return

   68    6.6   

Maintenance of Properties

   68    6.7   

Taxes

   68    6.8   

Insurance

   69    6.9   

Location of Inventory and Equipment

   69    6.10   

Compliance with Laws

   70    6.11   

Leases

   70    6.12   

Brokerage Commissions

   70    6.13   

Existence

   70    6.14   

Environmental

   70    6.15   

Disclosure Updates

   70 7.    NEGATIVE COVENANTS    71    7.1   

Indebtedness

   71    7.2   

Liens

   72    7.3   

Restrictions on Fundamental Changes.

   72    7.4   

Disposal of Assets

   73    7.5   

Change Name

   73    7.6   

Guarantee

   73    7.7   

Nature of Business

   73    7.8   

Prepayments and Amendments

   73    7.9   

Change of Control

   73    7.10   

Consignments

   74

 

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               Page    7.11   

Distributions

   74    7.12   

Accounting Methods

   74    7.13   

Investments

   74    7.14   

Transactions with Affiliates

   74    7.15   

Suspension

   75    7.16   

Intentionally Omitted

   75    7.17   

Use of Proceeds

   75    7.18   

Change in Location of Chief Executive Office; Inventory and Equipment with
Bailees

   75    7.19   

Securities Accounts

   75    7.20   

Financial Covenants

   76    7.21   

Permitted Foreign Subsidiary Credit Facilities

   77 8.    EVENTS OF DEFAULT.    77 9.    THE LENDER GROUP’S RIGHTS AND
REMEDIES.    79    9.1   

Rights and Remedies

   79    9.2   

Remedies Cumulative

   81 10.    TAXES AND EXPENSES.    81 11.    WAIVERS; INDEMNIFICATION.    82   
11.1   

Demand; Protest; etc

   82    11.2   

The Lender Group’s Liability for Collateral

   82    11.3   

Indemnification

   82 12.    NOTICES.    83 13.    CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
   84 14.    ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.    85    14.1   

Assignments and Participations

   85    14.2   

Successors

   87 15.    AMENDMENTS; WAIVERS.    88    15.1   

Amendments and Waivers

   88    15.2   

Replacement of Holdout Lender

   89    15.3   

No Waivers; Cumulative Remedies

   89

 

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               Page 16.    AGENT; THE LENDER GROUP.    89    16.1   

Appointment and Authorization of Agent

   89    16.2   

Delegation of Duties

   90    16.3   

Liability of Agent

   90    16.4   

Reliance by Agent

   91    16.5   

Notice of Default or Event of Default

   91    16.6   

Credit Decision

   91    16.7   

Costs and Expenses; Indemnification

   92    16.8   

Agent in Individual Capacity

   93    16.9   

Successor Agent

   93    16.10   

Lender in Individual Capacity

   93    16.11   

Withholding Taxes

   94    16.12   

Collateral Matters

   96    16.13   

Restrictions on Actions by Lenders; Sharing of Payments

   96    16.14   

Agency for Perfection

   97    16.15   

Payments by Agent to the Lenders

   97    16.16   

Concerning the Collateral and Related Loan Documents

   97    16.17   

Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
Other Reports and Information

   98    16.18   

Several Obligations; No Liability

   99    16.19   

Legal Representation of Agent

   99 17.    GENERAL PROVISIONS.    99    17.1   

Effectiveness

   99    17.2   

Section Headings

   100    17.3   

Interpretation

   100    17.4   

Severability of Provisions

   100    17.5   

Amendments in Writing

   100    17.6   

Counterparts; Telefacsimile Execution

   100    17.7   

Revival and Reinstatement of Obligations

   100    17.8   

Patriot Act Notice

   100    17.9   

Integration

   101    17.10   

Parent as Agent for Borrowers

   101

 

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EXHIBITS AND SCHEDULES

Exhibit A-1

  

Form of Assignment and Acceptance

Exhibit B-1

  

Form of Borrowing Base Certificate

Exhibit C-1

  

Form of Compliance Certificate

Exhibit L-1

  

Form of LIBOR Notice

Schedule C-1

  

Commitments

Schedule D-1

  

Subsidiaries Comprising the Domestic Business Unit

Schedule E-1

  

Eligible Inventory Locations

Schedule P-1

  

Permitted Liens

Schedule R-1

  

Real Property Collateral

Schedule 2.7(a)

  

Cash Management Banks

Schedule 3.2

  

Excluded First Tier Foreign Subsidiaries

Schedule 5.5

  

Locations of Inventory and Equipment

Schedule 5.7

  

Chief Executive Office; FEIN; Organizational Identification Number

Schedule 5.8(b)

  

Capitalization of Borrowers

Schedule 5.8(c)

  

Capitalization of Borrowers’ Subsidiaries

Schedule 5.9

  

Consents and Authorizations

Schedule 5.10

  

Litigation

Schedule 5.14

  

Environmental Matters

Schedule 5.16

  

Intellectual Property

Schedule 5.18

  

Demand Deposit Accounts

Schedule 5.20

  

Permitted Indebtedness

Schedule 5.21

  

Management Agreements

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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”), is
entered into as of March 31, 2006 between and among, on the one hand, the
lenders identified on the signature pages hereof (such lenders, together with
their respective successors and assigns, are referred to hereinafter each
individually as a “Lender” and collectively as the “Lenders”), WELLS FARGO
FOOTHILL, INC., formerly known as Foothill Capital Corporation, a California
corporation with an office in Atlanta, Georgia, as the arranger and
administrative agent for the Lenders (“Agent”), and, on the other hand, CELLSTAR
CORPORATION, a Delaware corporation (“Parent” and “Administrative Borrower”),
and each of Parent’s Subsidiaries identified on the signature pages hereof (such
Subsidiaries, together with Parent, are referred to hereinafter each
individually as a “Borrower”, and individually and collectively, jointly and
severally, as the “Borrowers”).

WITNESSETH:

WHEREAS, Borrowers, Agent and Lenders are parties to that certain Loan and
Security Agreement, dated as of September 28, 2001 (as amended, supplemented, or
otherwise modified prior to the date hereof, the “Prior Loan Agreement”); and

WHEREAS, Borrowers have requested that Agent and Lenders amend and restate the
Prior Loan Agreement in its entirety to make certain changes and amendments as
set forth herein; and

WHEREAS, Agent and Lenders have each agreed to such amendment and restatement of
the Prior Loan Agreement in the manner set forth herein; and

WHEREAS, Borrowers acknowledge and agree that the security interests granted to
Agent, for the benefit of the Lender Group (as defined herein), pursuant to the
Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan
Agreement) shall remain outstanding and in full force and effect in accordance
with the Prior Loan Agreement and such other Loan Documents and shall continue
to secure the Obligations (as defined herein); and

WHEREAS, each of Borrowers, Agent and the Lenders acknowledges and agrees that
(i) the Obligations (as defined herein) represent, among other things, the
amendment, restatement, renewal, extension, consolidation and modification of
the Obligations (as defined in the Prior Loan Agreement) arising in connection
with the Prior Loan Agreement and the other Loan Documents (as defined in the
Prior Loan Agreement) executed in connection therewith; (ii) Borrowers, Agent
and the Lenders intend that the Prior Loan Agreement and the other Loan
Documents (as defined in the Prior Loan Agreement) executed in connection
therewith and the collateral pledged thereunder shall secure, without
interruption or impairment of any kind, all existing Obligations (as defined in
the Prior Loan Agreement) under the Prior Loan Agreement and the other Loan
Documents (as defined in the Prior Loan Agreement) executed in connection
therewith as amended, restated, renewed, extended, consolidated and modified
hereunder, together with all other Obligations (as defined herein) hereunder;
(iii) all Liens (as defined in the Prior Loan Agreement) evidenced by the Prior
Loan Agreement and the other Loan Documents

 

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(as defined in the Prior Loan Agreement) executed in connection therewith are
hereby ratified, confirmed and continued; (iv) this Agreement is intended to
restate, renew, extend, consolidate, amend and modify the Prior Loan Agreement;
and (v) the Loan Documents (as defined in the Prior Loan Agreement) (other than
the Prior Loan Agreement which shall be restated, renewed, extended,
consolidated, amended and modified as set forth herein) shall remain extant and
in full force and effect (except to the extent amended and modified as of the
date hereof); and

WHEREAS, each of Borrowers, Agent and the Lenders intend that (i) the provisions
of the Prior Loan Agreement be hereby superseded and replaced by the provisions
hereof; and (ii) by entering into and performing their respective obligations
hereunder, this transaction shall not constitute a novation;

NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants herein set forth and other good and valuable consideration, the
receipt and adequacy of all of the foregoing as legally sufficient consideration
being hereby acknowledged, Borrowers, Agent and the Lenders do hereby agree that
the Prior Loan Agreement is amended and restated in its entirety by this
Agreement, and further agree as follows:

1. DEFINITIONS AND CONSTRUCTION.

1.1 Definitions. As used in this Agreement, the following terms shall have the
following definitions:

“Account Debtor” means any Person who is or who may become obligated under, with
respect to, or on account of, an Account, chattel paper, or a General
Intangible.

“Accounts” means all of Borrowers’ now owned or hereafter acquired right, title,
and interest with respect to “accounts” (as that term is defined in the Code),
and any and all supporting obligations in respect thereof.

“Additional Documents” has the meaning set forth in Section 4.4.

“Administrative Borrower” has the meaning set forth in Section 17.10.

“Advances” has the meaning set forth in Section 2.1.

“Affiliate” means, as applied to any Person, any other Person who, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. For purposes of this definition, “control” means the possession,
directly or indirectly, of the power to direct the management and policies of a
Person, whether through the ownership of Stock, by contract, or otherwise;
provided, however, that, in any event: (a) any Person which owns directly or
indirectly 10% or more of the securities having ordinary voting power for the
election of directors or other members of the governing body of a Person or 10%
or more of the partnership or other ownership interests of a Person (other than
as a limited partner of such Person) shall be deemed to control such Person;
(b) each director (or comparable manager) of a Person shall be deemed to be an
Affiliate of such Person; and (c) each partnership or joint venture in which a
Person is a partner or joint venturer shall be deemed to be an Affiliate of such
Person.

 

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“Agent” means Foothill, solely in its capacity as agent for the Lenders
hereunder, and any successor thereto.

“Agent’s Account” means an account at a bank designated by Agent from time to
time as the account into which Borrowers shall make all payments to Agent for
the benefit of the Lender Group and into which the Lender Group shall make all
payments to Agent under this Agreement and the other Loan Documents; unless and
until Agent notifies Administrative Borrower and the Lender Group to the
contrary, Agent’s Account shall be that certain deposit account bearing account
number 323-266193 and maintained by Agent with JPMorgan Chase Bank, 4 New York
Plaza, 15th Floor, New York, New York 10004, ABA #021000021. Agent shall provide
Administrative Borrower with a copy of the monthly bank statements for the
Agent’s Account.

“Agent Advances” has the meaning set forth in Section 2.3(e)(i).

“Agent’s Liens” means the Liens granted by Borrowers to Agent for the benefit of
the Lender Group under this Agreement or the other Loan Documents.

“Agent-Related Persons” means Agent together with its Affiliates, officers,
directors, employees, and agents.

“Agreement” has the meaning set forth in the preamble hereto.

“Applicable Prepayment Premium” means, as of any date of determination, an
amount equal to (a) during the period from and after the date of the execution
and delivery of this Agreement up to September 27, 2006, 3% times the Maximum
Revolver Amount, (b) during the period from and including September 27, 2006 up
to September 27, 2007, 2% times the Maximum Revolver Amount, and (c) during the
period from and including September 27, 2007 up to the Maturity Date, 1% times
the Maximum Revolver Amount, provided, however; if this Agreement is terminated
and all of the Obligations are repaid in full in connection with (1) the
acquisition of all of the Stock or assets of the Parent and its Subsidiaries on
or prior to March 31, 2007 or (2) a binding commitment, subject only to delivery
of documentation and customary closing deliverables, for a loan facility
obtained by Borrowers within 150 days of the Closing Date for which the Agent
and the Lenders do not agree in writing to match the terms contained in such
commitment within 30 days after Agent’s receipt of a copy of such commitment,
the Applicable Prepayment Premium shall be equal to (A) 1.00% times the Maximum
Revolver Amount if such prepayment occurs prior to September 27, 2006, or
(B) 0.50% times the Maximum Revolver Amount if such prepayment occurs on or
after September 27, 2006 but prior to March 31, 2007; provided, further, if the
Applicable Prepayment Premium, as calculated hereunder, when added to all
interest and other charges for the use of money as contemplated by the Official
Code of Georgia Annotated, Section 7-4-18 (the “Interest Charges”) exceeds
5% per month (the “Legal Limit”), the amount of such Applicable Prepayment
Premium shall be reduced to an amount which when added to the Interest Charges
would equal the Legal Limit less $1.00.

 

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“Assignee” has the meaning set forth in Section 14.1.

“Assignment and Acceptance” means an Assignment and Acceptance in the form of
Exhibit A-1.

“Asurion” means Asurion Corporation, a Delaware corporation, successor by merger
to lock\line, LLC, a Kansas limited liability company.

“Authorized Person” means any officer or other employee of Administrative
Borrower.

“Availability” means, as of any date of determination, if such date is a
Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount that Borrowers are entitled to borrow as Advances under Section 2.1
(after giving effect to all then outstanding Obligations and all sublimits and
reserves applicable hereunder).

“Bankruptcy Code” means the United States Bankruptcy Code, as in effect from
time to time.

“Base LIBOR Rate” means the rate per annum, determined by Agent in accordance
with its customary procedures, and utilizing such electronic or other quotation
sources as it considers appropriate (rounded upwards, if necessary, to the next
1/16%), on the basis of the rates at which Dollar deposits are offered to major
banks in the London interbank market on or about 2:00 p.m. (Georgia time) 2
Business Days prior to the commencement of the applicable Interest Period, for a
term and in amounts comparable to the Interest Period and amount of the LIBOR
Rate Loan requested by Administrative Borrower in accordance with this
Agreement, which determination shall be conclusive in the absence of manifest
error.

“Base Rate” means, the rate of interest announced within Wells Fargo at its
principal office in San Francisco as its “prime rate”, with the understanding
that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the
lowest of such rates) and serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto and is
evidenced by the recording thereof after its announcement in such internal
publication or publications as Wells Fargo may designate.

“Base Rate Loan” means each portion of an Advance that bears interest at a rate
determined by reference to the Base Rate.

“Base Rate Margin” means 0.0 percentage points (0.0%).

“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of
ERISA) for which any Borrower or any Subsidiary or ERISA Affiliate of any
Borrower has been an “employer” (as defined in Section 3(5) of ERISA) within the
past six years which is covered by ERISA.

“Board of Directors” means the board of directors (or comparable managers) of
Parent or any committee thereof duly authorized to act on behalf thereof.

 

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“Books” means all of each Borrower’s now owned or hereafter acquired books and
records (including all of its Records indicating, summarizing, or evidencing its
assets (including the Collateral) or liabilities, all of its Records relating to
its business operations or financial condition, and all of its goods or General
Intangibles related to such information).

“Borrower” and “Borrowers” have the respective meanings set forth in the
preamble to this Agreement.

“Borrowing” means a borrowing hereunder consisting of Advances made on the same
day by the Lenders (or Agent on behalf thereof), or by Swing Lender in the case
of a Swing Loan, or by Agent in the case of an Agent Advance, in each case, to
Administrative Borrower.

“Borrowing Base” has the meaning set forth in Section 2.1.

“Borrowing Base Certificate” means a certificate in the form of Exhibit B-1.

“Business Day” means any day that is not a Saturday, Sunday, or other day on
which national banks are authorized or required to close, except that, if a
determination of a Business Day shall relate to a LIBOR Rate Loan, the term
“Business Day” also shall exclude any day on which banks are closed for dealings
in Dollar deposits in the London interbank market.

“Capital Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.

“Capitalized Lease Obligation” means any Indebtedness represented by obligations
under a Capital Lease.

“Cash Equivalents” means

(a) readily marketable direct obligations of the United States of America or any
agency thereof with maturities of one year or less from the date of acquisition;

(b) fully insured certificates of deposit with maturities of one year or less
from the date of acquisition, issued by any commercial bank operating in the
United States of America having capital and surplus in excess of $50,000,000,
provided, however, that time deposits in an aggregate amount not in excess of
$100,000 may be maintained in any bank whose deposits are insured by the Federal
Deposit Insurance Corporation;

(c) commercial paper of a domestic issuer if at the time of purchase such paper
is rated in one of the two highest rating categories of Standard & Poor’s or
Moody’s Investors Services, Inc.;

(d) debt securities which shall have one of the two highest ratings from
Standard & Poor’s or Moody’s Investors Services, Inc. and which mature within
one year from the date of acquisition;

(e) investments in eurodollars placed through any financial institution having
combined capital, surplus, and undivided profits of not less than $100,000,000;

 

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(f) “overnight investments” or short-term obligations issued by any commercial
bank located in the U.S. in those areas where Borrowers conduct their business
whose deposits are insured by the Federal Deposit Insurance Corporation; and

(g) investments in daily money market mutual funds having assets greater than
$2,000,000,000 and limited in holdings to assets of the types described in
clauses (a), (b) and (c) above.

“Cash Management Bank” has the meaning set forth in Section 2.7(a).

“Cash Management Account” has the meaning set forth in Section 2.7(a).

“Cash Management Agreements” means those certain cash management service
agreements, in form and substance satisfactory to Agent, each of which is among
Administrative Borrower, Agent, and one of the Cash Management Banks, including,
without limitation, any cash management service agreement delivered in
connection with the Prior Loan Agreement.

“CellStar, Ltd.” means CellStar, Ltd., a Texas limited partnership.

“CellStar Mexico” means, collectively, Celular Express S.A. de C.V., Celular
Express Management S.A. de C.V., and CellStar Mexico S.A. de C.V.

“CellStar Netherlands” means CellStar Netherlands Holdings B.V., with a
corporate seat in Amsterdam, the Netherlands.

“Change of Control” means (a) any “person” or “group” (within the meaning of
Sections 13(d) and 14(d) of the Exchange Act), becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 35%,
or more, of the Stock of Parent having the right to vote for the election of
members of the Board of Directors, or (b) a majority of the members of the Board
of Directors do not constitute Continuing Directors, or (c) Parent ceases to
directly or indirectly own and control 100% of the outstanding Stock of each of
its Subsidiaries extant as of the Closing Date (except as permitted by
Section 7.3 or in connection with a Permitted Disposition).

“Closing Date” means the date of the making of the initial Advance (or other
extension of credit) hereunder or the date on which Agent sends Borrower a
written notice that each of the conditions precedent set forth in Section 3.1
either have been satisfied or have been waived.

“Closing Date Business Plan” means the set of Projections of Borrowers for the
remainder of the fiscal year in which the Closing Date occurs and for the two
succeeding fiscal years following the Closing Date (on a month by month basis
for the remainder of the fiscal year in which the Closing Date occurs and for
fiscal year 2007, and on a yearly basis thereafter), in form and substance
(including as to scope and underlying assumptions) satisfactory to Agent.

“Code” means the Georgia Uniform Commercial Code, as in effect from time to
time, together with any replacement or successor statutes enacted thereto,
including, without limitation, Revised Article 9.

 

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“Collateral” means all of each Borrower’s now owned or hereafter acquired right,
title, and interest in and to each of the following:

(a) Accounts,

(b) Books,

(c) Equipment,

(d) General Intangibles,

(e) Inventory,

(f) Investment Property,

(g) Negotiable Collateral,

(h) Real Property Collateral,

(i) money or other assets of each such Borrower that now or hereafter come into
the possession, custody, or control of any member of the Lender Group, and

(j) the proceeds and products, whether tangible or intangible, of any of the
foregoing, including proceeds of insurance covering any or all of the foregoing,
and any and all Accounts, Books, Equipment, General Intangibles, Inventory,
Investment Property, Negotiable Collateral, Real Property, money, deposit
accounts, or other tangible or intangible property resulting from the sale,
exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.

“Collateral Access Agreement” means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in the Equipment or Inventory, in each case, in form and substance satisfactory
to Agent.

“Collections” means all cash, checks, notes, instruments, and other items of
payment (including insurance proceeds, proceeds of cash sales, rental proceeds,
and tax refunds) of Borrowers.

“Commitment” means, with respect to each Lender, its Commitment, and, with
respect to all Lenders, their Commitments, in each case as such Dollar amounts
are set forth beside such Lender’s name under the applicable heading on Schedule
C-1 or in the Assignment and Acceptance pursuant to which such Lender became a
Lender hereunder in accordance with the provisions of Section 14.1.

“Compliance Certificate” means a certificate substantially in the form of
Exhibit C-1 delivered by the chief executive officer, president, chief financial
officer, treasurer or controller of the Administrative Borrower to Agent.

 

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“Continuing Director” means (a) any member of the Board of Directors who was a
director (or comparable manager) of Parent on the Closing Date, and (b) any
individual who becomes a member of the Board of Directors after the Closing Date
if such individual was appointed or nominated for election to the Board of
Directors by a majority of the Continuing Directors, but excluding any such
individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Parent (as such terms are used in Rule 14a-11 under the Exchange Act) and whose
initial assumption of office resulted from such contest or the settlement
thereof.

“Control Agreement” means a control agreement, in form and substance
satisfactory to Agent, executed and delivered by the applicable Borrower, Agent,
and the applicable securities intermediary with respect to a Securities Account
or a bank with respect to a deposit account, including, without limitation, any
control agreement delivered in connection with the Prior Loan Agreement.

“Daily Balance” means, with respect to each day during the term of this
Agreement, the amount of an Obligation owed at the end of such day.

“DDA” means any checking or other demand deposit account maintained by any
Borrower.

“Default” means an event, condition, or default that, with the giving of notice,
the passage of time, or both, would be an Event of Default.

“Defaulting Lender” means any Lender that fails to make any Advance (or other
extension of credit) that it is required to make hereunder on the date that it
is required to do so hereunder.

“Defaulting Lender Rate” means (a) the Base Rate for the first 3 days from and
after the date the relevant payment is due, and (b) thereafter, at the interest
rate then applicable to Advances that are Base Rate Loans (inclusive of the Base
Rate Margin applicable thereto).

“Designated Account” means account number 088-06172217 of Administrative
Borrower maintained with the Designated Account Bank, or such other deposit
account of Administrative Borrower (located within the United States) that has
been designated as such, in writing, by Administrative Borrower to Agent.

“Designated Account Bank” means J. P. Morgan Chase & Company (formerly known as
The Chase Manhattan Bank), whose office is located at 2200 Ross Avenue, Dallas,
Texas 75201, and whose ABA number is 113000609.

“Dilution” means, as of any date of determination, a percentage that is the
result of dividing the Dollar amount of (a) bad debt write-downs, discounts,
advertising allowances, credits, or other dilutive items with respect to the
Accounts during the applicable period, by (b) Borrowers’ Collections with
respect to Accounts during such period (excluding extraordinary items) plus the
Dollar amount of clause (a), in each case, based the greater of the experience
of the immediately prior (x) trailing 6-months, or (y) trailing 12-months.

 

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“Dilution Reserve” means, as of any date of determination, an amount sufficient
to reduce the advance rate against Eligible Accounts by one percentage point for
each percentage point (or any fraction thereof equal to or greater than .50%) by
which Dilution is in excess of 5%.

“Disbursement Letter” means an instructional letter executed and delivered by
Administrative Borrower to Agent regarding the extensions of credit to be made
on the Closing Date, the form and substance of which is satisfactory to Agent.

“Dobson” means Dobson Cellular Systems, Inc., a Delaware corporation.

“Dollars” or “$” means United States dollars.

“Domestic Business Unit” means the Parent and such Subsidiaries of Parent
included as part of the “domestic business operations” in the Parent’s financial
statements, which Subsidiaries, as of the Closing Date, are set forth on
Schedule D-1.

“Domestic Subsidiary” means any Subsidiary of Parent organized under the laws of
any State of the U.S. (or the District of Columbia) and domiciled in the U.S.

“Due Diligence Letter” means the due diligence letter sent by Agent’s counsel to
Administrative Borrower, together with Administrative Borrower’s completed
responses to the inquiries set forth therein, the form and substance of such
responses to be satisfactory to Agent.

“EBITDA” means, with respect to any Person during any fiscal period, (a) net
earnings (or loss), minus (b) extraordinary gains, plus (c)(i) extraordinary
losses recorded in accordance with GAAP, (ii) with respect only to the EBITDA
calculation for the quarter ended November 30, 2005, losses resulting from
discontinuation of operations incurred during the fiscal quarter ended
November 30, 2005, in an amount not to exceed $3,000,000, (iii) all non-cash
expenses not associated with Collateral, (iv) interest expense (including
factoring costs associated with sale of Accounts), (v) income taxes, and
(vi) depreciation and amortization for such period, as determined in accordance
with GAAP.

“Eligible Accounts” means Eligible Domestic Accounts and Eligible Foreign
Accounts, as the case may be.

“Eligible Domestic Accounts” means those Accounts created by any Borrower in the
ordinary course of its business, that arise out of its sale of goods or
rendition of services, that comply with each of the representations and
warranties respecting Eligible Accounts made by Borrowers under the Loan
Documents, and that are not excluded as ineligible by virtue of one or more of
the criteria set forth below; provided, however, that such criteria may be fixed
and revised from time to time by Agent in Agent’s Permitted Discretion to
address the results of any audit performed by Agent from time to time after the
Closing Date. In determining the amount to be included, Eligible Domestic
Accounts shall be calculated net of customer deposits and unapplied cash
remitted to Borrowers. Eligible Domestic Accounts shall not include the
following:

(a) Accounts owing by an Account Debtor that such Account Debtor has failed to
pay within 90 days of original invoice date or has selling terms of more than 60
days,

 

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(b) Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of
all Accounts owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clause (a) above,

(c) Accounts with respect to which the Account Debtor is an employee or
Affiliate of any Borrower,

(d) Accounts arising in a transaction wherein goods are placed on consignment or
are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a
bill and hold, or any other terms by reason of which the payment by the Account
Debtor may be conditional (unless such Accounts (including, without limitation,
Accounts owed by Dobson) are subject to a bill and hold letter or other
agreement in form and substance satisfactory to Agent),

(e) Accounts that are not payable in Dollars,

(f) Accounts with respect to which the Account Debtor either (i) does not
maintain its principal place of business in the United States, or (ii) is not
organized under the laws of the United States or any state thereof, or (iii) is
the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof,

(g) Accounts with respect to which the Account Debtor is either (i) the United
States or any department, agency, or instrumentality of the United States
(exclusive, however, of Accounts with respect to which the applicable Borrower
has complied, to the reasonable satisfaction of Agent, with the Assignment of
Claims Act, 31 USC § 3727), or (ii) any state of the United States (exclusive,
however, of (y) Accounts owed by any state that does not have a statutory
counterpart to the Assignment of Claims Act or (z) Accounts owed by any state
that does have a statutory counterpart to the Assignment of Claims Act as to
which the applicable Borrower has complied to Agent’s satisfaction),

(h) Accounts with respect to which the Account Debtor is a creditor of any
Borrower, has or has asserted a right of setoff, has disputed its liability, or
has made any claim with respect to its obligation to pay the Account, but only
to the extent of such claim, right of setoff, or dispute,

(i) Accounts, to the extent such Accounts, together with all other Accounts
owing by such Account Debtor to Borrowers, exceed in the aggregate (i) 20% of
all Eligible Domestic Accounts (without giving effect to this clause) in the
case of Dobson, (ii) 25% of all Eligible Domestic Accounts (without giving
effect to this clause) in the case of Asurion, and (iii) 10% of all Eligible
Domestic Accounts (without giving effect to this clause) in all other cases,
provided, however, (a) the foregoing percentages may be revised from time to
time by Agent in its Permitted Discretion, and (b) Accounts of the applicable
Account Debtor which in the aggregate exceed the limits set forth shall be
deemed to constitute Eligible Domestic Accounts (subject to compliance with all
other standards of Eligible Domestic Accounts) if the Accounts exceeding such
limits are backed or secured by a letter of credit reasonably satisfactory to
Agent in all respects and such letter of credit has been assigned to Agent upon
terms acceptable to Agent in its discretion,

 

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(j) Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent, has gone out of business, or as to which
a Borrower has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor,

(k) Accounts with respect to which the Account Debtor is located in the states
of New Jersey, Minnesota, or West Virginia (or any other state that requires a
creditor to file a business activity report or similar document in order to
bring suit or otherwise enforce its remedies against such Account Debtor in the
courts or through any judicial process of such state), unless the applicable
Borrower has qualified to do business in New Jersey, Minnesota, West Virginia,
or such other states, or has filed a business activities report with the
applicable division of taxation, the department of revenue, or with such other
state offices, as appropriate, for the then-current year, or is exempt from such
filing requirement,

(l) Accounts, the collection of which, Agent, in its Permitted Discretion,
believes to be doubtful by reason of the Account Debtor’s financial condition,

(m) Accounts that are not subject to a valid and perfected first priority
Agent’s Lien,

(n) Accounts with respect to which (i) the goods giving rise to such Account
have not been shipped and billed to the Account Debtor, or (ii) the services
giving rise to such Account have not been performed and billed to the Account
Debtor, (unless such Accounts are subject to a bill and hold letter or other
agreement satisfactory to Agent), or

(o) Accounts that represent the right to receive progress payments or other
advance billings that are due prior to the completion of performance by the
applicable Borrower of the subject contract for goods or services.

