EXHIBIT 10.1
 
 
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of March 22, 2007
among
NAVARRE CORPORATION,
as Borrower,
THE OTHER PERSONS PARTY HERETO
THAT ARE DESIGNATED AS CREDIT PARTIES,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Administrative Agent, Agent and Lender
GE CAPITAL MARKETS, INC.
as Lead Arranger
 
 

 

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TABLE OF CONTENTS

                                      Page
 
                    1.   AMOUNT AND TERMS OF CREDIT     2  
 
                   
 
    1.1     Credit Facilities     2  
 
    1.2     Letters of Credit     4  
 
    1.2A     Swap Related Reimbursement Obligations     5  
 
    1.3     Prepayments     6  
 
    1.4     Use of Proceeds     8  
 
    1.5     Interest and Applicable Margins     8  
 
    1.6     Eligible Accounts     10  
 
    1.7     Eligible Inventory     13  
 
    1.8     Cash Management Systems     14  
 
    1.9     Fees     15  
 
    1.10     Receipt of Payments     15  
 
    1.11     Application and Allocation of Payments     16  
 
    1.12     Loan Account and Accounting     16  
 
    1.13     Indemnity     17  
 
    1.14     Access     18  
 
    1.15     Taxes     18  
 
    1.16     Capital Adequacy; Increased Costs; Illegality     19  
 
    1.17     Single Loan     20  
 
                    2.   CONDITIONS PRECEDENT     21  
 
                   
 
    2.1     Conditions to the Initial Loans     21  
 
    2.2     Further Conditions to Each Loan     22  
 
                    3.   REPRESENTATIONS AND WARRANTIES     23  
 
                   
 
    3.1     Corporate Existence; Compliance with Law     23  
 
    3.2     Executive Offices, Collateral Locations, FEIN     23  
 
    3.3     Corporate Power, Authorization, Enforceable Obligations     23  
 
    3.4     Financial Statements and Projections     24  
 
    3.5     Material Adverse Effect     24  
 
    3.6     Ownership of Property; Liens     25  
 
    3.7     Labor Matters     25  
 
    3.8     Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness     26  
 
    3.9     Government Regulation     26  
 
    3.10     Margin Regulations     26  
 
    3.11     Taxes     26  
 
    3.12     ERISA     27  
 
    3.13     No Litigation     28  
 
    3.14     Brokers     28  
 
    3.15     Intellectual Property     28  
 
    3.16     Full Disclosure     28  
 
    3.17     Environmental Matters     29  

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                                      Page
 
    3.18     Insurance     29  
 
    3.19     Deposit and Disbursement Accounts     30  
 
    3.20     Government Contracts     30  
 
    3.21     Customer and Trade Relations     30  
 
    3.22     Agreements and Other Documents     30  
 
    3.23     Solvency     30  
 
    3.24     [Intentionally Deleted]     30  
 
    3.25     Status of Navarre CP, Navarre CLP and Navarre CS     30  
 
    3.26     Second Lien Loan     31  
 
    3.27     Vendor Advances     31  
 
                    4.   FINANCIAL STATEMENTS AND INFORMATION     31  
 
                   
 
    4.1     Reports and Notices     31  
 
    4.2     Communication with Accountants     31  
 
                    5.   AFFIRMATIVE COVENANTS     31  
 
                   
 
    5.1     Maintenance of Existence and Conduct of Business     31  
 
    5.2     Payment of Charges     32  
 
    5.3     Books and Records     32  
 
    5.4     Insurance; Damage to or Destruction of Collateral     32  
 
    5.5     Compliance with Laws     34  
 
    5.6     Supplemental Disclosure     34  
 
    5.7     Intellectual Property     34  
 
    5.8     Environmental Matters     34  
 
    5.9     Landlords’ Agreements     35  
 
    5.10     Further Assurances     36  
 
                    6.   NEGATIVE COVENANTS     36  
 
                   
 
    6.1     Mergers, Subsidiaries, Etc     36  
 
    6.2     Investments; Loans and Advances     37  
 
    6.3     Indebtedness     37  
 
    6.4     Employee Loans and Affiliate Transactions     38  
 
    6.5     Capital Structure and Business     39  
 
    6.6     Guaranteed Indebtedness     39  
 
    6.7     Liens and Related Matters     39  
 
    6.8     Sale of Stock and Assets     40  
 
    6.9     ERISA     40  
 
    6.10     Financial Covenants     40  
 
    6.11     Hazardous Materials     40  
 
    6.12     Sale-Leasebacks     41  
 
    6.13     Cancellation of Indebtedness     41  
 
    6.14     Restricted Payments     41  
 
    6.15     Change of Corporate Name or Location; Change of Fiscal Year     41
 
 
    6.16     No Impairment of Intercompany Transfers     42  
 
    6.17     No Speculative Transactions     42  
 
    6.18     Leases; Real Estate Purchases     42  
 
    6.19     Amendments     42  

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                                      Page
 
    6.20     Navarre CP, Navarre CLP and Navarre CS     42  
 
                    7.   TERM     42  
 
                   
 
    7.1     Termination     42  
 
    7.2     Survival of Obligations Upon Termination of Financing Arrangements  
  42  
 
                    8.   EVENTS OF DEFAULT; RIGHTS AND REMEDIES     43  
 
                   
 
    8.1     Events of Default     43  
 
    8.2     Remedies     45  
 
    8.3     Waivers by Credit Parties     45  
 
                    9.   ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT    
46  
 
                   
 
    9.1     Assignment and Participations     46  
 
    9.2     Appointment of Agent     48  
 
    9.3     Agent’s Reliance, Etc.     49  
 
    9.4     GE Capital and Affiliates     49  
 
    9.5     Lender Credit Decision     50  
 
    9.6     Indemnification     50  
 
    9.7     Successor Agent     50  
 
    9.8     Setoff and Sharing of Payments     51  
 
    9.9     Advances; Payments; Non-Funding Lenders; Information; Actions in
Concert     52  
 
    9.10     Intercreditor Agreement     54  
 
                    10.   SUCCESSORS AND ASSIGNS     54  
 
                   
 
    10.1     Successors and Assigns     54  
 
                    11.   MISCELLANEOUS     54  
 
                   
 
    11.1     Complete Agreement; Modification of Agreement     54  
 
    11.2     Amendments and Waivers     55  
 
    11.3     Fees and Expenses     57  
 
    11.4     No Waiver     58  
 
    11.5     Remedies     58  
 
    11.6     Severability     58  
 
    11.7     Conflict of Terms     58  
 
    11.8     Confidentiality     58  
 
    11.9     GOVERNING LAW     59  
 
    11.10     Notices     60  
 
    11.11     Section Titles     61  
 
    11.12     Counterparts     61  
 
    11.13     WAIVER OF JURY TRIAL     61  
 
    11.14     Press Releases and Related Matters     62  
 
    11.15     Reinstatement     62  
 
    11.16     Advice of Counsel     62  
 
    11.17     No Strict Construction     62  
 
    11.18     Compliance with Federal Law     63  
 
    11.19     Customer Identification — USA Patriot Act Notice     63  

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                                      Page
 
                    12.   AMENDMENT AND RESTATEMENT     63  
 
                   
 
    12.1     Interrelationship with the Existing Credit Agreement     63  

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INDEX OF APPENDICES

         
Annex A (Recitals)
  —   Definitions
Annex B (Section 1.2)
  —   Letters of Credit
Annex C (Section 1.8)
  —   Cash Management System
Annex D (Section 2.1(a))
  —   Closing Checklist
Annex E (Section 4.1(a))
  —   Financial Statements and Projections — Reporting
Annex F (Section 4.1(b))
  —   Collateral Reports
Annex G (Section 6.10)
  —   Financial Covenants
Annex H (Section 9.9(a))
  —   Lenders’ Wire Transfer Information
Annex I (Section 11.10)
  —   Notice Addresses
Annex J (from Annex A-
   Commitments definition)
  —   Commitments as of Closing Date  
Exhibit 1.1(a)(i)
  —   Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii)
  —   Form of Revolving Note
Exhibit 1.1(b)(ii)
  —   Form of Swing Line Note
Exhibit 1.5(e)
  —   Form of Notice of Conversion/Continuation
Exhibit 4.1(b)
  —   Form of Borrowing Base Certificate
Exhibit 9.1(a)
  —   Form of Assignment Agreement
Exhibit B-1
  —   Application for Standby Letter of Credit
Schedule A-1
  —   Withdrawal From Eligible Investment Funds
Schedule 1.1
  —   Agent’s Representatives
Disclosure Schedule 3.1
  —   Type of Entity; State of Organization
Disclosure Schedule 3.2
  —   Executive Offices, Collateral Locations, FEIN
Disclosure Schedule 3.4
  —   Financial Statement Exceptions
Disclosure Schedule 3.4(a)
  —   Financial Statements
Disclosure Schedule 3.4(b)
  —   Projections
Disclosure Schedule 3.4(c)
  —   Pro Forma
Disclosure Schedule 3.6
  —   Real Estate and Leases
Disclosure Schedule 3.7
  —   Labor Matters
Disclosure Schedule 3.8
  —   Ventures, Subsidiaries and Affiliates; Outstanding Stock
Disclosure Schedule 3.11
  —   Tax Matters
Disclosure Schedule 3.12
  —   ERISA Plans
Disclosure Schedule 3.13
  —   Litigation
Disclosure Schedule 3.15
  —   Intellectual Property
Disclosure Schedule 3.17
  —   Hazardous Materials
Disclosure Schedule 3.18
  —   Insurance
Disclosure Schedule 3.19
  —   Deposit and Disbursement Accounts
Disclosure Schedule 3.20
  —   Government Contracts
Disclosure Schedule 3.22
  —   Material Agreements
Disclosure Schedule 3.27
  —   Vendor Advances
Disclosure Schedule 5.1
  —   Trade Names
Disclosure Schedule 6.3
  —   Indebtedness
Disclosure Schedule 6.4(a)
  —   Transactions with Affiliates

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Disclosure Schedule 6.7
  —   Existing Liens
Disclosure Schedule 6.8
  —   Texas Real Estate Sale Transaction
Disclosure Schedule 6.14
  —   Eric Paulson’s Deferred Compensation Payments

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          This FOURTH AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”),
dated as of March 22, 2007, by and among NAVARRE CORPORATION, a Minnesota
corporation (“Borrower”), the Credit Parties signatory hereto, GENERAL ELECTRIC
CAPITAL CORPORATION, a Delaware corporation (in its individual capacity, “GE
Capital”), for itself, as Lender, and as Agent for Lenders, and the other
Lenders signatory hereto from time to time.
RECITALS
          WHEREAS, Borrower, the other Credit Parties signatory thereto, Agent
and the Lenders signatory thereto are parties to that certain Third Amended and
Restated Credit Agreement dated as of June 1, 2005 (as amended or otherwise
modified prior to the date hereof, the “Existing Credit Agreement”);
          WHEREAS, Borrower has requested that Lenders extend a revolving credit
facility to Borrower of up to Ninety Five Million Dollars ($95,000,000) in the
aggregate for the purposes of (a) providing working capital financing for
Borrower and Capital Expenditures for Borrower as permitted hereunder,
(b) providing funds for other general corporate purposes of Borrower and
(c) providing funds for other purposes permitted hereunder; and for these
purposes, Lenders are willing to make certain loans and other extensions of
credit to Borrower of up to such amount upon the terms and conditions set forth
herein;
          WHEREAS, Borrower has agreed to secure all of its obligations under
the Loan Documents by granting to Agent, for the benefit of Agent and Lenders, a
security interest in and lien upon all of its existing and after-acquired
personal and real property;
          WHEREAS, the Credit Parties signatory hereto (other than Borrower)
have agreed to guarantee the Obligations and to grant to Agent, for the benefit
of Agent and Lenders, a security interest in and lien upon all of their existing
and after-acquired personal and real property to secure the Obligations; and
          WHEREAS, capitalized terms used in this Agreement shall have the
meanings ascribed to them in Annex A and, for purposes of this Agreement and the
other Loan Documents, the rules of construction set forth in Annex A shall
govern. All Annexes, Disclosure Schedules, Exhibits and other attachments
(collectively, “Appendices”) hereto, or expressly identified to this Agreement,
are incorporated herein by reference, and taken together with this Agreement,
shall constitute but a single agreement. These Recitals shall be construed as
part of the Agreement.
          NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the parties hereto agree to amend and restate the Existing Credit Agreement in
its entirety as set forth herein:

 

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1. AMOUNT AND TERMS OF CREDIT
          1.1 Credit Facilities.
          (a) Revolving Credit Facility.
               (i) Subject to the terms and conditions hereof, each Revolving
Lender agrees to make available to Borrower from time to time until the
Commitment Termination Date its Pro Rata Share of advances (each, a “Revolving
Credit Advance”). The Pro Rata Share of the Revolving Loan of any Revolving
Lender shall not at any time exceed its separate Revolving Loan Commitment. The
obligations of each Revolving Lender hereunder shall be several and not joint.
Until the Commitment Termination Date, Borrower may from time to time borrow,
repay and reborrow under this Section 1.1(a); provided, that the amount of any
Revolving Credit Advance to be made at any time shall not exceed Borrowing
Availability at such time. Borrowing Availability may be further reduced by
Reserves imposed by Agent in its reasonable credit judgment for reasons relating
to any Credit Party, any Credit Party’s business or industry and/or the Agent’s
ability to collect or realize the full value of any Collateral. Each Revolving
Credit Advance shall be made on notice by Borrower to one of the representatives
of Agent identified in Schedule 1.1 at the address specified therein. Any such
notice must be given no later than (1) 11:00 a.m. (Chicago time) on the Business
Day of the proposed Revolving Credit Advance, in the case of an Index Rate Loan,
or (2) 11:00 a.m. (Chicago time) on the date which is 3 Business Days prior to
the proposed Revolving Credit Advance, in the case of a LIBOR Loan. Each such
notice (a “Notice of Revolving Credit Advance”) must be given in writing (by
telecopy or overnight courier) substantially in the form of Exhibit 1.1(a)(i),
and shall include the information required in such Exhibit and such other
information as may be required by Agent. If Borrower desires to have the
Revolving Credit Advances bear interest by reference to a LIBOR Rate, it must
comply with Section 1.5(e).
               (ii) Except as provided in Section 1.12, Borrower shall execute
and deliver to each Revolving Lender a note to evidence the Revolving Loan
Commitment of that Revolving Lender. Each note shall be in the principal amount
of the Revolving Loan Commitment of the applicable Revolving Lender, dated the
Closing Date and substantially in the form of Exhibit 1.1(a)(ii) (each a
“Revolving Note” and, collectively, the “Revolving Notes”). Each Revolving Note
shall represent the obligation of Borrower to pay the amount of Revolving
Lender’s Revolving Loan Commitment or, if less, such Revolving Lender’s Pro Rata
Share of the aggregate unpaid principal amount of all Revolving Credit Advances
to Borrower together with interest thereon as prescribed in Section 1.5. The
entire unpaid balance of the Revolving Loan and all other non-contingent
Obligations shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date.
          (b) Swing Line Facility.
               (i) Agent shall notify the Swing Line Lender upon Agent’s receipt
of any Notice of Revolving Credit Advance. Subject to the terms and conditions

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hereof, the Swing Line Lender may, in its discretion, make available from time
to time until the Commitment Termination Date advances (each, a “Swing Line
Advance”) in accordance with any such notice. The provisions of this
Section 1.1(b) shall not relieve Revolving Lenders of their obligations to make
Revolving Credit Advances under Section 1.1(a); provided that if the Swing Line
Lender makes a Swing Line Advance pursuant to any such notice, such Swing Line
Advance shall be in lieu of any Revolving Credit Advance that otherwise may be
made by Revolving Credit Lenders pursuant to such notice. The aggregate amount
of Swing Line Advances outstanding shall not exceed at any time the lesser of
(A) the Swing Line Commitment and (B) the lesser of the Maximum Amount and the
Borrowing Base, in each case, less the outstanding balance of the Revolving Loan
at such time (“Swing Line Availability”). Until the Commitment Termination Date,
Borrower may from time to time borrow, repay and reborrow under this Section
1.1(b). Each Swing Line Advance shall be made pursuant to a Notice of Revolving
Credit advance delivered by Borrower to Agent in accordance with Section 1.1(a).
Any such notice must be given no later than 11:00 a.m. (Chicago time) on the
Business Day of the proposed Swing Line Advance. Unless the Swing Line Lender
has received at least one Business Day’s prior written notice from Requisite
Lenders instructing it not to make a Swing Line Advance, the Swing Line Lender
shall, notwithstanding the failure of any condition precedent set forth in
Sections 2.2, be entitled to fund that Swing Line Advance, and to have such
Revolving Lender make Revolving Credit Advances in accordance with
Section 1.1(b)(iii) or purchase participating interests in accordance with
Section 1.1(b)(iv). Notwithstanding any other provision of this Agreement or the
other Loan Documents, the Swing Line Loan shall constitute an Index Rate Loan.
Borrower shall repay the aggregate outstanding principal amount of the Swing
Line Loan upon demand therefor by Agent.
               (ii) Borrower shall execute and deliver to the Swing Line Lender
a promissory note to evidence the Swing Line Commitment. Such note shall be in
the principal amount of the Swing Line Commitment of the Swing Line Lender,
dated the Closing Date and substantially in the form of Exhibit 1.1(b)(ii) (the
“Swing Line Note”). The Swing Line Note shall represent the obligation of
Borrower to pay the amount of the Swing Line Commitment or, if less, the
aggregate unpaid principal amount of all Swing Line Advances made to Borrower
together with interest thereon as prescribed in Section 1.5. The entire unpaid
balance of the Swing Line Loan and all other noncontingent Obligations shall be
immediately due and payable in full in immediately available funds on the
Commitment Termination Date if not sooner paid in full.
               (iii) The Swing Line Lender, at any time and from time to time in
its sole and absolute discretion but at least once per week, may on behalf of
Borrower (and Borrower hereby irrevocably authorizes the Swing Line Lender to so
act on its behalf) request each Revolving Lender (including the Swing Line
Lender) to make a Revolving Credit Advance to Borrower (which shall be an Index
Rate Loan) in an amount equal to that Revolving Lender’s Pro Rata Share of the
principal amount of the Swing Line Loan (the “Refunded Swing Line Loan”)
outstanding on the date such notice is given. Unless any of the events described
in Sections 8.1(h) or 8.1(i) has occurred (in which event the procedures of
Section 1.1(b)(iv) shall apply) and regardless of whether

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the conditions precedent set forth in this Agreement to the making of a
Revolving Credit Advance are then satisfied, each Revolving Lender shall
disburse directly to Agent, its Pro Rata Share of a Revolving Credit Advance on
behalf of the Swing Line Lender, prior to 2:00 p.m. (Chicago time), in
immediately available funds on the Business Day next succeeding the date that
notice is given. The proceeds of those Revolving Credit Advances shall be
immediately paid to the Swing Line Lender and applied to repay the Refunded
Swing Line Loan.
               (iv) If, prior to refunding a Swing Line Loan with a Revolving
Credit Advance pursuant to Section 1.1(b)(iii), one of the events described in
Sections 8.1(h) or 8.1(i) has occurred, then, subject to the provisions of
Section 1.1(b)(v) below, each Revolving Lender shall, on the date such Revolving
Credit Advance was to have been made for the benefit of Borrower, purchase from
the Swing Line Lender an undivided participation interest in the Swing Line Loan
in an amount equal to its Pro Rata Share of such Swing Line Loan. Upon request,
each Revolving Lender shall, prior to 2:00 p.m. (Chicago time) in immediately
available funds on the Business Day next succeeding the date such request is
made, promptly transfer to the Swing Line Lender, in immediately available
funds, the amount of its participation interest.
               (v) Each Revolving Lender’s obligation to make Revolving Credit
Advances in accordance with Section 1.1(b)(iii) and to purchase participation
interests in accordance with Section 1.1(b)(iv) shall be absolute and
unconditional and shall not be affected by any circumstance, including (A) any
setoff, counterclaim, recoupment, defense or other right that such Revolving
Lender may have against the Swing Line Lender, Borrower or any other Person for
any reason whatsoever; (B) the occurrence or continuance of any Default or Event
of Default; (C) any inability of Borrower to satisfy the conditions precedent to
borrowing set forth in this Agreement at any time or (D) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
If any Revolving Lender does not make available to Agent or the Swing Line
Lender, as applicable, the amount required pursuant to Sections 1.1(b)(iii) or
1.1(b)(iv), as the case may be, the Swing Line Lender shall be entitled to
recover such amount on demand from such Revolving Lender, together with interest
thereon for each day from the date of non-payment until such amount is paid in
full at the Federal Funds Rate for the first two Business Days and at the Index
Rate thereafter.
          (c) Reliance on Notices. Agent shall be entitled to rely upon, and
shall be fully protected in relying upon, any Notice of Revolving Credit
Advance, Notice of Conversion/Continuation or similar notice believed by Agent
to be genuine. Agent may assume that each Person executing and delivering any
notice in accordance herewith was duly authorized, unless the responsible
individual acting thereon for Agent has actual knowledge to the contrary.
          1.2 Letters of Credit . Subject to and in accordance with the terms
and conditions contained herein and in Annex B, Borrower shall have the right to
request, and Revolving Lenders agree to incur, or purchase participations in,
Letter of Credit Obligations in respect of Borrower.

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          1.2A Swap Related Reimbursement Obligations.
          (a) Borrower agrees to reimburse GE Capital in immediately available
funds in the amount of any payment made by GE Capital under a Swap Related L/C
(such reimbursement obligation, whether contingent upon payment by GE Capital
under the Swap Related L/C or otherwise, being herein called a “Swap Related
Reimbursement Obligation”). No Swap Related Reimbursement Obligation for any
Swap Related L/C may exceed the amount of the payment obligations owed by
Borrower under the interest rate protection or hedging agreement or transaction
supported by the Swap Related L/C.
          (b) A Swap Related Reimbursement Obligation shall be due and payable
by Borrower within one (1) Business Day after the date on which the related
payment is made by GE Capital under the Swap Related L/C.
          (c) Any Swap Related Reimbursement Obligation shall, during the period
in which it is unpaid, bear interest at the rate per annum equal to the LIBOR
Rate plus one percent (1%), as if the unpaid amount of the Swap Related
Reimbursement Obligation were a LIBOR Loan, and not at any otherwise applicable
Default Rate. Such interest shall be payable upon demand. The following
additional provisions apply to the calculation and charging of interest on Swap
Related Reimbursement Obligations by reference to the LIBOR Rate:
               (i) The LIBOR Rate shall be determined for each successive
one-month LIBOR Period during which the Swap Related Reimbursement Obligation is
unpaid, notwithstanding the occurrence of any Event of Default and even if the
LIBOR Period were to extend beyond the Commitment Termination Date.
               (ii) If a Swap Related Reimbursement Obligation is paid during a
monthly period for which the LIBOR Rate is determined, interest shall be
pro-rated and charged for the portion of the monthly period during which the
Swap Related Reimbursement Obligation was unpaid. Section 1.13(b) shall not
apply to any payment of a Swap Related Reimbursement Obligation during the
monthly period.
               (iii) Notwithstanding the last paragraph of the definition of
“LIBOR Rate”, if the LIBOR Rate is no longer available from Telerate News
Service, the LIBOR Rate with respect to Swap Related Reimbursement Obligations
shall be determined by GE Capital from such financial reporting service or other
information available to GE Capital as in GE Capital’s reasonable discretion
indicates GE Capital’s cost of funds.
          (d) Except as provided in the foregoing provisions of this
Section 1.2A and in Section 11.3, Borrower shall not be obligated to pay to GE
Capital or any of its Affiliates any Letter of Credit Fee, or any other fees,
charges or expenses, in respect of a Swap Related L/C or arranging for any
interest rate protection or hedging agreement or transaction supported by the
Swap Related L/C. GE Capital and its Affiliates shall look to the beneficiary of
a Swap Related L/C for payment of any such letter of credit fees or other fees,
charges or expenses and such beneficiary may factor such fees, charges, or
expenses into the pricing of any interest rate protection or hedging arrangement
or transaction supported by the Swap Related L/C.

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          (e) If any Swap Related L/C is revocable prior to its scheduled expiry
date, GE Capital agrees not to revoke the Swap Related L/C unless the Commitment
Termination Date or an Event of Default has occurred.
          (f) GE Capital or any of its Affiliates shall be permitted to
(i) provide confidential or other information furnished to it by any of the
Credit Parties (including, without limitation, copies of any documents and
information in or referred to in the Closing Checklist, Financial Statements and
Compliance Certificates) to a beneficiary or potential beneficiary of a Swap
Related L/C and (ii) receive confidential or other information from the
beneficiary or potential beneficiary relating to any agreement or transaction
supported or to be supported by the Swap Related L/C. However, no confidential
information shall be provided to any Person under this paragraph unless the
Person has agreed to comply with the covenant substantially as contained in
Section 11.8 of this Agreement.
          1.3 Prepayments.
          (a) Voluntary Prepayments; Reductions in Revolving Loan Commitments.
Borrower may at any time on at least five (5) days’ prior written notice to
Agent permanently reduce (but not terminate) the Revolving Loan Commitment;
provided that (A) any such reductions shall be in a minimum amount of $3,000,000
and integral multiples of $250,000 in excess of such amount, (B) the Revolving
Loan Commitment shall not be reduced to an amount less than the amount of the
Revolving Loan outstanding, and (C) after giving effect to such reductions,
Borrower shall comply with Section 1.3(b)(i). Borrower may at any time on at
least ten (10) days’ prior written notice to Agent terminate the Revolving Loan
Commitment; provided that upon such termination all Loans and other Obligations
shall be immediately due and payable in full and all Letter of Credit
Obligations shall be cash collateralized or otherwise satisfied in accordance
with Annex B hereto. Any voluntary prepayment and any reduction or termination
of the Revolving Loan Commitment must be accompanied by payment of the Fee
required by Section 1.9(c), if any, plus the payment of any LIBOR funding
breakage costs in accordance with Section 1.13(b). Upon any such reduction or
termination of the Revolving Loan Commitment, Borrower’s right to request
Revolving Credit Advances, or request that Letter of Credit Obligations be
incurred on its behalf, or request Swing Line Advances, shall simultaneously be
permanently reduced or terminated, as the case may be; provided that a permanent
reduction of the Revolving Loan Commitment shall require a corresponding pro
rata reduction in the L/C Sublimit. Each notice of partial prepayment shall
designate the Loan or other Obligations to which such prepayment is to be
applied.
          (b) Mandatory Prepayments.
               (i) If at any time the outstanding balances of the Revolving Loan
and the Swing Line Loan exceed the lesser of (A) the Maximum Amount and (B) the
Borrowing Base, Borrower shall immediately repay the aggregate outstanding
Revolving Credit Advances to the extent required to eliminate such excess. If
any such excess remains after repayment in full of the aggregate outstanding
Revolving Credit Advances, Borrower shall provide cash collateral for the Letter
of Credit Obligations in the manner set forth in Annex B to the extent required
to eliminate such excess.

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               (ii) Immediately upon receipt by any Credit Party of any proceeds
of any asset disposition (excluding proceeds of asset dispositions permitted by
Sections 6.8(a) and, as long as no Default or Event of Default then exists,
6.8(d), but including any sale of Stock of any Subsidiary of any Credit Party,
Borrower shall, unless such prepayment is waived in writing by the Requisite
Lenders, prepay the Loans in an amount equal to all such proceeds, net of
(A) commissions and other reasonable and customary transaction costs, fees and
expenses properly attributable to such transaction and payable by Borrower in
connection therewith (in each case, paid to non-Affiliates), (B) transfer taxes,
(C) amounts payable to holders of senior Liens (to the extent such Liens
constitute Permitted Encumbrances hereunder (but excluding, in any event, Liens
securing obligations under the Second Lien Credit Agreement)), if any, and
(D) an appropriate reserve for income taxes in accordance with GAAP in
connection therewith. Any such prepayment shall be applied in accordance with
Section 1.3(c).
               (iii) If Borrower issues or incurs any Indebtedness (other than
Indebtedness permitted under Section 6.3 hereof), no later than the Business Day
following the date of receipt of the proceeds thereof, Borrower shall, unless
such prepayment is waived in writing by the Requisite Lenders, prepay the Loans
in an amount equal to all such proceeds, net of underwriting discounts and
commissions and other reasonable costs paid to non-Affiliates in connection
therewith. If Borrower issues Stock, no later than the Business Day following
the date of receipt of the proceeds thereof, Borrower shall, unless such
prepayment is waived in writing by the Requisite Lenders, prepay the Loans in an
amount equal fifty percent (50%) of such proceeds, net of underwriting discounts
and commissions and other reasonable costs paid to non-Affiliates in connection
therewith. Any such prepayment shall be applied in accordance with
Section 1.3(c).
          (c) Application of Certain Mandatory Prepayments. Any prepayments made
by Borrower pursuant to Sections 1.3(b)(ii) or (b)(iii) above shall be applied
as follows: first, to Fees and reimbursable expenses of Agent then due and
payable pursuant to any of the Loan Documents; second, to interest then due and
payable on the Swing Line Loan; third, to the principal balance of the Swing
Line Loan until the same has been repaid in full; fourth, to interest then due
and payable on the Revolving Credit Advances; fifth, to the outstanding
principal balance of Revolving Credit Advances until the same has been paid in
full; sixth, to any Letter of Credit Obligations, to provide cash collateral
therefor in the manner set forth in Annex B, until all such Letter of Credit
Obligations have been fully cash collateralized in the manner set forth in Annex
B; and seventh, pro rata to all other Obligations then due and owing. The
Revolving Loan Commitment shall be permanently reduced by the amount of any such
prepayments to the extent, when added to the amount of prepayments made in
accordance with Section 5.4(d), in excess of $5,000,000 in the aggregate.
          (d) Application of Prepayments from Insurance Proceeds and
Condemnation Proceeds. Prepayments from insurance or condemnation proceeds in
accordance with Section 5.4(d), shall, unless such prepayment is waived in
writing by the Requisite Lenders, be applied as follows: insurance proceeds from
casualties or losses to cash or Inventory shall be applied first, to the Swing
Line Loans and second, to the Revolving Credit Advances. The Revolving Loan
Commitment shall be permanently reduced by the amount of any such prepayments to
the

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extent, when added to the amount of prepayments made in accordance with Sections
1.3(b)(ii) or (b)(iii), in excess of $5,000,000 in the aggregate.
          (e) No Implied Consent. Nothing in this Section 1.3 shall be construed
to constitute Agent’s or any Lender’s consent to any transaction that is not
permitted by other provisions of this Agreement or the other Loan Documents.
          1.4 Use of Proceeds.
          Borrower shall utilize the proceeds of the Revolving Loan and the
Swing Line Loan solely for the financing of Borrower’s ordinary working capital,
Capital Expenditures as permitted hereunder, and for other general corporate
purposes.
          1.5 Interest and Applicable Margins.
          (a) Borrower shall pay interest to Agent, for the ratable benefit of
Lenders in accordance with the Loans being made by each Lender, in arrears on
each applicable Interest Payment Date, at the Index Rate plus the Applicable
Revolver Index Margin per annum or, at the election of Borrower, at the
applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum, based
on the aggregate Revolving Credit Advances outstanding from time to time.
          As of the Closing Date, the Applicable Margins are as follows:

         
Applicable Revolver Index Margin
    0.75 %
 
       
Applicable Revolver LIBOR Margin
    2.00 %
 
       
Applicable L/C Margin
    2.00 %
 
       
Applicable Unused Line Fee Margin
    0.25 %

          The Applicable Margins shall be adjusted (up or down) prospectively on
a quarterly basis as determined based upon the average daily Borrowing
Availability for the then most recently ended Fiscal Quarter, commencing with
the Fiscal Quarter ending on September 30, 2007. All adjustments in the
Applicable Margins thereafter shall be implemented quarterly on a prospective
basis at any time there is a need for an adjustment (the determination as to
whether an adjustment is necessary to be made by Agent in good faith).
Adjustments in Applicable Margins will be determined by reference to the
following grids:

      If average daily Borrowing Availability for the Fiscal   Level of Quarter
is:   Applicable Margins:
³ $45,000,000
  Level I
³ $35,000,000, but < $45,000,000
  Level II
³ $20,000,000, but < $35,000,000
  Level III
³ $7,500,000, but < $20,000,000
  Level IV

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      If average daily Borrowing Availability for the Fiscal   Level of Quarter
is:   Applicable Margins:
< $7,500,000
  Level V

                                              Level I   Level II   Level III  
Level IV   Level V
Applicable Revolver Index Margin
    0.25 %     0.50 %     0.75 %     1.00 %     1.25 %
Applicable Revolver LIBOR Margin
    1.50 %     1.75 %     2.00 %     2.25 %     2.50 %
Applicable L/C Margin
    1.50 %     1.75 %     2.00 %     2.25 %     2.50 %
Applicable Unused Line Fee Margin
    0.375 %     0.375 %     0.25 %     0.25 %     0.25 %

          If any Default or an Event of Default has occurred and is continuing
at the time any reduction in the Applicable Margins is to be implemented, that
reduction shall be deferred until the first day of the first calendar month
following the date on which all Defaults or Events of Default are waived or
cured.
          (b) If any payment on any Loan becomes due and payable on a day other
than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
          (c) All computations of Fees calculated on a per annum basis and
interest shall be made by Agent on the basis of a 360-day year, in each case for
the actual number of days occurring in the period for which such interest and
Fees are payable. The Index Rate is a floating rate determined for each day.
Each determination by Agent of an interest rate and Fees hereunder shall be
final, binding and conclusive on Borrower, absent manifest error.
          (d) So long as an Event of Default has occurred and is continuing
under Section 8.1(a), (h) or (i), or so long as any other Default or Event of
Default has occurred and is continuing and at the election of Agent (or upon the
written request of Requisite Lenders) confirmed by written notice from Agent to
Borrower, the interest rates applicable to the Loans and the Letter of Credit
Fees shall be increased by two percentage points (2%) per annum above the rates
of interest or the rate of such Fees otherwise applicable hereunder (“Default
Rate”), and all outstanding Obligations shall bear interest at the Default Rate
applicable to such Obligations. Interest and Letter of Credit Fees at the
Default Rate shall accrue from the initial date of such Default or Event of
Default until that Default or Event of Default is cured or waived and shall be
payable upon demand.
          (e) Subject to the conditions precedent set forth in Section 2.2,
Borrower shall have the option to (i) request that any Revolving Credit Advance
be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding
Loans (other than the Swing Line Loan) from Index Rate Loans to LIBOR Loans,
(iii) convert any LIBOR Loan to an Index Rate Loan, subject

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to payment of LIBOR breakage costs in accordance with Section 1.13(b) if such
conversion is made prior to the expiration of the LIBOR Period applicable
thereto, or (iv) continue all or any portion of any Loan (other than the Swing
Line Loan) as a LIBOR Loan upon the expiration of the applicable LIBOR Period
and the succeeding LIBOR Period of that continued Loan shall commence on the
first day after the last day of the LIBOR Period of the Loan to be continued.
Any Loan or group of Loans having the same proposed LIBOR Period to be made or
continued as, or converted into, a LIBOR Loan must be in a minimum amount of
$1,000,000 and integral multiples of $500,000 in excess of such amount. Any such
election must be made by 11:00 a.m. (Chicago time) on the 3rd Business Day prior
to (1) the date of any proposed Advance which is to bear interest at the LIBOR
Rate, (2) the end of each LIBOR Period with respect to any LIBOR Loans to be
continued as such, or (3) the date on which Borrower wishes to convert any Index
Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower in such
election. If no election is received with respect to a LIBOR Loan by 11:00 a.m.
(Chicago time) on the 3rd Business Day prior to the end of the LIBOR Period with
respect thereto (or if a Default or an Event of Default has occurred and is
continuing or the additional conditions precedent set forth in Section 2.2 shall
not have been satisfied), that LIBOR Loan shall be converted to an Index Rate
Loan at the end of its LIBOR Period. Borrower must make such election by notice
to Agent in writing, by telecopy or overnight courier. In the case of any
conversion or continuation, such election must be made pursuant to a written
notice (a “Notice of Conversion/Continuation”) in the form of Exhibit 1.5(e).
          (f) Notwithstanding anything to the contrary set forth in this
Section 1.5, if a court of competent jurisdiction determines in a final order
that the rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the “Maximum Lawful Rate”), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate. Thereafter, interest hereunder shall be
paid at the rate(s) of interest and in the manner provided in Sections 1.5(a)
through (e), unless and until the rate of interest again exceeds the Maximum
Lawful Rate, and at that time this paragraph shall again apply. In no event
shall the total interest received by any Lender pursuant to the terms hereof
exceed the amount that such Lender could lawfully have received had the interest
due hereunder been calculated for the full term hereof at the Maximum Lawful
Rate. If the Maximum Lawful Rate is calculated pursuant to this paragraph, such
interest shall be calculated at a daily rate equal to the Maximum Lawful Rate
divided by the number of days in the year in which such calculation is made. If,
notwithstanding the provisions of this Section 1.5(f), a court of competent
jurisdiction shall finally determine that a Lender has received interest
hereunder in excess of the Maximum Lawful Rate, Agent shall, to the extent
permitted by applicable law, promptly apply such excess in the order specified
in Section 1.11 and thereafter shall refund any excess to Borrower or as a court
of competent jurisdiction may otherwise order.
          1.6 Eligible Accounts. All of the Accounts owned by one or more of the
Eligible Credit Parties and reflected in the most recent Borrowing Base
Certificate delivered by Borrower to Agent shall be “Eligible Accounts” for
purposes of this Agreement, except any Account to which any of the exclusionary
criteria set forth below applies. Agent shall have the right to establish or
modify or eliminate Reserves against Eligible Accounts from time to time in its
reasonable credit judgment. In addition, Agent reserves the right, at any time
and from time to time after the Closing Date, to adjust any of the criteria set
forth below, to establish new criteria and to adjust advance rates with respect
to Eligible Accounts, in its reasonable credit

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judgment for reasons relating to any Credit Party, any Credit Party’s business
or industry and/or the Agent’s ability to collect or realize the full value of
any Collateral, subject to the approval of Supermajority Revolving Lenders in
the case of adjustments or new criteria or changes in advance rates or the
elimination of Reserves which have the effect of making more credit available.
Eligible Accounts shall not include any Account of any Eligible Credit Party:
          (a) that does not arise from the sale of goods or the performance of
services by such Eligible Credit Party in the ordinary course of its business;
          (b) (i) upon which the right of such Eligible Credit Party to receive
payment is not absolute or is contingent upon the fulfillment of any condition
whatsoever or (ii) as to which such Eligible Credit Party is not able to bring
suit or otherwise enforce its remedies against the Account Debtor through
judicial process, or (iii) if the Account represents a progress billing
consisting of an invoice for goods sold or used or services rendered pursuant to
a contract under which the Account Debtor’s obligation to pay that invoice is
subject to such Eligible Credit Party’s completion of further performance under
such contract or is subject to the equitable lien of a surety bond issuer;
          (c) to the extent that any defense, counterclaim, setoff or dispute is
asserted as to such Account;
          (d) that is not a true and correct statement of bona fide indebtedness
incurred in the amount of the Account for merchandise sold to or services
rendered and accepted by the applicable Account Debtor;
          (e) with respect to which an invoice has not been sent to the
applicable Account Debtor;
          (f) that (i) is not owned by such Eligible Credit Party or (ii) is
subject to any right, claim, security interest or other interest of any other
Person, other than Liens in favor of Agent, on behalf of itself and Lenders and
Liens securing the obligations under the Second Lien Credit Agreement, as long
as such Liens are subject to the Second Lien Intercreditor Agreement;
          (g) that arises from a sale to any director, officer, other employee
or Affiliate of any Credit Party, or to any entity that has any common officer
or director with any Credit Party;
          (h) that is the obligation of an Account Debtor that is the United
States government or a political subdivision thereof, or any state, county or
municipality or department, agency or instrumentality thereof unless Agent, in
its sole discretion, has agreed to the contrary in writing and such Eligible
Credit Party, if necessary or desirable, has complied with respect to such
obligation with the Federal Assignment of Claims Act of 1940, or any applicable
state, county or municipal law restricting the assignment thereof with respect
to such obligation;
          (i) that is the obligation of an Account Debtor located in a foreign
country other than Canada (excluding the province of Newfoundland, the Northwest
Territories and the Territory of Nunavit) unless payment thereof is assured by a
letter of credit assigned and delivered to Agent, satisfactory to Agent as to
form, amount and issuer;