“Eligible Foreign Accounts” means those Accounts created by National Auto
Center, Inc. in the ordinary course of its business, that arise out of its sale
of goods or rendition of services through its Miami, Florida operations, that
comply with each of the representations and warranties respecting Eligible
Accounts made by Borrowers under the Loan Documents, and that are not excluded
as ineligible by virtue of one or more of the criteria set forth below;
provided, however, that such criteria may be fixed and revised from time to time
by Agent in Agent’s Permitted Discretion to address the results of any audit
performed by Agent from time to time after the Closing Date. In determining the
amount to be included, Eligible Foreign Accounts shall be calculated net of
customer deposits and unapplied cash remitted to Borrowers. Eligible Foreign
Accounts shall not include the following:

(a) Accounts owing by an Account Debtor that such Account Debtor has failed to
pay within 90 days of original invoice date or has selling terms of more than 60
days,

 

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(b) Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of
all Accounts owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clause (a) above,

(c) Accounts with respect to which the Account Debtor is an employee or
Affiliate of any Borrower,

(d) Accounts arising in a transaction wherein goods are placed on consignment or
are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a
bill and hold, or any other terms by reason of which the payment by the Account
Debtor may be conditional (unless such Accounts are subject to a bill and hold
letter or other agreement in form and substance satisfactory to Agent),

(e) Accounts that are not payable in Dollars,

(f) Accounts that are not (1) supported by an irrevocable letter of credit
satisfactory to Agent (as to form, substance, and issuer or domestic confirming
bank) that has been delivered to Agent and is directly drawable by Agent, or
(2) covered by credit insurance in form, substance, and amount, and by an
insurer, satisfactory to all Lenders,

(g) Accounts with respect to which the Account Debtor is a creditor of any
Borrower, has or has asserted a right of setoff, has disputed its liability, or
has made any claim with respect to its obligation to pay the Account, but only
to the extent of such claim, right of setoff, or dispute,

(h) Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent, has gone out of business, or as to which
a Borrower has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor,

(i) Accounts, the collection of which, Agent, in its Permitted Discretion,
believes to be doubtful by reason of the Account Debtor’s financial condition,

(j) Accounts that are not subject to a valid and perfected first priority
Agent’s Lien,

(k) Accounts with respect to which (i) the goods giving rise to such Account
have not been shipped and billed to the Account Debtor, or (ii) the services
giving rise to such Account have not been performed and billed to the Account
Debtor, (unless such Accounts are subject to a bill and hold letter or other
agreement satisfactory to Agent), or

(l) Accounts that represent the right to receive progress payments or other
advance billings that are due prior to the completion of performance by National
Auto Center, Inc. of the subject contract for goods or services.

“Eligible Inventory” means the Inventory of any Borrower located in the U.S.
consisting of digital handset finished goods held for sale in the ordinary
course of Borrowers’ business located at one of the business locations of
Borrowers set forth on Schedule E-1 (or in-transit

 

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between any such locations), that complies with each of the representations and
warranties respecting Eligible Inventory made by Borrowers in the Loan
Documents, and that is not excluded as ineligible by virtue of the one or more
of the criteria set forth below; provided, however, that such criteria may be
fixed and revised from time to time by Agent in Agent’s Permitted Discretion to
address the results of any audit or appraisal performed by Agent from time to
time after the Closing Date. For purposes of this Agreement, finished goods
which are in the process of being packaged into kits shall not be considered
work-in-process Inventory and shall be considered finished goods. In determining
the amount to be so included, Inventory shall be valued at the lower of cost or
market on a basis consistent with Borrowers’ historical accounting practices. An
item of Inventory shall not be included in Eligible Inventory if:

(a) a Borrower does not have good, valid, and marketable title thereto,

(b) it is not located at one of the locations in the United States set forth on
Schedule E-1 or in transit from one such location to another such location,

(c) it is located on real property leased by a Borrower or in a contract
warehouse, in each case, unless it is subject to a Collateral Access Agreement
executed by the lessor, warehouseman, or other third party, as the case may be,
and unless it is segregated or otherwise separately identifiable from goods of
others, if any, stored on the premises,

(d) it is not subject to a valid and perfected first priority security Agent’s
Lien,

(e) it consists of goods that are obsolete or slow moving (which shall include
all goods not sold within 120 days of the date of such Borrowers’ receipt of
such goods), restrictive or custom items, analog handsets, accessories,
work-in-process, raw materials, or goods that constitute spare parts, packaging
and shipping materials, supplies used or consumed in a Borrower’s business, bill
and hold goods, defective goods, “seconds,” Inventory acquired on consignment or
Inventory held on consignment.

“Eligible Transferee” means (a) a commercial bank organized under the laws of
the United States, or any state thereof, and having total assets in excess of
$250,000,000, (b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company, insurance
company, or other financial institution or fund that is engaged in making,
purchasing, or otherwise investing in commercial loans in the ordinary course of
its business and having (together with its Affiliates) total assets in excess of
$250,000,000, (d) any Affiliate (other than individuals) of a Lender that was
party hereto as of the Closing Date, (e) so long as no Event of Default has
occurred and is continuing, any other Person approved by Agent and
Administrative Borrower, and (f) during the continuation of an Event of Default,
any other Person approved by Agent.

“Environmental Actions” means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other communication from any Governmental
Authority, or any third party involving

 

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violations of Environmental Laws or releases of Hazardous Materials from (a) any
assets, properties, or businesses of any Borrower or any predecessor in
interest, (b) from adjoining properties or businesses onto any assets,
properties or businesses of Borrower, or (c) from or onto any facilities which
received Hazardous Materials generated by any Borrower or any predecessor in
interest.

“Environmental Law” means any applicable federal, state, provincial, foreign or
local statute, law, rule, regulation, ordinance, code, binding and enforceable
guideline, binding and enforceable written policy or rule of common law now or
hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on Borrowers, relating
to the environment, employee health and safety, or Hazardous Materials,
including the Comprehensive Environmental Response, Compensation, and Liability
Act (“CERCLA”), 42 U.S.C. § 9601 et seq; the Resource Conservation and Recovery
Act (“RCRA”), 42 U.S.C. § 6901 et seq; the Federal Water Pollution Control Act,
33 USC § 1251 et seq; the Toxic Substances Control Act, 15 USC, § 2601 et seq;
the Clean Air Act, 42 USC § 7401 et seq.; the Safe Drinking Water Act, 42 USC. §
3803 et seq.; the Oil Pollution Act of 1990, 33 USC. § 2701 et seq.; the
Emergency Planning and the Community Right-to-Know Act of 1986, 42 USC. § 11001
et seq.; the Hazardous Material Transportation Act, 49 USC § 1801 et seq.; and
the Occupational Safety and Health Act, 29 USC. §651 et seq. (to the extent it
regulates occupational exposure to Hazardous Materials); any state and local or
foreign counterparts or equivalents, in each case as amended from time to time.

“Environmental Liabilities and Costs” means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts, or consultants, and costs of
investigation and feasibility studies), fines, penalties, sanctions, and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any Environmental Action.

“Environmental Lien” means any Lien in favor of any Governmental Authority for
Environmental Liabilities and Costs.

“Equipment” means all of Borrowers’ now owned or hereafter acquired right,
title, and interest with respect to equipment, machinery, machine tools, motors,
furniture, furnishings, fixtures, vehicles (including motor vehicles), tools,
parts, goods (other than consumer goods, farm products, or Inventory), wherever
located, including all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute thereto.

“ERISA Affiliate” means (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of a Borrower under
IRC Section 414(b), (b) any trade or business subject to ERISA whose employees
are treated as employed by the same employer as the employees of a Borrower
under IRC Section 414(c), (c) solely for

 

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purposes of Section 302 of ERISA and Section 412 of the IRC, any organization
subject to ERISA that is a member of an affiliated service group of which a
Borrower is a member under IRC Section 414(m), or (d) solely for purposes of
Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA
that is a party to an arrangement with a Borrower and whose employees are
aggregated with the employees of a Borrower under IRC Section 414(o).

“Event of Default” has the meaning set forth in Section 8.

“Excess Availability” means the amount, as of the date any determination thereof
is to be made, equal to Availability minus the aggregate amount, if any, of all
trade payables of Borrowers aged in excess of their historical levels with
respect thereto and all book overdrafts in excess of their historical practices
with respect thereto, in each case as determined by Agent in its Permitted
Discretion.

“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time
to time.

“Existing Subordinated Debt” means the subordinated Indebtedness of Parent in a
original principal amount equal to $12,374,000 issued pursuant to the Existing
Subordinated Debt Documents.

“Existing Subordinated Debt Documents” means that certain Indenture, dated as of
February 20, 2002, between Parent, as Issuer, and The Bank of New York, as
Trustee, with respect to $12,374,000 of 12% senior subordinated notes due
January 15, 2007, together with such other documents and instruments executed in
connection therewith.

“Fee Letter” means that certain fee letter, dated as of even date herewith,
between Borrowers and Agent, in form and substance satisfactory to Agent,
together with any other fee letters which are entered into between Agent and
Borrowers after the date hereof.

“FEIN” means Federal Employer Identification Number.

“First Tier Foreign Subsidiary” means any directly held Foreign Subsidiary of a
Borrower.

“Fixed Charge Coverage Ratio” means, with respect to any Person during any
fiscal period and without duplication, the ratio for such Person during such
fiscal period, of (a) EBITDA, minus (i) cash capital expenditures, minus
(ii) tax expense (excluding amounts to be offset by any net operating losses)
for such Person during such fiscal period, plus cash tax refunds received in
such period, to (b) (i) principal payments made by such Person on any
Indebtedness during such fiscal period (other than (A) refinancings permitted by
Section 7.1(d), (B) payments on Advances, (C) payments on revolving loans under
any Permitted Foreign Subsidiary Credit Facility to the extent available to be
reborrowed under such facility or to the extent cash collateral is released as a
result thereof, (D) payments under any Permitted Foreign Subsidiary Credit
Facility with an initial term, including any permitted extensions thereof, of
six (6) months or less, and (E) refinancings of debt of a Foreign Subsidiary
with the proceeds of a credit facility obtained by another Foreign Subsidiary
within the same non-U.S. geographic region, plus (ii) cash interest expense
(including factoring costs associated with sale of Accounts) during such fiscal
period minus (iii) interest income during such fiscal period.

 

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“Foothill” means Wells Fargo Foothill, Inc., formerly known as Foothill Capital
Corporation, a California corporation.

“Foreign Affiliate” means any Person in which any Borrower or any of its
Subsidiaries has an equity or ownership interest equal to or less than 50% and
which is organized or domiciled in any country other than the U.S.

“Foreign Subsidiary” means any Subsidiary of Parent organized or domiciled in
any country (or state, province or subdivision thereof) other than the U.S.

“Funding Date” means the date on which a Borrowing occurs.

“Funding Losses” has the meaning set forth in Section 2.13(b)(ii).

“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States, consistently applied.

“General Intangibles” means all of Borrowers’ now owned or hereafter acquired
right, title, and interest with respect to general intangibles (including
payment intangibles, commercial tort claims, contract rights, rights to payment,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, software, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), and any and all supporting obligations in respect thereof,
and any other personal property other than goods, Accounts, Investment Property,
and Negotiable Collateral.

“Governing Documents” means, with respect to any Person, the certificate or
articles of incorporation, articles of organization, certificate of limited
partnership, partnership agreement, limited liability company operating
agreement, by-laws, or other organizational documents of such Person.

“Governmental Authority” means any federal, state, local, or other governmental
or administrative body, instrumentality, department, or agency or any court,
tribunal, administrative hearing body, arbitration panel, commission, or other
similar dispute-resolving panel or body.

“Hazardous Materials” means (a) substances that are defined or listed in, or
otherwise classified pursuant to, any applicable laws or regulations as
“hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic
substances” under either CERCLA, RCRA or any other statute or regulation
intended for the protection of human health or the environment, or any other
formulation intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, or

 

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“EP toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.

“Hedging Obligations” of a Person shall mean any and all obligations of such
Person, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party’s assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collateral protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.

“Indebtedness” of any Person means (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of such Person in respect of letters of credit, bankers acceptances,
interest rate swaps, or other financial products, (c) all obligations of such
Person under Capital Leases, (d) all obligations or liabilities of others
secured by a Lien on any asset of such Person, irrespective of whether such
obligation or liability is assumed, (e) all obligations of such Person for the
deferred purchase price of assets (other than trade debt incurred in the
ordinary course of such Person’s business and repayable in accordance with
customary trade practices), and (f) any obligation of such Person guaranteeing
or intended to guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted, or sold with recourse to a Borrower) any obligation of any
other Person.

“Indemnified Liabilities” has the meaning set forth in Section 11.3.

“Indemnified Person” has the meaning set forth in Section 11.3.

“Insolvency Proceeding” means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code or under any other state or federal
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.

“Intangible Assets” means, with respect to any Person, that portion of the book
value of all of such Person’s assets that would be treated as intangibles under
GAAP.

“Intellectual Property Security Agreement” means a security agreement executed
and delivered by any Borrower in favor of Agent, granting to Agent, for the
benefit of the Lender Group, a first-priority security interest in all of such
Borrower’s patents, trademarks, copyrights, licenses and other intellectual
property, the form and substance of which is satisfactory to Agent, including,
without limitation, any security agreement delivered in connection with the
Prior Loan Agreement.

 

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“Intercompany Subordination Agreement” means, individually and collectively, a
subordination agreement executed and delivered by Parent, its Subsidiaries and
Agent, the form and substance of which is satisfactory to Agent.

“Interest Period” means, with respect to each LIBOR Rate Loan, a period
commencing on the date of the making of such LIBOR Rate Loan and ending 1, 2, or
3 months thereafter; provided, however, that (a) if any Interest Period would
end on a day that is not a Business Day, such Interest Period shall be extended
(subject to clauses (c)-(e) below) to the next succeeding Business Day,
(b) interest shall accrue at the applicable rate based upon the LIBOR Rate from
and including the first day of each Interest Period to, but excluding, the day
on which any Interest Period expires, (c) any Interest Period that would end on
a day that is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business Day, (d) with
respect to an Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period), the Interest Period shall
end on the last Business Day of the calendar month that is 1, 2, or 3 months
after the date on which the Interest Period began, as applicable, and
(e) Borrowers (or Administrative Borrower on behalf thereof) may not elect an
Interest Period which will end after the Maturity Date.

“Inventory” means all Borrowers’ now owned or hereafter acquired right, title,
and interest with respect to inventory, including goods held for sale or lease
or to be furnished under a contract of service, goods that are leased by a
Borrower as lessor, goods that are furnished by a Borrower under a contract of
service, and raw materials, work in process, or materials used or consumed in a
Borrower’s business.

“Inventory Reserves” means reserves (determined from time to time by Agent in
its Permitted Discretion) for (a) the estimated costs relating to unpaid freight
charges, warehousing or storage charges, taxes, duties, and other similar unpaid
costs associated with the acquisition of Eligible In-Transit Inventory by
Borrowers, plus (b) the estimated reclamation claims of unpaid sellers of
Inventory sold to Borrowers.

“Investment” means, with respect to any Person, any investment by such Person in
any other Person (including Affiliates) in the form of loans, guarantees,
advances, or capital contributions (excluding (a) commission, travel, and
similar advances to officers and employees of such Person made in the ordinary
course of business, and (b) bona fide Accounts arising from the sale of goods or
rendition of services in the ordinary course of business consistent with past
practice), purchases or other acquisitions for consideration of Indebtedness or
Stock, and any other items that are or would be classified as investments on a
balance sheet prepared in accordance with GAAP.

“Investment Property” means all of Borrowers’ now owned or hereafter acquired
right, title, and interest with respect to “investment property” as that term is
defined in the Code, and any and all supporting obligations in respect thereof.

 

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“IRC” means the Internal Revenue Code of 1986, as amended and as in effect from
time to time.

“Issuing Lender” means Foothill or any other Lender that, at the request of
Administrative Borrower and with the consent of Agent agrees, in such Lender’s
sole discretion, to become an Issuing Lender for the purpose of issuing L/Cs or
L/C Undertakings pursuant to Section 2.12.

“L/C” has the meaning set forth in Section 2.12(a).

“L/C Disbursement” means a payment made by the Issuing Lender pursuant to a
Letter of Credit.

“L/C Undertaking” has the meaning set forth in Section 2.12(a).

“Lender” and “Lenders” have the respective meanings set forth in the preamble to
this Agreement, and shall include any other Person made a party to this
Agreement in accordance with the provisions of Section 14.1.

“Lender Group” means, individually and collectively, each of the Lenders
(including the Issuing Lender) and Agent.

“Lender Group Expenses” means all (a) costs or expenses (including taxes, and
insurance premiums) required to be paid by a Borrower under any of the Loan
Documents that are paid or incurred by the Lender Group, (b) fees or charges
paid or incurred by Agent in connection with the Lender Group’s transactions
with Borrowers, including, reasonable fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record searches
(including tax lien, litigation, and UCC searches and including searches with
the patent and trademark office, the copyright office, or the department of
motor vehicles), filing, recording, publication, appraisal (including periodic
Collateral appraisals or business valuations as set forth in Section 4.6) to the
extent of the fees and charges contained in this Agreement, real estate surveys,
real estate title policies and endorsements, and environmental audits,
(c) reasonable costs and expenses incurred by Agent in the disbursement of funds
to or for the account of Borrowers (by wire transfer or otherwise), (d) charges
paid or incurred by Agent resulting from the dishonor of checks, (e) reasonable
costs and expenses paid or incurred by the Lender Group to correct any default
or enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated, (f) audit fees and expenses of
Agent related to audit examinations of the Books to the extent of the fees and
charges (and up to the amount of any limitation) contained in this Agreement,
(g) reasonable costs and expenses of third party claims or any other suit paid
or incurred by the Lender Group in enforcing or defending the Loan Documents or
in connection with the transactions contemplated by the Loan Documents or the
Lender Group’s relationship with any Borrower or any guarantor of the
Obligations, (h) Agent’s reasonable fees and expenses (including attorneys fees)
incurred in advising, structuring, drafting, reviewing, administering, or
amending the Loan Documents, and (i) Agent’s and each Lender’s reasonable fees
and expenses (including attorneys fees) incurred in terminating, enforcing
(including attorneys fees and

 

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expenses incurred in connection with a “workout,” a “restructuring,” or an
Insolvency Proceeding concerning any Borrower or in exercising rights or
remedies under the Loan Documents), or defending the Loan Documents,
irrespective of whether suit is brought, or in taking any Remedial Action
concerning the Collateral.

“Lender-Related Person” means, with respect to any Lender, such Lender, together
with such Lender’s Affiliates, and the officers, directors, employees, and
agents of such Lender.

“Letter of Credit” means an L/C or an L/C Undertaking, as the context requires.

“Letter of Credit Usage” means, as of any date of determination, the aggregate
undrawn amount of all outstanding Letters of Credit plus 100% of the amount of
outstanding time drafts accepted by an Underlying Issuer as a result of drawings
under Underlying Letters of Credit.

“LIBOR Deadline” has the meaning set forth in Section 2.13(b)(i).

“LIBOR Notice” means a written notice in the form of Exhibit L-1.

“LIBOR Option” has the meaning set forth in Section 2.13(a).

“LIBOR Rate” means, for each Interest Period for each LIBOR Rate Loan, the rate
per annum determined by Agent (rounded upwards, if necessary, to the next 1/16%)
by dividing (a) the Base LIBOR Rate for such Interest Period, by (b) 100% minus
the Reserve Percentage. The LIBOR Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage.

“LIBOR Rate Loan” means each portion of an Advance that bears interest at a rate
determined by reference to the LIBOR Rate.

“LIBOR Rate Margin” means 2.5 percentage points (2.50%).

“Lien” means any interest in an asset securing an obligation owed to, or a claim
by, any Person other than the owner of the asset, whether such interest shall be
based on the common law, statute, or contract, whether such interest shall be
recorded or perfected, and whether such interest shall be contingent upon the
occurrence of some future event or events or the existence of some future
circumstance or circumstances, including the lien or security interest arising
from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, security agreement, conditional sale or trust receipt, or
from a lease, consignment, or bailment for security purposes and also including
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases, and other title exceptions and encumbrances
affecting Real Property.

“Loan Account” has the meaning set forth in Section 2.10.

“Loan Documents” means this Agreement, the Cash Management Agreements, the
Control Agreements, the Intellectual Property Security Agreement, the
Disbursement Letter,

 

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the Due Diligence Letter, the Fee Letter, the Letters of Credit, the Mortgages
(if any), the Officers’ Certificate, any Stock Pledge Agreement, the
Intercompany Subordination Agreement, the Reaffirmation Agreement, any note or
notes executed by a Borrower in connection with this Agreement and payable to a
member of the Lender Group, and any other agreement entered into, now or in the
future, by any Borrower and the Lender Group in connection with this Agreement.

“Loan Party” means any Borrower or Foreign Subsidiary whose stock is subject to
a first priority perfected Lien in favor of the Agent pursuant to a Stock Pledge
Agreement.

“Management Agreement” means, individually and collectively, any agreement
pursuant to which a Management Fee is payable to any Borrower by any Subsidiary
or Affiliate.

“Management Fee” means, individually and collectively, any administrative,
management, consulting, technical support, royalty, license, or other similar
fees paid or owing to any Borrower by any Subsidiary or Affiliate, as more fully
set forth in the applicable Management Agreement.

“Material Adverse Change” means (a) a material adverse change in the business,
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of Parent and its Subsidiaries taken as a whole, (b) a
material impairment of a Borrower’s ability to perform its obligations under the
Loan Documents to which it is a party or of the Lender Group’s ability to
enforce the Obligations or realize upon the Collateral, or (c) a material
impairment of the enforceability or priority of the Agent’s Liens with respect
to the Collateral as a result of an action or failure to act on the part of a
Borrower.

“Material Vendor” means Nokia, Motorola, or any other trade creditor of any
Borrower that supplies 35% or more of the annual product needs of the Borrowers,
taken as a whole.

“Maturity Date” has the meaning set forth in Section 3.4.

“Maximum Revolver Amount” means $85,000,000.

“Miami A/R Factoring Facility” means one or more accounts receivable factoring
facilities or other credit facilities that satisfy the requirements set forth in
Section 7.1(e)(iii), in each case as determined by the Agent in its sole and
absolute discretion.

“Mortgages” means, individually and collectively, one or more mortgages, deeds
of trust, or deeds to secure debt, executed and delivered by any Borrower in
favor of Agent, for the benefit of the Lender Group, in form and substance
satisfactory to Agent, that encumbers the Real Property Collateral owned by such
Borrower and the related improvements thereto.

“Negotiable Collateral” means all of Borrowers’ now owned and hereafter acquired
right, title, and interest with respect to letters of credit, letter of credit
rights, instruments, promissory notes, drafts, documents, and chattel paper
(including electronic chattel paper and tangible chattel paper), and any and all
supporting obligations in respect thereof.

 

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“Net Liquidation Percentage” means the percentage of the book value of
Borrowers’ Inventory that is estimated to be recoverable, after liquidation
expenses, in an orderly liquidation of such Inventory, such percentage to be as
determined from time to time by a qualified appraisal company selected by Agent.
Administrative Borrower shall be provided with a copy of the appraisal company’s
report or similar detailed information reflecting the method and basis for such
calculation upon request.

“Non-Loan Party” means any Subsidiary of Parent that is not a Loan Party.

“Obligations” means all loans, Advances, debts, principal, interest (including
any interest that, but for the provisions of the Bankruptcy Code, would have
accrued), contingent reimbursement obligations with respect to outstanding
Letters of Credit, premiums, liabilities (including all amounts charged to
Borrowers’ Loan Account pursuant hereto), obligations, fees (including the fees
provided for in the Fee Letter), charges, costs, Lender Group Expenses
(including any fees or expenses that, but for the provisions of the Bankruptcy
Code, would have accrued), lease payments, guaranties, covenants, and duties of
any kind and description owing by Borrowers to the Lender Group pursuant to or
evidenced by the Loan Documents and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and including all interest not paid when due
and all Lender Group Expenses that Borrowers are required to pay or reimburse by
the Loan Documents, by law, or otherwise. Any reference in this Agreement or in
the Loan Documents to the Obligations shall include all amendments, changes,
extensions, modifications, renewals replacements, substitutions, and
supplements, thereto and thereof, as applicable, both prior and subsequent to
any Insolvency Proceeding.

“Officers’ Certificate” means the representations and warranties of officers
form submitted by Agent to Administrative Borrower, together with Borrowers’
completed responses to the inquiries set forth therein, the form and substance
of such responses to be satisfactory to Agent.

“Originating Lender” has the meaning set forth in Section 14.1(e).

“Overadvance” has the meaning set forth in Section 2.5.

“Parent” has the meaning set forth in the preamble to this Agreement.

“Participant” has the meaning set forth in Section 14.1(e).

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

“Pay-Off Letter” means one or more letters, in form and substance satisfactory
to Agent, setting forth the amount necessary to repay all or a portion of the
obligations of Borrowers owing to the issuer thereof pursuant to the Existing
Subordinated Debt Documents.

 

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“Permitted Affiliate Transaction” means a transaction between Parent and its
Subsidiaries, or among Parent’s Subsidiaries, that satisfies one or more of the
following criteria:

(a) Transactions between Parent and its Subsidiaries (including Borrowers).
Parent may, provided that no Event of Default exists or will result therefrom
(i) guarantee obligations of any Subsidiary, including any Borrower, with
respect to (A) trade payables consisting of goods or materials purchased in the
ordinary course of business of such Subsidiary for which payment is not more
than 90 days past due (unless subject to a dispute being diligently contested),
(B) real property operating leases, (C) personal property operating leases not
to exceed $5 Million in the aggregate outstanding at any one time, (D) a
Permitted Foreign Subsidiary Credit Facility, provided that (X) such guarantee
is unsecured, and in the case of Parent’s guarantee of any Permitted Foreign
Subsidiary Credit Facility entered into after the Closing Date, such guarantee
is also subordinated to the Obligations under this Agreement, (Y) no default has
occurred pursuant to such guarantee obligation, (Z) no demand for payment has
resulted from any such guarantee obligation, and (E) a performance bond issued
in connection with tax claims of such Subsidiary, provided such guarantees under
this clause (E) do not exceed $5,000,000 in the aggregate; and (ii) make capital
contributions pursuant to subsection (h) below, for the benefit of any
Subsidiary, including any Borrower;

(b) Transactions between Borrowers. Parent and any other Borrower may (i) make
unsecured loans to, or (ii) sell, lease or transfer assets (provided Agent shall
have a first priority perfected Lien on such asset after such sale, lease or
transfer) to, any other Borrower;

(c) Transactions between Borrowers and Foreign Subsidiaries. Any Borrower may,
provided that no Event of Default exists or will result therefrom, (i) make
loans to any Foreign Subsidiary, up to an aggregate amount owing at any time to
all Borrowers not to exceed $2,500,000, and (ii) transfer assets (other than
Inventory and Accounts) with a market value not exceeding $1,000,000 for all
such transfers by all Borrowers in the aggregate during any fiscal year, to any
Foreign Subsidiary;

(d) Transactions between Foreign Subsidiaries and Loan Parties. Any Foreign
Subsidiary Loan Party may (i) make unsecured loans to any other Loan Party,
(ii) sell, lease or transfer assets to, any other Loan Party, or (iii) guarantee
unsecured obligations arising in the ordinary course of business for the benefit
of, any other Loan Party;

(e) Transactions between Foreign Subsidiary Loan Parties and Non-Loan Parties.
Provided that no Event of Default exists or will result therefrom, any Foreign
Subsidiary Loan Party may (i) transfer assets to any Non-Loan Party with a
market value not exceeding $2,000,000 for all such transfers by Foreign
Subsidiary Loan Parties in the aggregate during any fiscal year, and (ii) make
loans to, or guarantee unsecured obligations arising in the ordinary course of
business for the benefit of, any Non-Loan Party not to exceed $50,000,000 in the
aggregate owing at any one time for all such loans and guarantees; provided,
however, that loans to such Non-Loan Parties may not exceed $10,000,000 in the
aggregate owing at any one time;

(f) Transactions between Foreign Subsidiaries and CellStar Netherlands. Any
Foreign Subsidiary may (i) make unsecured loans to CellStar Netherlands (or such
other global agency treasury center as Borrowers may establish from time to
time) for the purpose of making a loan to an Affiliate that would have been
permitted hereunder if such loan was made directly by such Foreign Subsidiary,
or (ii) make investments through CellStar Netherlands constituting the foreign
equivalent of “Cash Equivalents” as such term is defined herein;

 

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(g) Transactions between Non-Loan Parties and any other Person. Any Non-Loan
Party may (i) make unsecured loans to, (ii) make capital contributions to,
(iii) sell, lease or transfer assets to, or (iv) guarantee any Indebtedness for
the benefit of, any (x) Borrower, (y) Loan Party, or (z) other Non-Loan Party
(including, without limitation, CellStar Netherlands); and

(h) Capital Contributions by any Loan Party. Provided that no Event of Default
exists or will result therefrom, any Loan Party may make (i) initial capital
contributions in any Subsidiary created after the Closing Date in accordance
with the other provisions of this Agreement not to exceed $25,000 for each such
Subsidiary, and (ii) capital contributions, to the extent required by applicable
law, in an amount not to exceed $2,000,000 in the aggregate for any such
Subsidiary during the period from and including the Closing Date through the
Maturity Date, provided, that (x) all such capital contributions to all such
Subsidiaries shall not exceed (i) $2,000,000 per fiscal year in the aggregate,
and (ii) $10,000,000 in the aggregate during the period from and including the
Closing Date through the Maturity Date, (y) Administrative Borrower shall have
given Agent notice promptly after becoming aware of any such requirement for
capital contributions, and (z) Excess Availability is at least $10,000,000 after
giving effect to any such capital contributions.

“Permitted Discretion” means a determination made in good faith and in the
exercise of reasonable (from the perspective of a secured asset-based lender)
business judgment.

“Permitted Dispositions” means (a) sales or other dispositions by Borrowers of
Equipment that is worn, damaged, or obsolete in the ordinary course of the
applicable Borrower’s business, (b) sales by Borrowers of Inventory to buyers in
the ordinary course of business, (c) the use or transfer of money or Cash
Equivalents by Borrowers in a manner that is not prohibited by the terms of this
Agreement or the other Loan Documents, (d) the licensing by Borrowers, on a
non-exclusive basis, of patents, trademarks, copyrights, and other intellectual
property rights in the ordinary course of the applicable Borrower’s business,
(e) sales of Equipment and other assets (other than Real Property, Inventory and
Accounts) having a fair market value not to exceed $3,000,000 in the aggregate
during the period from the Closing Date through the Maturity Date, provided that
all proceeds of any and all dispositions of all such assets of any Borrower
shall be paid to Agent for application to outstanding Advances (which amounts
may be reborrowed subject to the terms and conditions of this Agreement),
(f) dispositions of assets during any fiscal year with an aggregate market value
of less than $100,000, (g) so long as no Event of Default has occurred and is
continuing, the sale of any (i) Foreign Subsidiary with a net worth of less than
$1,500,000, or (ii) a Domestic Subsidiary or Borrower with a net worth of less
than $1,500,000 with the consent of Agent, (h) dispositions of Accounts of
CellStar Mexico in an aggregate amount not exceeding $30,000,000 outstanding at
any time pursuant to a factoring facility permitted by Section 7.1(e)(ii)
hereof, and (i) disposition of Accounts of CellStar Ltd. and/or National Auto
Center, Inc. owed by non-U.S. Account Debtors pursuant to a factoring facility
or other credit facility permitted by Section 7.1(e)(iii) hereof.