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          (j) to the extent such Eligible Credit Party or any of its
Subsidiaries is liable for goods sold or services rendered by the applicable
Account Debtor to such Eligible Credit Party or any of its Subsidiaries or a
rebate but only to the extent of the potential offset;
          (k) that arises with respect to goods that are delivered on a
bill-and-hold, cash-on-delivery basis or placed on consignment (provided, that
once consigned goods are actually sold by the relevant Account Debtor, the
Accounts generated by such sale shall not be deemed ineligible pursuant to this
clause (k)), guaranteed sale or other terms by reason of which the payment by
the Account Debtor is or may be conditional;
          (l) that is in default; provided, that, without limiting the
generality of the foregoing, an Account shall be deemed in default upon the
occurrence of any of the following:
               (i) (x) the Account owing by Account Debtors (other than Approved
Obligors) is not paid within the earlier of: 60 days following its due date or
90 days following its original invoice date or (y) the Account owing by Approved
Obligors is not paid within the earlier of: 60 days following its due date or
120 days following its original invoice date;
               (ii) the Account Debtor obligated upon such Account suspends
business, makes a general assignment for the benefit of creditors or fails to
pay its debts generally as they come due; or
               (iii) a petition is filed by or against any Account Debtor
obligated upon such Account under any bankruptcy law or any other federal, state
or foreign (including any provincial) receivership, insolvency relief or other
law or laws for the relief of debtors;
          (m) that is the obligation of an Account Debtor if 50% or more of the
Dollar amount of all Accounts owing by that Account Debtor are ineligible under
the other criteria set forth in this Section 1.6;
          (n) as to which Agent’s Lien thereon, on behalf of itself and Lenders,
is not a first priority perfected Lien (or if the applicable agreement would be
breached, terminated, terminable or in default as a result of the applicable
Credit Party (i) assigning its rights thereunder to the Agent or (ii) granting a
lien on the relevant Account to the Agent);
          (o) as to which any of the representations or warranties in the Loan
Documents are untrue;
          (p) to the extent such Account is evidenced by a judgment, Instrument
or Chattel Paper;
          (q) to the extent such Account exceeds any credit limit established by
Agent, in its reasonable credit judgment;
          (r) to the extent that such Account, together with all other Accounts
owing by such Account Debtor and its Affiliates as of any date of determination
exceed 15% of all

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otherwise Eligible Accounts (provided, however, that Accounts owing by (i) an
Approved Obligor (other than Best Buy Co., Inc. and its Affiliates) and its
Affiliates which constitute less than 25% of all otherwise Eligible Accounts
shall not be deemed ineligible pursuant to this clause (r) or (ii) Best Buy Co.,
Inc. and its Affiliates which constitute less than 35% of all otherwise Eligible
Accounts shall not be deemed ineligible pursuant to this clause (r));
          (s) that is payable in any currency other than Dollars or Canadian
Dollars;
          (t) to the extent such Account arises from the sale of goods if the
applicable Eligible Credit Party has not acquired title to such goods pursuant
to an agreement which is in form and substance reasonably acceptable to the
Agent; or
          (u) that is otherwise unacceptable to Agent in its reasonable credit
judgment for reasons relating to any Credit Party, any Credit Party’s business
or industry and/or the Agent’s ability to collect or realize the full value of
any Collateral.
          1.7 Eligible Inventory. All of the inventory owned by one or more of
the Eligible Credit Parties and reflected in the most recent Borrowing Base
Certificate delivered by Borrower to Agent shall be “Eligible Inventory” for
purposes of this Agreement, except any Inventory to which any of the
exclusionary criteria set forth below applies. Agent shall have the right to
establish, modify, or eliminate Reserves against Eligible Inventory from time to
time in its reasonable credit judgment. In addition, Agent reserves the right,
at any time and from time to time after the Closing Date, to adjust any of the
criteria set forth below, to establish new criteria and to adjust advance rates
with respect to Eligible Inventory in its reasonable credit judgment, subject to
the approval of Supermajority Revolving Lenders in the case of adjustments or
new criteria or changes in advance rates or the elimination of Reserves which
have the effect of making more credit available. Eligible Inventory shall not
include any Inventory of any Eligible Credit Party that:
          (a) is not owned by such Eligible Credit Party free and clear of all
Liens and rights of any other Person (including the rights of a purchaser that
has made progress payments and the rights of a surety that has issued a bond to
assure the performance of such Eligible Credit Party with respect to that
Inventory), except the Liens in favor of Agent, on behalf of itself and Lenders;
          (b) (i) is not located on premises owned, leased or rented by such
Eligible Credit Party and set forth in Disclosure Schedule (3.2) or (ii) is
stored at a leased location, unless Agent has given its prior consent thereto
and unless (x) a reasonably satisfactory landlord waiver has been delivered to
Agent, or (y) Reserves satisfactory to Agent have been established with respect
thereto, (iii) is stored with a bailee or warehouseman unless a reasonably
satisfactory, acknowledged bailee letter has been received by Agent and Reserves
reasonably satisfactory to Agent have been established with respect thereto, or
(iv) is located at an owned location subject to a mortgage in favor of a lender
other than Agent, unless a reasonably satisfactory mortgagee waiver has been
delivered to Agent, or (v) is located at any site if the aggregate book value of
Inventory at any such location is less than $100,000;

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          (c) is placed on consignment or is in transit, except for Inventory in
transit between domestic locations of Credit Parties as to which Agent’s Liens
have been perfected at origin and destination;
          (d) is covered by a negotiable document of title, unless such document
has been delivered to Agent with all necessary endorsements, free and clear of
all Liens except those in favor of Agent and Lenders;
          (e) is delisted, excess, obsolete, unsalable, shopworn, seconds,
damaged or unfit for sale;
          (f) consists of display items or packing or shipping materials,
manufacturing supplies, work-in-process Inventory or replacement parts;
          (g) consists of goods which have been returned by the buyer;
          (h) is not of a type held for sale in the ordinary course of such
Eligible Credit Party’s business;
          (i) is not subject to a first priority Lien in favor of Agent on
behalf of itself and Lenders subject to Permitted Encumbrances described in
clause (e) of the definition of Permitted Encumbrances and Liens securing the
obligations under the Second Lien Credit Agreement, as long as such Liens are
subject to the Second Lien Intercreditor Agreement;
          (j) breaches any of the representations or warranties pertaining to
Inventory set forth in the Loan Documents;
          (k) consists of any costs associated with “freight-in” charges;
          (l) consists of Hazardous Materials or goods that can be transported
or sold only with licenses that are not readily available;
          (m) is not covered by casualty insurance reasonably acceptable to
Agent;
          (n) if such Inventory is music related, it has been produced or
published by anyone other than one of the Major Labels;
          (o) consists of owned independent music; or
          (p) the Agent does not have the right, in Agent’s reasonable
determination, to freely transfer without the need for any license, sublicense
or consent which has not been obtained; or is otherwise unacceptable to Agent in
its reasonable credit judgment for reasons relating to any Credit Party, any
Credit Party’s business or industry and/or the Agent’s ability to collect or
realize the full value of any Collateral.
          1.8 Cash Management Systems. On or prior to the Closing Date, Borrower
will establish and will maintain until the Termination Date, the cash management
systems described in Annex C (the “Cash Management Systems”).

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          1.9 Fees.
          (a) Borrower shall pay to GE Capital, individually, the Fees specified
in the GE Capital Fee Letter, at the times specified for payment therein.
          (b) As additional compensation for the Revolving Lenders, Borrower
shall pay to Agent, for the ratable benefit of such Lenders, in arrears, on the
first Business Day of each month prior to the Commitment Termination Date and on
the Commitment Termination Date, a Fee for Borrower’s non-use of available funds
in an amount equal to the Applicable Unused Line Fee Margin per annum
(calculated on the basis of a 360 day year for actual days elapsed) multiplied
by the difference between (x) the Maximum Amount (as it may be reduced from time
to time) and (y) the average for the period of the daily closing balances of the
Revolving Loan and the Swing Line Loan outstanding during the period for which
the such Fee is due.
          (c) If, on or prior to the third anniversary of the Closing Date,
Borrower prepays the Revolving Loan and/or reduces or terminates the Revolving
Loan Commitment, whether voluntarily or involuntarily and whether before or
after acceleration of the Obligations or if the Revolving Loan Commitments are
reduced or terminated, Borrower shall pay to Agent, for the benefit of Lenders
as liquidated damages and compensation for the costs of being prepared to make
funds available hereunder an amount equal to the Applicable Percentage (as
defined below) multiplied by the amount of the reduction of the Revolving Loan
Commitment. As used herein, the term “Applicable Percentage” shall mean (x) two
percent (2%), in the case of a reduction on or prior to the first anniversary of
the Closing Date, (y) one percent (1%), in the case of a reduction after the
first anniversary of the Closing Date but on or prior to the second anniversary
thereof and (z) one half of one percent (0.5%), in the case of a reduction after
the second anniversary of the Closing Date but on or prior to the third
anniversary thereof. The Credit Parties agree that the Applicable Percentages
are a reasonable calculation of Lenders’ lost profits in view of the
difficulties and impracticality of determining actual damages resulting from an
early termination of the Revolving Loan Commitment. Notwithstanding the
foregoing, no prepayment fee shall be payable by Borrower upon a mandatory
prepayment made pursuant to Sections 1.3(b) 1.16(c) or 5.4(d); provided that
Borrower does not permanently reduce or terminate the Revolving Loan Commitment
upon any such prepayment and, in the case of prepayments made pursuant to
Sections 1.3(b)(ii) or (b)(iii), the transaction giving rise to the applicable
prepayment is a sale of a Subsidiary or division of Borrower expressly permitted
under Section 6.
          (d) Borrower shall pay to Agent, for the ratable benefit of Revolving
Lenders, the Letter of Credit Fee as provided in Annex B.
          1.10 Receipt of Payments. Borrower shall make each payment under this
Agreement not later than 2:00 p.m. (Chicago time) on the day when due in
immediately available funds in Dollars to the Collection Account. All payments
(including prepayments) to be made by Borrower on account of principal, interest
and fees shall be made without defense, set-off or counterclaim (except as
provided in Section 1.15). For purposes of computing interest and Fees and
determining Borrowing Availability as of any date, all payments shall be deemed
received on the first Business Day following the Business Day on which
immediately available funds therefor are received in the Collection Account
prior to 2:00 p.m. Chicago time. Payments

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received after 2:00 p.m. Chicago time on any Business Day or on a day that is
not a Business Day shall be deemed to have been received on the following
Business Day.
          1.11 Application and Allocation of Payments.
          (a) So long as no Event of Default has occurred and is continuing,
(i) payments consisting of proceeds of Accounts received in the ordinary course
of business shall be applied, first, to the Swing Line Loan and, second, to the
Revolving Loan; (ii) voluntary prepayments shall be applied as determined by
Borrower, subject to the provisions of Section 1.3(a); and (iii) mandatory
prepayments shall be applied as set forth in Sections 1.3(c) and 1.3(d). All
payments and prepayments applied to a particular Loan shall be applied ratably
to the portion thereof held by each Lender as determined by its Pro Rata Share.
As to any other payment, and as to all payments made when an Event of Default
has occurred and is continuing or following the Commitment Termination Date,
Borrower hereby irrevocably waives the right to direct the application of any
and all payments received from or on behalf of Borrower, and Borrower hereby
irrevocably agrees that Agent shall have the continuing exclusive right to apply
any and all such payments against the Obligations as Agent may deem advisable
notwithstanding any previous entry by Agent in the Loan Account or any other
books and records. In the absence of a specific determination by Agent with
respect thereto, payments shall be applied to amounts then due and payable in
the following order: first, to Fees and Agent’s expenses reimbursable hereunder;
second, to interest on the Swing Line Loan; third, to principal payments on the
Swing Line Loan; fourth, to interest on the other Loans and unpaid Swap Related
Reimbursement Obligations, ratably in proportion to the interest accrued as to
each Loan and unpaid Swap Related Reimbursement Obligation, as applicable;
fifth, to principal payments on the other Loans and unpaid Swap Related
Reimbursement Obligations and to provide cash collateral for Letter of Credit
Obligations in the manner described in Annex B, ratably to the aggregate,
combined principal balance of the other Loans, unpaid Swap Related Reimbursement
Obligations and outstanding Letter of Credit Obligations; and sixth, to all
other Obligations including expenses of Lenders to the extent reimbursable under
Section 11.3
          (b) Agent is authorized to, and at its sole election may, charge to
the Revolving Loan balance on behalf of Borrower and cause to be paid all Fees,
expenses, Charges, costs (including insurance premiums in accordance with
Section 5.4(a)) and interest and principal, other than principal of the
Revolving Loan, owing by Borrower under this Agreement or any of the other Loan
Documents if and to the extent Borrower fails to pay promptly any such amounts
as and when due, even if the amount of such charges would exceed Borrowing
Availability at such time. At Agent’s option and to the extent permitted by law,
any charges so made shall constitute part of the Revolving Loan hereunder.
          1.12 Loan Account and Accounting. Agent shall maintain a loan account
(the “Loan Account”) on its books to record: all Advances, all payments made by
Borrower, and all other debits and credits as provided in this Agreement with
respect to the Loans or any other Obligations. All entries in the Loan Account
shall be made in accordance with Agent’s customary accounting practices as in
effect from time to time. The balance in the Loan Account, as recorded on
Agent’s most recent printout or other written statement, shall, absent manifest
error, be presumptive evidence of the amounts due and owing to Agent and Lenders
by Borrower; provided that any failure to so record or any error in so recording
shall not

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limit or otherwise affect Borrower’s duty to pay the Obligations. Agent shall
render to Borrower a monthly accounting of transactions with respect to the
Loans setting forth the balance of the Loan Account for the immediately
preceding month. Unless Borrower notifies Agent in writing of any objection to
any such accounting (specifically describing the basis for such objection),
within 90 days after the date thereof, each and every such accounting shall,
absent manifest error, be deemed final, binding and conclusive on Borrower in
all respects as to all matters reflected therein. Only those items expressly
objected to in such notice shall be deemed to be disputed by Borrower.
Notwithstanding any provision herein contained to the contrary, any Lender may
elect (which election may be revoked) to dispense with the issuance of Notes to
that Lender and may rely on the Loan Account as evidence of the amount of
Obligations from time to time owing to it.
          1.13 Indemnity.
          (a) Each Credit Party that is a signatory hereto shall jointly and
severally indemnify and hold harmless each of Agent, Lenders and their
respective Affiliates, and each such Person’s respective officers, directors,
employees, attorneys, agents and representatives (each, an “Indemnified
Person”), from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and expenses (including reasonable attorneys’ fees
and disbursements and other costs of investigation or defense, including those
incurred upon any appeal) that may be instituted or asserted against or incurred
by any such Indemnified Person as the result of credit having been extended,
suspended or terminated under this Agreement and the other Loan Documents and
the administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith, including any and all Environmental Liabilities
and legal costs and expenses arising out of or incurred in connection with
disputes between or among any parties to any of the Loan Documents
(collectively, “Indemnified Liabilities”); provided, that no such Credit Party
shall be liable for any indemnification to an Indemnified Person to the extent
that any such suit, action, proceeding, claim, damage, loss, liability or
expense results from that Indemnified Person’s gross negligence or willful
misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER
PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY
OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH
PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE
ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED
UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
HEREUNDER OR THEREUNDER.
          (b) To induce Lenders to provide the LIBOR Rate option on the terms
provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to
the last day of any applicable LIBOR Period (whether that repayment is made
pursuant to any provision of this Agreement or any other Loan Document or occurs
as a result of acceleration, by operation of law or otherwise); (ii) Borrower
shall default in payment when due of the principal amount of or interest on any
LIBOR Loan; (iii) Borrower shall refuse to accept any borrowing of, or shall
request a termination of any borrowing, conversion into or continuation of LIBOR
Loans after Borrower has given notice requesting the same in accordance
herewith; or (iv) Borrower shall

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fail to make any prepayment of a LIBOR Loan after Borrower has given a notice
thereof in accordance herewith, then Borrower shall indemnify and hold harmless
each Lender from and against all losses, costs and expenses resulting from or
arising from any of the foregoing. Such indemnification shall include any loss
(including loss of margin) or expense arising from the reemployment of funds
obtained by it or from fees payable to terminate deposits from which such funds
were obtained. For the purpose of calculating amounts payable to a Lender under
this subsection, each Lender shall be deemed to have actually funded its
relevant LIBOR Loan through the purchase of a deposit bearing interest at the
LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a
maturity comparable to the relevant LIBOR Period; provided, that each Lender may
fund each of its LIBOR Loans in any manner it sees fit, and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
this subsection. This covenant shall survive the termination of this Agreement
and the payment of the Notes and all other amounts payable hereunder. As
promptly as practicable under the circumstances, each Lender shall provide
Borrower with its written calculation of all amounts payable pursuant to this
Section 1.13(b), and such calculation shall be binding on the parties hereto
unless Borrower shall object in writing within 10 Business Days of receipt
thereof, specifying the basis for such objection in detail.
          1.14 Access. Each Credit Party that is a party hereto shall, during
normal business hours, from time to time upon 5 Business Day’s prior notice as
frequently as Agent determines to be appropriate: (a) provide Agent and any of
its officers, employees and agents access to its properties, facilities,
advisors and employees (including officers) of each Credit Party and to the
Collateral, (b) permit Agent, and any of its officers, employees and agents, to
inspect, audit and make extracts from any Credit Party’s books and records, and
(c) permit Agent, and its officers, employees and agents, to inspect, review,
evaluate and make test verifications and counts of the Accounts, Inventory and
other Collateral of any Credit Party. If a Default or Event of Default has
occurred and is continuing or if access is necessary to preserve or protect the
Collateral as determined by the Agent, each such Credit Party shall provide such
access to Agent and to each Lender at all times and without advance notice.
Furthermore, so long as any Event of Default has occurred and is continuing,
Borrower shall provide Agent and each Lender with access to its suppliers and
customers. Each Credit Party shall make available to Agent and its counsel, as
quickly as is possible under the circumstances, originals or copies of all books
and records that Agent may reasonably request. Each Credit Party shall deliver
any document or instrument necessary for Agent, as it may from time to time
request, to obtain records from any service bureau or other Person that
maintains records for such Credit Party, and shall maintain duplicate records or
supporting documentation on media, including computer tapes and discs owned by
such Credit Party. Agent will give Lenders at least 5 days’ prior notice
(10 days’ prior notice for any audit to be commenced during the period from and
including October 1 through and including January 15) of regularly scheduled
audits. Representatives of other Lenders may accompany Agent’s representatives
on regularly scheduled audits at no charge to Borrower.
          1.15 Taxes.
          (a) Any and all payments by Borrower hereunder or under the Notes
shall be made, in accordance with this Section 1.15, free and clear of and
without deduction for any and all present or future Taxes. If Borrower shall be
required by law to deduct any Taxes from or in

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respect of any sum payable hereunder or under the Notes, (i) the sum payable
shall be increased as much as shall be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 1.15) Agent or Lenders, as applicable, receive an amount
equal to the sum they would have received had no such deductions been made,
(ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full
amount deducted to the relevant taxing or other authority in accordance with
applicable law. Within 30 days after the date of any payment of Taxes, Borrower
shall furnish to Agent the original or a certified copy of a receipt evidencing
payment thereof. Agent and Lenders shall not be obligated to return or refund
any amounts received pursuant to this Section.
          (b) Each Credit Party that is a signatory hereto shall indemnify and,
within 10 days of demand therefor, pay Agent and each Lender for the full amount
of Taxes (including any Taxes imposed by any jurisdiction on amounts payable
under this Section 1.15) paid by Agent or such Lender, as appropriate, and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes were correctly or legally asserted.
          (c) Each Lender organized under the laws of a jurisdiction outside the
United States (a “Foreign Lender”) as to which payments to be made under this
Agreement or under the Notes are exempt from United States withholding tax under
an applicable statute or tax treaty shall provide to Borrower and Agent a
properly completed and executed IRS Form W-8ECI or Form W-8BEN or other
applicable form, certificate or document prescribed by the IRS or the United
States certifying as to such Foreign Lender’s entitlement to such exemption (a
“Certificate of Exemption”). Any foreign Person that seeks to become a Lender
under this Agreement shall provide a Certificate of Exemption to Borrower and
Agent prior to becoming a Lender hereunder. No foreign Person may become a
Lender hereunder if such Person fails to deliver a Certificate of Exemption in
advance of becoming a Lender.
          1.16 Capital Adequacy; Increased Costs; Illegality.
          (a) If any Lender shall have determined that any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by any Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law), in each case, adopted after the Closing Date, from any
central bank or other Governmental Authority increases or would have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by such Lender and thereby reducing the rate of return on such
Lender’s capital as a consequence of its obligations hereunder, then Borrower
shall from time to time upon demand by such Lender (with a copy of such demand
to Agent) pay to Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction. A certificate as to the
amount of that reduction and showing the basis of the computation thereof
submitted by such Lender to Borrower and to Agent shall, absent manifest error,
be final, conclusive and binding for all purposes.
          (b) If, due to either (i) the introduction of or any change in any law
or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted after the Closing Date, there shall be any increase in the cost

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to any Lender of agreeing to make or making, funding or maintaining any Loan,
then Borrower shall from time to time, upon demand by such Lender (with a copy
of such demand to Agent), pay to Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to Borrower and
to Agent by such Lender, shall be conclusive and binding on Borrower for all
purposes, absent manifest error. Each Lender agrees that, as promptly as
practicable after it becomes aware of any circumstances referred to above which
would result in any such increased cost, the affected Lender shall, to the
extent not inconsistent with such Lender’s internal policies of general
application, use reasonable commercial efforts to minimize costs and expenses
incurred by it and payable to it by Borrower pursuant to this Section 1.16(b).
          (c) Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender’s
opinion, adversely affecting it or its Loans or the income obtained therefrom,
on notice thereof and demand therefor by such Lender to Borrower through Agent,
(i) the obligation of such Lender to agree to make or to make or to continue to
fund or maintain LIBOR Loans shall terminate and (ii) Borrower shall forthwith
prepay in full all outstanding LIBOR Loans owing to such Lender, together with
interest accrued thereon, unless Borrower, within 5 Business Days after the
delivery of such notice and demand, converts all LIBOR Loans into Index Rate
Loans.
          (d) Within 15 days after receipt by Borrower of written notice and
demand from any Lender (an “Affected Lender”) for payment of additional amounts
or increased costs as provided in Sections 1.15(a), 1.16(a) or 1.16(b), Borrower
may, at its option, notify Agent and such Affected Lender of its intention to
replace the Affected Lender. So long as no Default or Event of Default has
occurred and is continuing, Borrower, with the consent of Agent, may obtain, at
Borrower’s expense, a replacement Lender (“Replacement Lender”) for the Affected
Lender, which Replacement Lender must be reasonably satisfactory to Agent. If
Borrower obtains a Replacement Lender within 90 days following notice of its
intention to do so, the Affected Lender must sell and assign its Loans and
Commitments to such Replacement Lender for an amount equal to the principal
balance of all Loans held by the Affected Lender and all accrued interest and
Fees with respect thereto through the date of such sale; provided, that Borrower
shall have reimbursed such Affected Lender for the additional amounts or
increased costs that it is entitled to receive under this Agreement through the
date of such sale and assignment. Notwithstanding the foregoing, Borrower shall
not have the right to obtain a Replacement Lender if the Affected Lender
rescinds its demand for increased costs or additional amounts within 15 days
following its receipt of Borrower’s notice of intention to replace such Affected
Lender. Furthermore, if Borrower gives a notice of intention to replace and does
not so replace such Affected Lender within 90 days thereafter, Borrower’s rights
under this Section 1.16(d) shall terminate and Borrower shall promptly pay all
increased costs or additional amounts demanded by such Affected Lender pursuant
to Sections 1.15(a), 1.16(a) and 1.16(b).
          1.17 Single Loan. All Loans to Borrower and all of the other
Obligations of Borrower arising under this Agreement and the other Loan
Documents shall

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constitute one general obligation of Borrower secured, until the Termination
Date, by all of the Collateral.
2. CONDITIONS PRECEDENT
          2.1 Conditions to the Initial Loans. No Lender shall be obligated to
make any Loan or incur any Letter of Credit Obligations on the Closing Date, or
to take, fulfill, or perform any other action hereunder, until the following
conditions have been satisfied or provided for in a manner satisfactory to
Agent, or waived in writing by Agent and Requisite Lenders:
          (a) Credit Agreement; Loan Documents. This Agreement or counterparts
hereof shall have been duly executed by, and delivered to, Borrower, Agent and
Lenders; and Agent shall have received such documents, instruments, agreements
and legal opinions as Agent shall reasonably request in connection with the
transactions contemplated by this Agreement and the other Loan Documents,
including all those listed in the Closing Checklist attached hereto as Annex D,
each in form and substance reasonably satisfactory to Agent.
          (b) Approvals. Agent shall have received (i) satisfactory evidence
that the Credit Parties have obtained all required consents and approvals of all
Persons including all requisite Governmental Authorities, to the execution,
delivery and performance of this Agreement and the other Loan Documents and the
consummation of the Related Transactions or (ii) an officer’s certificate in
form and substance reasonably satisfactory to Agent affirming that no such
consents or approvals are required.
          (c) Payment of Fees. Borrower shall have paid the Fees required to be
paid on the Closing Date in the respective amounts specified in Section 1.9
(including the Fees specified in the GE Capital Fee Letter), and shall have
reimbursed Agent for all fees, costs and expenses of closing presented as of the
Closing Date.
          (d) Capital Structure: Other Indebtedness. The capital structure of
each Credit Party and the terms and conditions of all Indebtedness of each
Credit Party shall be acceptable to Agent in its sole discretion.
          (e) Due Diligence. Agent shall have completed its business and legal
due diligence with results reasonably satisfactory to Agent.
          (f) Consummation of Related Transactions. Agent shall have received
fully executed, final and complete copies of each of the Related Transactions
Documents, each of which shall be in full force and effect in form and substance
reasonably satisfactory to Agent. The Related Transactions shall have been
consummated in accordance with the terms of the Related Transactions Documents.
The Second Lien Loan shall have been funded.
          (g) Total Indebtedness. After giving effect to the Loans and the
Related Transactions and the payment of all fees and expenses in connection
therewith, the aggregate Indebtedness of Borrower and its Subsidiaries on a
consolidated basis shall not exceed $70,000,000.

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          (h) Opening Availability. The Eligible Accounts and Eligible Inventory
supporting the initial Revolving Credit Advance and the initial Letter of Credit
Obligations incurred and the amount of the Reserves to be established on the
Closing Date shall be sufficient in value, as determined by Agent, to provide
Borrower with Borrowing Availability, after giving effect to the initial
Revolving Credit Advance, the incurrence of any initial Letter of Credit
Obligations and the consummation of the Related Transactions (on a pro forma
basis, with trade payables being paid currently consistent with past practice,
and expenses and liabilities being paid in the ordinary course of business and
without acceleration of sales) of at least $15,000,000.
          2.2 Further Conditions to Each Loan. Except as otherwise expressly
provided herein, no Lender shall be obligated to fund any Advance, convert or
continue any Loan as a LIBOR Loan or incur any Letter of Credit Obligation, if,
as of the date thereof:
          (a) any representation or warranty by any Credit Party contained
herein or in any other Loan Document is untrue or incorrect as of such date,
except to the extent that such representation or warranty expressly relates to
an earlier date and except for changes therein expressly permitted or expressly
contemplated by this Agreement, and Agent or Requisite Lenders have determined
not to make such Advance, convert or continue any Loan as LIBOR Loan or incur
such Letter of Credit Obligation as a result of the fact that such warranty or
representation is untrue or incorrect;
          (b) any event or circumstance having a Material Adverse Effect has
occurred since the date hereof as determined by the Requisite Lenders, and Agent
or Requisite Lenders have determined not to make such Advance, convert or
continue any Loan as a LIBOR Loan or incur such Letter of Credit Obligation as a
result of the fact that such event or circumstance has occurred;
          (c) any Default or Event of Default has occurred and is continuing or
would result after giving effect to any Advance (or the incurrence of any Letter
of Credit Obligation), and Agent or Requisite Lenders shall have determined not
to make any Advance, convert or continue any Loan as a LIBOR Loan or incur any
Letter of Credit Obligation as a result of that Default or Event of Default;
          (d) after giving effect to any Advance (or the incurrence of any
Letter of Credit Obligations), the outstanding principal amount of the Revolving
Loan would exceed the lesser of the Borrowing Base and the Maximum Amount, in
each case, less the then outstanding principal amount of the Swing Line Loan; or
          (e) Borrower shall have paid all Fees owing and payable to GE Capital,
Agent and Lenders as of such date under this Agreement and the GE Capital Fee
Letter.
The request and acceptance by Borrower of the proceeds of any Advance, the
incurrence of any Letter of Credit Obligations or the conversion or continuation
of any Loan into, or as, a LIBOR Loan shall be deemed to constitute, as of the
date thereof, (i) a representation and warranty by Borrower that the conditions
in this Section 2.2 have been satisfied and (ii) a reaffirmation by Borrower of
the granting and continuance of Agent’s Liens, on behalf of itself and Lenders,
pursuant to the Collateral Documents.

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3. REPRESENTATIONS AND WARRANTIES
          To induce Lenders to make the Loans and to incur Letter of Credit
Obligations, the Credit Parties executing this Agreement, jointly and severally,
make the following representations and warranties to Agent and each Lender with
respect to all Credit Parties, each and all of which shall survive the execution
and delivery of this Agreement.
          3.1 Corporate Existence; Compliance with Law. Each Credit Party (a) is
a corporation, limited liability company or limited partnership duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation or organization set forth in Disclosure Schedule
(3.1); (b) is duly qualified to conduct business and is in good standing in each
other jurisdiction where its ownership or lease of property or the conduct of
its business requires such qualification, except where the failure to be so
qualified would not result in exposure to losses, damages or liabilities in
excess of $50,000; (c) has the requisite power and authority and the legal right
to own, pledge, mortgage or otherwise encumber and operate its properties, to
lease the property it operates under lease and to conduct its business as now,
heretofore and proposed to be conducted; (d) subject to specific representations
regarding Environmental Laws, has all material licenses, permits, consents or
approvals from or by, and has made all material filings with, and has given all
material notices to, all Governmental Authorities having jurisdiction, to the
extent required for such ownership, operation and conduct; (e) is in compliance
with its charter and bylaws or partnership or operating agreement, as
applicable; and (f) subject to specific representations set forth herein
regarding ERISA, Environmental Laws, tax and other laws, is in compliance with
all applicable provisions of law, except where the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
          3.2 Executive Offices, Collateral Locations, FEIN. As of the Closing
Date, each Credit Party’s name as it appears in official filings in its state of
incorporation or organization, state of incorporation or organization,
organization type, organization number, if any, issued by its state
incorporation or organization, and the current location of each Credit Party’s
chief executive office and the warehouses and premises at which any Collateral
is located are set forth in Disclosure Schedule (3.2), and none of such
locations has changed within 12 months preceding the Closing Date. In addition,
Disclosure Schedule (3.2) lists the federal employer identification number of
each Credit Party.
          3.3 Corporate Power, Authorization, Enforceable Obligations. The
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein:
(a) are within such Person’s power; (b) have been duly authorized by all
necessary corporate, limited liability company or limited partnership action;
(c) do not contravene any provision of such Person’s charter, bylaws or
partnership or operating agreement as applicable; (d) do not violate any law or
regulation, or any order or decree of any court or Governmental Authority;
(e) do not conflict with or result in the breach or termination of, constitute a
default under or accelerate or permit the acceleration of any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Person is a party or by which such Person or any of its
property is bound; (f) do not result in the creation or imposition of any Lien
upon any of the property of such Person other than those in favor of Agent, on
behalf of itself and Lenders, pursuant to the

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Loan Documents; and (g) do not require the consent or approval of any
Governmental Authority or any other Person, except those referred to in
Section 2.1(c), all of which will have been duly obtained, made or complied with
prior to the Closing Date. Each of the Loan Documents shall be duly executed and
delivered by each Credit Party that is a party thereto and each such Loan
Document shall constitute a legal, valid and binding obligation of such Credit
Party enforceable against it in accordance with its terms.
          3.4 Financial Statements and Projections. Except for the Projections
and except as described in Disclosure Schedule 3.4, all Financial Statements
concerning Borrower and its Subsidiaries that are referred to below have been
prepared in accordance with GAAP consistently applied throughout the periods
covered (except as disclosed therein and except, with respect to unaudited
Financial Statements, for the absence of footnotes and normal year-end audit
adjustments) and present fairly in all material respects the financial position
of the Persons covered thereby as at the dates thereof and the results of their
operations and cash flows for the periods then ended.
          (a) Financial Statements. The following Financial Statements attached
hereto as Disclosure Schedule (3.4(a)) have been delivered on the date hereof:
               (i) The audited consolidated and consolidating balance sheets at
March 31, 2006 and the related statements of income and cash flows of Borrower
and its Subsidiaries for the Fiscal Year 2006 then ended, certified by Grant
Thornton, LLP.
               (ii) The unaudited balance sheet(s) at December 31, 2006 and the
related statement(s) of income and cash flows of Borrower and its Subsidiaries
for the nine month period then ended.
          (b) Projections. The Projections delivered on the date hereof and
attached hereto as Disclosure Schedule (3.4(b)) have been prepared by Borrower
in light of the past operations of its businesses, and reflect projections for
the period beginning on January 1, 2007 and ending on March 31, 2011 on a
month-by-month basis through March 31, 2008 and on a year-by-year basis
thereafter. The Projections are based upon estimates and assumptions stated
therein, all of which Borrower believes to be reasonable and fair in light of
current conditions and current facts known to Borrower and, as of the Closing
Date, reflect Borrower’s good faith and reasonable estimates of the future
financial performance of Borrower and of the other information projected therein
for the period set forth therein.
          (c) Pro Forma. The Pro Forma delivered on the date hereof and attached
hereto as Disclosure Schedule (3.4(c)) was prepared by Borrower giving pro forma
effect to the Related Transactions, was based on the unaudited consolidated and
consolidating balance sheets of Borrower and its Subsidiaries dated January 31,
2007 and was prepared in accordance with GAAP, with only such adjustments
thereto as would be required in accordance with GAAP.
          3.5 Material Adverse Effect. Between March 31, 2006 and the Closing
Date, (a) no Credit Party has incurred any obligations, contingent or
noncontingent liabilities, liabilities for Charges, long-term leases or unusual
forward or long-term commitments that, alone or in the aggregate, could
reasonably be expected to have a Material Adverse Effect,

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(b) no contract, lease or other agreement or instrument has been entered into by
any Credit Party or has become binding upon any Credit Party’s assets and no law
or regulation applicable to any Credit Party has been adopted that has had or
could reasonably be expected to have a Material Adverse Effect, and (c) no
Credit Party is in default and to the best of Borrower’s knowledge no third
party is in default under any material contract, lease or other agreement or
instrument, that alone or in the aggregate could reasonably be expected to have
a Material Adverse Effect. Between March 31, 2006 and the Closing Date no event
has occurred, that alone or together with other events, could reasonably be
expected to have a Material Adverse Effect.
          3.6 Ownership of Property; Liens. As of the Closing Date, the real
estate (“Real Estate”) listed in Disclosure Schedule (3.6) constitutes all of
the real property owned, leased, subleased, or used by any Credit Party. Each
Credit Party owns good and marketable fee simple title to all of its owned Real
Estate, and valid and marketable leasehold interests in all of its leased Real
Estate, all as described on Disclosure Schedule (3.6), and copies of all such
leases or a summary of terms thereof reasonably satisfactory to Agent have been
delivered to Agent. Disclosure Schedule (3.6) further describes any Real Estate
with respect to which any Credit Party is a lessor, sublessor or assignor as of
the Closing Date. Each Credit Party also has good and marketable title to, or
valid leasehold interests in, all of its personal property and assets. As of the
Closing Date, none of the properties and assets of any Credit Party are subject
to any Liens other than Permitted Encumbrances, and there are no facts,
circumstances or conditions known to any Credit Party that may result in any
Liens (including Liens arising under Environmental Laws) other than Permitted
Encumbrances. Each Credit Party has received all deeds, assignments, waivers,
consents, nondisturbance and attornment or similar agreements, bills of sale and
other documents, and has duly effected all recordings, filings and other actions
necessary to establish, protect and perfect such Credit Party’s right, title and
interest in and to all such Real Estate and other properties and assets.
Disclosure Schedule (3.6) also describes any purchase options, rights of first
refusal or other similar contractual rights pertaining to any Real Estate. As of
the Closing Date, no portion of any Credit Party’s Real Estate has suffered any
material damage by fire or other casualty loss that has not heretofore been
repaired and restored in all material respects to its original condition or
otherwise remedied. As of the Closing Date, all material permits required to
have been issued or appropriate to enable the Real Estate to be lawfully
occupied and used for all of the purposes for which it is currently occupied and
used have been lawfully issued and are in full force and effect.
          3.7 Labor Matters. As of the Closing Date (a) no strikes or other
material labor disputes against any Credit Party are pending or, to any Credit
Party’s knowledge, threatened; (b) hours worked by and payment made to employees
of each Credit Party comply with the Fair Labor Standards Act and each other
federal, state, local or foreign law applicable to such matters; (c) all
payments due from any Credit Party for employee health and welfare insurance
have been paid or accrued as a liability on the books of such Credit Party;
(d) except as set forth in Disclosure Schedule (3.7), no Credit Party is a party
to or bound by any collective bargaining agreement, management agreement,
consulting agreement, employment agreement, bonus, restricted stock, stock
option, or stock appreciation plan or agreement or any similar plan, agreement
or arrangement (and true and complete copies of any agreements described on
Disclosure Schedule (3.7) have been delivered to Agent); (e) there is no
organizing activity involving any Credit Party pending or, to any Credit Party’s
knowledge, threatened by any labor union or group of employees; (f) there are no
representation proceedings pending or, to any