 

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“Permitted Foreign Subsidiary Credit Facility” means any credit facility
hereafter entered into by any Foreign Subsidiary or Foreign Subsidiaries to
provide financing for such Foreign Subsidiary’s working capital needs that:
(i) is not guaranteed by any Borrower; provided, such Permitted Foreign
Subsidiary Credit Facility may be guaranteed by Parent if such guaranty is
unsecured and subject to a subordination agreement satisfactory to Agent,
(ii) does not limit or prohibit (or would limit or prohibit upon the happening
of certain events) payment of any Management Fees to any Borrower, and
(iii) both before and after giving effect thereto, does not result in a Fixed
Charge Coverage Ratio calculated for the immediately preceding four fiscal
quarter period for the region in which such Foreign Subsidiary is located of
less than 2.0:1.0. As of the date hereof, there are no Permitted Foreign
Subsidiary Credit Facilities.

“Permitted Investments” means (a) investments in Cash Equivalents,
(b) investments in negotiable instruments for collection, and (c) advances made
in connection with purchases of goods or services in the ordinary course of
business.

“Permitted Liens” means (a) Liens held by Agent for the benefit of Agent and the
Lenders, (b) Liens for unpaid taxes that either (i) are not yet delinquent, or
(ii) do not constitute an Event of Default hereunder and are the subject of
Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the interests of
lessors under operating leases, (e) purchase money Liens or the interests of
lessors under Capital Leases to the extent that such Liens or interests secure
Permitted Purchase Money Indebtedness and so long as such Lien attaches only to
the asset purchased or acquired and the proceeds thereof, (f) Liens arising by
operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of
Borrowers’ business and not in connection with the borrowing of money, and which
Liens either (i) are for sums not yet delinquent, or (ii) are the subject of
Permitted Protests, (g) Liens arising from deposits made in connection with
obtaining worker’s compensation or other unemployment insurance, (h) Liens or
deposits to secure performance of bids, tenders, or leases incurred in the
ordinary course of Borrowers’ business and not in connection with the borrowing
of money, (i) Liens granted as security for surety or appeal bonds in connection
with obtaining such bonds in the ordinary course of Borrowers’ business,
(j) Liens resulting from any judgment or award that is not an Event of Default
hereunder, (k) Liens with respect to the Real Property Collateral that are
exceptions to the commitments for title insurance issued in connection with the
Mortgages, as accepted by Agent, (l) with respect to any Real Property that is
not part of the Real Property Collateral, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof by Borrowers, (m) Liens on funds in the possession of credit
card companies pertaining to credit card sales of Inventory in the ordinary
course of business pursuant to merchant credit card services agreements provided
that Agent shall have a satisfactory agreement with such credit card companies
regarding the assignment of such credit card receivables to Agent, and (n) Liens
on any unearned insurance premiums and dividends that may become payable under
the insurance policies and loss payments which reduce the unearned premiums
relating to insurance policies, subject to any mortgagee or loss payee
interests, securing financing of insurance premiums by third party insurance
finance companies in the ordinary course of business and to the extent permitted
by Section 7.1(i) hereof.

“Permitted Protest” means the right of the applicable Borrower to protest any
Lien (other than any such Lien that secures the Obligations), taxes (other than
payroll taxes or taxes

 

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that are the subject of a United States federal tax lien), or rental payment,
provided that (a) a reserve with respect to such obligation is established on
the Books in such amount as is required under GAAP, (b) any such protest is
instituted promptly and prosecuted diligently by the applicable Borrower in good
faith, and (c) Agent is satisfied that, while any such protest is pending, there
will be no impairment of the enforceability, validity, or priority of any of the
Agent’s Liens.

“Permitted Purchase Money Indebtedness” means, as of any date of determination,
Purchase Money Indebtedness incurred after the Closing Date in an aggregate
amount outstanding at any one time not in excess of $5,000,000.

“Person” means natural persons, corporations, limited liability companies,
limited partnerships, general partnerships, limited liability partnerships,
joint ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.

“Personal Property Collateral” means all Collateral other than Real Property.

“Prior Loan Agreement” has the meaning set forth in the recitals hereto.

“Projections” means the forecasted (a) balance sheets, (b) profit and loss
statements, and (c) cash flow statements, all prepared on a consistent basis
with Parent’s historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions, prepared
separately for the Parent (consolidated with its Subsidiaries) and the Domestic
Business Unit.

“Pro Rata Share” means, as of any date of determination:

(a) with respect to a Lender’s obligation to make Advances and receive payments
of principal, interest, fees, costs, and expenses with respect thereto,
(i) prior to the Commitments being terminated or reduced to zero, the percentage
obtained by dividing (y) such Lender’s Commitment, by (z) the aggregate
Commitments of all Lenders, and (ii) from and after the time that the
Commitments have been terminated or reduced to zero, the percentage obtained by
dividing (y) the aggregate outstanding principal amount of such Lender’s
Advances by (z) the aggregate outstanding principal amount of all Advances,

(b) with respect to a Lender’s obligation to participate in Letters of Credit,
to reimburse the Issuing Lender, and to receive payments of fees with respect
thereto, (i) prior to the Commitments being terminated or reduced to zero, the
percentage obtained by dividing (y) such Lender’s Commitment, by (z) the
aggregate Commitments of all Lenders, and (ii) from and after the time that the
Commitments have been terminated or reduced to zero, the percentage obtained by
dividing (y) the aggregate outstanding principal amount of such Lender’s
Advances by (z) the aggregate outstanding principal amount of all Advances,

(c) with respect to all other matters as to a particular Lender (including the
indemnification obligations arising under Section 16.7), the percentage obtained
by dividing (i) such Lender’s Commitment, by (ii) the aggregate amount of
Commitments of all Lenders; provided, however, that in the event the Commitments
have been terminated or reduced to zero,

 

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Pro Rata Share under this clause shall be the percentage obtained by dividing
(A) the outstanding principal amount of such Lender’s Advances plus such
Lender’s ratable portion of the Risk Participation Liability with respect to
outstanding Letters of Credit, by (B) the outstanding principal amount of all
Advances plus the aggregate amount of the Risk Participation Liability with
respect to outstanding Letters of Credit.

“Purchase Money Indebtedness” means Indebtedness (other than the Obligations,
but including Capitalized Lease Obligations), incurred at the time of, or within
20 days after, the acquisition of any fixed assets for the purpose of financing
all or any part of the acquisition cost thereof.

“Reaffirmation Agreement” means that certain Reaffirmation Agreement, dated as
of the date hereof, executed by Borrowers and Agent.

“Real Property” means any fee simple estates in real property now owned or
hereafter acquired by any Borrower and the improvements thereto.

“Real Property Collateral” means the parcel or parcels of Real Property
identified on Schedule R-1 and any Real Property hereafter acquired by a
Borrower.

“Record” means information that is inscribed on a tangible medium or which is
stored in an electronic or other medium and is retrievable in perceivable form.

“Remedial Action” means all actions taken to (a) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate, or in any way address Hazardous
Materials in the indoor or outdoor environment, (b) prevent or minimize a
release or threatened release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment, (c) perform any pre-remedial studies, investigations, or
post-remedial operation and maintenance activities, or (d) conduct any other
actions authorized by 42 USC § 9601.

“Report” has the meaning set forth in Section 16.17.

“Required Lenders” means, at any time, (a) Agent, and (b) Lenders whose Pro Rata
Shares (calculated under clause (c) of the definition of Pro Rata Shares)
aggregate 66-2/3% or more of the Commitments, or if the Commitments have been
terminated irrevocably, 66-2/3% or more of the Obligations then outstanding,
provided, however, that, if there are 2 or more Lenders at any time, in no event
shall the Required Lenders be less than 2 Lenders.

“Reserve Percentage” means, on any day, for any Lender, the maximum percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor Governmental Authority) for determining the reserve requirements
(including any basic, supplemental, marginal, or emergency reserves) that are in
effect on such date with respect to eurocurrency funding (currently referred to
as “eurocurrency liabilities”) of that Lender, but so long as such Lender is not
required or directed under applicable regulations to maintain such reserves, the
Reserve Percentage shall be zero.

 

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“Revolver Usage” means, as of any date of determination, the sum of (a) the then
extant amount of outstanding Advances, plus (b) the then extant amount of the
Letter of Credit Usage.

“Risk Participation Liability” means, as to each Letter of Credit, all
reimbursement obligations of Borrowers to the Issuing Lender with respect to an
L/C Undertaking, consisting of (a) the amount available to be drawn or which may
become available to be drawn, (b) all amounts that have been paid by the Issuing
Lender to the Underlying Issuer to the extent not reimbursed by Borrowers,
whether by the making of an Advance or otherwise, and (c) all accrued and unpaid
interest, fees, and expenses payable with respect thereto.

“SEC” means the United States Securities and Exchange Commission and any
successor thereto.

“Securities Account” means a “securities account” as that term is defined in the
Code.

“Settlement” has the meaning set forth in Section 2.3(f)(i).

“Settlement Date” has the meaning set forth in Section 2.3(f)(i).

“Solvent” means, with respect to any Person on a particular date, that such
Person is not insolvent (as such term is defined in the Uniform Fraudulent
Transfer Act).

“Stock” means all shares, options, warrants, interests, participations, or other
equivalents (regardless of how designated) of or in a Person, whether voting or
nonvoting, including common stock, preferred stock, 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).

“Stock Pledge Agreement” means, individually and collectively, each pledge
agreement, in form and substance satisfactory to Agent, executed and delivered
by any Borrower that owns Stock of a Subsidiary of Parent, pledging 100% of the
Stock owned by such Borrower of a Domestic Subsidiary and 65% of the Stock owned
by such Borrower of a First Tier Foreign Subsidiary, including, without
limitation, any pledge agreement delivered in connection with the Prior Loan
Agreement.

“Subsidiary” of a Person means a corporation, partnership, limited liability
company, or other entity in which that Person directly or indirectly owns or
controls the shares of Stock having ordinary voting power to elect a majority of
the board of directors (or appoint other comparable managers) of such
corporation, partnership, limited liability company, or other entity and
including, without limitation, any Foreign Subsidiary or Domestic Subsidiary.

“Swing Lender” means Foothill or any other Lender that, at the request of
Administrative Borrower and with the consent of Agent agrees, in such Lender’s
sole discretion, to become the Swing Lender hereunder.

“Swing Loan” has the meaning set forth in Section 2.3(d)(i).

 

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“Taxes” has the meaning set forth in Section 16.11(e).

“Underlying Issuer” means a third Person which is the beneficiary of an L/C
Undertaking and which has issued a letter of credit at the request of the
Issuing Lender for the benefit of Borrowers and, in the case of a proposed
Qualified Import Letter of Credit, has agreed, in writing, to hold documents of
title as agent for Agent.

“Underlying Letter of Credit” means a letter of credit that has been issued by
an Underlying Issuer.

“U.S.” means the United States of America.

“Voidable Transfer” has the meaning set forth in Section 17.7.

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

1.2 Accounting Terms. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP. When used herein, the term “financial
statements” shall include the notes and schedules thereto. Whenever the term
“Borrowers” or the term “Parent” is used in respect of a financial covenant or a
related definition, it shall be understood to mean Parent and its Subsidiaries
on a consolidated basis unless the context clearly requires otherwise.

1.3 Code. Any terms used in this Agreement that are defined in the Code shall be
construed and defined as set forth in the Code unless otherwise defined herein.

1.4 Construction. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term “including” is
not limiting, and the term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or.” The words “hereof,”
“herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). Any reference herein to any Person shall be construed to
include such Person’s successors and assigns. Any requirement of a writing
contained herein or in the other Loan Documents shall be satisfied by the
transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.

1.5 Schedules and Exhibits. All of the schedules and exhibits attached to this
Agreement shall be deemed incorporated herein by reference.

 

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2. LOAN AND TERMS OF PAYMENT.

2.1 Revolver Advances.

(a) Subject to the terms and conditions of this Agreement, and during the term
of this Agreement, each Lender with a Commitment agrees (severally, not jointly
or jointly and severally) to make advances (“Advances”) to Borrowers in an
amount at any one time outstanding not to exceed such Lender’s Pro Rata Share of
an amount equal to the lesser of (i) the Maximum Revolver Amount less the Letter
of Credit Usage, or (ii) the Borrowing Base less the Letter of Credit Usage. For
purposes of this Agreement, “Borrowing Base,” as of any date of determination,
shall mean the result of:

 

  (v) 85% of the amount of Eligible Domestic Accounts, less the amount, if any,
of the Dilution Reserve, plus

 

  (w) the lowest of

(i) $42,500,000,

(ii) the lesser of (1) 60% of the value of Eligible Inventory consisting of
digital handsets, or (2) 85% times the then extant Net Liquidation Percentage
(as calculated by Agent), times the book value of such Eligible Inventory
consisting of digital handsets, or

(iii) 100% of the amount of credit availability created by clause (v) above,
plus

 

  (x) the lowest of

(i) $10,000,000, or

(ii) 75% of the amount of Eligible Foreign Accounts, less the amount, if any, of
the Dilution Reserve, minus,

 

  (y) with respect to the amount of credit availability created by clause
(x) above, the aggregate amount of reserves established by Agent in its
Permitted Discretion in connection with (1) any deductible under any credit
insurance policy covering such Eligible Foreign Accounts, (2) the amount by
which any Eligible Foreign Account exceeds the maximum limit established under
the applicable credit insurance policy covering such Eligible Foreign Account or
the applicable Account Debtor, and (3) the amount of availability created under
clause (x) above in excess of the amount of Existing Subordinated Debt that has
been repaid pursuant to an executed Pay-Off Letter, minus,

 

  (z) the aggregate amount of reserves, if any, established by Agent under
Section 2.1(b).

 

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(b) Anything to the contrary in this Section 2.1 notwithstanding, Agent shall
have the right to establish reserves in such amounts, and with respect to such
matters, as Agent in its Permitted Discretion shall deem necessary or
appropriate, against the Borrowing Base, including reserves with respect to
(i) sums that Borrowers are required to pay (such as taxes, assessments,
insurance premiums, or, in the case of leased assets, rents or other amounts
payable under such leases) and has failed to pay under any Section of this
Agreement or any other Loan Document, and (ii) amounts owing by Borrowers to any
Person to the extent secured by a Lien on, or trust over, any of the Collateral
(other than any existing Permitted Lien set forth on Schedule P-1 which is
specifically identified thereon as entitled to have priority over the Agent’s
Liens), which Lien or trust, in the Permitted Discretion of Agent likely would
have a priority superior to the Agent’s Liens (such as Liens or trusts in favor
of landlords, warehousemen, carriers, mechanics, materialmen, laborers, or
suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes
where given priority under applicable law) in and to such item of the
Collateral. In addition to the foregoing, Agent shall have the right to have the
Inventory reappraised by a qualified appraisal company selected by Agent from
time to time after the Closing Date for the purpose of redetermining the Net
Liquidation Percentage of the Eligible Inventory portion of the Collateral and,
as a result, redetermining the Borrowing Base, as Agent in its Permitted
Discretion shall deem necessary or appropriate.

(c) The Lenders with Commitments shall have no obligation to make additional
Advances hereunder to the extent such additional Advances would cause the
Revolver Usage to exceed the Maximum Revolver Amount.

(d) Amounts borrowed pursuant to this Section may be repaid and, subject to the
terms and conditions of this Agreement, reborrowed at any time during the term
of this Agreement.

2.2 Intentionally Omitted.

2.3 Borrowing Procedures and Settlements.

(a) Procedure for Borrowing. Each Borrowing shall be made by an irrevocable
written request by an Authorized Person delivered to Agent (which notice must be
received by Agent no later than 1:00 p.m. (Georgia time) on the Business Day
prior to the date that is the requested Funding Date in the case of a request
for an Advance specifying (i) the amount of such Borrowing, and (ii) the
requested Funding Date, which shall be a Business Day; provided, however, that
in the case of a request for Swing Loan in an amount of $15,000,000, or less,
such notice will be timely received if it is received by Agent no later than
1:00 p.m. (Georgia time) on the Business Day that is the requested Funding Date
specifying (i) the amount of such Borrowing, and (ii) the requested Funding
Date, which shall be a Business Day. At Agent’s election, in lieu of delivering
the above-described written request, any Authorized Person may give Agent
telephonic notice of such request by the required time, with such telephonic
notice to be confirmed in writing within 24 hours of the giving of such notice.

 

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(b) Agent’s Election. Promptly after receipt of a request for a Borrowing
pursuant to Section 2.3(a), Agent shall elect, in its discretion, (i) to have
the terms of Section 2.3(c) apply to such requested Borrowing, or (ii) if the
Borrowing is for an Advance, to request Swing Lender to make a Swing Loan
pursuant to the terms of Section 2.3(d) in the amount of the requested
Borrowing; provided, however, that if Swing Lender declines in its sole
discretion to make a Swing Loan pursuant to Section 2.3(d), Agent shall elect to
have the terms of Section 2.3(c) apply to such requested Borrowing.

(c) Making of Advances.

(i) In the event that Agent shall elect to have the terms of this Section 2.3(c)
apply to a requested Borrowing as described in Section 2.3(b), then promptly
after receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent
shall notify the Lenders, not later than 4:00 p.m. (Georgia time) on the
Business Day immediately preceding the Funding Date applicable thereto, by
telecopy, telephone, or other similar form of transmission, of the requested
Borrowing. Each Lender shall make the amount of such Lender’s Pro Rata Share of
the requested Borrowing available to Agent in immediately available funds, to
Agent’s Account, not later than 1:00 p.m. (Georgia time) on the Funding Date
applicable thereto. After Agent’s receipt of the proceeds of such Advances, upon
satisfaction of the applicable conditions precedent set forth in Section 3
hereof, Agent shall make the proceeds thereof available to Administrative
Borrower on the applicable Funding Date by transferring immediately available
funds equal to such proceeds received by Agent to Administrative Borrower’s
Designated Account; provided, however, that, subject to the provisions of
Section 2.3(i), Agent shall not request any Lender to make, and no Lender shall
have the obligation to make, any Advance if Agent shall have actual knowledge
that (1) one or more of the applicable conditions precedent set forth in
Section 3 will not be satisfied on the requested Funding Date for the applicable
Borrowing unless such condition has been waived, or (2) the requested Borrowing
would exceed the Availability on such Funding Date.

(ii) Unless Agent receives notice from a Lender on or prior to the Closing Date
or, with respect to any Borrowing after the Closing Date, at least 1 Business
Day prior to the date of such Borrowing, that such Lender will not make
available as and when required hereunder to Agent for the account of Borrowers
the amount of that Lender’s Pro Rata Share of the Borrowing, Agent may assume
that each Lender has made or will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may (but shall not be
so required), in reliance upon such assumption, make available to Borrowers on
such date a corresponding amount. If and to the extent any Lender shall not have
made its full amount available to Agent in immediately available funds and Agent
in such circumstances has made available to Borrowers such amount, that Lender
shall on the Business Day following such Funding Date make such amount

 

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available to Agent, together with interest at the Defaulting Lender Rate for
each day during such period. A notice submitted by Agent to any Lender with
respect to amounts owing under this subsection shall be conclusive, absent
manifest error. If such amount is so made available, such payment to Agent shall
constitute such Lender’s Advance on the date of Borrowing for all purposes of
this Agreement. If such amount is not made available to Agent on the Business
Day following the Funding Date, Agent will notify Administrative Borrower of
such failure to fund and, upon demand by Agent, Borrowers shall pay such amount
to Agent for Agent’s account, together with interest thereon for each day
elapsed since the date of such Borrowing, at a rate per annum equal to the
interest rate applicable at the time to the Advances composing such Borrowing.
The failure of any Lender to make any Advance on any Funding Date shall not
relieve any other Lender of any obligation hereunder to make an Advance on such
Funding Date, but no Lender shall be responsible for the failure of any other
Lender to make the Advance to be made by such other Lender on any Funding Date.

(iii) Agent shall not be obligated to transfer to a Defaulting Lender any
payments made by Borrowers to Agent for the Defaulting Lender’s benefit, and, in
the absence of such transfer to the Defaulting Lender, Agent shall transfer any
such payments to each other non-Defaulting Lender member of the Lender Group
ratably in accordance with their Commitments (but only to the extent that such
Defaulting Lender’s Advance was funded by the other members of the Lender Group)
or, if so directed by Administrative Borrower and if no Default or Event of
Default had occurred and is continuing (and to the extent such Defaulting
Lender’s Advance was not funded by the Lender Group), retain same to be
re-advanced to Borrowers as if such Defaulting Lender had made Advances to
Borrowers. Subject to the foregoing, Agent may hold and, in its Permitted
Discretion, re-lend to Borrowers for the account of such Defaulting Lender the
amount of all such payments received and retained by Agent for the account of
such Defaulting Lender. Solely for the purposes of voting or consenting to
matters with respect to the Loan Documents, such Defaulting Lender shall be
deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be
zero. This Section shall remain effective with respect to such Lender until
(x) the Obligations under this Agreement shall have been declared or shall have
become immediately due and payable, (y) the non-Defaulting Lenders, Agent, and
Administrative Borrower shall have waived such Defaulting Lender’s default in
writing, or (z) the Defaulting Lender makes its Pro Rata Share of the applicable
Advance and pays to Agent all amounts owing by Defaulting Lender in respect
thereof. The operation of this Section shall not be construed to increase or
otherwise affect the Commitment of any Lender, to relieve or excuse the
performance by such Defaulting Lender or any other Lender of its duties and
obligations hereunder, or to relieve or excuse the performance by Borrowers of
their duties and obligations hereunder to Agent or to the Lenders other than
such Defaulting Lender. Any such failure to fund by any Defaulting Lender shall
constitute a material breach by such Defaulting Lender of this Agreement and
shall entitle Administrative Borrower at its option, upon written notice to
Agent, to arrange for a substitute Lender to assume the Commitment of such
Defaulting

 

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Lender, such substitute Lender to be acceptable to Agent. In connection with the
arrangement of such a substitute Lender, the Defaulting Lender shall have no
right to refuse to be replaced hereunder, and agrees to execute and deliver a
completed form of Assignment and Acceptance Agreement in favor of the substitute
Lender (and agrees that it shall be deemed to have executed and delivered such
document if it fails to do so) subject only to being repaid its share of the
outstanding Obligations (including an assumption of its Pro Rata Share of the
Risk Participation Liability) without any premium or penalty of any kind
whatsoever; provided further, however, that any such assumption of the
Commitment of such Defaulting Lender shall not be deemed to constitute a waiver
of any of the Lender Groups’ or Borrowers’ rights or remedies against any such
Defaulting Lender arising out of or in relation to such failure to fund.

(d) Making of Swing Loans.

(i) In the event Agent shall elect, with the consent of Swing Lender, as a
Lender, to have the terms of this Section 2.3(d) apply to a requested Borrowing
as described in Section 2.3(b), Swing Lender as a Lender shall make such Advance
in the amount of such Borrowing (any such Advance made solely by Swing Lender as
a Lender pursuant to this Section 2.3(d) being referred to as a “Swing Loan” and
such Advances being referred to collectively as “Swing Loans”) available to
Borrowers on the Funding Date applicable thereto by transferring immediately
available funds to Administrative Borrower’s Designated Account. Each Swing Loan
is an Advance hereunder and shall be subject to all the terms and conditions
applicable to other Advances, except that no such Swing Loan shall be eligible
for the LIBOR Option and payments on any Swing Loan shall be payable to Swing
Lender as a Lender solely for its own account (and for the account of the holder
of any participation interest with respect to such Swing Loan). Subject to the
provisions of Section 2.3(i), Agent shall not request Swing Lender as a Lender
to make, and Swing Lender as a Lender shall not make, any Swing Loan if Agent
has actual knowledge that (i) one or more of the applicable conditions precedent
set forth in Section 3 will not be satisfied on the requested Funding Date for
the applicable Borrowing unless such condition has been waived, or (ii) the
requested Borrowing would exceed the Availability on such Funding Date. Swing
Lender as a Lender shall not otherwise be required to determine whether the
applicable conditions precedent set forth in Section 3 have been satisfied on
the Funding Date applicable thereto prior to making, in its sole discretion, any
Swing Loan.

(ii) The Swing Loans shall be secured by the Agent’s Liens, shall constitute
Advances and Obligations hereunder, and shall bear interest at the rate
applicable from time to time to Advances that are Base Rate Loans.

(e) Agent Advances.

(i) Agent hereby is authorized by Borrowers and the Lenders, from time to time
in Agent’s sole discretion, (1) after the occurrence and during the

 

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continuance of a Default or an Event of Default, or (2) at any time that any of
the other applicable conditions precedent set forth in Section 3 have not been
satisfied, to make Advances to Borrowers on behalf of the Lenders that Agent, in
its Permitted Discretion deems necessary or desirable (A) to preserve or protect
the Collateral, or any portion thereof, (B) to enhance the likelihood of
repayment of the Obligations, or (C) to pay any other amount chargeable to
Borrowers pursuant to the terms of this Agreement, including Lender Group
Expenses and the costs, fees, and expenses described in Section 10 (any of the
Advances described in this Section 2.3(e) shall be referred to as “Agent
Advances”). Each Agent Advance is an Advance hereunder and shall be subject to
all the terms and conditions applicable to other Advances, except that no such
Agent Advance shall be eligible for the LIBOR Option and all payments thereon
shall be payable to Agent solely for its own account (and for the account of the
holder of any participation interest with respect to such Agent Advance).

(ii) The Agent Advances shall be repayable on demand and secured by the Agent’s
Liens granted to Agent under the Loan Documents, shall constitute Advances and
Obligations hereunder, and shall bear interest at the rate applicable from time
to time to Advances that are Base Rate Loans.

(f) Settlement. It is agreed that each Lender’s funded portion of the Advances
is intended by the Lenders to equal, at all times, such Lender’s Pro Rata Share
of the outstanding Advances. Such agreement notwithstanding, Agent, Swing
Lender, and the other Lenders agree (which agreement shall not be for the
benefit of or enforceable by Borrowers) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Advances, the Swing Loans, and the Agent Advances shall take
place on a periodic basis in accordance with the following provisions:

(i) Agent shall request settlement (“Settlement”) with the Lenders on a weekly
basis, or on a more frequent basis if so determined by Agent, (1) on behalf of
Swing Lender, with respect to each outstanding Swing Loan, (2) for itself, with
respect to each Agent Advance, and (3) with respect to Collections of any
Borrower received, as to each by notifying the Lenders by telecopy, telephone,
or other similar form of transmission, of such requested Settlement, no later
than 5:00 p.m. (Georgia time) on the Business Day immediately prior to the date
of such requested Settlement (the date of such requested Settlement being the
“Settlement Date”). Such notice of a Settlement Date shall include a summary
statement of the amount of outstanding Advances, Swing Loans, and Agent Advances
for the period since the prior Settlement Date. Subject to the terms and
conditions contained herein (including Section 2.3(c)(iii)): (y) if a Lender’s
balance of the Advances, Swing Loans, and Agent Advances exceeds such Lender’s
Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a
Settlement Date, then Agent shall, by no later than 3:00 p.m. (Georgia time) on
the Settlement Date, transfer in immediately available funds to the account of
such Lender as such Lender may designate, an amount such that each such Lender
shall, upon receipt of such amount, have as of the Settlement Date, its Pro Rata
Share of the Advances, Swing Loans, and Agent Advances, and (z) if a Lender’s

 

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balance of the Advances, Swing Loans, and Agent Advances is less than such
Lender’s Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a
Settlement Date, such Lender shall no later than 3:00 p.m. (Georgia time) on the
Settlement Date transfer in immediately available funds to the Agent’s Account,
an amount such that each such Lender shall, upon transfer of such amount, have
as of the Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and
Agent Advances. Such amounts made available to Agent under clause (z) of the
immediately preceding sentence shall be applied against the amounts of the
applicable Swing Loan or Agent Advance and, together with the portion of such
Swing Loan or Agent Advance representing Swing Lender’s Pro Rata Share thereof,
shall constitute Advances of such Lenders. If any such amount is not made
available to Agent by any Lender on the Settlement Date applicable thereto to
the extent required by the terms hereof, Agent shall be entitled to recover for
its account such amount on demand from such Lender together with interest
thereon at the Defaulting Lender Rate.

(ii) In determining whether a Lender’s balance of the Advances, Swing Loans, and
Agent Advances is less than, equal to, or greater than such Lender’s Pro Rata
Share of the Advances, Swing Loans, and Agent Advances as of a Settlement Date,
Agent shall, as part of the relevant Settlement, apply to such balance the
portion of payments actually received in good funds by Agent with respect to
principal, interest, fees payable by Borrowers and allocable to the Lenders
hereunder, and proceeds of Collateral. To the extent that a net amount is owed
to any such Lender after such application, such net amount shall be distributed
by Agent to that Lender as part of such next Settlement.

(iii) Between Settlement Dates, Agent, to the extent no Agent Advances or Swing
Loans are outstanding, may pay over to Swing Lender any payments received by
Agent, that in accordance with the terms of this Agreement would be applied to
the reduction of the Advances, for application to Swing Lender’s Pro Rata Share
of the Advances. If, as of any Settlement Date, Collections of any Borrower
received since the then immediately preceding Settlement Date have been applied
to Swing Lender’s Pro Rata Share of the Advances other than to Swing Loans, as
provided for in the previous sentence, Swing Lender shall pay to Agent for the
accounts of the Lenders, and Agent shall pay to the Lenders, to be applied to
the outstanding Advances of such Lenders, an amount such that each Lender shall,
upon receipt of such amount, have, as of such Settlement Date, its Pro Rata
Share of the Advances. During the period between Settlement Dates, Swing Lender
with respect to Swing Loans, Agent with respect to Agent Advances, and each
Lender (subject to the effect of letter agreements between Agent and individual
Lenders) with respect to the Advances other than Swing Loans and Agent Advances,
shall be entitled to interest at the applicable rate or rates payable under this
Agreement on the daily amount of funds employed by Swing Lender, Agent, or the
Lenders, as applicable.

(g) Notation. Agent shall record on its books the principal amount of the
Advances owing to each Lender, including the Swing Loans owing to Swing Lender,
and Agent

 

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Advances owing to Agent, and the interests therein of each Lender, from time to
time. In addition, each Lender is authorized, at such Lender’s option, to note
the date and amount of each payment or prepayment of principal of such Lender’s
Advances in its books and records, including computer records, such books and
records constituting conclusive evidence, absent manifest error, of the accuracy
of the information contained therein.

(h) Lenders’ Failure to Perform. All Advances (other than Swing Loans and Agent
Advances) shall be made by the Lenders contemporaneously and in accordance with
their Pro Rata Shares. It is understood that (i) no Lender shall be responsible
for any failure by any other Lender to perform its obligation to make any
Advances (or other extension of credit) hereunder, nor shall any Commitment of
any Lender be increased or decreased as a result of any failure by any other
Lender to perform its obligations hereunder, and (ii) no failure by any Lender
to perform its obligations hereunder shall excuse any other Lender from its
obligations hereunder.

(i) Optional Overadvances.

(i) Any contrary provision of this Agreement notwithstanding, the Lenders hereby
authorize Agent or Swing Lender, as applicable, and Agent or Swing Lender, as
applicable, may, but is not obligated to, knowingly and intentionally, continue
to make Advances (including Swing Loans) to Borrowers notwithstanding that an
Overadvance exists or thereby would be created, so long as (x) after giving
effect to such Advances (including a Swing Loan), the Revolver Usage does not
exceed the Borrowing Base by more than $500,000, (y) after giving effect to such
Advances (including a Swing Loan) the outstanding Revolver Usage (except for and
excluding amounts charged to the Loan Account for interest, fees, or Lender
Group Expenses) does not exceed the Maximum Revolver Amount, and (z) at the time
of the making of any such Advance (including a Swing Loan), Agent does not
believe, in good faith, that the Overadvance created by such Advance will be
outstanding for more than 90 days. The foregoing provisions are for the
exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended
to benefit Borrowers in any way. The Advances and Swing Loans, as applicable,
that are made pursuant to this Section 2.3(i) shall be subject to the same terms
and conditions as any other Advance or Swing Loan, as applicable, except that
they shall not be eligible for the LIBOR Option and the rate of interest
applicable thereto shall be the rate applicable to Advances that are Base Rate
Loans under Section 2.6(c) hereof without regard to the presence or absence of a
Default or Event of Default.

(ii) In the event Agent obtains actual knowledge that the Revolver Usage exceeds
the amounts permitted by the preceding paragraph, regardless of the amount of,
or reason for, such excess, Agent shall notify Lenders as soon as practicable
(and prior to making any (or any additional) intentional Overadvances (except
for and excluding amounts charged to the Loan Account for interest, fees, or
Lender Group Expenses) unless Agent determines that prior notice would result in
imminent harm to the Collateral or its value), and the Lenders with Commitments
thereupon shall, together with Agent, jointly determine the terms of

 

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arrangements that shall be implemented with Borrowers and intended to reduce,
within a reasonable time, the outstanding principal amount of the Advances to
Borrowers to an amount permitted by the preceding paragraph. In the event Agent
or any Lender disagrees over the terms of reduction or repayment of any
Overadvance, the terms of reduction or repayment thereof shall be implemented
according to the determination of the Required Lenders.

(iii) Each Lender with a Commitment shall be obligated to settle with Agent as
provided in Section 2.3(f) for the amount of such Lender’s Pro Rata Share of any
unintentional Overadvances by Agent reported to such Lender, any intentional
Overadvances made as permitted under this Section 2.3(i), and any Overadvances
resulting from the charging to the Loan Account of interest, fees, or Lender
Group Expenses.

2.4 Payments.

(a) Payments by Borrowers.

(i) Except as otherwise expressly provided herein, all payments by Borrowers
shall be made to Agent’s Account for the account of the Lender Group and shall
be made in immediately available funds, no later than 2:00 p.m. (Georgia time)
on the date specified herein. Any payment received by Agent later than 2:00 p.m.
(Georgia time), shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue until such
following Business Day.

(ii) Unless Agent receives notice from Administrative Borrower prior to the date
on which any payment is due to the Lenders that Borrowers will not make such
payment in full as and when required, Agent may assume that Borrowers have made
(or will make) such payment in full to Agent on such date in immediately
available funds and Agent may (but shall not be so required), in reliance upon
such assumption, distribute to each applicable Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent Borrowers do not
make such payment in full to Agent on the date when due, each applicable Lender
severally shall repay to Agent on demand such amount distributed to such Lender,
together with interest thereon at the Defaulting Lender Rate for each day from
the date such amount is distributed to such Lender until the date repaid.

(b) Apportionment and Application.

(i) Except as otherwise provided with respect to Defaulting Lenders and except
as otherwise provided in the Loan Documents (including letter agreements between
Agent and individual Lenders), aggregate principal and interest payments shall
be apportioned ratably among the Lenders (according to the unpaid principal
balance of the Obligations to which such payments relate held by each Lender)
and payments of fees and expenses (other than fees or

 

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expenses that are for Agent’s separate account, after giving effect to any
letter agreements between Agent and individual Lenders) shall be apportioned
ratably among the Lenders having a Pro Rata Share of the type of Commitment or
Obligation to which a particular fee relates. All payments shall be remitted to
Agent and all such payments (other than payments received while no Default or
Event of Default has occurred and is continuing and which relate to the payment
of principal or interest of specific Obligations or which relate to the payment
of specific fees), and all proceeds of Accounts or other Collateral received by
Agent, shall be applied as follows:

A. first, to pay any Lender Group Expenses then due to Agent under the Loan
Documents, until paid in full,

B. second, to pay any Lender Group Expenses then due to the Lenders under the
Loan Documents, on a ratable basis, until paid in full,

C. third, to pay any fees then due to Agent (for its separate accounts, after
giving effect to any letter agreements between Agent and the individual Lenders)
under the Loan Documents until paid in full,

D. fourth, to pay any fees then due to any or all of the Lenders (after giving
effect to any letter agreements between Agent and individual Lenders) under the
Loan Documents, on a ratable basis, until paid in full,

E. fifth, to pay interest due in respect of all Agent Advances, until paid in
full,

F. sixth, ratably to pay interest due in respect of the Advances (other than
Agent Advances) and the Swing Loans until paid in full,

G. seventh, to pay the principal of all Agent Advances until paid in full,

H. eighth, to pay the principal of all Swing Loans until paid in full,

I. ninth, to pay the principal of all Advances until paid in full,

J. tenth, if an Event of Default has occurred and is continuing, to Agent, to be
held by Agent, for the ratable benefit of Issuing Lender and those Lenders
having a Commitment, as cash collateral in an amount up to 105% of the then
extant Letter of Credit Usage until paid in full,

K. eleventh, if an Event of Default has occurred and is continuing, to pay any
other Obligations, and

L. twelfth, to Borrowers (to be wired to the Designated Account) or such other
Person entitled thereto under applicable law.

 

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(ii) Agent promptly shall distribute to each Lender, pursuant to the applicable
wire instructions received from each Lender in writing, such funds as it may be
entitled to receive, subject to a Settlement delay as provided in
Section 2.3(h).

(iii) In each instance, so long as no Default or Event of Default has occurred
and is continuing, Section 2.4(b) shall not be deemed to apply to any payment by
Borrowers specified by Borrowers to be for the payment of specific Obligations
then due and payable (or prepayable) under any provision of this Agreement.

(iv) For purposes of the foregoing, “paid in full” means payment of all amounts
owing under the Loan Documents according to the terms thereof, including loan
fees, service fees, professional fees, interest (and specifically including
interest accrued after the commencement of any Insolvency Proceeding), default
interest, interest on interest, and expense reimbursements, whether or not the
same would be or is allowed or disallowed in whole or in part in any Insolvency
Proceeding.

(v) In the event of a direct conflict between the priority provisions of this
Section 2.4 and other provisions contained in any other Loan Document, it is the
intention of the parties hereto that such priority provisions in such documents
shall be read together and construed, to the fullest extent possible, to be in
concert with each other. In the event of any actual, irreconcilable conflict
that cannot be resolved as aforesaid, the terms and provisions of this
Section 2.4 shall control and govern.

2.5 Overadvances. If, at any time or for any reason, the amount of Obligations
owed by Borrowers to the Lender Group pursuant to Sections 2.1 and 2.12 is
greater than either the Dollar or percentage limitations set forth in Sections
2.1 or 2.12, (an “Overadvance”), Borrowers immediately shall pay to Agent, in
cash, the amount of such excess, which amount shall be used by Agent to reduce
the Obligations in accordance with the priorities set forth in Section 2.4(b).
In addition, Borrowers hereby promise to pay the Obligations (including
principal, interest, fees, costs, and expenses) in Dollars in full to the Lender
Group as and when due and payable under the terms of this Agreement and the
other Loan Documents.

2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations.

(a) Interest Rates. Except as provided in clause (c) below, all Obligations
(except for undrawn Letters of Credit) that have been charged to the Loan
Account pursuant to the terms hereof shall bear interest on the Daily Balance
thereof as follows (i) if the relevant Obligation is an Advance that is a LIBOR
Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR Rate
Margin, and (ii) otherwise, at a per annum rate equal to the Base Rate plus the
Base Rate Margin.

 

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(b) Letter of Credit Fee. Borrowers shall pay Agent (for the ratable benefit of
the Lenders with a Commitment, subject to any letter agreement between Agent and
individual Lenders), a Letter of Credit fee (in addition to the charges,
commissions, fees, and costs set forth in Section 2.12(e)) which shall accrue at
a rate equal to 2.00% per annum times the Daily Balance of the undrawn amount of
all outstanding Letters of Credit.

(c) Default Rate. Upon the occurrence and during the continuation of an Event of
Default (and at the election of Agent or the Required Lenders),

(i) all Obligations (except for undrawn Letters of Credit ) that have been
charged to the Loan Account pursuant to the terms hereof shall bear interest on
the Daily Balance thereof at a per annum rate equal to 2 percentage points above
the per annum rate otherwise applicable hereunder, and

(ii) the Letter of Credit fee provided for above shall be increased to 2
percentage points above the per annum rate otherwise applicable hereunder.

(d) Payment. Interest, Letter of Credit fees, and all other fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
at any time that Obligations or Commitments are outstanding. Borrowers hereby
authorize Agent, from time to time, without prior notice to Borrowers, to charge
such interest and fees, all Lender Group Expenses (as and when incurred), the
charges, commissions, fees, and costs provided for in Section 2.12(e) (as and
when accrued or incurred), the fees and costs provided for in Section 2.11 (as
and when accrued or incurred), and all other payments as and when due and
payable under any Loan Document to Borrowers’ Loan Account, which amounts
thereafter constitute Advances hereunder and shall accrue interest at the rate
then applicable to Advances hereunder. Any interest not paid when due shall be
compounded by being charged to Borrowers’ Loan Account and shall thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances that are Base Rate Loans hereunder.

(e) Computation. All interest and fees chargeable under the Loan Documents shall
be computed on the basis of a 360 day year for the actual number of days
elapsed. In the event the Base Rate is changed from time to time hereafter, the
rates of interest hereunder based upon the Base Rate automatically and
immediately shall be increased or decreased by an amount equal to such change in
the Base Rate.

(f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the
interest rate or rates payable under this Agreement, plus any other amounts paid
in connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. Borrowers and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto, as
of the date of this Agreement, Borrowers are and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrowers
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such excess.

 

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2.7 Cash Management.

(a) Borrowers shall (i) establish and maintain cash management services of a
type and on terms satisfactory to Agent at one or more of the banks set forth on
Schedule 2.7(a) (each a “Cash Management Bank”), and shall request in writing
and otherwise take such reasonable steps to ensure that all of its Account
Debtors forward payment of the amounts owed by them directly to such Cash
Management Bank, and (ii) deposit or cause to be deposited promptly, and in any
event no later than the first Business Day after the date of receipt thereof,
all Collections of any Borrower (including those sent directly by Account
Debtors to a Cash Management Bank) into a bank account in Agent’s name (a “Cash
Management Account”) at one of the Cash Management Banks.

(b) Each Cash Management Bank shall establish and maintain Cash Management
Agreements with Agent and Borrowers, in form and substance acceptable to Agent.
Each such Cash Management Agreement shall provide, among other things, that
(i) all items of payment deposited in such Cash Management Account and proceeds
thereof are held by such Cash Management Bank agent or bailee-in-possession for
Agent, (ii) the Cash Management Bank has no rights of setoff or recoupment or
any other claim against the applicable Cash Management Account, other than for
payment of its service fees and other charges directly related to the
administration of such Cash Management Account and for returned checks or other
items of payment, and (iii) it immediately will forward by daily sweep all
amounts in the applicable Cash Management Account to the Agent’s Account.

(c) So long as no Default or Event of Default has occurred and is continuing,
Administrative Borrower may amend Schedule 2.7(a) to add or replace a Cash
Management Account Bank or Cash Management Account; provided, however, that
(i) such prospective Cash Management Bank shall be satisfactory to Agent and
Agent shall have consented in writing in advance to the opening of such Cash
Management Account with the prospective Cash Management Bank, and (ii) prior to
the time of the opening of such Cash Management Account, Borrowers and such
prospective Cash Management Bank shall have executed and delivered to Agent a
Cash Management Agreement. Borrowers shall, within 60 days of notice from Agent
that the creditworthiness of any Cash Management Bank is no longer acceptable in
Agent’s reasonable judgment, or as promptly as practicable and in any event
within 60 days of notice from Agent that the operating performance, funds
transfer, or availability procedures or performance of the Cash Management Bank
with respect to Cash Management Accounts or Agent’s liability under any Cash
Management Agreement with such Cash Management Bank is no longer acceptable in
Agent’s reasonable judgment, (x) establish replacement Cash Management Accounts
in accordance with clauses (i) and (ii) above, and (y) direct all Account
Debtors to remit payments to the new Cash Management Accounts in writing, and
Borrowers shall close such unacceptable Cash Management Accounts as soon as
reasonably practicable thereafter.

(d) The Cash Management Accounts shall be cash collateral accounts, with all
cash, checks and similar items of payment in such accounts securing payment of
the Obligations, and in which Borrowers are hereby deemed to have granted a Lien
to Agent.

 

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2.8 Crediting Payments; Float Charge. The receipt of any payment item by Agent
(whether from transfers to Agent by the Cash Management Banks pursuant to the
Cash Management Agreements or otherwise) shall not be considered a payment on
account unless such payment item is a wire transfer of immediately available
federal funds made to the Agent’s Account or unless and until such payment item
is honored when presented for payment. Should any payment item not be honored
when presented for payment, then Borrowers shall be deemed not to have made such
payment and interest shall be calculated accordingly. Anything to the contrary
contained herein notwithstanding, any payment item shall be deemed received by
Agent only if it is received into the Agent’s Account on a Business Day on or
before 2:00 p.m. (Georgia time). If any payment item is received into the
Agent’s Account on a non-Business Day or after 2:00 p.m. (Georgia time) on a
Business Day, it shall be deemed to have been received by Agent as of the
opening of business on the immediately following Business Day. From and after
the Closing Date, Agent shall be entitled to charge Borrowers for one Business
Day of ‘clearance’ or ‘float’ at the rate applicable to Advances that are Base
Rate Loans under Section 2.6 on all Collections that are received by any
Borrower (regardless of whether forwarded by the Cash Management Banks to
Agent). This across-the-board one Business Day clearance or float charge on all
such Collections is acknowledged by the parties to constitute an integral aspect
of the pricing of the financing of Borrowers and shall apply irrespective of
whether or not there are any outstanding monetary Obligations; the effect of
such clearance or float charge being the equivalent of charging one Business Day
of interest on such Collections. The parties acknowledge and agree that the
economic benefit of the foregoing provisions of this Section 2.8 shall be for
the exclusive benefit of Agent.

2.9 Designated Account. Agent is authorized to make the Advances and Issuing
Lender is authorized to issue the Letters of Credit, under this Agreement based
upon telephonic or other instructions received from anyone purporting to be an
Authorized Person, or without instructions if pursuant to Section 2.6(d).
Administrative Borrower agrees to establish and maintain the Designated Account
with the Designated Account Bank for the purpose of receiving the proceeds of
the Advances requested by Borrowers and made by Agent or the Lenders hereunder.
Unless otherwise agreed by Agent and Administrative Borrower, any Advance, Agent
Advance, or Swing Loan requested by Borrowers and made by Agent or the Lenders
hereunder shall be made to the Designated Account.

2.10 Maintenance of Loan Account; Statements of Obligations. Agent shall
maintain an account on its books in the name of Borrowers (the “Loan Account”)
on which Borrowers will be charged with all Advances (including Agent Advances
and Swing Loans) made by Agent, Swing Lender, or the Lenders to Borrowers or for
Borrowers’ account, the Letters of Credit issued by Issuing Lender for
Borrowers’ account, and with all other payment Obligations hereunder or under
the other Loan Documents, including, accrued interest, fees and expenses, and
Lender Group Expenses. In accordance with Section 2.8, the Loan Account will be
credited with all payments received by Agent from Borrowers or for Borrowers’
account, including all amounts received in the Agent’s Account from any Cash
Management Bank. Agent shall render statements regarding the Loan Account to
Administrative Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Lender Group Expenses
owing, and such statements shall be conclusively presumed to be correct and
accurate and constitute an account stated

 

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between Borrowers and the Lender Group unless, within 30 days after receipt
thereof by Administrative Borrower, Administrative Borrower shall deliver to
Agent written objection thereto describing the error or errors contained in any
such statements.

2.11 Fees. Borrowers shall pay to Agent the following fees and charges, which
fees and charges shall be non-refundable when paid (irrespective of whether this
Agreement is terminated thereafter) and shall be apportioned among the Lenders
in accordance with the terms of letter agreements between Agent and individual
Lenders:

(a) Unused Line Fee. On the first day of each month during the term of this
Agreement, an unused line fee in the amount equal to 0.375% per annum times the
result of (a) the Maximum Revolver Amount, less (b) the sum of (i) the average
Daily Balance of Advances that were outstanding during the immediately preceding
month, plus (ii) the average Daily Balance of the Letter of Credit Usage during
the immediately preceding month,

(b) Fee Letter Fees. As and when due and payable under the terms of the Fee
Letter, Borrowers shall pay to Agent the fees set forth in the Fee Letter, and

(c) Audit, Appraisal, and Valuation Charges. For the separate account of Agent,
audit, appraisal, and valuation fees and charges as follows, (i) a fee of $850
per day, per auditor, plus reasonable out-of-pocket expenses for each financial
audit of a Borrower performed by personnel employed by Agent, (ii) reasonable
out-of-pocket expenses for each appraisal of the Collateral performed by
personnel employed by Agent, and (iii) the actual charges paid or incurred by
Agent if it elects to employ the services of one or more third Persons to
perform financial audits of Borrowers, to appraise the Collateral, or any
portion thereof, or to assess a Borrower’s business valuation.

2.12 Letters of Credit

(a) Subject to the terms and conditions of this Agreement, the Issuing Lender
agrees to issue letters of credit for the account of Borrowers (each, an “L/C”)
or to purchase participations or execute indemnities or reimbursement
obligations (each such undertaking, an “L/C Undertaking”) with respect to
letters of credit issued by an Underlying Issuer (as of the Closing Date, the
prospective Underlying Issuer is to be Wells Fargo) for the account of
Borrowers. To request the issuance of an L/C or an L/C Undertaking (or the
amendment, renewal, or extension of an outstanding L/C or L/C Undertaking),
Administrative Borrower shall hand deliver or telecopy (or transmit by
electronic communication, if arrangements for doing so have been approved by the
Issuing Lender) to the Issuing Lender and Agent (reasonably in advance of the
requested date of issuance, amendment, renewal, or extension) a notice
requesting the issuance of an L/C or L/C Undertaking, or identifying the L/C or
L/C Undertaking to be amended, renewed, or extended, the date of issuance,
amendment, renewal, or extension, the date on which such L/C or L/C Undertaking
is to expire, the amount of such L/C or L/C Undertaking, the name and address of
the beneficiary thereof (or of the Underlying Letter of Credit, as applicable),
and such other information as shall be necessary to prepare, amend, renew, or
extend such L/C or L/C Undertaking. If requested by the Issuing Lender,
Borrowers also shall be an applicant under the application with respect to any
Underlying Letter of Credit that is to be the subject of an L/C Undertaking. The
Issuing Lender shall have no obligation to issue a Letter of Credit if any of
the following would result after giving effect to the requested Letter of
Credit:

(i) the Letter of Credit Usage would exceed the Borrowing Base less the amount
of outstanding Advances, or

 

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(ii) the Letter of Credit Usage would exceed $15,000,000, or

(iii) the Letter of Credit Usage would exceed the Maximum Revolver Amount less
the then extant amount of outstanding Advances.

Borrowers and the Lender Group acknowledge and agree that certain Underlying
Letters of Credit may be issued to support letters of credit that already are
outstanding as of the Closing Date. Each Letter of Credit (and corresponding
Underlying Letter of Credit) shall have an expiry date no later than 30 days
prior to the Maturity Date and all such Letters of Credit (and corresponding
Underlying Letter of Credit) shall be in form and substance acceptable to the
Issuing Lender (in the exercise of its Permitted Discretion), including the
requirement that the amounts payable thereunder must be payable in Dollars. If
Issuing Lender is obligated to advance funds under a Letter of Credit, Borrowers
immediately shall reimburse such L/C Disbursement to Issuing Lender by paying to
Agent an amount equal to such L/C Disbursement not later than 2:00 p.m., Georgia
time, on the date that such L/C Disbursement is made, if Administrative Borrower
shall have received written or telephonic notice of such L/C Disbursement prior
to 1:00 p.m., Georgia time, on such date, or, if such notice has not been
received by Administrative Borrower prior to such time on such date, then not
later than 2:00 p.m., Georgia time, on (i) the Business Day that Administrative
Borrower receives such notice, if such notice is received prior to 1:00 p.m.,
Georgia time, on the date of receipt, and, in the absence of such reimbursement,
the L/C Disbursement immediately and automatically shall be deemed to be an
Advance hereunder and, thereafter, shall bear interest at the rate then
applicable to Advances that are Base Rate Loans under Section 2.6. To the extent
an L/C Disbursement is deemed to be an Advance hereunder, Borrowers’ obligation
to reimburse such L/C Disbursement shall be discharged and replaced by the
resulting Advance. Promptly following receipt by Agent of any payment from
Borrowers pursuant to this paragraph, Agent shall distribute such payment to the
Issuing Lender or, to the extent that Lenders have made payments pursuant to
Section 2.12(c) to reimburse the Issuing Lender, then to such Lenders and the
Issuing Lender as their interest may appear.

(b) Promptly following receipt of a notice of L/C Disbursement pursuant to
Section 2.12(a), each Lender with a Commitment agrees to fund its Pro Rata Share
of any Advance deemed made pursuant to the foregoing subsection on the same
terms and conditions as if Borrowers had requested such Advance and Agent shall
promptly pay to Issuing Lender the amounts so received by it from the Lenders.
By the issuance of a Letter of Credit (or an amendment to a Letter of Credit
increasing the amount thereof) and without any further action on the part of the
Issuing Lender or the Lenders with Commitments, the Issuing Lender shall be
deemed to have granted to each Lender with a Commitment, and each Lender with a
Commitment shall be deemed to have purchased, a participation in each Letter of
Credit, in an amount equal to its Pro Rata Share of the Risk Participation
Liability of such Letter of Credit, and each such Lender agrees to pay to Agent,
for the account of the Issuing Lender, such

 

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Lender’s Pro Rata Share of any payments made by the Issuing Lender under such
Letter of Credit. In consideration and in furtherance of the foregoing, each
Lender with a Commitment hereby absolutely and unconditionally agrees to pay to
Agent, for the account of the Issuing Lender, such Lender’s Pro Rata Share of
each L/C Disbursement made by the Issuing Lender and not reimbursed by Borrowers
on the date due as provided in clause (a) of this Section, or of any
reimbursement payment required to be refunded to Borrowers for any reason. Each
Lender with a Commitment acknowledges and agrees that its obligation to deliver
to Agent, for the account of the Issuing Lender, an amount equal to its
respective Pro Rata Share pursuant to this Section 2.12(b) shall be absolute and
unconditional and such remittance shall be made notwithstanding the occurrence
or continuation of an Event of Default or Default or the failure to satisfy any
condition set forth in Section 3 hereof. If any such Lender fails to make
available to Agent the amount of such Lender’s Pro Rata Share of any payments
made by the Issuing Lender in respect of such Letter of Credit as provided in
this Section, Agent (for the account of the Issuing Lender) shall be entitled to
recover such amount on demand from such Lender together with interest thereon at
the Defaulting Lender Rate until paid in full.

(c) Each Borrower hereby agrees to indemnify, save, defend, and hold the Lender
Group harmless from any loss, cost, expense, or liability, and reasonable
attorneys fees incurred by the Lender Group arising out of or in connection with
any Letter of Credit; provided, however, that no Borrower shall be obligated
hereunder to indemnify for any loss, cost, expense, or liability that is caused
by the gross negligence or willful misconduct of the Issuing Lender or any other
member of the Lender Group. Each Borrower agrees to be bound by the Underlying
Issuer’s regulations and interpretations of any Underlying Letter of Credit or
by Issuing Lender’s interpretations of any L/C issued by Issuing Lender to or
for such Borrower’s account, even though this interpretation may be different
from such Borrower’s own, and each Borrower understands and agrees that the
Lender Group shall not be liable for any error, negligence, or mistake, whether
of omission or commission, in following Borrowers’ instructions or those
contained in the Letter of Credit or any modifications, amendments, or
supplements thereto. Each Borrower understands that the L/C Undertakings may
require Issuing Lender to indemnify the Underlying Issuer for certain costs or
liabilities arising out of claims by Borrowers against such Underlying Issuer.
Each Borrower hereby agrees to indemnify, save, defend, and hold the Lender
Group harmless with respect to any loss, cost, expense (including reasonable
attorneys fees), or liability incurred by the Lender Group under any L/C
Undertaking as a result of the Lender Group’s indemnification of any Underlying
Issuer; provided, however, that no Borrower shall be obligated hereunder to
indemnify for any loss, cost, expense, or liability that is caused by the gross
negligence or willful misconduct of the Issuing Lender or any other member of
the Lender Group.

(d) Each Borrower hereby authorizes and directs any Underlying Issuer to deliver
to the Issuing Lender all instruments, documents, and other writings and
property received by such Underlying Issuer pursuant to such Underlying Letter
of Credit and to accept and rely upon the Issuing Lender’s instructions with
respect to all matters arising in connection with such Underlying Letter of
Credit and the related application.

(e) Any and all charges, commissions, fees, and costs incurred by the Issuing
Lender relating to Underlying Letters of Credit shall be Lender Group Expenses
for purposes of this Agreement and immediately shall be reimbursable by
Borrowers to Agent for the account of

 

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the Issuing Lender; it being acknowledged and agreed by each Borrower that, as
of the Closing Date, the issuance charge imposed by the prospective Underlying
Issuer is .825% per annum times the face amount of each Underlying Letter of
Credit, that such issuance charge may be changed from time to time, and that the
Underlying Issuer also imposes a schedule of charges for amendments, extensions,
drawings, and renewals.

(f) If by reason of (i) any change after the date of this Agreement in any
applicable law, treaty, rule, or regulation or any change after the date of this
Agreement in the interpretation or application thereof by any Governmental
Authority, or (ii) compliance by the Underlying Issuer or the Lender Group with
any direction, request, or requirement (irrespective of whether having the force
of law) of any Governmental Authority or monetary authority including,
Regulation D of the Federal Reserve Board as from time to time in effect (and
any successor thereto):

(i) any reserve, deposit, or similar requirement is or shall be imposed or
modified in respect of any Letter of Credit issued hereunder, or

(ii) there shall be imposed on the Underlying Issuer or the Lender Group any
other condition regarding any Underlying Letter of Credit or any Letter of
Credit issued pursuant hereto;

and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter
of Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Administrative Borrower, and Borrowers shall pay on demand such amounts
as Agent may specify to be necessary to compensate the Lender Group for such
additional cost or reduced receipt, together with interest on such amount from
the date of such demand until payment in full thereof at the rate then
applicable to Base Rate Loans hereunder. The determination by Agent of any
amount due pursuant to this Section, as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the absence of manifest
or demonstrable error, be final and conclusive and binding on all of the parties
hereto.

(g) Each Borrower acknowledges and agrees that certain of the Qualified Import
Letters of Credit may provide for the presentation of time drafts to the
Underlying Issuer. If an Underlying Issuer accepts such a time draft that is
presented under an Underlying Letter of Credit, it is acknowledged and agreed
that (i) the Letter of Credit will require the Issuing Lender to reimburse the
Underlying Issuer for amounts paid on account of such time draft on or after the
maturity date thereof, (ii)the pricing provisions hereof (including Sections
2.6(b) and 2.12(e)) shall continue to apply, until payment of such time draft on
or after the maturity date thereof, as if the Underlying Letter of Credit were
still outstanding, and (iii) on the date on which Issuing Lender makes payment
to the Underlying Issuer of the amounts paid on account of such time draft, the
Borrowers immediately shall reimburse such amount to Issuing Lender and such
amount shall constitute an L/C Disbursement hereunder.

 

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2.13 LIBOR Option.

(a) Interest and Interest Payment Dates. In lieu of having interest charged at
the rate based upon the Base Rate, Borrowers shall have the option (the “LIBOR
Option”) to have interest on all or a portion of the Advances be charged at the
LIBOR Rate. Interest on LIBOR Rate Loans shall be payable on the earliest of
(i) the last day of the Interest Period applicable thereto, (ii) the occurrence
of an Event of Default in consequence of which the Required Lenders or Agent on
behalf thereof elect to accelerate the maturity of the Obligations, or
(iii) termination of this Agreement pursuant to the terms hereof. On the last
day of each applicable Interest Period, unless Administrative Borrower properly
has exercised the LIBOR Option with respect thereto, the interest rate
applicable to such LIBOR Rate Loan automatically shall convert to the rate of
interest then applicable to Base Rate Loans of the same type hereunder. At any
time that an Event of Default has occurred and is continuing, Borrowers no
longer shall have the option to request that Advances bear interest at the LIBOR
Rate and Agent shall have the right to convert the interest rate on all
outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans
hereunder.

(b) LIBOR Election.

(i) Administrative Borrower may, at any time and from time to time, so long as
no Event of Default has occurred and is continuing, elect to exercise the LIBOR
Option by notifying Agent prior to 2:00 p.m. (Georgia time) at least 3 Business
Days prior to the commencement of the proposed Interest Period (the “LIBOR
Deadline”). Notice of Administrative Borrower’s election of the LIBOR Option for
a permitted portion of the Advances and an Interest Period pursuant to this
Section shall be made by delivery to Agent of a LIBOR Notice received by Agent
before the LIBOR Deadline, or by telephonic notice received by Agent before the
LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice received
by Agent prior to 5:00 p.m. (Georgia time) on the same day. Promptly upon its
receipt of each such LIBOR Notice, Agent shall provide a copy thereof to each of
the Lenders having a Commitment.