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Credit Party’s knowledge, threatened with the National Labor Relations Board,
and no labor organization or group of employees of any Credit Party has made a
pending demand for recognition; and (g) except as set forth in Disclosure
Schedule (3.7), there are no material complaints or charges against any Credit
Party pending or, to the knowledge of any Credit Party, threatened to be filed
with any Governmental Authority or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by any Credit Party of any individual.
          3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in Disclosure Schedule (3.8), as of the
Closing Date, no Credit Party has any Subsidiaries, is engaged in any joint
venture or partnership with any other Person, or is an Affiliate of any other
Person. All of the issued and outstanding Stock of each Credit Party is owned by
each of the Stockholders and in the amounts set forth in Disclosure Schedule
(3.8). Except as set forth in Disclosure Schedule (3.8), there are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Credit Party may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock or
other equity securities of its Subsidiaries. All outstanding Indebtedness and
Guaranteed Indebtedness of each Credit Party as of the Closing Date (except for
the Obligations) is described in Section 6.3 (including Disclosure Schedule
(6.3)).
          3.9 Government Regulation. No Credit Party is an “investment company”
or an “affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company,” as such terms are defined in the Investment Company Act of
1940. No Credit Party is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, or any other federal or state
statute that restricts or limits its ability to incur Indebtedness or to perform
its obligations hereunder. The making of the Loans by Lenders to Borrower, the
incurrence of the Letter of Credit Obligations on behalf of Borrower, the
application of the proceeds thereof and repayment thereof and the consummation
of the Related Transactions will not violate any provision of any such statute
or any rule, regulation or order issued by the Securities and Exchange
Commission.
          3.10 Margin Regulations. No Credit Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of “purchasing” or “carrying” any “margin
stock” as such terms are defined in Regulation U of the Federal Reserve Board as
now and from time to time hereafter in effect (such securities being referred to
herein as “Margin Stock”). No Credit Party owns any Margin Stock, and none of
the proceeds of the Loans or other extensions of credit under this Agreement
will be used, directly or indirectly, for the purpose of purchasing or carrying
any Margin Stock, for the purpose of reducing or retiring any Indebtedness that
was originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any of the Loans or other extensions of credit under
this Agreement to be considered a “purpose credit” within the meaning of
Regulations T, U or X of the Federal Reserve Board. No Credit Party will take or
permit to be taken any action that might cause any Loan Document to violate any
regulation of the Federal Reserve Board.
          3.11 Taxes. All tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by any
Credit Party

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have been filed with the appropriate Governmental Authority and all Charges have
been paid prior to the date on which any fine, penalty, interest or late charge
may be added thereto for nonpayment thereof (or any such fine, penalty,
interest, late charge or loss has been paid), excluding Charges or other amounts
being contested in accordance with Section 5.2(b). Proper and accurate amounts
have been withheld by each Credit Party from its respective employees for all
periods in full and complete compliance with all applicable federal, state,
local and foreign laws and such withholdings have been timely paid to the
respective Governmental Authorities. Disclosure Schedule (3.11) sets forth as of
the Closing Date those taxable years for which any Credit Party’s tax returns
are currently being audited by the IRS or any other applicable Governmental
Authority and any assessments or threatened assessments in connection with such
audit, or otherwise currently outstanding. Except as described in Disclosure
Schedule (3.11), no Credit Party has executed or filed with the IRS or any other
Governmental Authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any Charges.
None of the Credit Parties and their respective predecessors are liable for any
Charges: (a) under any agreement (including any tax sharing agreements) or
(b) to each Credit Party’s knowledge, as a transferee. As of the Closing Date,
no Credit Party has agreed or been requested to make any adjustment under IRC
Section 481(a), by reason of a change in accounting method or otherwise, which
would have a Material Adverse Effect.
          3.12 ERISA.
          (a) Disclosure Schedule (3.12) lists all Plans and separately
identifies all Pension Plans, including Title IV Plans, Multiemployer Plans,
ESOPs and Welfare Plans, including all Retiree Welfare Plans. Copies of all such
listed Plans, together with a copy of the latest form. IRS/DOL 5500-series for
each such Plan have been delivered to Agent. Except with respect to
Multiemployer Plans, each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the IRC, the trusts created thereunder have been
determined to be exempt from tax under the provisions of Section 501 of the IRC,
and nothing has occurred that would cause the loss of such qualification or
tax-exempt status. Each Plan is in compliance with the applicable provisions of
ERISA and the IRC, including the timely filing of all reports required under the
IRC or ERISA, including the statement required by 29 CFR Section 2520.104-23.
Neither any Credit Party nor ERISA Affiliate has failed to make any contribution
or pay any amount due as required by either Section 412 of the IRC or
Section 302 of ERISA or the terms of any such Plan. Neither any Credit Party nor
ERISA Affiliate has engaged in a “prohibited transaction,” as defined in
Section 406 of ERISA and Section 4975 of the IRC, in connection with any Plan,
that would subject any Credit Party to a material tax on prohibited transactions
imposed by Section 502(i) of ERISA or Section 4975 of the IRC.
          (b) Except as set forth in Disclosure Schedule (3.12): (i) no Title IV
Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event described
in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is
reasonably expected to occur; (iii) there are no pending, or to the knowledge of
any Credit Party, threatened claims (other than claims for benefits in the
normal course), sanctions, actions or lawsuits, asserted or instituted against
any Plan or any Person as fiduciary or sponsor of any Plan; (iv) no Credit Party
or ERISA Affiliate has incurred or reasonably expects to incur any liability as
a result of a complete or partial withdrawal from a Multiemployer Plan;
(v) within the last five years no Title IV Plan

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of any Credit Party or ERISA Affiliate has been terminated, whether or not in a
“standard termination” as that term is used in Section 404(b)(1) of ERISA, nor
has any Title IV Plan of any Credit Party or ERISA Affiliate (determined at any
time within the past five years) with Unfunded Pension Liabilities been
transferred outside of the “controlled group” (within the meaning of
Section 4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate;
(vi) except in the case of any ESOP, Stock of all Credit Parties and their ERISA
Affiliates makes up, in the aggregate, no more than 10% of fair market value of
the assets of any Plan measured on the basis of fair market value as of the
latest valuation date of any Plan; and (vii) no liability under any Title IV
Plan has been satisfied with the purchase of a contract from an insurance
company that is not rated AAA by the Standard & Poor’s Corporation or an
equivalent rating by another nationally recognized rating agency.
          3.13 No Litigation. No action, claim, lawsuit, demand, investigation
or proceeding is now pending or, to the knowledge of any Credit Party,
threatened against any Credit Party, before any Governmental Authority or before
any arbitrator or panel of arbitrators (collectively, “Litigation”), (a) that
challenges any Credit Party’s right or power to enter into or perform any of its
obligations under the Loan Documents to which it is a party, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (b) that
has a reasonable risk of being determined adversely to any Credit Party and
that, if so determined, could reasonably be expected to have a Material Adverse
Effect. Except as set forth on Disclosure Schedule (3.13), as of the Closing
Date there is no Litigation pending or threatened that seeks damages in excess
of $500,000 or injunctive relief against, or alleges criminal misconduct of, any
Credit Party.
          3.14 Brokers. No broker or finder acting on behalf of any Credit Party
or Affiliate thereof brought about the obtaining, making or closing of the Loans
or the Related Transactions, and no Credit Party or Affiliate thereof has any
obligation to any Person in respect of any finder’s or brokerage fees in
connection therewith.
          3.15 Intellectual Property. As of the Closing Date, each Credit Party
owns or has rights to use all Intellectual Property necessary to continue to
conduct its business as now or heretofore conducted by it or proposed to be
conducted by it, and each Patent, Trademark, Copyright and License is listed,
together with application or registration numbers, as applicable, in Disclosure
Schedule (3.15). Each Credit Party conducts its business and affairs without
infringement of or interference with any Intellectual Property of any other
Person in any material respect. Except as set forth on Disclosure Schedule
(3.15), no Credit Party is aware of any infringement claim by any other Person
with respect to any Intellectual Property that (i) seeks damages in excess of
$250,000 or (ii) pursuant to a formal proceeding, seeks injunctive relief.
          3.16 Full Disclosure. No information contained in this Agreement, any
of the other Loan Documents, any Projections, Financial Statements, Pro Forma or
Collateral Reports or other written reports from time to time delivered
hereunder or any written statement furnished by or on behalf of any Credit Party
to Agent or any Lender pursuant to the terms of this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. Projections
from time to

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time delivered hereunder are or will be based upon the estimates and assumptions
stated therein, all of which Borrower believed at the time of delivery to be
reasonable and fair in light of current conditions and current facts known to
Borrower as of such delivery date, and reflect Borrower’s good faith and
reasonable estimates of the future financial performance of Borrower and of the
other information projected therein for the period set forth therein. The Liens
granted to Agent, on behalf of itself and Lenders, pursuant to the Collateral
Documents will at all times be fully perfected first priority Liens in and to
the Collateral described therein, subject, as to priority, only to Permitted
Encumbrances. After giving effect to the Related Transactions, no default or
event of default under or with respect to any of the Related Transactions
Documents has occurred and is continuing.
          3.17 Environmental Matters.
          (a) Except as set forth in Disclosure Schedule (3.17), as of the
Closing Date: (i) the Credit Parties are and have been in compliance with all
Environmental Laws, except for such noncompliance that would not result in
Environmental Liabilities which could reasonably be expected to exceed $100,000;
(ii) the Credit Parties have obtained, and are in compliance with, all
Environmental Permits required by Environmental Laws for the operations of their
respective businesses as presently conducted or as proposed to be conducted,
except where the failure to so obtain or comply with such Environmental Permits
would not result in Environmental Liabilities that could reasonably be expected
to exceed $100,000, and all such Environmental Permits are valid, uncontested
and in good standing; (iii) no Credit Party is involved in operations or knows
of any facts, circumstances or conditions, including any Releases of Hazardous
Materials, that are likely to result in any Environmental Liabilities of such
Credit Party which could reasonably be expected to exceed $100,000, and no
Credit Party has permitted any current or former tenant or occupant of the Real
Estate to engage in any such operations; (iv) there is no Litigation arising
under or related to any Environmental Laws, Environmental Permits or Hazardous
Material that seeks damages, penalties, fines, costs or expenses in excess of
$25,000 or injunctive relief against, or that alleges criminal misconduct by,
any Credit Party; (v) no notice has been received by any Credit Party
identifying it as a “potentially responsible party” or requesting information
under CERCLA or analogous state statutes, and to the knowledge of the Credit
Parties, there are no facts, circumstances or conditions that may result in any
Credit Party being identified as a “potentially responsible party” under CERCLA
or analogous state statutes; and (vi) the Credit Parties have provided to Agent
copies of all existing environmental reports, reviews and audits and all written
information pertaining to actual or potential Environmental Liabilities, in each
case relating to any Credit Party.
          (b) Each Credit Party hereby acknowledges and agrees that Agent (i) is
not now, and has not ever been, in control of any of the Real Estate or any
Credit Party’s affairs, and (ii) does not have the capacity through the
provisions of the Loan Documents or otherwise to influence any Credit Party’s
conduct with respect to the ownership, operation or management of any of its
Real Estate or compliance with Environmental Laws or Environmental Permits.
          3.18 Insurance. Disclosure Schedule (3.18) lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party, as well as a summary of the terms of each such
policy.

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          3.19 Deposit and Disbursement Accounts. Disclosure Schedule (3.19)
lists all banks and other financial institutions at which any Credit Party
maintains deposit or other accounts as of the Closing Date, including any
Disbursement Accounts, and such Schedule correctly identifies the name, address
and telephone number of each depository, the name in which the account is held,
a description of the purpose of the account, and the complete account number
therefor.
          3.20 Government Contracts. Except as set forth in Disclosure Schedule
(3.20), as of the Closing Date, no Credit Party is a party to any contract or
agreement with any Governmental Authority and no Credit Party’s Accounts are
subject to the Federal Assignment of Claims Act (31 U.S.C. Section 3727) or any
similar state or local law.
          3.21 Customer and Trade Relations. As of the Closing Date, there
exists no actual or, to the knowledge of any Credit Party, threatened
termination or cancellation of, or any material adverse modification or change
in: the business relationship of any Credit Party with any customer or group of
customers whose purchases during the preceding 12 months caused them to be
ranked among the ten largest customers of such Credit Party; or the business
relationship of any Credit Party with any supplier material to its operations.
          3.22 Agreements and Other Documents. As of the Closing Date, each
Credit Party has provided to Agent or its counsel, on behalf of Lenders,
accurate and complete copies (or summaries) of all of the following agreements
or documents to which it is subject and each of which is listed in Disclosure
Schedule (3.22): supply agreements and purchase agreements involving
transactions in excess of $5,000,000 per annum; agreements relating to Vendor
Advances in excess of $2,000,000; leases of Equipment having a remaining term of
one year or longer and requiring aggregate rental and other payments in excess
of $1,000,000 per annum; licenses and permits held by the Credit Parties, the
absence of which could be reasonably likely to have a Material Adverse Effect;
instruments and documents evidencing any Indebtedness or Guaranteed Indebtedness
of such Credit Party and any Lien granted by such Credit Party with respect
thereto; and instruments and agreements evidencing the issuance of any equity
securities, warrants, rights or options to purchase equity securities of such
Credit Party.
          3.23 Solvency. Both before and after giving effect to (a) the Loans
and Letter of Credit Obligations to be made or incurred on the Closing Date or
such other date as Loans and Letter of Credit Obligations requested hereunder
are made or incurred, (b) the disbursement of the proceeds of such Loans
pursuant to the instructions of Borrower, (c) the consummation of the other
Related Transactions, and (d) the payment and accrual of all transaction costs
in connection with the foregoing, each Credit Party is and will be Solvent.
          3.24 [Intentionally Deleted].
          3.25 Status of Navarre CP, Navarre CLP and Navarre CS. None of Navarre
CP, Navarre CLP and Navarre CS has engaged in any business or incurred any
Indebtedness or any other liabilities (except in connection with its corporate
formation, the Related Transactions Documents and this Agreement).

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          3.26 Second Lien Loan. As of the Closing Date, Borrower shall have
delivered to Agent a complete and correct copy of the Second Lien Credit
Agreement and all related documents (including all schedules, exhibits,
amendments, supplements, modifications, assignments and all other documents
delivered pursuant thereto or in connection therewith). Borrower has the
corporate power and authority to incur the Second Lien Loan. All Obligations
hereunder, including the Letter of Credit Obligations, constitute First Lien
Obligations (as defined in the Second Lien Intercreditor Agreement) and are
entitled to the benefits of the provisions thereof. Borrower acknowledges that
Agent and each Lender are entering into this Agreement and are extending the
Commitments in reliance upon the subordination provisions of the Second Lien
Intercreditor Agreement and this Section 3.26.
          3.27 Vendor Advances. As of the last day of the last month to end
prior to the Closing Date, Disclosure Schedule 3.27 sets forth an accurate
listing of all outstanding Vendor Advances.
4. FINANCIAL STATEMENTS AND INFORMATION
          4.1 Reports and Notices.
          (a) Each Credit Party executing this Agreement hereby agrees that from
and after the Closing Date and until the Termination Date, it shall deliver to
Agent or to Agent and Lenders, as required, the Financial Statements, notices,
Projections and other information at the times, to the Persons and in the manner
set forth in Annex E.
          (b) Each Credit Party executing this Agreement hereby agrees that from
and after the Closing Date and until the Termination Date, it shall deliver to
Agent or to Agent and Lenders, as required, the various Collateral Reports
(including Borrowing Base Certificates in the form of Exhibit 4.1(b)) at the
times, to the Persons and in the manner set forth in Annex F.
          4.2 Communication with Accountants. Each Credit Party executing this
Agreement authorizes (a) Agent and (b) so long as an Event of Default has
occurred and is continuing, each Lender, to communicate directly with the
partner in charge of such Credit Party’s audit at such Credit Party’s
independent certified public accountants, and authorizes and shall request those
accountants and advisors to communicate to Agent and each Lender information
relating to any Credit Party with respect to the business, results of operations
and financial condition of any Credit Party.
5. AFFIRMATIVE COVENANTS
          Each Credit Party executing this Agreement jointly and severally
agrees as to all Credit Parties that from and after the date hereof and until
the Termination Date:
          5.1 Maintenance of Existence and Conduct of Business. Each Credit
Party shall: do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and its rights and franchises;
continue to conduct its business substantially as now conducted or as otherwise
permitted hereunder; at all times maintain, preserve and protect all of its
assets and properties used or useful in the conduct of its business, and keep
the same in good repair, working order and condition in all material respects
(taking

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into consideration ordinary wear and tear) and from time to time make, or cause
to be made, all necessary or appropriate repairs, replacements and improvements
thereto consistent with industry practices; and transact business only in such
corporate and trade names as are set forth in Disclosure Schedule (5.1).
          5.2 Payment of Charges.
          (a) Subject to Section 5.2(b), each Credit Party shall pay and
discharge or cause to be paid and discharged promptly all Charges payable by it,
including (i) Charges imposed upon it, its income and profits, or any of its
property (real, personal or mixed) and all Charges with respect to tax, social
security and unemployment withholding with respect to its employees, (ii) lawful
claims for labor, materials, supplies and services or otherwise, and (iii) all
storage or rental charges payable to warehousemen and bailees, in each case,
before any thereof shall become past due.
          (b) Each Credit Party may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges, Taxes or claims described in
Section 5.2(a); provided, that (i) adequate reserves with respect to such
contest are maintained on the books of such Credit Party, in accordance with
GAAP; (ii) no Lien shall be imposed to secure payment of such Charges (other
than payments to warehousemen and/or bailees) that is superior to any of the
Liens securing payment of the Obligations and such contest is maintained and
prosecuted continuously and with diligence and operates to suspend collection or
enforcement of such Charges, (iii) none of the Collateral becomes subject to
forfeiture or loss as a result of such contest, (iv) such Credit Party shall
promptly pay or discharge such contested Charges, Taxes or claims and all
additional charges, interest, penalties and expenses, if any, and shall deliver
to Agent evidence reasonably acceptable to Agent of such compliance, payment or
discharge, if such contest is terminated or discontinued adversely to such
Credit Party or the conditions set forth in this Section 5.2(b) are no longer
met, and (v) Agent has not advised Borrower in writing that Agent reasonably
believes that nonpayment or nondischarge thereof could have or result in a
Material Adverse Effect.
          5.3 Books and Records. Each Credit Party shall keep adequate books and
records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financial Statements attached as Disclosure Schedule
(3.4(a)).
          5.4 Insurance; Damage to or Destruction of Collateral.
          (a) The Credit Parties shall, at their sole cost and expense, maintain
the policies of insurance described on Disclosure Schedule (3.18) as in effect
on the date hereof or otherwise in form and amounts and with insurers reasonably
acceptable to Agent. Such policies of insurance (or the loss payable and
additional insured endorsements delivered to Agent) shall contain provisions
pursuant to which the insurer agrees to provide 30 days prior written notice to
Agent in the event of any non-renewal, cancellation or amendment of any such
insurance policy. If any Credit Party at any time or times hereafter shall fail
to obtain or maintain any of the policies of insurance required above or to pay
all premiums relating thereto, Agent may at any time or times thereafter obtain
and maintain such policies of insurance and pay such premiums

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and take any other action with respect thereto that Agent deems advisable. Agent
shall have no obligation to obtain insurance for any Credit Party or pay any
premiums therefor. By doing so, Agent shall not be deemed to have waived any
Default or Event of Default arising from any Credit Party’s failure to maintain
such insurance or pay any premiums therefor. All sums so disbursed, including
reasonable attorneys’ fees, court costs and other charges related thereto, shall
be payable on demand by Borrower to Agent and shall be additional Obligations
hereunder secured by the Collateral.
          (b) Agent reserves the right at any time upon any change in any Credit
Party’s risk profile (including any change in the product mix maintained by any
Credit Party or any laws affecting the potential liability of such Credit Party)
to require additional forms and limits of insurance to, in Agent’s reasonable
opinion, adequately protect both Agent’s and Lender’s interests in all or any
portion of the Collateral and to ensure that each Credit Party is protected by
insurance in amounts and with coverage customary for its industry. If reasonably
requested by Agent, each Credit Party shall deliver to Agent from time to time a
report of a reputable insurance broker, reasonably satisfactory to Agent, with
respect to its insurance policies.
          (c) Borrower shall deliver to Agent, in form and substance reasonably
satisfactory to Agent, endorsements to (i) all “All Risk” and business
interruption insurance policies naming Agent, on behalf of itself and Lenders,
as loss payee, and (ii) all general liability and other liability policies
naming Agent and Lenders, as additional insured.
          (d) Solely with respect to such “All Risk” and other casualty
insurance policies, Borrower irrevocably makes, constitutes and appoints Agent
(and all officers, employees or agents designated by Agent), so long as any
Default or Event of Default has occurred and is continuing or the anticipated
insurance proceeds under such insurance policies exceed $1,000,000, as
Borrower’s true and lawful agent and attorney-in-fact for the purpose of making,
settling and adjusting claims under such “All Risk” policies, endorsing the name
of Borrower on any check or other item of payment for the proceeds of such “All
Risk” policies and for making all determinations and decisions with respect to
such “All Risk” policies. Agent shall have no duty to exercise any rights or
powers granted to it pursuant to the foregoing power-of-attorney. Borrower shall
promptly notify Agent of any loss, damage, or destruction to the Collateral in
the amount of $250,000 or more, whether or not covered by insurance. After
deducting from such proceeds the expenses, if any, incurred by Agent in the
collection or handling thereof, Agent may, at its option, apply such proceeds to
the reduction of the Obligations in accordance with Section 1.3(d), or permit or
require Borrower to use such money, or any part thereof, to replace, repair,
restore or rebuild the Collateral in a diligent and expeditious manner with
materials and workmanship of substantially the same quality as existed before
the loss, damage or destruction. Notwithstanding the foregoing, if the casualty
giving rise to such insurance proceeds could not reasonably be expected to have
a Material Adverse Effect and such insurance proceeds do not exceed $1,000,000
in the aggregate, Agent shall permit Borrower to replace, restore, repair or
rebuild the Collateral; provided that if Borrower has not completed or entered
into binding agreements to complete such replacement, restoration, repair or
rebuilding within 180 days of such casualty, Agent may apply such insurance
proceeds to the Obligations in accordance with Section 1.3(d). All insurance
proceeds that are to be made available to Borrower to replace, repair, restore
or rebuild the Collateral shall be applied by Agent to reduce the outstanding
principal balance of the Revolving Loan (which application

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shall not result in a permanent reduction of the Revolving Loan Commitment) and
upon such application, Agent shall establish a Reserve against the Borrowing
Base in an amount equal to the amount of such proceeds so applied. All insurance
proceeds made available to any Credit Party that is not a Borrower to replace,
repair, restore or rebuild Collateral shall be deposited in a cash collateral
account. Thereafter, such funds shall be made available to Borrower to provide
funds to replace, repair, restore or rebuild the Collateral as follows:
(i) Borrower shall request a Revolving Credit Advance be made to Borrower in the
amount requested to be released; (ii) so long as the conditions set forth in
Section 2.2 have been met, Revolving Lenders shall make such Revolving Credit
Advance or Agent shall release funds from the cash collateral account; and
(iii) in the case of insurance proceeds applied against the Revolving Loan, the
Reserve established with respect to such insurance proceeds shall be reduced by
the amount of such Revolving Credit Advance. To the extent not used to replace,
repair, restore or rebuild the Collateral, such insurance proceeds shall be
applied in accordance with Section 1.3(d).
          5.5 Compliance with Laws. Each Credit Party shall comply with all
federal, state, local and foreign laws and regulations applicable to it
(including, without limitation, rules and regulations of the Securities and
Exchange Commission requiring the filing of certain financial and other
information or materials), including those relating to ERISA and labor matters
and Environmental Laws and Environmental Permits, except to the extent that the
failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
          5.6 Supplemental Disclosure. From time to time as may be reasonably
requested by Agent (which request will not be made more frequently than once
each year absent the occurrence and continuance of a Default or an Event of
Default), the Credit Parties shall supplement each Disclosure Schedule hereto,
or any representation herein or in any other Loan Document, with respect to any
matter hereafter arising that, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or that is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to any such Disclosure Schedule or representation shall amend,
supplement or otherwise modify any Disclosure Schedule or representation, or be
or be deemed a waiver of any Default or Event of Default resulting from the
matters disclosed therein, except as consented to by Agent and Requisite Lenders
in writing, and (b) no supplement shall be required or permitted as to
representations and warranties that relate solely to the Closing Date.
          5.7 Intellectual Property. Each Credit Party will conduct its business
and affairs without infringement of or interference with any Intellectual
Property of any other Person in any material respect.
          5.8 Environmental Matters. Each Credit Party shall and shall cause
each Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions that are

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appropriate or necessary to maintain the value and marketability of the Real
Estate or to otherwise comply with Environmental Laws and Environmental Permits
pertaining to the presence, generation, treatment, storage, use, disposal,
transportation or Release of any Hazardous Material on, at, in, under, above,
to, from or about any of its Real Estate; (c) notify Agent promptly after such
Credit Party becomes aware of any violation of Environmental Laws or
Environmental Permits or any Release on, at, in, under, above, to, from or about
any Real Estate that is reasonably likely to result in Environmental Liabilities
in excess of $25,000; and (d) promptly forward to Agent a copy of any order,
notice, request for information or any communication or report received by such
Credit Party in connection with any such violation or Release or any other
matter relating to any Environmental Laws or Environmental Permits that could
reasonably be expected to result in Environmental Liabilities in excess of
$50,000, in each case whether or not the Environmental Protection Agency or any
Governmental Authority has taken or threatened any action in connection with any
such violation, Release or other matter. If Agent at any time has a reasonable
basis to believe that there may be a violation of any Environmental Laws or
Environmental Permits by any Credit Party or any Environmental Liability arising
thereunder, or a Release of Hazardous Materials on, at, in, under, above, to,
from or about any of its Real Estate, that, in each case, could reasonably be
expected to have a Material Adverse Effect, then each Credit Party shall, upon
Agent’s written request (i) cause the performance of such environmental audits
including subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at Borrower’s expense, as Agent may from time to time
reasonably request, which shall be conducted by reputable environmental
consulting firms reasonably acceptable to Agent and shall be in form and
substance reasonably acceptable to Agent, and (ii) permit Agent or its
representatives to have access to all Real Estate for the purpose of conducting
such environmental audits and testing as Agent deems appropriate, including
subsurface sampling of soil and groundwater. Borrower shall reimburse Agent for
the costs of such audits and tests and the same will constitute a part of the
Obligations secured hereunder.
          5.9 Landlords’ Agreements. Each Credit Party shall obtain a landlord’s
agreement, mortgagee agreement and bailee letter as applicable, from the lessor
of each leased property, mortgagee of owned property or bailee with respect to
any warehouse, processor or converter facility or other location where
Collateral is stored or located, which agreement or letter shall contain a
waiver or subordination of all Liens or claims that the landlord, mortgagee or
bailee may assert against the Collateral at that location, and shall otherwise
be reasonably satisfactory in form and substance to Agent. With respect to such
locations or warehouse space leased or owned as of the Closing Date and
thereafter, if Agent has not received a landlord or mortgagee agreement or
bailee letter as of the Closing Date (or, if later, as of the date such location
is acquired or leased), Borrower’s Eligible Inventory at that location shall, in
Agent’s discretion, be excluded from the Borrowing Base or be subject to such
Reserves as may be established by Agent in its reasonable credit judgment. After
the Closing Date, no real property or warehouse space shall be leased by any
Credit Party and no Inventory shall be shipped to a processor or converter under
arrangements established after the Closing Date without the prior written
consent of Agent (which consent, in Agent’s discretion, may be conditioned upon
the exclusion from the Borrowing Base of Eligible Inventory at that location or
the establishment of Reserves acceptable to Agent) or, unless and until a
satisfactory landlord agreement or bailee letter, as appropriate, shall first
have been obtained with respect to such location. Each Credit Party shall timely
and fully pay and perform its obligations under all

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leases and other agreements with respect to each leased location or public
warehouse where any Collateral is or may be located. To the extent permitted
hereunder, if any Credit Party proposes to acquire a fee ownership interest in
Real Estate after the Closing Date, it shall first provide to Agent a mortgage
or deed of trust granting Agent a first priority Lien on such Real Estate,
together with environmental audits, mortgage title insurance commitment, real
property survey, local counsel opinion(s), and, if required by Agent,
supplemental casualty insurance and flood insurance, and such other documents,
instruments or agreements reasonably requested by Agent, in each case, in form
and substance reasonably satisfactory to Agent.
          5.10 Further Assurances. Each Credit Party executing this Agreement
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party’s expense and upon request of Agent, duly execute and deliver, or cause to
be duly executed and delivered, to Agent such further instruments and do and
cause to be done such further acts as may be necessary or proper in the
reasonable opinion of Agent to carry out more effectively the provisions and
purposes of this Agreement or any other Loan Document.
6. NEGATIVE COVENANTS
          Each Credit Party executing this Agreement jointly and severally
agrees as to all Credit Parties that from and after the date hereof until the
Termination Date:
          6.1 Mergers, Subsidiaries, Etc. Without the prior written consent of
the Requisite Lenders (which consent may be provided or withheld in the
Requisite Lender’s sole discretion), no Credit Party shall directly or
indirectly, by operation of law or otherwise, (a) form or acquire any
Subsidiary, (b) merge with, consolidate with, acquire all or substantially all
of the assets or Stock of, or otherwise combine with or acquire, any Person, or
(c) other than purchases of Inventory and licenses of Intellectual Property, in
each case in the ordinary course of business consistent with practices as in
effect on the date hereof, purchase assets from any Person if (i) such purchase
is not a Capital Expenditure or (ii) the amount paid for such purchase does not
reduce the EBITDA, during the period such purchase is made and by the amount
paid for such purchase, of the Credit Party which makes such purchase.
Notwithstanding the foregoing, Credit Parties may form one or more new
wholly-owned Subsidiaries as long as (i) no more than ten (10) new subsidiaries
are formed after the date hereof; (ii) as of the date of such formation of such
new Subsidiary, no Event of Default shall have occurred and be continuing;
(iii) pursuant to documentation acceptable to the Agent, each of such new
Subsidiaries at the time it is formed becomes a Credit Party (each, a “New
Credit Party”) under this Agreement; and (iv) at the time that such New Credit
Party is formed, all Credit Parties, including each such New Credit Party, shall
have executed and delivered such amendments, restatements or other supplements
to this Agreement and/or the other existing Loan Documents, and such new Loan
Documents and other notes, documents, certificates, opinions and agreements as
Agent may deem necessary or appropriate, including, without limitation, (a) a
joinder agreement with respect to this Agreement, the Security Agreement and the
Guaranty and a Mortgage, as applicable, together with all necessary financing
statements and/or fixture filings, as applicable, by each New Credit Party to
ensure that the Obligations are secured by first priority Liens on substantially
all of the assets of such New Credit Party and that each New Credit Party is
guarantying the Obligations, (b) a Pledge Amendment to the Pledge Agreement
pledging 100% of the Stock of each such New Credit Party to Agent, and (c)
formation and organization

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documents, certificates, resolutions and legal opinions with respect to the
foregoing which shall, in each case, be in form and substance satisfactory to
Agent.
          6.2 Investments; Loans and Advances. No Credit Party shall make or
permit to exist any investment in, or make, accrue or permit to exist loans or
advances of money to, any Person, through the direct or indirect lending of
money, holding of securities or otherwise, except that: (a) Credit Parties may
hold investments comprised of notes payable, or stock or other securities issued
by Account Debtors to such Credit Party, as applicable pursuant to negotiated
agreements with respect to settlement of such Account Debtor’s Accounts in the
ordinary course of business, so long as the aggregate amount of such Accounts so
settled by the Credit Parties does not exceed $500,000 in the aggregate
outstanding at any time (in the aggregate for the Credit Parties combined);
(b) each Credit Party may maintain its existing equity investments in its
Subsidiaries as of the Closing Date; (c) Borrower may maintain Eligible
Certificate of Deposits; (d) so long as no Default or Event of Default has
occurred and is continuing and there is no outstanding Revolving Loan balance,
Borrower may make investments, subject to Control Letters in favor of Agent for
the benefit of Lenders or otherwise subject to a perfected security interest in
favor of Agent for the benefit of Lenders, in Permitted Cash Equivalents;
(e) Credit Parties may make Vendor Advances as long as the aggregate amount of
Net Vendor Advances made during any Fiscal Year does not at any time during such
Fiscal Year exceed for each Fiscal Year ending on or prior to March 31, 2007,
$15,000,000, (ii) for each Fiscal Year ending after March 31, 2007 but on or
prior to March 31, 2009, $16,500,000 and (iii) for each Fiscal Year thereafter,
$17,500,000 (provided, that the amount set forth for any Fiscal Year shall be
increased by the lesser of (x) $3,000,000 or (y) the maximum Net Vendor Advances
which were, pursuant to this Section, permitted to be made during the then
immediately preceding Fiscal Year less the actual amount of Net Vendor Advances
made during such immediately preceding Fiscal Year; (f) advances by a Credit
Party to its employees expressly permitted by Section 6.4(b) hereof; (g) the
Credit Parties may make loans or advances to the other Credit Parties as
permitted under Section 6.3(a)(v); (h) the Borrower may make (and permit to
exist) capital contributions to Navarre CP, Navarre CLP and Navarre CS as long
as each of such Persons uses all of the proceeds thereof on the date received to
either make a payment due pursuant to Section 1.4 of the FUNimation Purchase
Agreement or make a Performance Payment (as defined in the FUNimation Purchase
Agreement); (i) a loan by the Borrower to Eric Paulson pursuant to Eric
Paulson’s employment agreement in an aggregate principal amount not to exceed
$400,000 may exist and (j) the Credit Parties may make other investments not
exceeding $250,000 in the aggregate at any time outstanding.
          6.3 Indebtedness.
          (a) No Credit Party shall create, incur, assume or permit to exist any
Indebtedness, except (without duplication) (i) Indebtedness secured by purchase
money security interests and Capital Leases permitted in Section 6.7(c),
(ii) the Loans and the other Obligations, (iii) unfunded pension fund and other
employee benefit plan obligations and liabilities to the extent they are
permitted to remain unfunded under applicable law, (iv) existing Indebtedness
described in Disclosure Schedule (6.3) and refinancings thereof or amendments or
modifications thereof that do not have the effect of increasing the principal
amount thereof or changing the amortization thereof (other than to extend the
same) and that are otherwise on terms and conditions no less favorable to any
Credit Party, Agent or any Lender, as determined by Agent,

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than the terms of the Indebtedness being refinanced, amended or modified,
(v) Indebtedness consisting of intercompany loans and advances made by a Credit
Party to any other Credit Party; provided, that: (A) each Credit Party shall
have executed and delivered a master subordinated intercompany note ( the
“Intercompany Note”) to evidence any such Indebtedness owing at any time, which
Intercompany Note shall be in form and substance reasonably satisfactory to
Agent and shall be pledged and delivered to Agent pursuant to the applicable
Pledge Agreement or Security Agreement as security for the Obligations; (B) each
Credit Party shall record all intercompany transactions on its books and records
in a manner reasonably satisfactory to Agent; (C) the obligations of each Credit
Party under such Intercompany Note shall be subordinated to the Obligations in a
manner reasonably satisfactory to Agent; (D) at the time any such intercompany
loan or advance is made by a Credit Party and after giving effect thereto, each
applicable Credit Party shall be Solvent; (E) no Default or Event of Default
would occur and be continuing after giving effect to any such proposed loan or
advance and (F) in the case of any New Credit Party, the related loans to such
New Credit Party are permitted pursuant to Section 6.2(h), (vi) obligations for
Performance Payments (as defined in the FUNimation Purchase Agreement) or
similar payment obligations incurred by the Borrower, Navarre CP, Navarre CLP
and/or Navarre CS in connection with the FUNimation Acquisition in an aggregate
amount not to exceed $17,000,000, (vii) Indebtedness incurred pursuant to the
Second Lien Credit Agreement in a principal amount not to exceed the difference
of (A) $15,000,000 minus (B) the aggregate amount of all payments of principal
made with respect to the Second Lien Loan in the aggregate at any time
outstanding and (viii) hedging obligations under swaps, caps and collar
arrangements arranged by GE Capital.
          (b) No Credit Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any, interest
or other amount payable in respect of any Indebtedness, other than (i) the
Obligations; (ii) Indebtedness (other than Indebtedness under the Second Lien
Credit Agreement) secured by a Permitted Encumbrance if the asset securing such
Indebtedness has been sold or otherwise disposed of in accordance with
Sections 6.8(b) or (c); (iii) Indebtedness permitted by Section 6.3(a)(iv) upon
any refinancing thereof in accordance with Section 6.3(a)(iv); (iv) other
Indebtedness (other than Indebtedness under the Second Lien Credit Agreement)
not in excess of $250,000; and (v) as otherwise permitted in Section 6.14.
          6.4 Employee Loans and Affiliate Transactions.
          (a) No Credit Party shall enter into or be a party to any transaction
with any other Credit Party or any Affiliate thereof except in the ordinary
course of and pursuant to the reasonable requirements of such Credit Party’s
business and upon fair and reasonable terms that are no less favorable to such
Credit Party than would be obtained in a comparable arm’s length transaction
with a Person not an Affiliate of such Credit Party. In addition, if any such
transaction or series of related transactions involves payments in excess of
$100,000 in the aggregate, the terms of these transactions must be disclosed in
advance to Agent and Lenders. All such transactions existing as of the date
hereof are described in Disclosure Schedule (6.4(a)).
          (b) No Credit Party shall enter into any lending or borrowing
transaction with any employees of any Credit Party, except loans to its
respective employees on an arm’s-length basis in the ordinary course of business
consistent with past practices for travel and

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entertainment expenses, relocation costs and similar purposes and stock option
financing up to a maximum of $100,000 to any employee and up to a maximum of
$500,000 in the aggregate at any one time outstanding.
          6.5 Capital Structure and Business. No Credit Party shall (a) make any
changes in any of its business objectives, purposes or operations that could in
any way adversely affect the repayment of the Loans or any of the other
Obligations or could reasonably be expected to have or result in a Material
Adverse Effect, (b) make any change in its capital structure as described in
Disclosure Schedule (3.8), including the issuance or sale of any shares of
Stock, warrants or other securities convertible into Stock or any revision of
the terms of its outstanding Stock; provided, that the Borrower may issue or
sell its Stock for cash so long as (i) the proceeds thereof are applied in
prepayment of the Obligations as required by Section 1.3(b)(iii), and (ii) no
Change of Control occurs after giving effect thereto, or (c) amend its charter
or bylaws in a manner that would adversely affect Agent or Lenders or such
Credit Party’s duty or ability to repay the Obligations. No Credit Party shall
engage in any business other than the businesses currently engaged in by it or
businesses reasonably related thereto.
          6.6 Guaranteed Indebtedness. No Credit Party shall create, incur,
assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement
of instruments or items of payment for deposit to the general account of any
Credit Party, and (b) for Guaranteed Indebtedness incurred for the benefit of
any other Credit Party if the primary obligation is expressly permitted by this
Agreement.
          6.7 Liens and Related Matters. (a) No Credit Party shall create,
incur, assume or permit to exist any Lien on or with respect to its Accounts or
any of its other properties or assets (whether now owned or hereafter acquired)
except for (a) Permitted Encumbrances; (b) Liens in existence on the date hereof
and summarized on Disclosure Schedule (6.7) securing Indebtedness described on
Disclosure Schedule (6.3) and permitted refinancings, extensions and renewals
thereof, including extensions or renewals of any such Liens; provided that the
principal amount so secured is not increased and the Lien does not attach to any
other property; (c) Liens created after the date hereof by conditional sale or
other title retention agreements (including Capital Leases) or in connection
with purchase money Indebtedness with respect to Equipment and Fixtures acquired
by any Credit Party in the ordinary course of business, involving the incurrence
of an aggregate amount of purchase money Indebtedness and Capital Lease
Obligations of not more than $250,000 outstanding at any one time for all such
Liens (provided that such Liens attach only to the assets subject to such
purchase money debt and such Indebtedness is incurred within 20 days following
such purchase and does not exceed 100% of the purchase price of the subject
assets); and (d) Liens securing obligations under the Second Lien Credit
Agreement, as long as the principal amount thereof is Indebtedness permitted
pursuant to Section 6.3(a)(xii) and such Liens do not attach to any assets that
are not subject to Liens securing the Obligations. In addition, no Credit Party
shall become a party to any agreement, note, indenture or instrument, or take
any other action, that would prohibit the creation of a Lien on any of its
properties or other assets in favor of Agent, on behalf of itself and Lenders,
as additional collateral for the Obligations, except operating leases, Capital
Leases or Licenses which prohibit Liens upon the assets that are subject
thereto.