(ii) Each LIBOR Notice shall be irrevocable and binding on Borrowers. In
connection with each LIBOR Rate Loan, each Borrower shall indemnify, defend, and
hold Agent and the Lenders harmless against any loss, cost, or expense incurred
by Agent or any Lender as a result of (a) the payment of any principal of any
LIBOR Rate Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (b) the conversion of
any LIBOR Rate Loan other than on the last day of the Interest Period applicable
thereto, or (c) the failure to borrow, convert, continue or prepay any LIBOR
Rate Loan on the date specified in any LIBOR Notice delivered pursuant hereto
(such losses, costs, and expenses, collectively, “Funding Losses”). Funding
Losses shall, with respect to Agent or any Lender, be deemed to equal the amount
determined by Agent or such Lender to be the excess, if any, of (i) the amount
of interest that would have accrued on the principal amount of such LIBOR Rate
Loan had such event not occurred, at the LIBOR Rate that would have been
applicable thereto, for the period from the date of such event to the last

 

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day of the then current Interest Period therefor (or, in the case of a failure
to borrow, convert or continue, for the period that would have been the Interest
Period therefor), minus (ii) the amount of interest that would accrue on such
principal amount for such period at the interest rate which Agent or such Lender
would be offered were it to be offered, at the commencement of such period,
Dollar deposits of a comparable amount and period in the London interbank
market. A certificate of Agent or a Lender delivered to Administrative Borrower
setting forth any amount or amounts that Agent or such Lender is entitled to
receive pursuant to this Section shall be conclusive absent manifest error.

(iii) Borrowers shall have not more than 5 LIBOR Rate Loans in effect at any
given time. Borrowers only may exercise the LIBOR Option for LIBOR Rate Loans of
at least $1,000,000 and integral multiples of $500,000 in excess thereof.

(c) Prepayments. Borrowers may prepay LIBOR Rate Loans at any time; provided,
however, that in the event that LIBOR Rate Loans are prepaid on any date that is
not the last day of the Interest Period applicable thereto, including as a
result of any automatic prepayment through the required application by Agent of
proceeds of Collections in accordance with Section 2.4(b) or for any other
reason, including early termination of the term of this Agreement or
acceleration of the Obligations pursuant to the terms hereof, each Borrower
shall indemnify, defend, and hold Agent and the Lenders and their Participants
harmless against any and all Funding Losses in accordance with clause (b) above.

(d) Special Provisions Applicable to LIBOR Rate.

(i) The LIBOR Rate may be adjusted by Agent with respect to any Lender on a
prospective basis to take into account any additional or increased costs to such
Lender of maintaining or obtaining any eurodollar deposits or increased costs
due to changes in applicable law occurring subsequent to the commencement of the
then applicable Interest Period, including changes in tax laws (except changes
of general applicability in corporate income tax laws) and changes in the
reserve requirements imposed by the Board of Governors of the Federal Reserve
System (or any successor), excluding the Reserve Percentage, which additional or
increased costs would increase the cost of funding loans bearing interest at the
LIBOR Rate. In any such event, the affected Lender shall give Administrative
Borrower and Agent notice of such a determination and adjustment and Agent
promptly shall transmit the notice to each other Lender and, upon its receipt of
the notice from the affected Lender, Administrative Borrower may, by notice to
such affected Lender (y) require such Lender to furnish to Administrative
Borrower a statement setting forth the basis for adjusting such LIBOR Rate and
the method for determining the amount of such adjustment, or (z) repay the LIBOR
Rate Loans with respect to which such adjustment is made (together with any
amounts due under clause (b)(ii) above).

(ii) In the event that any change in market conditions or any law, regulation,
treaty, or directive, or any change therein or in the interpretation of

 

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application thereof, shall at any time after the date hereof, in the reasonable
opinion of any Lender, make it unlawful or impractical for such Lender to fund
or maintain LIBOR Advances or to continue such funding or maintaining, or to
determine or charge interest rates at the LIBOR Rate, such Lender shall give
notice of such changed circumstances to Agent and Administrative Borrower and
Agent promptly shall transmit the notice to each other Lender and (y) in the
case of any LIBOR Rate Loans of such Lender that are outstanding, the date
specified in such Lender’s notice shall be deemed to be the last day of the
Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans
of such Lender thereafter shall accrue interest at the rate then applicable to
Base Rate Loans, and (z) Borrowers shall not be entitled to elect the LIBOR
Option until such Lender determines that it would no longer be unlawful or
impractical to do so.

(e) No Requirement of Matched Funding. Anything to the contrary contained herein
notwithstanding, neither Agent, nor any Lender, nor any of their Participants,
is required actually to acquire eurodollar deposits to fund or otherwise match
fund any Obligation as to which interest accrues at the LIBOR Rate. The
provisions of this Section shall apply as if each Lender or its Participants had
match funded any Obligation as to which interest is accruing at the LIBOR Rate
by acquiring eurodollar deposits for each Interest Period in the amount of the
LIBOR Rate Loans.

2.14 Capital Requirements. If, after the date hereof, any Lender determines that
(i) the adoption of or change in any law, rule, regulation or guideline
regarding capital requirements for banks or bank holding companies, or any
change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), has the effect of reducing the return on such Lender’s or
such holding company’s capital as a consequence of such Lender’s Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender’s or such holding company’s then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity’s capital) by any amount deemed by such Lender to be material, then such
Lender may notify Administrative Borrower and Agent thereof within 360 days
after such Lender obtains knowledge of such reduction. Following receipt of such
notice, Borrowers agree to pay such Lender on demand the amount of such
reduction of return of capital as and when such reduction is determined, payable
within 90 days after presentation by such Lender of a statement in the amount
and setting forth in reasonable detail such Lender’s calculation thereof and the
assumptions upon which such calculation was based (which statement shall be
deemed true and correct absent manifest error). In determining such amount, such
Lender may use any reasonable averaging and attribution methods.

2.15 Joint and Several Liability of Borrowers.

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

 

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(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 (including, without limitation, any
Obligations arising under this Section 2.15), it being the intention of the
parties hereto that all the Obligations shall be the joint and several
obligations of each Person composing 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 Persons composing Borrowers will make such payment with respect to, or
perform, such Obligation.

(d) The Obligations of each Person composing Borrowers under the provisions of
this Section 2.15 constitute the absolute and unconditional, full recourse
Obligations of each Person composing Borrowers enforceable against each such
Borrower to the full extent of its properties and assets, irrespective of the
validity, regularity or enforceability of this Agreement or any other
circumstances whatsoever.

(e) Except as otherwise expressly provided in this Agreement, each Person
composing Borrowers hereby waives notice of acceptance of its joint and several
liability, notice of any Advances or Letters of Credit issued under or pursuant
to this Agreement, notice of the occurrence of any Default, Event of Default, or
of any demand for any payment under this Agreement, notice of any action at any
time taken or omitted by Agent or Lenders under or in respect of any of the
Obligations, any requirement of diligence or to mitigate damages and, generally,
to the extent permitted by applicable law, all demands, notices and other
formalities of every kind in connection with this Agreement (except as otherwise
provided in this Agreement). Each Person composing Borrowers 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 payment of any of the
Obligations, the acceptance of any partial payment thereon, any waiver, consent
or other action or acquiescence by Agent or Lenders at any time or times in
respect of any default by any Person composing Borrowers in the performance or
satisfaction of any term, covenant, condition or provision of this Agreement,
any and all other indulgences whatsoever by Agent or Lenders 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
the addition, substitution or release, in whole or in part, of any Person
composing Borrowers. Without limiting the generality of the foregoing, each of
Borrowers assents to any other action or delay in acting or failure to act on
the part of any Agent or Lender with respect to the failure by any Person
composing Borrowers to comply with any of its respective Obligations, including,
without limitation, any failure strictly or diligently to assert any right or to
pursue any remedy or to comply fully with applicable laws or regulations
thereunder, which might, but for the provisions of this Section 2.15 afford
grounds for terminating, discharging or relieving any Person composing
Borrowers, in whole or in part, from any of its Obligations under this
Section 2.15, it being the intention of each Person composing Borrowers that, so
long as any of the Obligations hereunder remain unsatisfied, the Obligations of
such Person composing

 

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Borrowers under this Section 2.15 shall not be discharged except by performance
and then only to the extent of such performance. The Obligations of each Person
composing Borrowers under this Section 2.15 shall not be diminished or rendered
unenforceable by any winding up, reorganization, arrangement, liquidation,
reconstruction or similar proceeding with respect to any Person composing
Borrowers or any Agent or Lender. The joint and several liability of the Persons
composing Borrowers hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, constitution or place of formation of any of the Persons
composing Borrowers or any Agent or Lender.

(f) Each Person composing Borrowers represents and warrants to Agent and Lenders
that such Borrower is currently informed of the financial condition of Borrowers
and of all other circumstances which a diligent inquiry would reveal and which
bear upon the risk of nonpayment of the Obligations. Each Person composing
Borrowers further represents and warrants to Agent and Lenders that such
Borrower has read and understands the terms and conditions of the Loan
Documents. Each Person composing Borrowers hereby covenants that such Borrower
will continue to keep informed of Borrowers’ financial condition, the financial
condition of other guarantors, if any, and of all other circumstances which bear
upon the risk of nonpayment or nonperformance of the Obligations.

(g) Intentionally Omitted.

(h) Each of the Persons composing Borrowers waives all rights and defenses that
such Borrower may have because the Obligations are secured by Real Property.
This means, among other things:

(i) Agent and Lenders may collect from such Borrower without first foreclosing
on any Real or Personal Property Collateral pledged by Borrowers.

(ii) If Agent or any Lender forecloses on any Real Property Collateral pledged
by Borrowers:

A. The amount of the Obligations may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price.

B. Agent and Lenders may collect from such Borrower even if Agent or Lenders, by
foreclosing on the Real Property Collateral, has destroyed any right such
Borrower may have to collect from the other Borrowers.

This is an unconditional and irrevocable waiver of any rights and defenses such
Borrower may have because the Obligations are secured by Real Property.

(i) The provisions of this Section 2.15 are made for the benefit of the Agent,
the Lenders and their respective successors and assigns, and may be enforced by
it or them from time to time against any or all of the Persons composing
Borrowers as often as occasion therefor may arise and without requirement on the
part of any such Agent, Lender, successor or assign first to marshal any of its
or their claims or to exercise any of its or their rights against any of the

 

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other Persons composing Borrowers or to exhaust any remedies available to it or
them against any of the other Persons composing Borrowers or to resort to any
other source or means of obtaining payment of any of the Obligations hereunder
or to elect any other remedy. The provisions of this Section 2.15 shall remain
in effect until all of 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 Agent or Lender upon the insolvency, bankruptcy or
reorganization of any of the Persons composing Borrowers, or otherwise, the
provisions of this Section 2.15 will forthwith be reinstated in effect, as
though such payment had not been made.

(j) Each of the Persons composing Borrowers hereby agrees that it will not
enforce any of its rights of contribution or subrogation against the other
Persons composing Borrowers with respect to any liability incurred by it
hereunder or under any of the other Loan Documents, any payments made by it to
the Agent or the Lenders with respect to any of the Obligations or any
collateral security therefor until such time as all of the Obligations have been
paid in full in cash. Any claim which any Borrower may have against any other
Borrower with respect to any payments to any Agent or Lender hereunder or under
any other Loan Documents are hereby expressly made subordinate and junior in
right of payment, without limitation as to any increases in the Obligations
arising hereunder or thereunder, to the prior payment in full in cash of the
Obligations and, in the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar proceeding under the laws of any
jurisdiction relating to any Borrower, its debts or its assets, whether
voluntary or involuntary, all such Obligations shall be paid in full in cash
before any payment or distribution of any character, whether in cash, securities
or other property, shall be made to any other Borrower therefor.

(k) Each of the Persons composing Borrowers hereby agrees that, after the
occurrence and during the continuance of any Default or Event of Default, the
payment of any amounts due with respect to the indebtedness owing by any
Borrower to any other Borrower is hereby subordinated to the prior payment in
full in cash of the Obligations. Each Borrower hereby agrees that after the
occurrence and during the continuance of any Default or Event of Default, such
Borrower will not demand, sue for or otherwise attempt to collect any
indebtedness of any other Borrower owing to such Borrower until the Obligations
shall have been paid in full in cash. If, notwithstanding the foregoing
sentence, such Borrower shall collect, enforce or receive any amounts in respect
of such indebtedness, such amounts shall be collected, enforced and received by
such Borrower as trustee for the Agent, and the Agent shall deliver any such
amounts to the Administrative Agent for application to the Obligations in
accordance with Section 2.4(b).

3. CONDITIONS; TERM OF AGREEMENT.

3.1 Conditions Precedent to the Initial Extension of Credit. The obligation of
the Lender Group (or any member thereof) to make the initial Advance (or
otherwise to extend any credit provided for hereunder), is subject to the
fulfillment, to the satisfaction of Agent, of each of the conditions precedent
set forth below:

(a) the Closing Date shall occur on or before March 31, 2006;

 

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(b) Agent shall have received all financing statements required by Agent, duly
authorized by the applicable Borrowers;

(c) Agent shall have received each of the following documents, in form and
substance satisfactory to Agent, duly executed, and each such document shall be
in full force and effect:

(i) the Disbursement Letter,

(ii) the Fee Letter, and

(iii) the Reaffirmation Agreement.

(d) Agent shall have received a certificate from the Secretary of each Borrower
attesting to the resolutions of such Borrower’s Board of Directors authorizing
its execution, delivery, and performance of this Agreement and the other Loan
Documents to which such Borrower is a party and authorizing specific officers of
such Borrower to execute the same;

(e) Agent shall have received copies of each Borrower’s Governing Documents, as
amended, modified, or supplemented to the Closing Date, certified by the
Secretary of such Borrower;

(f) Agent shall have received a certificate of status with respect to each
Borrower, dated as of a recent date, such certificate to be issued by the
appropriate officer of the jurisdiction of organization of such Borrower, which
certificate shall indicate that such Borrower is in good standing in such
jurisdiction;

(g) Agent shall have received certificates of status with respect to each
Borrower, each dated as of a recent date, such certificates to be issued by the
appropriate officer of the jurisdictions (other than the jurisdiction of
organization of such Borrower) in which its failure to be duly qualified or
licensed would constitute a Material Adverse Change, which certificates shall
indicate that such Borrower is in good standing in such jurisdictions;

(h) Agent shall have received opinions of Borrowers’ counsel in form and
substance satisfactory to Agent;

(i) Agent shall have received satisfactory evidence (including a certificate of
the chief financial officer of each Borrower) that all tax returns required to
be filed by Borrowers have been timely filed and all taxes upon Borrowers or
their properties, assets, income, and franchises (including Real Property taxes
and payroll taxes) have been paid prior to delinquency, except such taxes that
are the subject of a Permitted Protest;

(j) Agent shall have received copies of Borrowers’ audited consolidated and
consolidating financial statements for the fiscal year ended November 30, 2005;

(k) Borrowers shall pay all Lender Group Expenses incurred in connection with
the transactions evidenced by this Agreement;

 

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(l) Agent shall have received Borrowers’ Closing Date Business Plan;

(m) Borrowers shall have received all licenses, approvals or evidence of other
actions required by any Governmental Authority in connection with the execution
and delivery by Borrowers of this Agreement or any other Loan Document or with
the consummation of the transactions contemplated hereby and thereby; and

(n) all other documents and legal matters in connection with the transactions
contemplated by this Agreement shall have been delivered, executed, or recorded
and shall be in form and substance satisfactory to Agent.

3.2 Conditions Subsequent to the Initial Extension of Credit. The obligation of
the Lender Group (or any member thereof) to continue to make Advances (or
otherwise extend credit hereunder) is subject to the fulfillment, on or before
the date applicable thereto, of each of the conditions subsequent set forth
below (the failure by Borrowers to so perform or cause to be performed
constituting an Event of Default):

(a) within 60 days of the Closing Date (as may be extended by Agent in its sole
discretion), Borrowers shall deliver to Agent any amendments, consents,
modification, filings, notices or other agreements reasonably requested by Agent
necessary or desirable to maintain the perfection and priority of the security
interest and other rights granted pursuant to the Stock Pledge Agreements
pledging to Agent 65% of the Stock and other equity interests held by any
Borrower in any First Tier Foreign Subsidiary (other than those Subsidiaries
listed on Schedule 3.2), together with all opinions of foreign and U.S. counsel
reasonably requested in connection therewith; and

(b) within 10 days of the Closing Date, Borrower shall deliver to Agent copies
of each Borrower’s Governing Documents as filed with the Secretary of State (or
other appropriate officer) of the jurisdiction of organization of such Borrower,
which shall be certified by such Secretary of State (or such other appropriate
officer) and dated within 10 days of the Closing Date.

3.3 Conditions Precedent to all Extensions of Credit. The obligation of the
Lender Group (or any member thereof) to make all Advances (or to extend any
other credit hereunder) shall be subject to the following conditions precedent:

(a) the representations and warranties contained in this Agreement and the other
Loan Documents shall be true and correct in all material respects on and as of
the date of such extension of credit, as though made on and as of such date
(except to the extent that such representations and warranties relate solely to
an earlier date);

(b) no Default or Event of Default shall have occurred and be continuing on the
date of such extension of credit, nor shall either result from the making
thereof;

(c) no injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the extending of such credit shall have
been issued and remain in force by any Governmental Authority against any
Borrower, Agent, any Lender, or any of their Affiliates; and

(d) no Material Adverse Change shall have occurred.

 

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3.4 Intentionally Omitted.

3.5 Term. This Agreement shall become effective upon the execution and delivery
hereof by Borrowers, Agent, and the Lenders and shall continue in full force and
effect for a term ending on September 27, 2009 (the “Maturity Date”). The
foregoing notwithstanding, the Lender Group, upon the election of the Required
Lenders, shall have the right to terminate its obligations under this Agreement
immediately and without notice upon the occurrence and during the continuation
of an Event of Default.

3.6 Effect of Termination. On the date of termination of this Agreement, all
Obligations (including contingent reimbursement obligations of Borrowers with
respect to any outstanding Letters of Credit) immediately shall become due and
payable without notice or demand (including either (i) providing cash collateral
to be held by Agent for the benefit of those Lenders with a Commitment in an
amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing
the original Letters of Credit to be returned to the Issuing Lender). No
termination of this Agreement, however, shall relieve or discharge Borrowers of
their duties, Obligations, or covenants hereunder and the Agent’s Liens in the
Collateral shall remain in effect until all Obligations have been fully and
finally discharged and the Lender Group’s obligations to provide additional
credit hereunder have been terminated. When this Agreement has been terminated
and all of the Obligations have been fully and finally discharged and the Lender
Group’s obligations to provide additional credit under the Loan Documents have
been terminated irrevocably, Agent will, at Borrowers’ sole expense, execute and
deliver any UCC termination statements, lien releases, mortgage releases,
re-assignments of trademarks, discharges of security interests, and other
similar discharge or release documents (and, if applicable, in recordable form)
as are reasonably necessary to release, as of record, the Agent’s Liens and all
notices of security interests and liens previously filed by Agent with respect
to the Obligations.

3.7 Early Termination by Borrowers. Borrowers have the option, at any time upon
90 days prior written notice by Administrative Borrower to Agent, to terminate
this Agreement by paying to Agent, for the benefit of the Lender Group, in cash,
the Obligations (including either (i) providing cash collateral to be held by
Agent for the benefit of those Lenders with a Commitment in an amount equal to
105% of the then extant Letter of Credit Usage, or (ii) causing the original
Letters of Credit to be returned to the Issuing Lender), in full, together with
the Applicable Prepayment Premium (to be allocated based upon letter agreements
between Agent and individual Lenders). If Administrative Borrower has sent a
notice of termination pursuant to the provisions of this Section, then the
Commitments shall terminate and Borrowers shall be obligated to repay the
Obligations (including either (i) providing cash collateral to be held by Agent
for the benefit of those Lenders with a Commitment in an amount equal to 105% of
the then extant Letter of Credit Usage, or (ii) causing the original Letters of
Credit to be returned to the Issuing Lender), in full, together with the
Applicable Prepayment Premium, on the date set forth as the date of termination
of this Agreement in such notice. In the event of the termination of this
Agreement and repayment of the Obligations at any time prior to the Maturity
Date, for any other reason, including (a) termination upon the election of the
Required Lenders to terminate after the

 

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occurrence of an Event of Default, (b) foreclosure and sale of Collateral,
(c) sale of the Collateral in any Insolvency Proceeding, or (iv) restructure,
reorganization or compromise of the Obligations by the confirmation of a plan of
reorganization, or any other plan of compromise, restructure, or arrangement in
any Insolvency Proceeding, then, in view of the impracticability and extreme
difficulty of ascertaining the actual amount of damages to the Lender Group or
profits lost by the Lender Group as a result of such early termination, and by
mutual agreement of the parties as to a reasonable estimation and calculation of
the lost profits or damages of the Lender Group, Borrowers shall pay the
Applicable Prepayment Premium to Agent (to be allocated based upon letter
agreements between Agent and individual Lenders), measured as of the date of
such termination.

3.8 Effect of this Amendment and Restatement. Upon this Agreement becoming
effective pursuant to Section 3.1:

(a) the terms and conditions of the Prior Loan Agreement shall be amended as set
forth herein and, as so amended, shall be restated in their entirety, but only
with respect to the rights, duties and obligations between Borrowers and the
members of the Lender Group accruing from and after the Closing Date;

(b) this Agreement shall not in any way release or impair the rights, duties or
obligations created pursuant to the Prior Loan Agreement and any other Loan
Document (as defined in the Prior Loan Agreement) or affect the relative
priorities thereof, in each case to the extent in force and effect thereunder as
of the Closing Date and except as modified hereby or by documents, instruments
and agreements executed and delivered in connection herewith, and all such
rights, duties and obligations are assumed, ratified and affirmed by Borrowers;

(c) (i) the Obligations represent, among other things, the amendment,
restatement, renewal, extension, consolidation and modification of the
Obligations (as defined in the Prior Loan Agreement) arising in connection with
the Prior Loan Agreement and the other Loan Documents (as defined in the Prior
Loan Agreement) executed in connection therewith; (ii) Borrowers, Agent and the
Lenders intend that the Prior Loan Agreement and the other Loan Documents (as
defined in the Prior Loan Agreement) executed in connection therewith and the
collateral pledged thereunder shall secure, without interruption or impairment
of any kind, all existing Obligations (as defined in the Prior Loan Agreement)
under the Prior Loan Agreement and the other Loan Documents (as defined in the
Prior Loan Agreement) executed in connection therewith as amended, restated,
renewed, extended, consolidated and modified hereunder, together with all other
Obligations hereunder; (iii) all Liens (as defined in the Prior Loan Agreement)
evidenced by the Prior Loan Agreement and the other Loan Documents (as defined
in the Prior Loan Agreement) executed in connection therewith are hereby
ratified, confirmed and continued; (iv) this Agreement is intended to restate,
renew, extend, consolidate, amend and modify the Prior Loan Agreement; and
(v) the Loan Documents (as defined in the Prior Loan Agreement) (other than the
Prior Loan Agreement which shall be restated, renewed, extended, consolidated,
amended and modified as set forth herein) shall remain extant and in full force
and effect (except to the extent amended and modified as of the date hereof);

(d) all indemnification obligations of Borrowers under the Prior Loan Agreement
and any other Loan Documents (as defined in the Prior Loan Agreement) shall, to
the

 

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extent therein expressly provided, survive the execution and delivery of this
Agreement and shall so continue in full force and effect for the benefit of the
members of the Lender Group and any other Person indemnified under the Prior
Loan Agreement or any other Loan Document (as defined in the Prior Loan
Agreement) at any time prior to the Closing Date;

(e) any and all references to the Prior Loan Agreement (including, without
limitation, in any other Loan Document) shall, without further action of the
parties, be deemed a reference to the Prior Loan Agreement, as amended and
restated by this Agreement, and as this Agreement may be further amended,
restated, supplemented or otherwise modified from time to time hereafter; and

(f) the interest, fees, expenses and other amounts accrued under the Prior Loan
Agreement as of the Closing Date shall be due and payable on the Closing Date to
Agent, in its capacity as administrative agent under the Prior Loan Agreement
and on behalf of the Lenders (as defined in the Prior Loan Agreement) and not
shared pro rata with any other Lenders in their capacity as a Lender under this
Agreement after the Closing Date.

4. CREATION OF SECURITY INTEREST.

4.1 Grant of Security Interest. Each Borrower hereby grants to Agent, for the
benefit of the Lender Group, a continuing security interest in all of its right,
title, and interest in all currently existing and hereafter acquired or arising
Personal Property Collateral in order to secure prompt repayment of any and all
of the Obligations in accordance with the terms and conditions of the Loan
Documents and in order to secure prompt performance by Borrowers of each of
their covenants and duties under the Loan Documents. The Agent’s Liens in and to
the Personal Property Collateral shall attach to all Personal Property
Collateral without further act on the part of Agent or Borrowers. Anything
contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for Permitted Dispositions, Borrowers have no authority,
express or implied, to dispose of any item or portion of the Collateral.

4.2 Negotiable Collateral. In the event that any Collateral, including proceeds,
is evidenced by or consists of Negotiable Collateral, and if and to the extent
that perfection or priority of Agent’s security interest is dependent on or
enhanced by possession, the applicable Borrower, immediately upon the request of
Agent, shall endorse and deliver physical possession of such Negotiable
Collateral to Agent.

4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral. At
any time after the occurrence and during the continuation of an Event of
Default, Agent or Agent’s designee may (a) notify Account Debtors of Borrowers
that the Accounts, chattel paper, or General Intangibles have been assigned to
Agent or that Agent has a security interest therein, or (b) collect the
Accounts, chattel paper, or General Intangibles directly and charge the
collection costs and expenses to the Loan Account. Each Borrower agrees that it
will hold in trust for the Lender Group, as the Lender Group’s trustee,
Collections of any Borrower that such Borrower receives and immediately will
deliver said Collections to Agent or a Cash Management Bank in their original
form as received by the applicable Borrower.

 

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4.4 Delivery of Additional Documentation Required; Authorization to File UCC
Financing Statements. Each Borrower authorizes Agent to file, transmit, or
communicate, as applicable, UCC financing statements, in-lieu financing
statements and amendments describing the Collateral as “all personal property of
Borrowers” or words of similar effect, in order to perfect the Agent’s Liens on
the Collateral without such Borrower’s signature to the extent permitted by
applicable law. Notwithstanding the foregoing, at any time upon the request of
Agent, Borrowers shall execute and deliver to Agent, any and all financing
statements, original financing statements in lieu of continuation statements,
fixture filings, security agreements, pledges, assignments, endorsements of
certificates of title, and all other documents (the “Additional Documents”) upon
which any Borrower’s signature may be required and that Agent may request in its
Permitted Discretion, in form and substance satisfactory to Agent, to perfect
and continue perfected or better perfect the Agent’s Liens in the Collateral
(whether now owned or hereafter arising or acquired), to create and perfect
Liens in favor of Agent in any Real Property acquired after the Closing Date,
and in order to fully consummate all of the transactions contemplated hereby and
under the other Loan Documents. To the maximum extent permitted by applicable
law, each Borrower authorizes Agent to execute any such Additional Documents in
the applicable Borrower’s name and authorize Agent to file such executed
Additional Documents in any appropriate filing office. No Borrower shall
terminate, amend or file a correction statement with respect to any UCC
financing statement filed pursuant to this Section 4 without Agent’s prior
written consent. In addition, on such periodic basis as Agent shall require,
Borrowers shall (a) provide Agent with a report of all new patentable,
copyrightable, or trademarkable materials acquired or generated by Borrowers
during the prior period, and (b) cause to be prepared, executed, and delivered
to Agent supplemental schedules to the applicable Loan Documents to identify
such patents, copyrights, and trademarks as being subject to the security
interests created thereunder. In addition, Borrowers agree that, upon acquiring
any interest in a commercial tort claim such Borrower shall, in writing,
describe the details of such claim and assign an interest thereto to Agent, and
upon acquiring any chattel paper after the date hereof (electronic, tangible or
otherwise), such Borrower shall assign to Agent a security interest in such
chattel paper, or if applicable, deliver such chattel paper to Agent as
Collateral hereunder.

4.5 Power of Attorney. Each Borrower hereby irrevocably makes, constitutes, and
appoints Agent (and any of Agent’s officers, employees, or agents designated by
Agent) as such Borrower’s true and lawful attorney, with power to (a) if such
Borrower refuses to, or fails timely to execute and deliver any of the documents
described in Section 4.4, sign the name of such Borrower on any of the documents
described in Section 4.4, (b) at any time that an Event of Default has occurred
and is continuing, sign such Borrower’s name on any invoice or bill of lading
relating to the Collateral, drafts against Account Debtors, or notices to
Account Debtors, (c) send requests for verification of Accounts, (d) endorse
such Borrower’s name on any Collection item that may come into the Lender
Group’s possession, (e) at any time that an Event of

 

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Default has occurred and is continuing, make, settle, and adjust all claims
under such Borrower’s policies of insurance and make all determinations and
decisions with respect to such policies of insurance, and (f) at any time that
an Event of Default has occurred and is continuing, settle and adjust disputes
and claims respecting the Accounts, chattel paper, or General Intangibles
directly with Account Debtors, for amounts and upon terms that Agent determines
to be reasonable, and Agent may cause to be executed and delivered any documents
and releases that Agent determines to be necessary. The appointment of Agent as
each Borrower’s attorney, and each and every one of its rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully and finally repaid and performed and the Lender Group’s obligations to
extend credit hereunder are terminated.

4.6 Right to Inspect. Agent and each Lender (through any of their respective
officers, employees, or agents) shall have the right, from time to time and
during normal business hours, to inspect the Books and to check, test, and
appraise the Collateral in order to verify Borrowers’ financial condition or the
amount, quality, value, condition of, or any other matter relating to, the
Collateral. Borrower shall allow Agent to conduct Inventory appraisals, at
Agent’s option, one time each quarter, and shall provide Agent with Real
Property appraisals and Phase I environmental reports upon request, but absent
the occurrence of an Event of Default, not more frequently than once every 2
years, in form and substance satisfactory to Agent.

4.7 Control Agreements. Each Borrower agrees that it will not transfer assets
out of any Securities Accounts other than as permitted under Section 7.19 and,
if to another securities intermediary, unless each of the applicable Borrower,
Agent, and the substitute securities intermediary have entered into a Control
Agreement. No arrangement contemplated hereby or by any Control Agreement in
respect of any Securities Accounts or other Investment Property shall be
modified by Borrowers without the prior written consent of Agent. Upon the
occurrence and during the continuance of an Event of Default, Agent may notify
any securities intermediary to liquidate the applicable Securities Account or
any related Investment Property maintained or held thereby and remit the
proceeds thereof to the Agent’s Account.