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          (b) The Credit Parties shall not, and shall not cause or permit their
Subsidiaries to, directly or indirectly enter into or assume any agreement
(other than the Loan Documents or the Second Lien Credit Agreement and related
documents) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired and other than (i)
provisions restricting subletting or assignment under any lease governing a
leasehold interest or lease of personal property and (ii) restrictions on
assignments or sublicensing of licensed Intellectual Property.
          (c) Except as provided herein or in the Second Lien Credit Agreement
and related documents, the Credit Parties shall not, and shall not cause or
permit their Subsidiaries to, directly or indirectly create or otherwise cause
or suffer to exist or become effective any consensual encumbrance or restriction
of any kind on the ability of any such Subsidiary to (1) pay dividends or make
any other distribution on any of such Subsidiary’s Stock owned by a Credit
Party, (2) pay any Indebtedness owed to any Credit Party, (3) make loans or
advances to any Credit Party, or (4) transfer any of its property or assets to
any Credit Party.
          6.8 Sale of Stock and Assets. No Credit Party shall sell, transfer,
convey, assign or otherwise dispose of any of its properties or other assets,
including the Stock of any of its Subsidiaries (whether in a public or a private
offering or otherwise) or any of its Accounts, other than (a) the sale of
Inventory in the ordinary course of business, (b) the sale, transfer, conveyance
or other disposition by a Credit Party of Equipment, Fixtures or Real Estate
that are obsolete or no longer used or useful in such Credit Party’s business
and having an appraised value not exceeding $100,000 in any single transaction
or $500,000 in the aggregate in any Fiscal Year, (c) a sale, transfer,
conveyance or other disposition permitted under Section 6.1 and (d) the sale by
AnimeOnline of the real property located in Decatur, Wise County, Texas as more
fully described on Disclosure Schedule (6.8) (such transaction, the “Texas Real
Estate Sale Transaction”) for an amount not less than the amount set forth on
Disclosure Schedule (6.8), as long as at the time of such sale and after giving
effect thereto, no Default or Event of Default has occurred and is continuing.
With respect to any disposition of assets or other properties permitted pursuant
to clauses (b) and (d) above, subject to Section 1.3(b), Agent agrees on
reasonable prior written notice to release its Lien on such assets or other
properties in order to permit the applicable Credit Party to effect such
disposition and shall execute and deliver to Borrower, at Borrower’s expense,
appropriate UCC-3 termination statements and other releases as reasonably
requested by Borrower.
          6.9 ERISA. No Credit Party shall, or shall cause or permit any ERISA
Affiliate to, cause or permit to occur an event that could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event
could reasonably be expected to have a Material Adverse Effect.
          6.10 Financial Covenants. Borrower shall not breach or fail to comply
with any of the Financial Covenants.
          6.11 Hazardous Materials. No Credit Party shall cause or permit a
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the Real Estate where such Release would (a) violate in any respect, or
form the basis for any

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Environmental Liabilities under, any Environmental Laws or Environmental Permits
or (b) otherwise adversely impact the value or marketability of any of the Real
Estate or any of the Collateral, other than such violations or Environmental
Liabilities that could not reasonably be expected to have a Material Adverse
Effect.
          6.12 Sale—Leasebacks. No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.
          6.13 Cancellation of Indebtedness. No Credit Party shall cancel any
claim or debt owing to it, except for reasonable consideration negotiated on an
arm’s-length basis and in the ordinary course of its business consistent with
past practices.
          6.14 Restricted Payments. No Credit Party shall make any Restricted
Payment, except (a) dividends and distributions by Subsidiaries of Borrower paid
to Borrower, (b) employee loans permitted under Section 6.4(b),(c) on any day,
the Borrower may repurchase the Borrower’s own shares of common stock, as long
as (i) at the time of such repurchase and after giving effect thereto, no
Default or Event of Default has occurred and is continuing, (ii) after giving
effect to such repurchase, the Borrowing Availability shall be at least
$15,000,000 and (iii) the aggregate consideration paid for all such repurchases
during any consecutive twelve month period does not exceed $250,000, (d) payment
of Earnout Amounts (under and as defined in the BCI Eclipse Purchase Agreement
as in effect on November 5, 2003) as long as (i) at the time of such payment and
after giving effect thereto, no Default or Event of Default has occurred and is
continuing, (ii) the aggregate amount of such payments to be made after the
Closing Date shall not exceed $300,000 in any Fiscal Year; (iii) the aggregate
amount of all such payments to be made after the Closing Date shall not at any
time exceed $750,000 and (iv) prior to such payment the Borrower has delivered
evidence satisfactory to the Agent demonstrating that, had such payment been
made on the last day of the then most recently completed Fiscal Quarter,
Borrower would have been in compliance with the financial covenants set forth on
Annex G to the Credit Agreement as of the end of such Fiscal Quarter,
(e) payment of Performance Payments (under, as defined in and in accordance with
the FUNimation Purchase Agreement) in an aggregate amount not to exceed
$17,000,000, (f) payments made to or for the benefit of Eric Paulson pursuant to
his employment agreement as more particularly described on Disclosure Schedule
(6.14).
          6.15 Change of Corporate Name or Location; Change of Fiscal Year. No
Credit Party shall (a) change its name as it appears in official filings in the
state of its incorporation or other organization, (b) change its chief executive
office, principal place of business, corporate offices or warehouses or
locations at which Collateral is held or stored, or the location of its records
concerning the Collateral, (c) change the type of entity that it is, (d) change
its organization identification number, if any, issued by its state of
incorporation or other organization, or (e) change its state of incorporation or
organization, in each case without at least 30 days prior written notice to
Agent and after Agent’s written acknowledgment that any reasonable action
requested by Agent in connection therewith, including to continue the perfection
of any Liens in favor of Agent, on behalf of Lenders, in any Collateral, has
been completed or taken, and provided that any such new location shall be in the
continental United States. Without limiting the foregoing, no Credit Party shall
change its name, identity or corporate structure in any manner that might make
any financing or continuation statement filed

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in connection herewith seriously misleading as such term is defined in and/or
used in the Code or any other then applicable provision of the Code except upon
prior written notice to Agent and Lenders and after Agent’s written
acknowledgment that any reasonable action requested by Agent in connection
therewith, including to continue the perfection of any Liens in favor of Agent,
on behalf of Lenders, in any Collateral, has been completed or taken. No Credit
Party shall change its Fiscal Year.
          6.16 No Impairment of Intercompany Transfers. No Credit Party shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) that could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of Borrower to
Borrower.
          6.17 No Speculative Transactions. No Credit Party shall engage in any
transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it and the values of foreign currencies
receivable or payable by it and interest swaps, caps or collars.
          6.18 Leases; Real Estate Purchases. No Credit Party shall enter into
any operating lease for Equipment or Real Estate, if the aggregate of all such
operating lease payments payable in any year for Borrower on a consolidated
basis would exceed $250,000. No Credit Party shall purchase a fee simple
ownership interest in Real Estate.
          6.19 Amendments. Without the prior written consent of the Requisite
Lenders, the Borrower shall not enter into any amendment, supplement,
restatement, other modification or waiver with respect to any of the Minnesota
Sale-Leaseback Documents or the FUNimation Acquisition Documents. In addition,
the Borrower shall not amend, supplement or otherwise modify the Second Lien
Credit Agreement or the related documents in a manner which would violate the
Second Lien Intercreditor Agreement.
          6.20 Navarre CP, Navarre CLP and Navarre CS. Each of Navarre CP,
Navarre CLP and Navarre CS shall not engage in any trade or business, own any
assets (other than Stock of FUNimation Productions and AnimeOnline) or incur any
Indebtedness or Guaranteed Indebtedness (other than the Obligations); provided,
however, that each of Navarre CP, Navarre CLP and Navarre CS may guarantee the
Second Lien Loan in the manner provided in the Second Lien Credit Agreement.
7. TERM
          7.1 Termination. The financing arrangements contemplated hereby shall
be in effect until the Commitment Termination Date, and the Loans and all other
Obligations shall be automatically due and payable in full on such date.
          7.2 Survival of Obligations Upon Termination of Financing
Arrangements. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of

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the Credit Parties or the rights of Agent and Lenders relating to any unpaid
portion of the Loans or any other Obligations, due or not due, liquidated,
contingent or unliquidated or any transaction or event occurring prior to such
termination, or any transaction or event, the performance of which is required
after the Commitment Termination Date. Except as otherwise expressly provided
herein or in any other Loan Document, all undertakings, agreements, covenants,
warranties and representations of or binding upon the Credit Parties, and all
rights of Agent and each Lender, all as contained in the Loan Documents, shall
not terminate or expire, but rather shall survive any such termination or
cancellation and shall continue in full force and effect until the Termination
Date; provided, that the provisions of Section 11, the payment obligations under
Sections 1.15 and 1.16, and the indemnities contained in the Loan Documents
shall survive the Termination Date.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
          8.1 Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an “Event
of Default” hereunder:
          (a) Borrower (i) fails to make any payment of principal of, or
interest on, or Fees owing in respect of, the Loans or any of the other
Obligations when due and payable, or (ii) fails to pay or reimburse Agent or
Lenders for any expense reimbursable hereunder or under any other Loan Document
within 10 days following Agent’s demand for such reimbursement or payment of
expenses.
          (b) Any Credit Party fails or neglects to perform, keep or observe any
of the provisions of Sections 1.4, 1.8, 5.4(a) or 6, or any of the provisions
set forth in Annexes C or G, respectively.
          (c) Borrower fails or neglects to perform, keep or observe any of the
provisions of Section 4 or any provisions set forth in Annexes E or F,
respectively, and the same shall remain unremedied for 5 days or more.
          (d) Any Credit Party fails or neglects to perform, keep or observe any
other provision of this Agreement or of any of the other Loan Documents (other
than any provision embodied in or covered by any other clause of this
Section 8.1) and the same shall remain unremedied for 30 days or more.
          (e) A default or breach occurs under any other agreement, document or
instrument to which any Credit Party is a party that is not cured within any
applicable grace period therefor, and such default or breach (i) involves the
failure to make any payment when due in respect of any Indebtedness or
Guaranteed Indebtedness (other than the Obligations) of any Credit Party in
excess of $250,000 in the aggregate (including (x) undrawn committed or
available amounts and (y) amounts owing to all creditors under any combined or
syndicated credit arrangements), or (ii) causes, or permits any holder of such
Indebtedness or Guaranteed Indebtedness or a trustee to cause, Indebtedness or
Guaranteed Indebtedness or a portion thereof in excess of $250,000 in the
aggregate to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, or cash collateral to be demanded in respect
thereof, in

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each case, regardless of whether such default is waived, or such right is
exercised, by such holder or trustee;
          (f) [Intentionally Deleted.]
          (g) Assets of any Credit Party with a fair market value of $250,000 or
more are attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the possession of any receiver, trustee, custodian or
assignee for the benefit of creditors of any Credit Party and such condition
continues for 30 days or more.
          (h) A case or proceeding is commenced against any Credit Party seeking
a decree or order in respect of such Credit Party (i) under the Bankruptcy Code
or any other applicable federal, state or foreign bankruptcy or other similar
law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) for such Credit Party or for any substantial
part of any such Credit Party’s assets, or (iii) ordering the winding-up or
liquidation of the affairs of such Credit Party, and such case or proceeding
shall remain undismissed or unstayed for 60 days or more or a decree or order
granting the relief sought in such case or proceeding by a court of competent
jurisdiction.
          (i) Any Credit Party (i) files a petition seeking relief under the
Bankruptcy Code or any other applicable federal, state or foreign bankruptcy or
other similar law, (ii) consents to or fails to contest in a timely and
appropriate manner to the institution of proceedings thereunder or to the filing
of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) for such Credit Party or for any substantial part of any such Credit
Party’s assets, (iii) makes an assignment for the benefit of creditors, or
(iv) takes any action in furtherance of any of the foregoing, or (v) admits in
writing its inability to, or is generally unable to, pay its debts as such debts
become due.
          (j) A final judgment or judgments for the payment of money in excess
of $250,000 in the aggregate at any time are outstanding against one or more of
the Credit Parties and the same are not, within 30 days after the entry thereof,
discharged or execution thereof stayed or bonded pending appeal, or such
judgments are not discharged prior to the expiration of any such stay.
          (k) Any material provision of any Loan Document for any reason ceases
to be valid, binding and enforceable in accordance with its terms (or any Credit
Party shall challenge the enforceability of any Loan Document or shall assert in
writing, or engage in any action or inaction based on any such assertion, that
any provision of any of the Loan Documents has ceased to be or otherwise is not
valid, binding and enforceable in accordance with its terms), or any Lien
created under any Loan Document ceases to be a valid and perfected first
priority Lien (except as otherwise permitted herein or therein) in any of the
Collateral purported to be covered thereby.
          (l) Any Change of Control occurs.
          (m) Any information contained in any Borrowing Base Certificate is
untrue or incorrect in any respect (other than errors which do not cause the
Borrowing Base to be

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overstated by more than $100,000 (in the aggregate) in any Borrowing Base
Certificate), or any representation or warranty herein or in any Loan Document
or in any written statement, report, financial statement or certificate (other
than a Borrowing Base Certificate) made or delivered to Agent or any Lender by
any Credit Party is untrue or incorrect in any material respect as of the date
when made or deemed made.
          8.2 Remedies.
          (a) If any Default or Event of Default has occurred and is continuing,
Agent may (and at the written request of the Requisite Lenders shall), without
notice, suspend the Revolving Loan facility with respect to additional Advances
and/or the incurrence of additional Letter of Credit Obligations, whereupon any
additional Advances and additional Letter of Credit Obligations shall be made or
incurred in Agent’s sole discretion (or in the sole discretion of the Requisite
Lenders, if such suspension occurred at their direction) so long as such Default
or Event of Default is continuing. If any Default or Event of Default has
occurred and is continuing, Agent may (and at the written request of Requisite
Lenders shall), without notice except as otherwise expressly provided herein,
increase the rate of interest applicable to the Loans and the Letter of Credit
Fees to the Default Rate.
          (b) If any Event of Default has occurred and is continuing, Agent may
(and at the written request of the Requisite Lenders shall), without notice:
(i) terminate the Revolving Loan facility with respect to further Advances or
the incurrence of further Letter of Credit Obligations; (ii) declare all or any
portion of the Obligations, including all or any portion of any Loan to be
forthwith due and payable, and require that the Letter of Credit Obligations be
cash collateralized as provided in Annex B, all without presentment, demand,
protest or further notice of any kind, all of which are expressly waived by
Borrower and each other Credit Party; or (iii) exercise any rights and remedies
provided to Agent under the Loan Documents or at law or equity, including all
remedies provided under the Code; provided, that upon the occurrence of an Event
of Default specified in Sections 8.1(h) or (i), the Commitments shall be
immediately terminated and all of the Obligations, including the Revolving Loan,
shall become immediately due and payable without declaration, notice or demand
by any Person.
          8.3 Waivers by Credit Parties. Except as otherwise provided for in
this Agreement or by applicable law, each Credit Party waives: (a) presentment,
demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Agent on which any Credit Party may in any way be
liable, and hereby ratifies and confirms whatever Agent may do in this regard,
(b) all rights to notice and a hearing prior to Agent’s taking possession or
control of, or to Agent’s replevy, attachment or levy upon, the Collateral or
any bond or security that might be required by any court prior to allowing Agent
to exercise any of its remedies, and (c) the benefit of all valuation,
appraisal, marshaling and exemption laws.

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9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
          9.1 Assignment and Participations.
          (a) Subject to the terms of this Section 9.1, any Lender may make an
assignment to a Qualified Assignee of, or sale of participations in, at any time
or times, the Loan Documents, Loans, Letter of Credit Obligations and any
Commitment or any portion thereof or interest therein, including any Lender’s
rights, title, interests, remedies, powers or duties thereunder. Any assignment
by a Lender shall: (i) require the consent of Agent (which consent shall not be
unreasonably withheld or delayed with respect to a Qualified Assignee) and the
execution of an assignment agreement (an “Assignment Agreement” substantially in
the form attached hereto as Exhibit 9.1(a) and otherwise in form and substance
reasonably satisfactory to, and acknowledged by, Agent; (ii) be conditioned on
such assignee Lender representing to the assigning Lender and Agent that it is
purchasing the applicable Loans to be assigned to it for its own account, for
investment purposes and not with a view to the distribution thereof; (iii) after
giving effect to any such partial assignment, the assignee Lender shall have
Commitments in an amount at least equal to $1,000,000 and the assigning Lender
shall have retained Commitments in an amount at least equal to $1,000,000;
(iv) include a payment to Agent of an assignment fee of $3,500. In the case of
an assignment by a Lender under this Section 9.1, the assignee shall have, to
the extent of such assignment, the same rights, benefits and obligations as all
other Lenders hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Commitments or assigned portion
thereof from and after the date of such assignment. Borrower hereby acknowledges
and agrees that any assignment shall give rise to a direct obligation of
Borrower to the assignee and that the assignee shall be considered to be a
“Lender”. In all instances, each Lender’s liability to make Loans hereunder
shall be several and not joint and shall be limited to such Lender’s Pro Rata
Share of the applicable Commitment. In the event Agent or any Lender assigns or
otherwise transfers all or any part of the Obligations, Agent or any such Lender
shall so notify Borrower and Borrower shall, upon the request of Agent or such
Lender, execute new Notes in exchange for the Notes, if any, being assigned.
Notwithstanding the foregoing provisions of this Section 9.1(a), any Lender may
at any time pledge the Obligations held by it and such Lender’s rights under
this Agreement and the other Loan Documents to a Federal Reserve Bank, and any
lender that is an investment fund may assign the Obligations held by it and such
Lender’s rights under this Agreement and the other Loan Documents to another
investment fund managed by the same investment advisor; provided, that no such
pledge to a Federal Reserve Bank shall release such Lender from such Lender’s
obligations hereunder or under any other Loan Document.
          (b) In addition to the other rights provided in this Section 9.1, each
Lender may, (x) with notice to the Agent, grant to an SPV the option to make all
or any part of any Loan that such Lender would otherwise be required to make
hereunder (and the exercise of such option by such SPV and the making of Loans
pursuant thereto shall satisfy the obligation of such Lender to make such Loans
hereunder) and such SPV may assign to such Lender the right to receive payment
with respect to any Obligation and (y) without notice to or consent from the
Agent or the Borrower, (i) sell participations to one or more Persons in or to
all or a portion of its rights and obligations under the Loan Documents
(including all its rights and obligations with respect to the Revolving Loans
and Letters of Credit) and (ii) transfer its rights to receive payments
hereunder to one or more Affiliates (a “Transferee”); provided, however, that,
whether