5. REPRESENTATIONS AND WARRANTIES.

In order to induce the Lender Group to enter into this Agreement, each Borrower
makes the following representations and warranties to the Lender Group which
shall be true, correct, and complete, in all material respects, as of the date
hereof, and shall be true, correct, and complete, in all material respects, as
of the Closing Date, and at and as of the date of the making of each Advance (or
other extension of credit) made thereafter, as though made on and as of the date
of such Advance (or other extension of credit) (except to the extent that such
representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:

5.1 No Encumbrances. Each Borrower has good and indefeasible title to its
Collateral and the Real Property, free and clear of Liens except for Permitted
Liens.

5.2 Eligible Accounts. The Eligible Accounts are bona fide existing payment
obligations of Account Debtors created by the sale and delivery of Inventory or
the rendition of services to such Account Debtors in the ordinary course of
Borrowers’ business, owed to

 

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Borrowers without defenses, disputes, offsets, counterclaims, or rights of
return or cancellation. As to each Account that is included as an Eligible
Account on a Borrowing Base Certificate, such Account meets all of the
requirements of an Eligible Account.

5.3 Eligible Inventory. All Eligible Inventory is of good and merchantable
quality, free from defects. As to each item of Inventory that is included as
Eligible Inventory on a Borrowing Base Certificate, such Inventory meets all of
the requirements for Eligible Inventory.

5.4 Equipment. All of the Equipment is used or held for use in Borrowers’
business and is fit for such purposes.

5.5 Location of Inventory and Equipment. Except as disclosed on Schedule 5.5,
the Inventory and Equipment are not stored with a bailee, warehouseman, or
similar party and are located only at the locations in the U.S. identified on
Schedule 5.5.

5.6 Inventory Records. Each Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.

5.7 Location of Chief Executive Office; FEIN. The chief executive office of each
Borrower is located at the address indicated in Schedule 5.7 and each Borrower’s
FEIN and organizational identification number issued by such Borrower’s state of
formation or incorporation is identified in Schedule 5.7.

5.8 Due Organization and Qualification; Subsidiaries

(a) Each Borrower is duly organized and existing and in good standing under the
laws of the jurisdiction of its organization and qualified to do business in any
state where the failure to be so qualified reasonably could be expected to have
a Material Adverse Change.

(b) Set forth on Schedule 5.8(b), is a complete and accurate description of the
authorized Stock of each Borrower, by class, and, as of the Closing Date, a
description of the number of shares of each such class that are issued and
outstanding. Other than as described on Schedule 5.8(b), there are no
subscriptions, options, warrants, or calls relating to any shares of each
Borrower’s Stock, including any right of conversion or exchange under any
outstanding security or other instrument. No Borrower is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its Stock or any security convertible into or exchangeable
for any of its Stock.

(c) Set forth on Schedule 5.8(c), is a complete and accurate list of each
Borrower’s direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their organization; (ii) the number of shares of each class of common and
preferred Stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by the applicable Borrower. All of the outstanding Stock of each
such Subsidiary has been validly issued and is fully paid and non-assessable.

(d) Except as set forth on Schedule 5.8(c), there are no subscriptions, options,
warrants, or calls relating to any shares of any Borrower’s Subsidiaries’ Stock,
including any

 

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right of conversion or exchange under any outstanding security or other
instrument. No Borrower or any of its respective Subsidiaries is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of any Borrower’s Subsidiaries’ Stock or any security
convertible into or exchangeable for any such Stock.

5.9 Due Authorization; No Conflict.

(a) As to each Borrower, the execution, delivery, and performance by such
Borrower of this Agreement and the Loan Documents to which it is a party have
been duly authorized by all necessary action on the part of such Borrower.

(b) As to each Borrower, the execution, delivery, and performance by such
Borrower of this Agreement and the Loan Documents to which it is a party do not
and will not (i) violate any provision of federal, state, or local law or
regulation applicable to any Borrower, the Governing Documents of any Borrower,
or any order, judgment, or decree of any court or other Governmental Authority
binding on any Borrower, (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
material contractual obligation of any Borrower, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any properties
or assets of Borrower, other than Permitted Liens, or (iv) except as set forth
on Schedule 5.9, require any approval of any Borrower’s interestholders or any
approval or consent of any Person under any material contractual obligation of
any Borrower.

(c) Other than the filing of financing statements, fixture filings, and
Mortgages (if any), the execution, delivery, and performance by each Borrower of
this Agreement and the Loan Documents to which such Borrower is a party do not
and will not require any registration with, consent, or approval of, or notice
to, or other action with or by, any Governmental Authority or other Person,
except such consents, registrations or other similar filings as may be required
in connection with the pledge of Stock of Foreign Subsidiaries.

(d) As to each Borrower, this Agreement and the other Loan Documents to which
such Borrower is a party, and all other documents contemplated hereby and
thereby, when executed and delivered by such Borrower will be the legally valid
and binding obligations of such Borrower, enforceable against such Borrower in
accordance with their respective terms, except as enforcement may be limited by
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws relating to or limiting creditors’ rights generally.

(e) The Agent’s Liens are validly created, perfected, and first priority Liens,
subject only to Permitted Liens.

5.10 Litigation. Other than those matters disclosed on Schedule 5.10, there are
no actions, suits, or proceedings pending or, to the best knowledge of
Borrowers, threatened against Borrowers, or any of their Subsidiaries, as
applicable, except for (a) matters that are fully covered by insurance (subject
to customary deductibles), and (b) matters arising after the Closing Date that,
if decided adversely to Borrowers, or any of their Subsidiaries, as applicable,
reasonably could not be expected to result in a Material Adverse Change.

 

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5.11 No Material Adverse Change. All financial statements relating to Borrowers
that have been delivered by Borrowers to the Lender Group have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit adjustments) and
present fairly in all material respects, Borrowers’ financial condition as of
the date thereof and results of operations for the period then ended. There has
not been a Material Adverse Change with respect to Borrowers since the date of
the latest financial statements submitted to the Lender Group on or before the
Closing Date.

5.12 Fraudulent Transfer.

(a) Each Borrower is Solvent (except for CellStar International Corporation/SA,
a Delaware corporation, and CellStar International Corporation/Asia, a Delaware
corporation).

(b) No transfer of property is being made by any Borrower and no obligation is
being incurred by any Borrower in connection with the transactions contemplated
by this Agreement or the other Loan Documents with the intent to hinder, delay,
or defraud either present or future creditors of Borrowers.

5.13 Employee Benefits. None of Borrowers, any of their Subsidiaries or any of
their ERISA Affiliates maintains or contributes to any Benefit Plan.

5.14 Environmental Condition. Except as set forth on Schedule 5.14, (a) to
Borrowers’ knowledge, none of Borrowers’ owned properties or assets has ever
been used by Borrowers or by previous owners or operators in the disposal of, or
to produce, store, handle, treat, release, or transport, any Hazardous
Materials, where such production, storage, handling, treatment, release or
transport was in violation, in any material respect, of applicable Environmental
Law, (b) to Borrowers’ knowledge, none of Borrowers’ properties or assets has
ever been designated or identified in any manner pursuant to any Environmental
Law as a Hazardous Materials disposal site, (c) none of Borrowers have received
notice that a Lien arising under any Environmental Law has attached to any
revenues or to any Real Property owned or operated by Borrowers, and (d) none of
Borrowers have received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by any Borrower resulting in the
releasing or disposing of Hazardous Materials into the environment.

5.15 Brokerage Fees. Except for the services described in the engagement letter
dated as of May 19, 2005, as amended, with Raymond James & Associates, Inc.,
Borrowers have not utilized the services of any broker or finder in connection
with Borrowers’ obtaining financing from the Lender Group under this Agreement
and no brokerage commission or finders fee is payable by Borrowers in connection
herewith.

5.16 Intellectual Property. Each Borrower owns, or holds licenses in, all
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of its business as currently conducted. Attached
hereto as Schedule 5.16 is a

 

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true, correct, and complete listing of all material patents, patent
applications, trademarks, trademark applications, copyrights, and copyright
registrations as to which each Borrower is the owner or is an exclusive
licensee.

5.17 Leases. Borrowers enjoy peaceful and undisturbed possession under all
leases material to the business of Borrowers and to which Borrowers are a party
or under which Borrowers are operating. All of such leases are valid and
subsisting and no material default by Borrowers exists under any of them.

5.18 DDAs. Set forth on Schedule 5.18 are all of the DDAs of each Borrower,
including, with respect to each depository (i) the name and address of that
depository, and (ii) the account numbers of the accounts maintained with such
depository.

5.19 Complete Disclosure. All factual information (taken as a whole) furnished
by or on behalf of Borrowers in writing to Agent or any Lender (including all
information contained in the Schedules hereto or in the other Loan Documents)
for purposes of or in connection with this Agreement, the other Loan Documents
or any transaction contemplated herein or therein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of Borrowers
in writing to the Agent or any Lender will be, true and accurate in all material
respects on the date as of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make such information
(taken as a whole) not misleading in any material respect at such time in light
of the circumstances under which such information was provided. On the Closing
Date, the Closing Date Projections represent, and as of the date on which any
other Projections are delivered to Agent, such additional Projections represent
Borrowers’ good faith best estimate of its future performance for the periods
covered thereby.

5.20 Indebtedness. Set forth on Schedule 5.20 is a true and complete list of all
Indebtedness of Parent and each of its Subsidiaries outstanding immediately
prior to the Closing Date that is to remain outstanding after the Closing Date
and such Schedule accurately reflects the aggregate principal amount of such
Indebtedness and the principal terms thereof.

5.21 Management Agreements. Set forth on Schedule 5.21 is a true and complete
list of all Management Agreements of any Borrower in effect as of the Closing
Date.

6. AFFIRMATIVE COVENANTS.

Each Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until full and final payment of the Obligations, Borrowers
shall and shall cause each of their respective Subsidiaries to do all of the
following:

6.1 Accounting System. Maintain a system of accounting that enables
Administrative Borrower to produce financial statements in accordance with GAAP
and maintain records pertaining to the Collateral that contain information as
from time to time reasonably may be requested by Agent. Borrowers also shall
keep an inventory reporting system that shows all additions, sales, claims,
returns, and allowances with respect to the Inventory.

 

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6.2 Collateral Reporting. Provide Agent (and if so requested by Agent, with
copies for each Lender) with the following documents at the following times in
form satisfactory to Agent:

 

Weekly    (a) summary agings of Accounts (including, without limitation, the
Miami, Florida based Accounts owed to Borrowers by non-U.S. Account Debtors),
and    (b) a list of the top 10 customers, with total Account balances and
summary agings of such Account balances, and    (c) Inventory reports specifying
each Borrower’s cost of its Inventory, by category. Monthly (not later than
the 15th day of each month)    (d) a sales journal, collection journal, and
credit register since the last such schedule and calculation of the Borrowing
Base as of such date, including Asurion and Dobson, and    (e) a detailed
calculation of the Borrowing Base (including detail regarding those Accounts
that are not Eligible Accounts), and    (f) a summary aging, by vendor, of
Borrowers’ accounts payable and any book overdraft, and    (g) a calculation of
Dilution for the prior month. Quarterly    (h) a detailed list of each
Borrower’s customers, and    (i) a report regarding each Borrower’s accrued, but
unpaid, ad valorem taxes. Upon request by Agent    (j) copies of invoices in
connection with the Accounts, credit memos, remittance advices, deposit slips,
shipping and delivery documents in connection with the Accounts and, for
Inventory and Equipment acquired by Borrowers, purchase orders and invoices, and
   (k) such other reports as to the Collateral, or the financial condition of
Borrowers as Agent may request.

If Excess Availability is less than $10,000,000 at any time, Agent may request,
and Borrowers shall implement, the Collateral reporting described in this
Section more frequently than as set forth above, including, without limitation,
certain daily reporting requirements.

 

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6.3 Financial Statements, Reports, Certificates. Deliver to Agent, with copies
to each Lender:

(a) as soon as available, but in any event within 45 days (60 days in the case
of a month that is the end of one of the first 3 fiscal quarters in a fiscal
year) after the end of each month during each of Parent’s fiscal years,

(i) a company prepared balance sheet and income statement, covering operations
during such period, on both a consolidated and consolidating basis for Parent,
its Subsidiaries and the Domestic Business Unit, in form and substance
reasonably satisfactory to Agent,

(ii) a company prepared statement of cash flow, covering operations on a year to
date basis, on a consolidated basis for Parent in form and substance reasonably
satisfactory to Agent,

(iii) a certificate signed by the chief executive officer, president, chief
financial officer, treasurer or controller of Administrative Borrower to the
effect that:

A. the financial statements delivered hereunder have been prepared in accordance
with GAAP (except for the lack of footnotes and being subject to year-end audit
adjustments) and fairly present in all material respects the financial condition
of Parent and its Subsidiaries,

B. the representations and warranties of Borrowers contained in this Agreement
and the other Loan Documents are true and correct in all material respects on
and as of the date of such certificate, as though made on and as of such date
(except to the extent that such representations and warranties relate solely to
an earlier date), and

C. there does not exist any condition or event that constitutes a Default or
Event of Default (or, to the extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge and what action
Borrowers have taken, are taking, or propose to take with respect thereto), and

(iv) for each month that is the date on which a financial covenant in
Section 7.20 is to be tested, a Compliance Certificate demonstrating, in
reasonable detail, compliance at the end of such period with the applicable
financial covenants contained in Section 7.20, and

(b) as soon as available, but in any event within 120 days after the end of each
of Parent’s fiscal years, financial statements of Parent and its Subsidiaries
for each such fiscal year, audited by independent certified public accountants
reasonably acceptable to Agent and

 

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certified, without any qualifications, by such accountants to have been prepared
in accordance with GAAP (such audited financial statements to include a balance
sheet, income statement, and statement of cash flow and, if prepared, such
accountants’ letter to management),

(c) as soon as available, but in any event at least 30 days prior to the start
of each of Parent’s fiscal years,

(i) copies of Projections, in form and substance (including as to scope and
underlying assumptions) satisfactory to Agent, in its sole discretion, for the
forthcoming 3 years, year by year, and for the forthcoming fiscal year, month by
month, for the Parent and the Domestic Business Unit, in each case certified by
the chief executive officer, president, chief financial officer, treasurer or
controller of Administrative Borrower as being such officer’s good faith best
estimate of the financial performance of Parent and its Subsidiaries during the
period covered thereby,

(d) if and when filed by any Borrower, within five days of such filing,

(i) 10-Q quarterly reports, Form 10-K annual reports, and Form 8-K current
reports,

(ii) any other filings made by any Borrower with the SEC,

(iii) copies of Borrowers’ federal income tax returns, and any amendments
thereto, filed with the Internal Revenue Service, and

(iv) any other information that is provided by Parent to its shareholders
generally,

(e) if and when filed by any Borrower and as requested by Agent, within five
days of the later of the filing or such request, satisfactory evidence of
payment of applicable excise taxes in each jurisdictions in which (i) any
Borrower conducts business or is required to pay any such excise tax, (ii) where
any Borrower’s failure to pay any such applicable excise tax would result in a
Lien on the properties or assets of any Borrower, or (iii) where any Borrower’s
failure to pay any such applicable excise tax reasonably could be expected to
result in a Material Adverse Change,

(f) as soon as a Borrower has knowledge of any event or condition that
constitutes a Default or an Event of Default, notice thereof and a statement of
the curative action that Borrowers propose to take with respect thereto,

(g) promptly upon any Borrower obtaining knowledge thereof, notice of any price
decrease (without consideration of price protection agreements) established by
any Material Vendor, affecting the value of Eligible Inventory included in the
Borrowing Base by more than 5%,

 

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(h) promptly upon the Parent obtaining knowledge or notice thereof, notice of
any demand for payment pursuant to the Parent’s guarantee of trade payables and
real property operating leases of any Foreign Subsidiary,

(i) promptly upon the Parent obtaining knowledge or notice thereof, notice of
any default, event of default, or request for payment from Parent pursuant to
any Permitted Foreign Subsidiary Credit Facility that Parent has guaranteed, and

(j) upon the request of Agent, any other report reasonably requested relating to
the financial condition of Borrowers.

In addition to the financial statements referred to above, Borrowers agree to
deliver financial statements prepared on both a consolidated and consolidating
basis and that no Borrower, or any Subsidiary of a Borrower, will have a fiscal
year different from that of Parent, other than certain Foreign Subsidiaries, but
only to the extent such Foreign Subsidiary’s jurisdiction of organization
requires a different fiscal year by law. Borrowers agree that their independent
certified public accountants are authorized to communicate with Agent and to
release to Agent whatever financial information concerning Borrowers that Agent
reasonably may request, provided, however, that Administrative Borrower will be
provided with reasonable notice of the time and place for such communication and
have the opportunity to be present during such communication. Each Borrower
waives the right to assert a confidential relationship, if any, it may have with
any accounting firm or service bureau in connection with any information
requested by Agent pursuant to or in accordance with this Agreement, and agree
that Agent may contact directly any such accounting firm or service bureau in
order to obtain such information.

6.4 Intentionally Omitted.

6.5 Return. Cause returns and allowances as between Borrowers and their Account
Debtors, to be on the same basis and in accordance with the usual customary
practices of the applicable Borrower, as they exist at the time of the execution
and delivery of this Agreement.

6.6 Maintenance of Properties. Maintain and preserve all of its properties which
are necessary or useful in the proper conduct to its business in good working
order and condition, ordinary wear and tear excepted, and comply at all times
with the provisions of all leases to which it is a party as lessee, so as to
prevent any loss or forfeiture thereof or thereunder.

6.7 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrowers
or any of their assets to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest. Borrowers
will make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Agent with proof satisfactory to Agent indicating
that the applicable Borrower has made such payments or deposits. Borrowers shall
deliver satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which any Borrower is required to pay any such excise tax.

 

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6.8 Insurance.

(a) At Borrowers’ expense, maintain insurance respecting its property and assets
wherever located, covering loss or damage by fire, theft, explosion, and all
other hazards and risks as ordinarily are insured against by other Persons
engaged in the same or similar businesses. Borrowers also shall maintain
business interruption, public liability, and product liability insurance, as
well as insurance against larceny, embezzlement, and criminal misappropriation.
All such policies of insurance shall be in such amounts and with such insurance
companies as are reasonably satisfactory to Agent. Borrowers shall deliver
copies of all such policies to Agent with a satisfactory lender’s loss payable
endorsement naming Agent as loss payee as its interest may appear or additional
insured, as appropriate. Each policy of insurance or endorsement shall contain a
clause requiring the insurer to give not less than 30 days prior written notice
to Agent in the event of cancellation of the policy for any reason whatsoever.

(b) Administrative Borrower shall give Agent prompt notice of any loss in excess
of $100,000 covered by such insurance attributable to operations in the U.S.
Agent shall have the exclusive right to adjust any losses payable under any such
insurance policies in excess of $250,000, without any liability to Borrowers
whatsoever in respect of such adjustments. Any monies received as payment for
any loss under any insurance policy mentioned above (other than liability
insurance policies) or as payment of any award or compensation for condemnation
or taking by eminent domain, shall be paid over to Agent to be applied at the
option of the Required Lenders either to the prepayment of the Obligations or
shall be disbursed to Administrative Borrower under staged payment terms
reasonably satisfactory to the Required Lenders for application to the cost of
repairs, replacements, or restorations. Any such repairs, replacements, or
restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property destroyed prior to
such damage or destruction.

(c) Borrowers shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under this
Section 6.8, unless Agent is included thereon as named insured with the loss
payable to Agent under a lender’s loss payable endorsement or its equivalent.
Administrative Borrower immediately shall notify Agent whenever such separate
insurance is taken out, specifying the insurer thereunder and full particulars
as to the policies evidencing the same, and copies of such policies promptly
shall be provided to Agent.

6.9 Location of Inventory and Equipment. Except for Inventory and Equipment with
an aggregate market value less than $500,000 and Inventory and Equipment
delivered to repair facilities in the normal course of business, keep the
Inventory and Equipment only at the locations identified on Schedule 5.5;
provided, however, that Administrative Borrower may amend Schedule 5.5 so long
as such amendment occurs by written notice to Agent not less than 30 days prior
to the date on which the Inventory or Equipment is moved to such new location,
so long as such new location is within the continental United States, and so
long as, at the time of such written notification, the applicable Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected the Agent’s Liens on such assets and also provides to Agent a
Collateral Access Agreement.

 

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6.10 Compliance with Laws. Comply with the requirements of all applicable laws,
rules, regulations, and orders of any Governmental Authority, including the Fair
Labor Standards Act and the Americans With Disabilities Act, other than laws,
rules, regulations, and orders the non-compliance with which, individually or in
the aggregate, would not result in and reasonably could not be expected to
result in a Material Adverse Change.

6.11 Leases. Pay when due all rents and other amounts payable under any leases
to which any Borrower is a party or by which any Borrower’s properties and
assets are bound, unless such payments are the subject of a Permitted Protest.

6.12 Brokerage Commissions. Pay any and all brokerage commission or finders fees
incurred in connection with or as a result of Borrowers’ obtaining financing
from the Lender Group under this Agreement. Borrowers agree and acknowledge that
payment of all such brokerage commissions or finders fees shall be the sole
responsibility of Borrowers, and each Borrower agrees to indemnify, defend, and
hold Agent and the Lender Group harmless from and against any claim of any
broker or finder arising out of Borrowers’ obtaining financing from the Lender
Group under this Agreement.

6.13 Existence. At all times preserve and keep in full force and effect each
Borrower’s valid existence and good standing and any rights and franchises
material to Borrowers’ businesses.

6.14 Environmental. (a) Keep any property either owned or operated by any
Borrower free of any Environmental Liens or post bonds or other financial
assurances sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens, (b) comply, in all material respects, with Environmental
Laws and provide to Agent documentation of such compliance which Agent
reasonably requests, (c) promptly notify Agent of any release of a Hazardous
Material of any reportable quantity under Environmental Laws from or onto
property owned or operated by any Borrower and take any Remedial Actions
required to abate said release or otherwise to come into compliance with
applicable Environmental Law, and (d) promptly provide Agent with written notice
within 10 days of the receipt of any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of any Borrower, (ii) commencement of any Environmental Action or notice that an
Environmental Action will be filed against any Borrower, and (iii) notice of a
violation, citation, or other administrative order which reasonably could be
expected to result in a Material Adverse Change.

6.15 Disclosure Updates. Promptly and in no event later than 5 Business Days
after obtaining knowledge thereof, (a) notify Agent if any written information,
exhibit, or report furnished to the Lender Group contained any untrue statement
of a material fact or omitted to state any material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which made, and (b) correct any defect or error that may be discovered therein
or in any Loan Document or in the execution, acknowledgement, filing, or
recordation thereof.

 

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7. NEGATIVE COVENANTS.

Each Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until full and final payment of the Obligations, Borrowers will
not and will not permit any of their respective Subsidiaries to do any of the
following:

7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise become
or remain, directly or indirectly, liable with respect to any Indebtedness,
except:

(a) Indebtedness evidenced by this Agreement and the other Loan Documents,
together with Indebtedness owed to Underlying Issuers with respect to Underlying
Letters of Credit;

(b) the Indebtedness set forth on Schedule 5.20;

(c) Permitted Purchase Money Indebtedness;

(d) refinancings, renewals, or extensions of Indebtedness permitted under
clauses (b), (c) and (e) of this Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not, in Agent’s judgment,
materially impair the prospects of repayment of the Obligations by Borrowers or
materially impair Borrowers’ creditworthiness, (ii) such refinancings, renewals,
or extensions do not result in an increase in the principal amount of, interest
payment on, or interest rate with respect to, the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, or extensions do not
result in a shortening of the average weighted maturity of the Indebtedness so
refinanced, renewed, or extended, nor are they on terms or conditions, that,
taken as a whole, are materially more burdensome or restrictive to the
applicable Borrower, and (iv) if the Indebtedness that is refinanced, renewed,
or extended was subordinated in right of payment to the Obligations, then the
terms and conditions of the refinancing, renewal, or extension of such
Indebtedness must include subordination terms and conditions that are at least
as favorable to the Lender Group as those that were applicable to the
refinanced, renewed, or extended Indebtedness;

(e) (i) any Permitted Foreign Subsidiary Credit Facility, (ii) any accounts
receivable factoring facility entered into by CellStar Mexico for general
working capital needs in an aggregate amount not exceeding $30,000,000
outstanding at any time; provided such factoring facility (x) is not guaranteed
by any Borrower; provided, such factoring facility may be guaranteed by a
Borrower if such guaranty is unsecured and subject to a subordination agreement
satisfactory to Agent, and (y) does not limit or prohibit the payment of any
Management Fees to any Borrower, and (iii) any accounts receivable factoring
facility or other credit facility for the Miami, Florida based Accounts owed by
non-U.S. Account Debtors entered into by CellStar Ltd. and/or National Auto
Center, Inc. for general working capital needs; provided such factoring facility
or other credit facility (x) is not guaranteed by or with recourse (other than
standard carve-outs for commercial disputes, delivery of non-conforming goods
and similar exceptions) to any Borrower; provided, such factoring facility may
be guaranteed by or with recourse to a Borrower if such guaranty or other
liability is unsecured and subject to a subordination agreement satisfactory to
Agent, (y) does not limit or prohibit the payment of any Management Fees to any
Borrower, and (z) is on terms satisfactory to Agent;

 

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(f) Indebtedness permitted by Section 7.6;

(g) Indebtedness that constitutes a Permitted Affiliate Transaction;

(h) Customary, prudent and non-speculative Hedging Obligations entered into in
the ordinary course of business for the purpose of protecting the Parent and its
Subsidiaries against fluctuations in interests rates, currency exchange rates
and similar risks; and

(i) Customary and prudent insurance financing arrangements for the financing of
insurance premiums by third party insurance finance companies in the ordinary
course of business, provided the aggregate Indebtedness outstanding in
connection therewith shall not exceed $5,000,000 at any time.

7.2 Liens. Create, incur, assume, or permit to exist, directly or indirectly,
any Lien on or with respect to any of its assets, of any kind, whether now owned
or hereafter acquired, or any income or profits therefrom, except for
(a) Permitted Liens (including Liens that are replacements of Permitted Liens to
the extent that the original Indebtedness is refinanced, renewed, or extended
under Section 7.1(d) and so long as the replacement Liens only encumber those
assets that secured the refinanced, renewed, or extended Indebtedness) and
(b) (i) Liens on the assets of any Foreign Subsidiaries securing any Permitted
Foreign Subsidiary Credit Facility, and (ii) Liens on accounts receivable of
CellStar Mexico securing an accounts receivable factoring facility permitted by
Section 7.1(e)(ii) hereof.

7.3 Restrictions on Fundamental Changes.

(a) Enter into any merger, consolidation, reorganization, or recapitalization,
or reclassify its Stock.

(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution).

(c) Convey, sell, lease, license, assign, transfer, or otherwise dispose of, in
one transaction or a series of transactions, all or any substantial part of its
assets.

Notwithstanding the foregoing, so long as no Default or Event of Default exists
or would result therefrom and the Agent receives at least 30 days prior written
notice and delivery of any documentation requested to ensure the continued
perfection and priority of Agent’s Liens:

(i) any Borrower (other than Administrative Borrower) may merge or consolidate
with any other Borrower;

(ii) any Borrower may be dissolved or liquidated so long as such dissolution or
liquidation results in all assets of such Borrower being owned by another
Borrower; and

 

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(iii) any Subsidiary that is not a Borrower hereunder and in which Agent does
not have a Stock pledge may be dissolved or liquidated, so long as such
dissolution or liquidation results in all assets of such Subsidiary being owned
by a Borrower or another Subsidiary in which Agent has a valid perfected first
priority Lien in the Stock of such transferee Subsidiary.

7.4 Disposal of Assets. Convey, sell, lease, license, assign, transfer, or
otherwise dispose of any of its assets other than (a) Permitted Dispositions,
and (b) pursuant to a Permitted Affiliate Transaction.

7.5 Change Name. Change any Borrower’s name, FEIN, corporate structure or
identity, or add any new fictitious name; provided, however, that a Borrower may
change its name upon at least 30 days prior written notice by Administrative
Borrower to Agent of such change and so long as, at the time of such written
notification, such Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected Agent’s Liens.

7.6 Guarantee. Guarantee or otherwise become in any way liable with respect to
the obligations of any third Person except (a) as provided herein, (b) by
endorsement of instruments or items of payment for deposit to the account of
such Person or which are transmitted or turned over to Agent, (c) guarantees
that constitute a Permitted Affiliate Transaction, and (d) guarantees by Parent
of the key executive employment agreements of any of its subsidiaries entered
into in the ordinary course of business.

7.7 Nature of Business. Make any change in the principal nature of Borrowers’
business.

7.8 Prepayments and Amendments.

(a) Except in connection with a refinancing permitted by Section 7.1(d), prepay,
redeem, defease, purchase, or otherwise acquire any Indebtedness of any Borrower
or make any payment on the Existing Subordinated Debt, other than (i) the
Obligations in accordance with this Agreement, and (ii) payments and prepayments
of principal and interest on the Existing Subordinated Debt provided that (A) no
Default or Event of Default has occurred or will be caused thereby and (B) not
more than $2,400,000 from the proceeds of Advances available under
Section 2.1(a)(v) or (w) shall be used for payments or prepayments of principal
of the Existing Subordinated Debt, and (iii) Indebtedness under Permitted
Affiliate Transactions to the extent the repayment thereof is permitted by the
Intercompany Subordination Agreement, and

(b) Except in connection with a refinancing permitted by Section 7.1(d),
directly or indirectly, amend, modify, alter, increase, or change any of the
terms or conditions of any agreement, instrument, document, indenture, or other
writing evidencing or concerning Indebtedness permitted under Sections 7.1(b) or
(c).

7.9 Change of Control. Cause, permit, or suffer, directly or indirectly, any
Change of Control.

 

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7.10 Consignments. Consign any Inventory or sell any Inventory on bill and hold
(without providing prior notice to Agent thereof), sale or return, sale on
approval, or other conditional terms of sale, except for (a) Inventory with an
aggregate market value, at any point in time, not in excess of $100,000, and
(b) the consignment by the Domestic Business Unit of Inventory consisting of
accessories; provided, in the case of this clause (b), (i) the aggregate book
value of all such accessory Inventory on consignment shall not exceed $5,000,000
at any time, and (ii) prior to placing any such Inventory on consignment, the
Agent shall have received a Collateral Access Agreement from the consignee,
together with all applicable uniform commercial code notice filings and such
other documents and certificates as the Agent shall reasonably request.

7.11 Distributions. Other than distributions or declaration and payment of
dividends by a Borrower to another Borrower and payment of dividends by a
Foreign Subsidiary to another Foreign Subsidiary that is a Loan Party, or to a
Borrower, make any distribution or declare or pay any dividends (in cash or
other property, other than common Stock) on, or purchase, acquire, redeem, or
retire any Stock, of any class, whether now or hereafter outstanding of such
Person, except for the payment of Management Fees to Parent.

7.12 Accounting Methods. Modify or change its method of accounting (other than
as may be required to conform to GAAP) or enter into, modify, or terminate any
agreement currently existing, or at any time hereafter entered into with any
third party accounting firm or service bureau for the preparation or storage of
Borrowers’ accounting records without said accounting firm or service bureau
agreeing to provide Agent information regarding the Collateral or Borrowers’
financial condition.

7.13 Investments. Directly or indirectly, make or acquire any Investment, or
incur any liabilities (including contingent obligations) for or in connection
with any Investment except for (a) Permitted Investments; provided, however,
that Borrowers shall not have Permitted Investments constituting Cash
Equivalents (other than in the Cash Management Accounts) in excess of $1,000,000
outstanding at any one time unless the applicable Borrower and the applicable
securities intermediary or bank have entered into Control Agreements or similar
arrangements governing such Permitted Investments, as Agent shall determine in
its Permitted Discretion, to perfect (and further establish) the Agent’s Liens
in such Permitted Investments, (b) the ownership of the Stock of any Subsidiary
or Foreign Affiliate owned on the Closing Date, (c) the ownership of the Stock
of any wholly-owned Subsidiary created after the Closing Date; provided, if such
new Subsidiary is a Domestic Subsidiary at the time of its creation, it becomes
a Borrower hereunder by executing an amendment to this Agreement assuming all
Obligations hereunder and delivers to Agent all other documentation necessary to
grant Agent a first-priority perfected Lien on its assets and the parent of such
new Subsidiary executes and delivers a Stock Pledge Agreement to Agent pledging
the Stock of such new Subsidiary in favor of Agent, or, if such new Subsidiary
is a First Tier Foreign Subsidiary, at the time of its creation, Agent receives
a pledge of 65% of such First Tier Foreign Subsidiary’s Stock, (d) Investments
that constitute a Permitted Affiliate Transaction, and (e) advances made by any
Borrower or any Subsidiary of any Borrower to its respective officers and
employees in the ordinary course of business not to exceed $100,000 in the
aggregate outstanding at any time.

 

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7.14 Transactions with Affiliates. Directly or indirectly enter into or permit
to exist any transaction with any Affiliate of any Borrower except for
(a) transactions that are in the ordinary course of Borrowers’ or such
Subsidiary’s business, upon fair and reasonable terms, that are fully disclosed
to Agent, and that are no less favorable to Borrowers or such Subsidiary than
would be obtained in an arm’s length transaction with a non-Affiliate, or
(b) Permitted Affiliate Transactions. Notwithstanding the foregoing, Borrowers
shall not sell Eligible Inventory with a value in excess of $2,000,000 in the
aggregate in any month to Foreign Subsidiaries unless Borrowers (x) promptly
notify Agent of the occurrence of such sale and the aggregate amount of the
transaction, and (y) promptly upon the occurrence of such transaction, deduct
the aggregate amount of such Eligible Inventory sold, from the Borrowing Base.

7.15 Suspension. Suspend or go out of a substantial portion of its business
except as permitted by Section 7.3 or in connection with a Permitted
Disposition.

7.16 Intentionally Omitted.

7.17 Use of Proceeds. Use the proceeds of the Advances for any purpose other
than (a) to repay, in full or in part, the outstanding principal, accrued
interest, and accrued fees and expenses owing with respect to the Existing
Subordinated Debt, (b) to pay transactional fees, costs, and expenses incurred
in connection with this Agreement, the other Loan Documents, and the
transactions contemplated hereby and thereby and (c) other uses consistent with
the terms and conditions hereof, for its lawful and permitted purposes.
Notwithstanding the foregoing, Borrowers shall not be permitted to use Advances
to fund the repayment of the Existing Subordinated Debt unless the
Administrative Borrower shall have first delivered a Pay-Off Letter with respect
to such repayment that is in form and substance satisfactory to the Agent;
provided, however, not more than $2,400,000 from the proceeds of Advances
available under Section 2.1(a)(v) or (w) shall be used for payments or
prepayments of principal of the Existing Subordinated Debt and such amounts
shall only be available for such purpose after Borrowers shall have used all
availability created under Section 2.1(a)(x); provided, further, proceeds of
Advances available under Section 2.1(a)(x) shall not be used for any purpose
other than the payments or prepayments of principal of the Existing Subordinated
Debt.

7.18 Change in Location of Chief Executive Office; Inventory and Equipment with
Bailees. Relocate the chief executive office of any Borrower to a new location
without Administrative Borrower providing 30 days prior written notification
thereof to Agent and so long as, at the time of such written notification, the
applicable Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected the Agent’s Liens and also provides
to Agent a Collateral Access Agreement with respect to such new location. The
Inventory and Equipment shall not at any time now or hereafter be stored with a
bailee, warehouseman, or similar party without Agent’s prior written consent.

7.19 Securities Accounts. Establish or maintain any Securities Account of a
Borrower unless Agent shall have received a Control Agreement in respect of such
Securities Account. Borrowers agree to not transfer assets out of any Securities
Account; provided,

 

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however, that, so long as no Event of Default has occurred and is continuing or
would result therefrom, Borrowers may use such assets (and the proceeds thereof)
to the extent not prohibited by this Agreement.

7.20 Financial Covenants.

(a) Minimum EBITDA. Parent and its Subsidiaries, taken as a whole, shall not
permit EBITDA, measured on a quarter-end basis, to be less than the required
amount set forth in the following table for the applicable period set forth
opposite thereto:

 

Applicable Amount

  

Applicable Period

$1,500,000

   For the one fiscal quarter period ending November 30, 2005

$1,100,000

   For the two fiscal quarter period ending February 28, 2006

$1,750,000

   For the three fiscal quarter period ending May 31, 2006

$5,400,000

   For the four fiscal quarter period ending August 31, 2006

$7,500,000

   For the four fiscal quarter period ending November 30, 2006

The greater of (i) 80% of the EBITDA contained in the Projections for such
period or (ii) $7,500,000

   For the four fiscal quarter period ending February 28, 2007 and each four
fiscal quarter period ending thereafter

(b) Fixed Charge Coverage Ratio. Parent and its Subsidiaries, taken as a whole,
shall fail to maintain a Fixed Charge Coverage Ratio of at least the required
ratio set forth in the following table as of the last day of each fiscal quarter
for the applicable period set forth opposite thereto:

 

Required Ratio

  

Applicable Period

0.75:1.00

   For the one fiscal quarter period ending November 30, 2005

0.10:1.00

   For the two fiscal quarter period ending February 28, 2006

 

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Required Ratio

  

Applicable Period

0.10:1.00

   For the three fiscal quarter period ending May 31, 2006

0.90:1.00

   For the four fiscal quarter period ending August 31, 2006

1.40:1.00

   For the four fiscal quarter period ending November 30, 2006

The greater of (i) 80% of the Fixed Charge Coverage Ratio calculated for such
period based on the Projections or (ii) 1.40:1.00

   For the four fiscal quarter period ending February 28, 2007 and each four
fiscal quarter period ending thereafter

(c) Capital Expenditures. Make capital expenditures in any fiscal year in excess
of the amount set forth in the following table for the applicable period:

 

Applicable Amount

  

Applicable Period

$3,000,000

   Fiscal Year 2005

$5,000,000

   Fiscal Year 2006

$7,000,000

   Each Fiscal Year thereafter

7.21 Permitted Foreign Subsidiary Credit Facilities. Allow any Foreign
Subsidiary to enter into any credit facility that is not a Permitted Foreign
Subsidiary Credit Facility.

8. EVENTS OF DEFAULT.

Any one or more of the following events shall constitute an event of default
(each, an “Event of Default”) under this Agreement:

8.1 If Borrowers fail to pay when due and payable or when declared due and
payable, all or any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due the Lender Group,
reimbursement of Lender Group Expenses, or other amounts constituting
Obligations); provided, however, that in the case of Overadvances that are
caused by the charging of interest, fees or Lender Group Expenses to the Loan
Account, such event shall not cause an Event of Default if, within 3 Business
Days of incurring such Overadvance, Borrowers repay or otherwise eliminate such
Overadvance;

 

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8.2 (a) If Borrowers fail to perform, keep, or observe any term, provision,
condition, covenant, or agreement contained in Sections 6.2 (Collateral
Reporting), 6.3 (Financial Statements, Reports, Certificates), 6.5 (Returns),
6.9 (Location of Inventory and Equipment), or 6.10 (Compliance with Laws), and
such failure continues for a period of 3 Business Days; (b) Borrowers fail to
perform, keep, or observe any term, provision, condition, covenant, or agreement
contained in Sections 6.1 (Accounting System), 6.6 (Maintenance of Properties),
or 6.11 (Leases), and such failure continues for a period of 10 Business Days;
or (c) Borrowers fail to perform, keep, or observe any other term, provision,
condition, covenant, or agreement contained in this Agreement, in any of the
Loan Documents, or in any other present or future agreement between Borrower and
any member of the Lender Group;

8.3 If any material portion of any Loan Party’s assets is attached, seized,
subjected to a writ or distress warrant, levied upon, or comes into the
possession of any third Person;

8.4 If an Insolvency Proceeding is commenced by any Loan Party;

8.5 If an Insolvency Proceeding is commenced against any Loan Party, and any of
the following events occur: (a) the applicable Loan Party consents to the
institution of the Insolvency Proceeding against it, (b) the petition commencing
the Insolvency Proceeding is not timely controverted, (c) the petition
commencing the Insolvency Proceeding is not dismissed within 60 calendar days of
the date of the filing thereof; provided, however, that, during the pendency of
such period, Agent (including any successor agent) and each other member of the
Lender Group shall be relieved of their obligation to extend credit hereunder,
(d) an interim trustee is appointed to take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, any Loan Party, or (e) an order for relief shall
have been entered therein;

8.6 If any Loan Party is enjoined, restrained, or in any way prevented by court
order from continuing to conduct all or any material part of its business
affairs;

8.7 If a notice of Lien, levy, or assessment in excess of (a) with respect to
any Borrower, $1,000,000, and (b) with respect to any Loan Party that is a
Foreign Subsidiary, $2,500,000, either individually, or in the aggregate, is
filed of record with respect to any Loan Party’s assets by the United States, or
any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency (including a foreign governmental agency or
entity), or if any taxes or debts owing at any time hereafter to any one or more
of such entities becomes a Lien, whether choate or otherwise, upon any such
Person’s assets and the same is not paid on the payment date thereof;

8.8 If a judgment or other claim in excess of (a) with respect to any Borrower,
$1,000,000, and (b) with respect to any Loan Party that is a Foreign Subsidiary,
$2,500,000, either individually, or in the aggregate, becomes a Lien or
encumbrance upon such Person’s properties or assets;

8.9 If there is a default in any material agreement to which any (a) Borrower is
a party and such default (i) occurs prior to the final maturity of the
obligations thereunder, or (ii) results in a right by the other party thereto,
irrespective of whether exercised, to accelerate

 

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the maturity of the applicable Borrower’s obligations thereunder, to terminate
such agreement, or to refuse to renew such agreement pursuant to an automatic
renewal right therein, including, without limitation, the Existing Subordinated
Debt Documents, or (b) Loan Party is a party and such default (i) occurs prior
to the final maturity of the obligations thereunder, or (ii) results in a right
by the other party thereto, irrespective of whether exercised, to accelerate the
maturity of the applicable Loan Party’s obligations thereunder, to terminate
such agreement, or to refuse to renew such agreement pursuant to an automatic
renewal right therein, and such termination could be reasonably expected to
result in a Material Adverse Change;

8.10 If any Loan Party makes any payment on account of Indebtedness that has
been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness, including, without
limitation, the Existing Subordinated Debt Documents;

8.11 If any material misstatement or misrepresentation exists now or hereafter
in any warranty, representation, statement, or Record made to the Lender Group
by any Borrower, its Subsidiaries, or any officer, employee, agent, or director
of any Borrower or any of its Subsidiaries;

8.12 If this Agreement or any other Loan Document that purports to create a
Lien, shall, for any reason, fail or cease to create a valid and perfected and,
except to the extent permitted by the terms hereof or thereof, first priority
Lien on or security interest in the Collateral covered hereby or thereby;

8.13 Any provision of any Loan Document shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by any Borrower, or a proceeding shall be commenced by any Borrower,
or by any Governmental Authority having jurisdiction over any Borrower, seeking
to establish the invalidity or unenforceability thereof, or any Borrower shall
deny that any Borrower has any liability or obligation purported to be created
under any Loan Document; or

8.14 If there shall occur a termination of a supply agreement with any Material
Vendor, or a termination, non-renewal or suspension of any Management Agreement
or any Subsidiary is enjoined, restrained or otherwise prevented from, or fails
or otherwise refuses to pay any Management Fees, unless such termination,
non-renewal, cancellation or non-payment could not reasonably be expected to
have a Material Adverse Effect.

9. THE LENDER GROUP’S RIGHTS AND REMEDIES.

9.1 Rights and Remedies. Upon the occurrence, and during the continuation, of an
Event of Default, the Required Lenders (at their election but without notice of
their election and without demand) may authorize and instruct Agent to do any
one or more of the following on behalf of the Lender Group (and Agent, acting
upon the instructions of the Required Lenders, shall do the same on behalf of
the Lender Group), all of which are authorized by Borrowers:

(a) Declare all Obligations, whether evidenced by this Agreement, by any of the
other Loan Documents, or otherwise, immediately due and payable;

 

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(b) Cease advancing money or extending credit to or for the benefit of Borrowers
under this Agreement, under any of the Loan Documents, or under any other
agreement between Borrowers and the Lender Group;

(c) Terminate this Agreement and any of the other Loan Documents as to any
future liability or obligation of the Lender Group, but without affecting any of
the Agent’s Liens in the Collateral and without affecting the Obligations;

(d) Settle or adjust disputes and claims directly with Account Debtors for
amounts and upon terms which Agent considers advisable, and in such cases, Agent
will credit the Loan Account with only the net amounts received by Agent in
payment of such disputed Accounts after deducting all Lender Group Expenses
incurred or expended in connection therewith;

(e) Cause Borrowers to hold all returned Inventory in trust for the Lender
Group, segregate all returned Inventory from all other assets of Borrowers or in
Borrowers’ possession and conspicuously label said returned Inventory as the
property of the Lender Group;

(f) Without notice to or demand upon any Borrower, make such payments and do
such acts as Agent considers necessary or reasonable to protect its security
interests in the Collateral. Each Borrower agrees to assemble the Personal
Property Collateral if Agent so requires, and to make the Personal Property
Collateral available to Agent at a place that Agent may designate which is
reasonably convenient to both parties. Each Borrower authorizes Agent to enter
the premises where the Personal Property Collateral is located, to take and
maintain possession of the Personal Property Collateral, or any part of it, and
to pay, purchase, contest, or compromise any Lien that in Agent’s determination
appears to conflict with the Agent’s Liens and to pay all expenses incurred in
connection therewith and to charge Borrowers’ Loan Account therefor. With
respect to any of Borrowers’ owned or leased premises, each Borrower hereby
grants Agent a license to enter into possession of such premises and to occupy
the same, without charge, in order to exercise any of the Lender Group’s rights
or remedies provided herein, at law, in equity, or otherwise;

(g) Without notice to any Borrower (such notice being expressly waived), and
without constituting a retention of any collateral in satisfaction of an
obligation (within the meaning of the Code), set off and apply to the
Obligations any and all (i) balances and deposits of any Borrower held by the
Lender Group (including any amounts received in the Cash Management Accounts),
or (ii) Indebtedness at any time owing to or for the credit or the account of
any Borrower held by the Lender Group;

(h) Hold, as cash collateral, any and all balances and deposits of any Borrower
held by the Lender Group, and any amounts received in the Cash Management
Accounts, to secure the full and final repayment of all of the Obligations;

(i) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell (in the manner provided for herein) the Personal
Property Collateral.

 

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Each Borrower hereby grants to Agent a license or other right to use, without
charge, such Borrower’s labels, patents, copyrights, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Personal Property Collateral, in completing
production of, advertising for sale, and selling any Personal Property
Collateral and such Borrower’s rights under all licenses and all franchise
agreements shall inure to the Lender Group’s benefit;

(j) Sell the Personal Property Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrowers’ premises) as Agent
determines is commercially reasonable. It is not necessary that the Personal
Property Collateral be present at any such sale;

(k) Agent shall give notice of the disposition of the Personal Property
Collateral as follows:

(i) Agent shall give Administrative Borrower (for the benefit of the applicable
Borrower) a notice in writing of the time and place of public sale, or, if the
sale is a private sale or some other disposition other than a public sale is to
be made of the Personal Property Collateral, the time on or after which the
private sale or other disposition is to be made; and

(ii) The notice shall be personally delivered or mailed, postage prepaid, to
Administrative Borrower as provided in Section 12, at least 10 days before the
earliest time of disposition set forth in the notice; no notice needs to be
given prior to the disposition of any portion of the Personal Property
Collateral that is perishable or threatens to decline speedily in value or that
is of a type customarily sold on a recognized market;

(l) Agent, on behalf of the Lender Group may credit bid and purchase at any
public sale;

(m) Agent may seek the appointment of a receiver or keeper to take possession of
all or any portion of the Collateral or to operate same and, to the maximum
extent permitted by law, may seek the appointment of such a receiver without the
requirement of prior notice or a hearing;

(n) The Lender Group shall have all other rights and remedies available to it at
law or in equity pursuant to any other Loan Documents; and

(o) Any deficiency that exists after disposition of the Personal Property
Collateral as provided above and the Real Property in accordance with applicable
law will be paid immediately by Borrowers. Any excess will be returned, without
interest and subject to the rights of third Persons, by Agent to Administrative
Borrower (for the benefit of the applicable Borrower).

9.2 Remedies Cumulative. The rights and remedies of the Lender Group under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided

 

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under the Code, by law, or in equity. No exercise by the Lender Group of one
right or remedy shall be deemed an election, and no waiver by the Lender Group
of any Event of Default shall be deemed a continuing waiver. No delay by the
Lender Group shall constitute a waiver, election, or acquiescence by it.

10. TAXES AND EXPENSES.

If any Borrower fails to pay any monies (whether taxes, assessments, insurance
premiums, or, in the case of leased properties or assets, rents or other amounts
payable under such leases) due to third Persons, or fails to make any deposits
or furnish any required proof of payment or deposit, all as required under the
terms of this Agreement, then, Agent, in its sole discretion and without prior
notice to any Borrower, may do any or all of the following: (a) make payment of
the same or any part thereof, (b) set up such reserves in Borrowers’ Loan
Account as Agent deems necessary to protect the Lender Group from the exposure
created by such failure, or (c) in the case of the failure to comply with
Section 6.8 hereof, obtain and maintain insurance policies of the type described
in Section 6.8 and take any action with respect to such policies as Agent deems
prudent. Any such amounts paid by Agent shall constitute Lender Group Expenses
and any such payments shall not constitute an agreement by the Lender Group to
make similar payments in the future or a waiver by the Lender Group of any Event
of Default under this Agreement. Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.

11. WAIVERS; INDEMNIFICATION.

11.1 Demand; Protest; etc. Each Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by the
Lender Group on which any such Borrower may in any way be liable.

11.2 The Lender Group’s Liability for Collateral. Each Borrower hereby agrees
that: (a) so long as the Lender Group complies with its obligations, if any,
under the Code, Agent shall not in any way or manner be liable or responsible
for: (i) the safekeeping of the Collateral, (ii) any loss or damage thereto
occurring or arising in any manner or fashion from any cause, (iii) any
diminution in the value thereof, or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of
loss, damage, or destruction of the Collateral shall be borne by Borrowers.

11.3 Indemnification. Each Borrower shall pay, indemnify, defend, and hold the
Agent-Related Persons, the Lender-Related Persons with respect to each Lender,
each Participant, and each of their respective officers, directors, employees,
agents, and attorneys-in-fact (each, an “Indemnified Person”) harmless (to the
fullest extent permitted by law) from and against any and all claims, demands,
suits, actions, investigations, proceedings, and damages, and all reasonable
attorneys fees and disbursements and other costs and expenses actually incurred
in connection therewith (as and when they are incurred and irrespective of
whether suit is brought), at any time asserted against, imposed upon, or
incurred by any of

 

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them (a) in connection with or as a result of or related to the execution,
delivery, enforcement, performance, or administration of this Agreement, any of
the other Loan Documents, or the transactions contemplated hereby or thereby,
and (b) with respect to any investigation, litigation, or proceeding related to
this Agreement, any other Loan Document, or the use of the proceeds of the
credit provided hereunder (irrespective of whether any Indemnified Person is a
party thereto), or any act, omission, event, or circumstance in any manner
related thereto (all the foregoing, collectively, the “Indemnified
Liabilities”). The foregoing to the contrary notwithstanding, Borrowers shall
have no obligation to any Indemnified Person under this Section 11.3 with
respect to any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful
misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrowers were required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrowers
with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO
EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE
OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

12. NOTICES.

Unless otherwise provided in this Agreement, all notices or demands by Borrowers
or Agent to the other relating to this Agreement or any other Loan Document
shall be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be
personally delivered or sent by registered or certified mail (postage prepaid,
return receipt requested), overnight courier, electronic mail (at such email
addresses as Administrative Borrower or Agent, as applicable, may designate to
each other in accordance herewith), or telefacsimile to Borrowers in care of
Administrative Borrower or to Agent, as the case may be, at its address set
forth below:

 

If to Administrative Borrower:    CELLSTAR CORPORATION    601 S. Royal Lane   
Coppell, Texas 75019    Attn: Elaine Rodriguez, Esq.    Fax No. (972) 462-3566
with copies to:    HAYNES AND BOONE, LLP    901 Main St., Suite 3100    Dallas,
Texas 75202    Attn: Paul H. Amiel, Esq.    Fax No. (214) 200-0555

 

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If to Agent:    WELLS FARGO FOOTHILL, INC.    1000 Abernathy Rd., N.E., Suite
1450    Atlanta, Georgia 30328    Attn: Business Finance Division Manager    Fax
No. (770) 508-1374 with copies to:    WELLS FARGO FOOTHILL, INC.    2450
Colorado Avenue, Suite 3000W    Santa Monica, California 90404    Attn: Business
Finance Division Manager    Fax No. (310) 453-7413 and copies to:    PAUL,
HASTINGS, JANOFSKY & WALKER LLP    600 Peachtree Street, N.E., Suite 2400   
Atlanta, Georgia 30308    Attn: Cindy J. K. Davis, Esq.    Fax No. (404)
815-2424

Agent and Borrowers may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other
party. All notices or demands sent in accordance with this Section 12, other
than notices by Agent in connection with enforcement rights against the
Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or 3 Business Days after the deposit
thereof in the mail. Each Borrower acknowledges and agrees that notices sent by
the Lender Group in connection with the exercise of enforcement rights against
Collateral under the provisions of the Code shall be deemed sent when deposited
in the mail or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.

13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH
OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO
ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL
BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF GEORGIA.

(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN
THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF FULTON, STATE OF GEORGIA,
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH

 

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COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND THE LENDER GROUP WAIVE,
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).

BORROWERS AND THE LENDER GROUP HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWERS
AND THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.

14.1 Assignments and Participations.

(a) Any Lender may, with the written consent of Agent (provided that no written
consent of Agent shall be required in connection with any assignment and
delegation by a Lender to an Eligible Transferee), assign and delegate to one or
more assignees (each an “Assignee”) all, or any ratable part of all, of the
Obligations, the Commitments and the other rights and obligations of such Lender
hereunder and under the other Loan Documents, in a minimum amount of $5,000,000;
provided, however, that Borrowers and Agent may continue to deal solely and
directly with such Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses, and related information with respect to the Assignee,
have been given to Administrative Borrower and Agent by such Lender and the
Assignee, (ii) such Lender and its Assignee have delivered to Administrative
Borrower and Agent an Assignment and Acceptance in form and substance
satisfactory to Agent, and (iii) the assignor Lender or Assignee has paid to
Agent for Agent’s separate account a processing fee in the amount of $5,000.
Anything contained herein to the contrary notwithstanding, the consent of Agent
shall not be required (and payment of any fees shall not be required) if such
assignment is in connection with any merger, consolidation, sale, transfer, or
other disposition of all or any substantial portion of the business or loan
portfolio of such Lender.

(b) From and after the date that Agent notifies the assignor Lender (with a copy
to Administrative Borrower) that it has received an executed Assignment and
Acceptance and payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations

 

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hereunder have been assigned to it pursuant to such Assignment and Acceptance,
shall have the rights and obligations of a Lender under the Loan Documents, and
(ii) the assignor Lender shall, to the extent that rights and obligations
hereunder and under the other Loan Documents have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights (except with respect to
Section 11.3 hereof) and be released from its obligations under this Agreement
(and in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender’s rights and obligations under this Agreement and
the other Loan Documents, such Lender shall cease to be a party hereto and
thereto), and such assignment shall affect a novation between Borrowers and the
Assignee.

(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the Assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (1) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other Loan Document furnished pursuant hereto,
(2) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrowers or the
performance or observance by Borrowers of any of their obligations under this
Agreement or any other Loan Document furnished pursuant hereto, (3) such
Assignee confirms that it has received a copy of this Agreement, together with
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance,
(4) such Assignee will, independently and without reliance upon Agent, such
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement, (5) such
Assignee appoints and authorizes Agent to take such actions and to exercise such
powers under this Agreement as are delegated to Agent, by the terms hereof,
together with such powers as are reasonably incidental thereto, and (6) such
Assignee agrees that it will perform all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.

(d) Immediately upon each Assignee’s making its processing fee payment under the
Assignment and Acceptance and receipt and acknowledgment by Agent of such fully
executed Assignment and Acceptance, this Agreement shall be deemed to be amended
to the extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Commitments arising therefrom. The
Commitment allocated to each Assignee shall reduce such Commitments of the
assigning Lender pro tanto.

(e) Any Lender may at any time, with the written consent of Agent, sell to one
or more commercial banks, financial institutions, or other Persons not
Affiliates of such Lender (a “Participant”) participating interests in its
Obligations, the Commitment, and the other rights and interests of that Lender
(the “Originating Lender”) hereunder and under the other Loan Documents
(provided that no written consent of Agent shall be required in connection with
any sale of any such participating interests by a Lender to an Eligible
Transferee); provided, however, that (i) the Originating Lender shall remain a
“Lender” for all purposes of this Agreement and the other Loan Documents and the
Participant receiving the participating interest in the Obligations, the
Commitments, and the other rights and interests of the Originating Lender
hereunder shall not constitute a “Lender” hereunder or under the other Loan
Documents and the Originating Lender’s obligations under this Agreement shall
remain unchanged, (ii) the

 

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Originating Lender shall remain solely responsible for the performance of such
obligations, (iii) Borrowers, Agent, and the Lenders shall continue to deal
solely and directly with the Originating Lender in connection with the
Originating Lender’s rights and obligations under this Agreement and the other
Loan Documents, (iv) no Lender shall transfer or grant any participating
interest under which the Participant has the right to approve any amendment to,
or any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment to, or consent or waiver with
respect to this Agreement or of any other Loan Document would (A) extend the
final maturity date of the Obligations hereunder in which such Participant is
participating, (B) reduce the interest rate applicable to the Obligations
hereunder in which such Participant is participating, (C) release all or a
material portion of the Collateral or guaranties (except to the extent expressly
provided herein or in any of the Loan Documents) supporting the Obligations
hereunder in which such Participant is participating, (D) postpone the payment
of, or reduce the amount of, the interest or fees payable to such Participant
through such Lender, or (E) change the amount or due dates of scheduled
principal repayments or prepayments or premiums; and (v) all amounts payable by
Borrowers hereunder shall be determined as if such Lender had not sold such
participation; except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement. The rights of any Participant only shall be derivative through the
Originating Lender with whom such Participant participates and no Participant
shall have any rights under this Agreement or the other Loan Documents or any
direct rights as to the other Lenders, Agent, Borrowers, the Collections, the
Collateral, or otherwise in respect of the Obligations. No Participant shall
have the right to participate directly in the making of decisions by the Lenders
among themselves.

(f) In connection with any such assignment or participation or proposed
assignment or participation, a Lender may disclose all documents and information
which it now or hereafter may have relating to Borrowers or Borrowers’ business.

(g) Any other provision in this Agreement notwithstanding, any Lender may at any
time create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement in favor of any Federal Reserve Bank in
accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury
Regulation 31 CFR §203.14, and such Federal Reserve Bank may enforce such pledge
or security interest in any manner permitted under applicable law.

14.2 Successors. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that Borrowers may not assign this Agreement or any rights or duties hereunder
without the Lenders’ prior written consent and any prohibited assignment shall
be absolutely void ab initio. No consent to assignment by the Lenders shall
release any Borrower from its Obligations. A Lender may assign this Agreement
and the other Loan Documents and its rights and duties hereunder and thereunder
pursuant to Section 14.1 hereof and, except as expressly required pursuant to
Section 14.1 hereof, no consent or approval by any Borrower is required in
connection with any such assignment.

 

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15. AMENDMENTS; WAIVERS.

15.1 Amendments and Waivers. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent with respect to any
departure by Borrowers therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by Agent at the written request
of the Required Lenders) and Administrative Borrower (on behalf of all
Borrowers) and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing and
signed by all of the Lenders affected thereby and Administrative Borrower (on
behalf of all Borrowers) and acknowledged by Agent, do any of the following:

(a) increase or extend any Commitment of any Lender,

(b) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees, or other amounts due
hereunder or under any other Loan Document,

(c) reduce the principal of, or the rate of interest on, any loan or other
extension of credit hereunder, or reduce any fees or other amounts payable
hereunder or under any other Loan Document,

(d) change the percentage of the Commitments that is required to take any action
hereunder,

(e) amend or modify this Section or any provision of the Agreement providing for
consent or other action by all Lenders,

(f) release Collateral other than as permitted by Section 16.12,

(g) change the definition of “Required Lenders” or “Pro Rata Share”,

(h) contractually subordinate any of the Agent’s Liens,

(i) release any Borrower from any obligation for the payment of money, or

(j) change the definition of Borrowing Base or the definitions of Eligible
Accounts, Eligible Domestic Accounts, Eligible Foreign Accounts, Eligible
Inventory, Maximum Revolver Amount, or change Section 2.1(b) or Section 2.4(b);
or

(k) amend any of the provisions of Section 16.

and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, Issuing Lender, or Swing Lender, affect
the rights or duties of Agent, Issuing Lender, or Swing Lender, as applicable,
under this Agreement or any other Loan Document. The foregoing notwithstanding,
any amendment, modification, waiver, consent,

 

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termination, or release of, or with respect to, any provision of this Agreement
or any other Loan Document that relates only to the relationship of the Lender
Group among themselves, and that does not affect the rights or obligations of
Borrowers, shall not require consent by or the agreement of Borrowers.

15.2 Replacement of Holdout Lender. If any action to be taken by the Lender
Group or Agent hereunder requires the unanimous consent, authorization, or
agreement of all Lenders, and a Lender (“Holdout Lender”) fails to give its
consent, authorization, or agreement, then Agent, upon at least 5 Business Days
prior irrevocable notice to the Holdout Lender, may permanently replace the
Holdout Lender with one or more substitute Lenders (each, a “Replacement
Lender”), and the Holdout Lender shall have no right to refuse to be replaced
hereunder. Such notice to replace the Holdout Lender shall specify an effective
date for such replacement, which date shall not be later than 15 Business Days
after the date such notice is given.

Prior to the effective date of such replacement, the Holdout Lender and each
Replacement Lender shall execute and deliver an Assignment and Acceptance
Agreement, subject only to the Holdout Lender being repaid its share of the
outstanding Obligations (including an assumption of its Pro Rata Share of the
Risk Participation Liability) without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver
any such Assignment and Acceptance Agreement prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Assignment and Acceptance Agreement. The replacement of any Holdout Lender
shall be made in accordance with the terms of Section 14.1. Until such time as
the Replacement Lenders shall have acquired all of the Obligations, the
Commitments, and the other rights and obligations of the Holdout Lender
hereunder and under the other Loan Documents, the Holdout Lender shall remain
obligated to make the Holdout Lender’s Pro Rata Share of Advances and to
purchase a participation in each Letter of Credit, in an amount equal to its Pro
Rata Share of the Risk Participation Liability of such Letter of Credit.

15.3 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to
exercise any right, remedy, or option under this Agreement or, any other Loan
Document, or delay by Agent or any Lender in exercising the same, will operate
as a waiver thereof. No waiver by Agent or any Lender will be effective unless
it is in writing, and then only to the extent specifically stated. No waiver by
Agent or any Lender on any occasion shall affect or diminish Agent’s and each
Lender’s rights thereafter to require strict performance by Borrowers of any
provision of this Agreement. Agent’s and each Lender’s rights under this
Agreement and the other Loan Documents will be cumulative and not exclusive of
any other right or remedy that Agent or any Lender may have.

16. AGENT; THE LENDER GROUP.

16.1 Appointment and Authorization of Agent. Each Lender hereby designates and
appoints Foothill as its representative under this Agreement and the other Loan
Documents and each Lender hereby irrevocably authorizes Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
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terms of this Agreement or any other Loan Document, together with such powers as
are reasonably incidental thereto. Agent agrees to act as such on the express
conditions contained in this Section 16. The provisions of this Section 16 are
solely for the benefit of Agent, and the Lenders, and Borrowers shall have no
rights as a third party beneficiary of any of the provisions contained herein.
Any provision to the contrary contained elsewhere in this Agreement or in any
other Loan Document notwithstanding, Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall Agent have
or be deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against Agent; it being expressly understood and agreed that the use of the word
“Agent” is for convenience only, that Foothill is merely the representative of
the Lenders, and only has the contractual duties set forth herein. Except as
expressly otherwise provided in this Agreement, Agent shall have and may use its
sole discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions that Agent
expressly is entitled to take or assert under or pursuant to this Agreement and
the other Loan Documents. Without limiting the generality of the foregoing, or
of any other provision of the Loan Documents that provides rights or powers to
Agent, Lenders agree that Agent shall have the right to exercise the following
powers as long as this Agreement remains in effect: (a) maintain, in accordance
with its customary business practices, ledgers and records reflecting the status
of the Obligations, the Collateral, the Collections, and related matters,
(b) execute or file any and all financing or similar statements or notices,
amendments, renewals, supplements, documents, instruments, proofs of claim,
notices and other written agreements with respect to the Loan Documents,
(c) make Advances, for itself or on behalf of Lenders as provided in the Loan
Documents, (d) exclusively receive, apply, and distribute the Collections as
provided in the Loan Documents, (e) open and maintain such bank accounts and
cash management accounts as Agent deems necessary and appropriate in accordance
with the Loan Documents for the foregoing purposes with respect to the
Collateral and the Collections, (f) perform, exercise, and enforce any and all
other rights and remedies of the Lender Group with respect to Borrowers, the
Obligations, the Collateral, the Collections, or otherwise related to any of
same as provided in the Loan Documents, and (g) incur and pay such Lender Group
Expenses as Agent may deem necessary or appropriate for the performance and
fulfillment of its functions and powers pursuant to the Loan Documents.

16.2 Delegation of Duties. Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.

16.3 Liability of Agent. None of the Agent-Related Persons shall (i) be liable
for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by any Borrower or any Subsidiary or
Affiliate of any Borrower, or any officer or director thereof, contained

 

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in this Agreement or in any other Loan Document, 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 other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of any Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall 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 other Loan
Document, or to inspect the Books or properties of Borrowers or the books or
records or properties of any of Borrowers’ Subsidiaries or Affiliates.

16.4 Reliance by Agent. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrowers
or counsel to any Lender), independent accountants and other experts selected by
Agent. Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless Agent shall first receive
such advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by Lenders against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action. Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Loan Document in accordance with a request or
consent of the requisite Lenders and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the Lenders.

16.5 Notice of Default or Event of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Agent for the account of the Lenders, except
with respect to Events of Default of which Agent has actual knowledge, unless
Agent shall have received written notice from a Lender or Administrative
Borrower referring to this Agreement, describing such Default or Event of
Default, and stating that such notice is a “notice of default.” Agent promptly
will notify the Lenders of its receipt of any such notice or of any Event of
Default of which Agent has actual knowledge. If any Lender obtains actual
knowledge of any Event of Default, such Lender promptly shall notify the other
Lenders and Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to
Section 16.4, Agent shall take such action with respect to such Default or Event
of Default as may be requested by the Required Lenders in accordance with
Section 9; provided, however, that unless and until Agent has received any such
request, 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.

16.6 Credit Decision. Each Lender acknowledges that none of the Agent-Related
Persons has made any representation or warranty to it, and that no act by Agent

 

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hereinafter taken, including any review of the affairs of Borrowers and their
Subsidiaries or Affiliates, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of
Borrowers and any other Person (other than the Lender Group) party to a Loan
Document, and all applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to Borrowers. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrowers and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.

16.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender Group
Expenses to the extent Agent reasonably deems necessary or appropriate for the
performance and fulfillment of its functions, powers, and obligations pursuant
to the Loan Documents, including court costs, reasonable attorneys fees and
expenses, costs of collection by outside collection agencies and auctioneer fees
and costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not Borrowers are obligated to reimburse Agent or Lenders
for such expenses pursuant to the Loan Agreement or otherwise. Agent is
authorized and directed to deduct and retain sufficient amounts from Collections
received by Agent to reimburse Agent for such out-of-pocket costs and expenses
prior to the distribution of any amounts to Lenders. In the event Agent is not
reimbursed for such costs and expenses from Collections received by Agent, each
Lender hereby agrees that it is and shall be obligated to pay to or reimburse
Agent for the amount of such Lender’s Pro Rata Share thereof. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (to the extent not reimbursed by or on
behalf of Borrowers and without limiting the obligation of Borrowers to do so),
according to their Pro Rata Shares, from and against any and all Indemnified
Liabilities; provided, however, that no Lender shall be liable for the payment
to any Agent-Related Person of any portion of such Indemnified Liabilities
resulting solely from such Person’s gross negligence or willful misconduct nor
shall any Lender be liable for the obligations of any Defaulting Lender in
failing to make an Advance or other extension of credit hereunder. Without
limitation of the foregoing, each Lender shall reimburse Agent upon demand for
such Lender’s ratable share of any costs or out-of-pocket expenses (including
attorneys fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
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of rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that Agent is
not reimbursed for such expenses by or on behalf of Borrowers. The undertaking
in this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Agent.

16.8 Agent in Individual Capacity. Foothill and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from, acquire
equity interests in, and generally engage in any kind of banking, trust,
financial advisory, underwriting, or other business with Borrowers and their
Subsidiaries and Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents as though Foothill were not Agent hereunder, and, in
each case, without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that, pursuant to such
activities, Foothill or its Affiliates may receive information regarding
Borrowers or their Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents that is subject to confidentiality obligations in
favor of Borrowers or such other Person and that prohibit the disclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall not be under any obligation to provide such information to them. The
terms “Lender” and “Lenders” include Foothill in its individual capacity.

16.9 Successor Agent. Agent may resign as Agent upon 45 days notice to the
Lenders. If Agent resigns under this Agreement, the Required Lenders shall
appoint a successor Agent for the Lenders. If no successor Agent is appointed
prior to the effective date of the resignation of Agent, Agent may appoint,
after consulting with the Lenders, a successor Agent. If Agent has materially
breached or failed to perform any material provision of this Agreement or of
applicable law, the Required Lenders may agree in writing to remove and replace
Agent with a successor Agent from among the Lenders. In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor Agent
shall succeed to all the rights, powers, and duties of the retiring Agent and
the term “Agent” shall mean such successor Agent and the retiring Agent’s
appointment, powers, and duties as Agent shall be terminated. After any retiring
Agent’s resignation hereunder as Agent, the provisions of this Section 16 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor Agent has accepted
appointment as Agent by the date which is 45 days following a retiring Agent’s
notice of resignation, the retiring Agent’s resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
Agent hereunder until such time, if any, as the Lenders appoint a successor
Agent as provided for above.

16.10 Lender in Individual Capacity. Any Lender and its respective Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with Borrowers and
their Subsidiaries and Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents as though such Lender were not a Lender
hereunder without notice to or consent of the other members of the Lender Group.
The other members of the Lender Group acknowledge that, pursuant to such

 

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activities, such Lender and its respective Affiliates may receive information
regarding Borrowers or their Affiliates and any other Person (other than the
Lender Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrowers or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender not shall be under any obligation to provide such
information to them. With respect to the Swing Loans and Agent Advances, Swing
Lender shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the sub-agent of the
Agent.

16.11 Withholding Taxes.

(a) If any Lender is a “foreign corporation, partnership or trust” within the
meaning of the IRC and such Lender claims exemption from, or a reduction of,
U.S. withholding tax under Sections 1441 or 1442 of the IRC, such Lender agrees
with and in favor of Agent and Borrowers, to deliver to Agent and Administrative
Borrower:

(i) if such Lender claims an exemption from withholding tax pursuant to its
portfolio interest exception, (a) a statement of the Lender, signed under
penalty of perjury, that it is not a (I) a “bank” as described in
Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder (within the meaning of
Section 881(c)(3)(B) of the IRC), or (III) a controlled foreign corporation
described in Section 881(c)(3)(C) of the IRC, and (B) a properly completed IRS
Form W-8BEN, before the first payment of any interest under this Agreement and
at any other time reasonably requested by Agent or Administrative Borrower;

(ii) if such Lender claims an exemption from, or a reduction of, withholding tax
under a United States tax treaty, properly completed IRS Form W-8BEN before the
first payment of any interest under this Agreement and at any other time
reasonably requested by Agent or Administrative Borrower;

(iii) if such Lender claims that interest paid under this Agreement is exempt
from United States withholding tax because it is effectively connected with a
United States trade or business of such Lender, two properly completed and
executed copies of IRS Form W-8ECI before the first payment of any interest is
due under this Agreement and at any other time reasonably requested by Agent or
Administrative Borrower;

(iv) such other form or forms as may be required under the IRC or other laws of
the United States as a condition to exemption from, or reduction of, United
States withholding tax.

Such Lender agrees promptly to notify Agent and Administrative Borrower of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.

 

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(b) If any Lender claims exemption from, or reduction of, withholding tax under
a United States tax treaty by providing IRS Form W-8BEN and such Lender sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of Borrowers to such Lender, such Lender agrees to notify Agent of
the percentage amount in which it is no longer the beneficial owner of
Obligations of Borrowers to such Lender. To the extent of such percentage
amount, Agent will treat such Lender’s IRS Form W-8BEN as no longer valid.

(c) If any Lender is entitled to a reduction in the applicable withholding tax,
Agent may withhold from any interest payment to such Lender an amount equivalent
to the applicable withholding tax after taking into account such reduction. If
the forms or other documentation required by subsection (a) of this Section are
not delivered to Agent, then Agent may withhold from any interest payment to
such Lender not providing such forms or other documentation an amount equivalent
to the applicable withholding tax.

(d) If the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that Agent did not properly withhold tax from
amounts paid to or for the account of any Lender (because the appropriate form
was not delivered, was not properly executed, or because such Lender failed to
notify Agent of a change in circumstances which rendered the exemption from, or
reduction of, withholding tax ineffective, or for any other reason) such Lender
shall indemnify and hold Agent harmless for all amounts paid, directly or
indirectly, by Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to Agent
under this Section, together with all costs and expenses (including attorneys
fees and expenses). The obligation of the Lenders under this subsection shall
survive the payment of all Obligations and the resignation or replacement of
Agent.

(e) All payments made by Borrowers hereunder or under any note or other Loan
Document will be made without setoff, counterclaim, or other defense, except as
required by applicable law other than for Taxes (as defined below). All such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction
(other than the United States) or by any political subdivision or taxing
authority thereof or therein (other than of the United States) with respect to
such payments (but excluding, any tax imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein (i) measured by or
based on the net income or net profits of a Lender, or (ii) to the extent that
such tax results from a change in the circumstances of the Lender, including a
change in the residence, place of organization, or principal place of business
of the Lender, or a change in the branch or lending office of the Lender
participating in the transactions set forth herein) and all interest, penalties
or similar liabilities with respect thereto (all such non-excluded taxes,
levies, imposts, duties, fees, assessments or other charges being referred to
collectively as “Taxes”). If any Taxes are so levied or imposed, each Borrower
agrees to pay the full amount of such Taxes, and such additional amounts as may
be necessary so that every payment of all amounts due under this Agreement or
under any note, including any amount paid pursuant to this Section 16.11(e)
after withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein; provided, however, that Borrowers shall not
be required to increase any such amounts payable to Agent or any Lender (i) that
is not organized under the laws of the United States, if such Person fails to
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Section 16.11, or (ii) if the increase in such amount payable results from
Agent’s or such Lender’s own willful misconduct or gross negligence. Borrowers
will furnish to Agent as promptly as possible after the date the payment of any
Taxes is due pursuant to applicable law certified copies of tax receipts
evidencing such payment by Borrowers.

16.12 Collateral Matters.

(a) The Lenders hereby irrevocably authorize Agent, at its option and in its
sole discretion, to release any Lien on any Collateral (i) upon the termination
of the Commitments and payment and satisfaction in full by Borrowers of all
Obligations, (ii) constituting property being sold or disposed of if a release
is required or desirable in connection therewith and if Administrative Borrower
certifies to Agent that the sale or disposition is permitted under Section 7.4
of this Agreement or the other Loan Documents (and Agent may rely conclusively
on any such certificate, without further inquiry), (iii) constituting property
in which no Borrower owned any interest at the time the security interest was
granted or at any time thereafter, or (iv) constituting property leased to a
Borrower under a lease that has expired or is terminated in a transaction
permitted under this Agreement. Except as provided above, Agent will not execute
and deliver a release of any Lien on any Collateral without the prior written
authorization of (y) if the release is of all or substantially all of the
Collateral, all of the Lenders, or (z) otherwise, the Required Lenders. Upon
request by Agent or Administrative Borrower at any time, the Lenders will
confirm in writing Agent’s authority to release any such Liens on particular
types or items of Collateral pursuant to this Section 16.12; provided, however,
that (1) Agent shall not be required to execute any document necessary to
evidence such release on terms that, in Agent’s opinion, would expose Agent to
liability or create any obligation or entail any consequence other than the
release of such Lien without recourse, representation, or warranty, and (2) such
release shall not in any manner discharge, affect, or impair the Obligations or
any Liens (other than those expressly being released) upon (or obligations of
Borrowers in respect of) all interests retained by Borrowers, including, the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.

(b) Agent shall have no obligation whatsoever to any of the Lenders to assure
that the Collateral exists or is owned by Borrowers or is cared for, protected,
or insured or has been encumbered, or that the Agent’s Liens have been properly
or sufficiently or lawfully created, perfected, protected, or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
Agent pursuant to any of the Loan Documents, it being understood and agreed that
in respect of the Collateral, or any act, omission, or event related thereto,
subject to the terms and conditions contained herein, Agent may act in any
manner it may deem appropriate, in its sole discretion given Agent’s own
interest in the Collateral in its capacity as one of the Lenders and that Agent
shall have no other duty or liability whatsoever to any Lender as to any of the
foregoing, except as otherwise provided herein.

16.13 Restrictions on Actions by Lenders; Sharing of Payments.

(a) 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
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off against the Obligations, any amounts owing by such Lender to Borrowers or
any deposit accounts of Borrowers now or hereafter maintained with such Lender.
Each of the Lenders further agrees that it shall not, unless specifically
requested to do so by Agent, take or cause to be taken any action, including,
the commencement of any legal or equitable proceedings, to foreclose any Lien
on, or otherwise enforce any security interest in, any of the Collateral the
purpose of which is, or could be, to give such Lender any preference or priority
against the other Lenders with respect to the Collateral.

(b) If, at any time or times any Lender shall receive (i) by payment,
foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments
with respect to the Obligations arising under, or relating to, this Agreement or
the other Loan Documents, except for any such proceeds or payments received by
such Lender from Agent pursuant to the terms of this Agreement, or (ii) payments
from Agent in excess of such Lender’s ratable portion of all such distributions
by Agent, such Lender promptly shall (1) turn the same over to Agent, in kind,
and with such endorsements as may be required to negotiate the same to Agent, or
in immediately available funds, as applicable, for the account of all of the
Lenders and for application to the Obligations in accordance with the applicable
provisions of this Agreement, or (2) purchase, without recourse or warranty, an
undivided interest and participation in the Obligations owed to the other
Lenders so that such excess payment received shall be applied ratably as among
the Lenders in accordance with their Pro Rata Shares; provided, however, that if
all or part of such excess payment received by the purchasing party is
thereafter recovered from it, those purchases of participations shall be
rescinded in whole or in part, as applicable, and the applicable portion of the
purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.

16.14 Agency for Perfection. Agent hereby appoints each other Lender as its
agent (and each Lender hereby accepts such appointment) for the purpose of
perfecting the Agent’s Liens in assets which, in accordance with Article 9 of
the UCC can be perfected only by possession. Should any Lender obtain possession
of any such Collateral, such Lender shall notify Agent thereof, and, promptly
upon Agent’s request therefor shall deliver such Collateral to Agent or in
accordance with Agent’s instructions.

16.15 Payments by Agent to the Lenders. All payments to be made by Agent to the
Lenders shall be made by bank wire transfer or internal transfer of immediately
available funds pursuant to such wire transfer instructions as each party may
designate for itself by written notice to Agent. Concurrently with each such
payment, Agent shall identify whether such payment (or any portion thereof)
represents principal, premium, or interest of the Obligations.

16.16 Concerning the Collateral and Related Loan Documents. Each member of the
Lender Group authorizes and directs Agent to enter into this Agreement and the
other Loan Documents relating to the Collateral, for the benefit of the Lender
Group. Each member of the Lender Group agrees that any action taken by Agent in
accordance with the terms of this Agreement or the other Loan Documents relating
to the Collateral and the exercise by Agent of its powers set forth therein or
herein, together with such other powers that are reasonably incidental thereto,
shall be binding upon all of the Lenders.

 

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16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by
Lenders; Other Reports and Information. By becoming a party to this Agreement,
each Lender:

(a) is deemed to have requested that Agent furnish such Lender, promptly after
it becomes available, a copy of each field audit or examination report (each a
“Report” and collectively, “Reports”) prepared by Agent, and Agent shall so
furnish each Lender with such Reports,

(b) expressly agrees and acknowledges that Agent does not (i) make any
representation or warranty as to the accuracy of any Report, and (ii) shall not
be liable for any information contained in any Report,

(c) expressly agrees and acknowledges that the Reports are not comprehensive
audits or examinations, that Agent or other party performing any audit or
examination will inspect only specific information regarding Borrowers and will
rely significantly upon the Books, as well as on representations of Borrowers’
personnel,

(d) agrees to keep all Reports and non-public information regarding Borrowers
and their Subsidiaries and their operations, assets, and existing and
contemplated business plans in a confidential manner; it being understood and
agreed by Borrowers that in any event such Lender may make disclosures (a) to
counsel for and other advisors, accountants, and auditors to such Lender,
(b) reasonably required by any bona fide potential or actual Assignee or
Participant in connection with any contemplated or actual assignment or transfer
by such Lender of an interest herein or any participation interest in such
Lender’s rights hereunder, (c) of information that has become public by
disclosures made by Persons other than such Lender, its Affiliates, assignees,
transferees, or Participants, or (d) as required or requested by any court,
governmental or administrative agency, pursuant to any subpoena or other legal
process, or by any law, statute, regulation, or court order; provided, however,
that, unless prohibited by applicable law, statute, regulation, or court order,
such Lender shall notify Administrative Borrower of any request by any court,
governmental or administrative agency, or pursuant to any subpoena or other
legal process for disclosure of any such non-public material information
concurrent with, or where practicable, prior to the disclosure thereof, and

(e) without limiting the generality of any other indemnification provision
contained in this Agreement, agrees: (i) to hold Agent and any such other Lender
preparing a Report harmless from any action the indemnifying Lender may take or
conclusion the indemnifying Lender may reach or draw from any Report in
connection with any loans or other credit accommodations that the indemnifying
Lender has made or may make to Borrowers, or the indemnifying Lender’s
participation in, or the indemnifying Lender’s purchase of, a loan or loans of
Borrowers; and (ii) to pay and protect, and indemnify, defend and hold Agent,
and any such other Lender preparing a Report harmless from and against, the
claims, actions, proceedings, damages, costs, expenses, and other amounts
(including, attorneys fees and costs) incurred by Agent and any such other
Lender preparing a Report as the direct or indirect result of any third parties
who might obtain all or part of any Report through the indemnifying Lender.

 

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In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrowers to Agent that has not been contemporaneously
provided by Borrowers to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender, (y) to the extent that Agent is
entitled, under any provision of the Loan Documents, to request additional
reports or information from Borrowers, any Lender may, from time to time,
reasonably request Agent to exercise such right as specified in such Lender’s
notice to Agent, whereupon Agent promptly shall request of Administrative
Borrower the additional reports or information reasonably specified by such
Lender, and, upon receipt thereof from Administrative Borrower, Agent promptly
shall provide a copy of same to such Lender, and (z) any time that Agent renders
to Administrative Borrower a statement regarding the Loan Account, Agent shall
send a copy of such statement to each Lender.

16.18 Several Obligations; No Liability. Notwithstanding that certain of the
Loan Documents now or hereafter may have been or will be executed only by or in
favor of Agent in its capacity as such, and not by or in favor of the Lenders,
any and all obligations on the part of Agent (if any) to make any credit
available hereunder shall constitute the several (and not joint) obligations of
the respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such credit not to exceed, in principal
amount, at any one time outstanding, the amount of their respective Commitments.
Nothing contained herein shall confer upon any Lender any interest in, or
subject any Lender to any liability for, or in respect of, the business, assets,
profits, losses, or liabilities of any other Lender. Each Lender shall be solely
responsible for notifying its Participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no Lender shall
have any obligation, duty, or liability to any Participant of any other Lender.
Except as provided in Section 16.7, no member of the Lender Group shall have any
liability for the acts or any other member of the Lender Group. No Lender shall
be responsible to any Borrower or any other Person for any failure by any other
Lender to fulfill its obligations to make credit available hereunder, nor to
advance for it or on its behalf in connection with its Commitment, nor to take
any other action on its behalf hereunder or in connection with the financing
contemplated herein.

16.19 Legal Representation of Agent. In connection with the negotiation,
drafting, and execution of this Agreement and the other Loan Documents, or in
connection with future legal representation relating to loan administration,
amendments, modifications, waivers, or enforcement of remedies, Paul, Hastings,
Janofsky & Walker, LLP (“Paul Hastings”) only has represented and only shall
represent Foothill in its capacity as Agent and as a Lender. Each other Lender
hereby acknowledges that Paul Hastings does not represent it in connection with
any such matters.

17. GENERAL PROVISIONS.

17.1 Effectiveness. This Agreement shall be binding and deemed effective when
executed by Borrowers, Agent, and each Lender whose signature is provided for on
the signature pages hereof.

 

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17.2 Section Headings. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each Section applies equally to this entire Agreement.

17.3 Interpretation. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against the Lender Group or Borrowers,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.

17.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

17.5 Amendments in Writing. This Agreement only can be amended by a writing in
accordance with Section 15.1.

17.6 Counterparts; Telefacsimile Execution. This Agreement may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.

17.7 Revival and Reinstatement of Obligations. If the incurrence or payment of
the Obligations by any Borrower or the transfer to the Lender Group of any
property should for any reason subsequently be declared to be void or voidable
under any state or federal law relating to creditors’ rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a “Voidable Transfer”), and if the Lender Group is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that the Lender Group is required
or elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of the Lender Group related thereto, the liability of Borrowers
automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made.

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

 

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17.9 Integration. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.

17.10 Parent as Agent for Borrowers. Each Borrower hereby irrevocably appoints
Parent as the borrowing agent and attorney-in-fact for all Borrowers (the
“Administrative Borrower”) which appointment shall remain in full force and
effect unless and until Agent shall have received prior written notice signed by
each Borrower that such appointment has been revoked and that another Borrower
acceptable to Agent has been appointed Administrative Borrower. Each Borrower
hereby irrevocably appoints and authorizes the Administrative Borrower (i) to
provide Agent with all notices with respect to Advances and Letters of Credit
obtained for the benefit of any Borrower and all other notices and instructions
under this Agreement and (ii) to take such action as the Administrative Borrower
deems appropriate on its behalf to obtain Advances and Letters of Credit and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes of this Agreement. It is understood that the handling of the Loan
Account and Collateral of Borrowers in a combined fashion, as more fully set
forth herein, is done solely as an accommodation to Borrowers in order to
utilize the collective borrowing powers of Borrowers in the most efficient and
economical manner and at their request, and that Lender Group shall not incur
liability to any Borrower as a result hereof. Each Borrower expects to derive
benefit, directly or indirectly, from the handling of the Loan Account and the
Collateral in a combined fashion since the successful operation of each Borrower
is dependent on the continued successful performance of the integrated group. To
induce the Lender Group to do so, and in consideration thereof, each Borrower
hereby jointly and severally agrees to indemnify each member of the Lender Group
and hold each member of the Lender Group harmless against any and all liability,
expense, loss or claim of damage or injury, made against the Lender Group by any
Borrower or by any third party whosoever, arising from or incurred by reason of
(a) the handling of the Loan Account and Collateral of Borrowers as herein
provided, (b) the Lender Group’s relying on any instructions of the
Administrative Borrower, or (c) any other action taken by the Lender Group
hereunder or under the other Loan Documents, except that Borrowers will have no
liability to the relevant Agent-Related Person or Lender-Related Person under
this Section 17.10 with respect to any liability that has been finally
determined by a court of competent jurisdiction to have resulted solely from the
gross negligence or willful misconduct of such Agent-Related Person or
Lender-Related Person, as the case may be.

[Signature page to follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered on the date first above written.

 

CELLSTAR CORPORATION,

a Delaware corporation

 

/s/ Elaine Flud Rodriguez

By:   Elaine Flud Rodriguez Title:   Sr. VP and General Counsel

CELLSTAR, LTD.,

a Texas limited partnership

By:   National Auto Center, Inc., its General Partner  

/s/ Elaine Flud Rodriguez

By:   Elaine Flud Rodriguez Title:   Sr. VP and General Counsel

NATIONAL AUTO CENTER, INC.,

a Delaware corporation

 

/s/ Elaine Flud Rodriguez

By:   Elaine Flud Rodriguez Title:   Sr. VP and General Counsel

CELLSTAR FINANCO, INC.,

a Delaware corporation

 

/s/ Elaine Flud Rodriguez

By:   Elaine Flud Rodriguez Title:   Sr. VP and General Counsel

Amended and Restated Loan and Security Agreement

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

CELLSTAR INTERNATIONAL CORPORATION/SA,

a Delaware corporation

 

/s/ Elaine Flud Rodriguez

By:   Elaine Flud Rodriguez Title:   Sr. VP and General Counsel

CELLSTAR FULFILLMENT, INC.,

a Delaware corporation

 

/s/ Elaine Flud Rodriguez

By:   Elaine Flud Rodriguez Title:   Sr. VP and General Counsel

CELLSTAR INTERNATIONAL CORPORATION/ASIA,

a Delaware Corporation

 

/s/ Elaine Flud Rodriguez

By:   Elaine Flud Rodriguez Title:   Sr. VP and General Counsel

AUDIOMEX EXPORT CORP.,

a Texas corporation

 

/s/ Elaine Flud Rodriguez

By:   Elaine Flud Rodriguez Title:   Sr. VP and General Counsel

NAC HOLDINGS, INC.,

a Nevada corporation

 

/s/ Elaine Flud Rodriguez

By:   Elaine Flud Rodriguez Title:   President

CELLSTAR FULFILLMENT LTD.,

a Texas limited partnership

By:   CellStar Fulfillment, Inc., its General Partner  

/s/ Elaine Flud Rodriguez

By:   Elaine Flud Rodriguez Title:   Sr. VP and General Counsel

Amended and Restated Loan and Security Agreement

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

WELLS FARGO FOOTHILL, INC.,

a California corporation, as Agent and as a Lender

 

/s/ Robert Bernier

By:   Robert Bernier Title:   Vice President BANK OF AMERICA, N.A. (successor to
Fleet Capital Corporation), as a Lender  

/s/ H. Michael Wills

Name:   H. Michael Wills Title:   Senior Vice President TEXTRON FINANCIAL
CORPORATION, as a Lender By:  

/s/ Stuart A. Hall

Name:   Stuart A. Hall Title:   Senior Account Executive

Amended and Restated Loan and Security Agreement