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as a result of any term of any Loan Document or of such grant, participation or
transfer, (i) no such SPV, participant or Transferee shall have a commitment, or
be deemed to have made an offer to commit, to make Loans hereunder, and, except
as provided in the applicable option agreement, none shall be liable for any
obligation of such Lender hereunder, (ii) such Lender’s rights and obligations,
and the rights and obligations of the Loan Parties and the secured parties
towards such Lender under any Loan Document shall remain unchanged and each
other party hereto shall continue to deal solely with such Lender, which shall
remain the registered holder of the Obligations, except that (A) each such
participant and SPV shall be entitled to the benefit of Sections 1.15 and 1.16,
but only to the extent such participant or SPV delivers the tax forms such
Lender is required to collect pursuant hereto and then only to the extent of any
amount to which such Lender would be entitled in the absence of any such grant
or participation and (B) each such SPV may receive other payments that would
otherwise be made to such Lender with respect to Loans funded by such SPV to the
extent provided in the applicable option agreement and set forth in a notice
provided to the Agent by such SPV and such Lender, provided, however, that in no
case (including pursuant to clause (A) or (B) above) shall an SPV, participant
or Transferee have the right to enforce any of the terms of any Loan Document,
and (iii) the consent of such SPV, participant or Transferee shall not be
required (either directly, as a restraint on such Lender’s ability to consent
hereunder or otherwise) for any amendments, waivers or consents with respect to
any Loan Document or to exercise or refrain from exercising any powers or rights
such Lender may have under or in respect of the Loan Documents (including the
right to enforce or direct enforcement of the Obligations), except with respect
to an SPV or a participant for those described in clauses 11.2(c)(ii) or (iii)
with respect to amounts, or dates fixed for payment of amounts, to which such
participant or SPV would otherwise be entitled and, in the case of participants,
except for those described in Section 11.2(c)(ii) or (iii) (or amendments,
consents and waivers with respect to Section 11.2(c)(ii) or (iii) the release of
all or substantially all of the Collateral). No party hereto shall institute
against any SPV grantee of an option pursuant to this clause (b) any bankruptcy,
reorganization, insolvency, liquidation or similar proceeding, prior to the date
that is one year and one day after the payment in full of all outstanding
commercial paper of such SPV; provided, however, that each Lender having
designated an SPV as such agrees to indemnify each Indemnitee against any
liability that may be incurred by, or asserted against, such Indemnitee as a
result of failing to institute such proceeding (including a failure to get
reimbursed by such SPV for any such liability). The agreement in the preceding
sentence shall survive the termination of the Commitments and the payment in
full of the Obligations.
          (c) Except as expressly provided in this Section 9.1, no Lender shall,
as between Borrower and that Lender, or Agent and that Lender, be relieved of
any of its obligations hereunder as a result of any sale, assignment, transfer
or negotiation of, or granting of participation in, all or any part of the
Loans, the Notes or other Obligations owed to such Lender.
          (d) Each Credit Party executing this Agreement shall assist any Lender
permitted to sell assignments or participations under this Section 9.1 as
reasonably required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any and all
agreements, notes and other documents and instruments as shall be requested and
the preparation of informational materials for, and the participation of
management in meetings with, potential assignees or participants. Each Credit
Party executing this Agreement shall certify the correctness, completeness and
accuracy of all descriptions of the Credit Parties and their respective affairs
contained in any selling materials provided by it and all

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other information provided by it and included in such materials, except that any
Projections delivered by Borrower shall only be certified by Borrower as having
been prepared by Borrower in compliance with the representations contained in
Section 3.4(c).
          (e) A Lender may furnish any information concerning Credit Parties in
the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants); provided that such Lender
shall obtain from assignees or participants confidentiality covenants
substantially equivalent to those contained in Section 11.8.
          (f) So long as no Event of Default has occurred and is continuing, no
Lender shall assign or sell participations in any portion of its Loans or
Commitments to a potential Lender or participant, if, as of the date of the
proposed assignment or sale, the assignee Lender or participant would be subject
to capital adequacy or similar requirements under Section 1.16(a), increased
costs under Section 1.16(b), an inability to fund LIBOR Loans under
Section 1.16(c), or withholding taxes in accordance with Section 1.15(a).
          (g) In addition to the other rights provided in this Section 9.1, each
Lender may grant a security interest in, or otherwise assign as collateral, any
of its rights under this Agreement, whether now owned or hereafter acquired
(including rights to payments of principal or interest on the Loans), to (A) any
federal reserve bank (pursuant to Regulation A of the Federal Reserve Board),
without notice to the Agent or (B) any holder of, or trustee for the benefit of
the holders of, such Lender’s securities by notice to the Agent; provided,
however, that no such holder or trustee, whether because of such grant or
assignment or any foreclosure thereon (unless such foreclosure is made through
an assignment in accordance with clause (a) above), shall be entitled to any
rights of such Lender hereunder and no such Lender shall be relieved of any of
its obligations hereunder.
          (h) Nothing contained in this Section 9 shall require the consent of
any party for GE Capital to assign any of its rights in respect of any Swap
Related Reimbursement Obligation.
          9.2 Appointment of Agent. GE Capital is hereby appointed to act on
behalf of all Lenders as Agent under this Agreement and the other Loan
Documents. The provisions of this Section 9.2 are solely for the benefit of
Agent and Lenders and no Credit Party nor any other Person shall have any rights
as a third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement and the other Loan Documents, Agent
shall act solely as an agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any Credit Party or any other Person. Agent shall have no duties or
responsibilities except for those expressly set forth in this Agreement and the
other Loan Documents. The duties of Agent shall be mechanical and administrative
in nature and Agent shall not have, or be deemed to have, by reason of this
Agreement, any other Loan Document or otherwise a fiduciary relationship in
respect of any Lender. Except as expressly set forth in this Agreement and the
other Loan Documents, Agent shall not have any duty to disclose, and shall not
be liable for failure to disclose, any information relating to any Credit Party
or any of their respective Subsidiaries or any Account Debtor that is
communicated to or obtained by GE Capital or any of its Affiliates in any
capacity. Neither Agent nor any of its Affiliates nor any of their respective
officers,

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directors, employees, agents or representatives shall be liable to any Lender
for any action taken or omitted to be taken by it hereunder or under any other
Loan Document, or in connection herewith or therewith, except for damages caused
by its or their own gross negligence or willful misconduct.
          If Agent shall request instructions from Requisite Lenders,
Supermajority Revolving Lenders or all affected Lenders with respect to any act
or action (including failure to act) in connection with this Agreement or any
other Loan Document, then Agent shall be entitled to refrain from such act or
taking such action unless and until Agent shall have received instructions from
Requisite Lenders, Supermajority Revolving Lenders or all affected Lenders, as
the case may be, and Agent shall not incur liability to any Person by reason of
so refraining. Agent shall be fully justified in failing or refusing to take any
action hereunder or under any other Loan Document (a) if such action would, in
the opinion of Agent, be contrary to law or the terms of this Agreement or any
other Loan Document, (b) if such action would, in the opinion of Agent, expose
Agent to Environmental Liabilities or (c) if Agent shall not first be
indemnified to its satisfaction against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
hereunder or under any other Loan Document in accordance with the instructions
of Requisite Lenders, Supermajority Revolving Lenders or all affected Lenders,
as applicable.
          9.3 Agent’s Reliance, Etc. Neither Agent nor any of its Affiliates nor
any of their respective directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the other Loan Documents, except for damages caused by
its or their own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, Agent: (a) may treat the payee of any Note as the
holder thereof until Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form reasonably satisfactory to Agent;
(b) may consult with legal counsel, independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken by it in good faith in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Credit Party or to
inspect the Collateral (including the books and records) of any Credit Party;
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (f) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
          9.4 GE Capital and Affiliates. With respect to its Commitments and
Loans hereunder, GE Capital shall have the same rights and powers under this
Agreement and the other Loan Documents as any other Lender and may exercise the
same as though it were not Agent; and the term “Lender” or “Lenders” shall,
unless otherwise expressly indicated, include

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GE Capital in its individual capacity. GE Capital and its Affiliates may lend
money to, invest in, and generally engage in any kind of business with, any
Credit Party, any of their Affiliates and any Person who may do business with or
own securities of any Credit Party or any such Affiliate, all as if GE Capital
were not Agent and without any duty to account therefor to Lenders. GE Capital
and its Affiliates may accept fees and other consideration from any Credit Party
for services in connection with this Agreement or otherwise without having to
account for the same to Lenders. GE Capital and its affiliates may also make
Loans under the Second Lien Credit Agreement and/or act as agent thereunder.
Each Lender acknowledges and waives the potential conflict of interest between
GE Capital as a Lender holding interests in the Loans and GE Capital as Agent
and GE Capital as lender and/or agent under the Second Lien Credit Agreement.
          9.5 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the Financial Statements referred to in Section 3.4(a) and such other documents
and information as it has deemed appropriate, made its own credit and financial
analysis of the Credit Parties and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon Agent 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. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of interest.
          9.6 Indemnification. Lenders agree to indemnify Agent (to the extent
not reimbursed by Credit Parties and without limiting the obligations of
Borrower hereunder), ratably according to their respective Pro Rata Shares, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against Agent
in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted to be taken by Agent in connection
therewith; provided, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Agent’s gross negligence or
willful misconduct. Without limiting the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including reasonable counsel fees) incurred by Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement and each other Loan Document, to the extent that Agent is not
reimbursed for such expenses by Credit Parties.
          9.7 Successor Agent. Agent may resign at any time by giving not less
than 30 days’ prior written notice thereof to Lenders and Borrower. Upon any
such resignation, the Requisite Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Requisite Lenders and shall have accepted such appointment within 30 days after
the resigning Agent’s giving notice of resignation, then the resigning Agent
may, on behalf of Lenders, appoint a successor Agent, which shall be a Lender,
if a Lender is willing to accept such appointment, or otherwise shall be a
commercial bank or financial

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institution or a subsidiary of a commercial bank or financial institution if
such commercial bank or financial institution is organized under the laws of the
United States of America or of any State thereof and has a combined capital and
surplus of at least $300,000,000. If no successor Agent has been appointed
pursuant to the foregoing, within 30 days after the date such notice of
resignation was given by the resigning Agent, such resignation shall become
effective and the Requisite Lenders shall thereafter perform all the duties of
Agent hereunder until such time, if any, as the Requisite Lenders appoint a
successor Agent as provided above. Any successor Agent appointed by Requisite
Lenders hereunder shall be subject to the approval of Borrower, such approval
not to be unreasonably withheld or delayed; provided that such approval shall
not be required if a Default or an Event of Default has occurred and is
continuing. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall succeed to and become vested with
all the rights, powers, privileges and duties of the resigning Agent. Upon the
earlier of the acceptance of any appointment as Agent hereunder by a successor
Agent or the effective date of the resigning Agent’s resignation, the resigning
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents, except that any indemnity rights or other rights
in favor of such resigning Agent shall continue. After any resigning Agent’s
resignation hereunder, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was acting
as Agent under this Agreement and the other Loan Documents.
          9.8 Setoff and Sharing of Payments. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default
and subject to Section 9.9(f), each Lender is hereby authorized at any time or
from time to time, without notice to any Credit Party or to any other Person,
any such notice being hereby expressly waived, to offset and to appropriate and
to apply any and all balances held by it at any of its offices for the account
of Borrower or any Guarantor (regardless of whether such balances are then due
to Borrower or any Guarantor) and any other properties or assets at any time
held or owing by that Lender or that holder to or for the credit or for the
account of Borrower or any Guarantor against and on account of any of the
Obligations that are not paid when due. Any Lender exercising a right of setoff
or otherwise receiving any payment on account of the Obligations in excess of
its Pro Rata Share thereof shall purchase for cash (and the other Lenders or
holders shall sell) such participations in each such other Lender’s or holder’s
Pro Rata Share of the Obligations as would be necessary to cause such Lender to
share the amount so offset or otherwise received with each other Lender or
holder in accordance with their respective Pro Rata Shares, (other than offset
rights exercised by any Lender with respect to Sections 1.13, 1.15 or 1.16).
Each Lender’s obligation under this Section 9.8 shall be in addition to and not
in limitation of its obligations to purchase a participation in an amount equal
to its Pro Rata Share of the Swing Line Loans under Section 1.1. Borrower and
each Guarantor agrees, to the fullest extent permitted by law, that (a) any
Lender may exercise its right to offset with respect to amounts in excess of its
Pro Rata Share of the Obligations and may sell participations in such amounts so
offset to other Lenders and holders and (b) any Lender so purchasing a
participation in the Loans made or other Obligations held by other Lenders or
holders may exercise all rights of offset, bankers’ lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender or
holder were a direct holder of the Loans and the other Obligations in the amount
of such participation. Notwithstanding the foregoing, if all or any portion of
the offset amount or payment otherwise received is thereafter recovered from the
Lender that has exercised the right

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of offset, the purchase of participations by that Lender shall be rescinded and
the purchase price restored without interest.
          9.9 Advances; Payments; Non-Funding Lenders; Information; Actions in
Concert.
          (a) Advances; Payments.
               (i) Revolving Lenders shall refund or participate in the Swing
Line Loan in accordance with clauses (iii) and (iv) of Section 1.1(b). If the
Swing Line Lender declines to make a Swing Line Loan or if Swing Line
Availability is zero, Agent shall notify Revolving Lenders, promptly after
receipt of a Notice of Revolving Advance and in any event prior to 1:00 p.m.
(Chicago time) on the date such Notice of Revolving Advance is received, by
telecopy, telephone or other similar form of transmission. Each Revolving Lender
shall make the amount of such Lender’s Pro Rata Share of such Revolving Credit
Advance available to Agent in same day funds by wire transfer to Agent’s account
as set forth in Annex H not later than 3:00 p.m. (Chicago time) on the requested
funding date, in the case of an Index Rate Loan and not later than 11:00 a.m.
(Chicago time) on the requested funding date in the case of a LIBOR Loan. After
receipt of such wire transfers (or, in the Agent’s sole discretion, before
receipt of such wire transfers), subject to the terms hereof, Agent shall make
the requested Revolving Credit Advance to Borrower. All payments by each
Revolving Lender shall be made without setoff, counterclaim or deduction of any
kind.
               (ii) On the 2nd Business Day of each calendar week or more
frequently at Agent’s election (each, a “Settlement Date”), Agent shall advise
each Lender by telephone, or telecopy of the amount of such Lender’s Pro Rata
Share of principal, interest and Fees paid for the benefit of Lenders with
respect to each applicable Loan. Provided that each Lender has funded all
payments and Advances required to be made by it and purchased all participations
required to be purchased by it under this Agreement and the other Loan Documents
as of such Settlement Date, Agent shall pay to each Lender such Lender’s Pro
Rata Share of principal, interest and Fees paid by Borrower since the previous
Settlement Date for the benefit of such Lender on the Loans held by it. To the
extent that any Lender (a “Non-Funding Lender”) has failed to fund all such
payments and Advances or failed to fund the purchase of all such participations,
Agent shall be entitled to set off the funding short-fall against that
Non-Funding Lender’s Pro Rata Share of all payments received from Borrower. Such
payments shall be made by wire transfer to such Lender’s account (as specified
by such Lender in Annex H or the applicable Assignment Agreement) not later than
1:00 p.m. (Chicago time) on the next Business Day following each Settlement
Date.
          (b) Availability of Lender‘s Pro Rata Share. Agent may assume that
each Revolving Lender will make its Pro Rata Share of each Revolving Credit
Advance available to Agent on each funding date. If such Pro Rata Share is not,
in fact, paid to Agent by such Revolving Lender when due, Agent will be entitled
to recover such amount on demand from such Revolving Lender without setoff,
counterclaim or deduction of any kind. If any Revolving Lender fails to pay the
amount of its Pro Rata Share forthwith upon Agent’s demand, Agent shall promptly
notify Borrower and Borrower shall immediately repay such amount to Agent.
Nothing in this Section 9.9(b) or elsewhere in this Agreement or the other Loan
Documents shall

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be deemed to require Agent to advance funds on behalf of any Revolving Lender to
relieve any Revolving Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that Borrower may have against any
Revolving Lender as a result of any default by such Revolving Lender hereunder.
To the extent that Agent advances funds to Borrower on behalf of any Revolving
Lender and is not reimbursed therefor on the same Business Day as such Advance
is made, Agent shall be entitled to retain for its account all interest accrued
on such Advance until reimbursed by the applicable Revolving Lender.
          (c) Return of Payments.
               (i) If Agent pays an amount to a Lender under this Agreement in
the belief or expectation that a related payment has been or will be received by
Agent from Borrower and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender on demand without
setoff, counterclaim or deduction of any kind.
               (ii) If Agent determines at any time that any amount received by
Agent under this Agreement must be returned to Borrower or paid to any other
Person pursuant to any insolvency law or otherwise, then, notwithstanding any
other term or condition of this Agreement or any other Loan Document, Agent will
not be required to distribute any portion thereof to any Lender. In addition,
each Lender will repay to Agent on demand any portion of such amount that Agent
has distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to Borrower or such other Person, without setoff,
counterclaim or deduction of any kind.
          (d) Non-Funding Lenders. The failure of any Non-Funding Lender to make
any Revolving Credit Advance or any payment required by it hereunder, or to
purchase any participation in any Swing Line Loan to be made or purchased by it
on the date specified therefor shall not relieve any other Lender (each such
other Revolving Lender, an “Other Lender”) of its obligations to make such
Advance or purchase such participation on such date, but neither any Other
Lender nor Agent shall be responsible for the failure of any Non-Funding Lender
to make an Advance, purchase a participation or make any other payment required
hereunder. Notwithstanding anything set forth herein to the contrary, a
Non-Funding Lender shall not have any voting or consent rights under or with
respect to any Loan Document or constitute a “Lender”, or a “Revolving Lender”
(or be included in the calculation of “Requisite Lenders” or “Supermajority
Revolving Lenders” hereunder) for any voting or consent rights under or with
respect to any Loan Document. At Borrower’s request, Agent or a Person
acceptable to Agent shall have the right with Agent’s consent and in Agent’s
sole discretion (but shall have no obligation) to purchase from any Non-Funding
Lender, and each Non-Funding Lender agrees that it shall, at Agent’s request,
sell and assign to Agent or such Person, all of the Commitments of that
Non-Funding Lender for an amount equal to the principal balance of all Loans
held by such Non-Funding Lender and all accrued interest and fees with respect
thereto through the date of sale, such purchase and sale to be consummated
pursuant to an executed Assignment Agreement.
          (e) Dissemination of Information. Agent shall use reasonable efforts
to provide Lenders with any notice of Default or Event of Default received by
Agent from, or delivered by Agent to, any Credit Party, with notice of any Event
of Default of which Agent has

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actually become aware and with notice of any action taken by Agent following any
Event of Default; provided, that Agent shall not be liable to any Lender for any
failure to do so, except to the extent that such failure is attributable to
Agent’s gross negligence or willful misconduct. Lenders acknowledge that
Borrower is required to provide Financial Statements and Collateral Reports to
Lenders in accordance with Annexes E and F hereto and agree that Agent shall
have no duty to provide the same to Lenders.
          (f) Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of setoff) without first
obtaining the prior written consent of Agent and Requisite Lenders, it being the
intent of Lenders that any such action to protect or enforce rights under this
Agreement and the Notes shall be taken in concert and at the direction or with
the consent of Agent or Requisite Lenders.
          9.10 Intercreditor Agreement. Agent is authorized to execute and
deliver the Second Lien Intercreditor Agreement with the initial lenders and/or
agent under the Second Lien Credit Agreement, and each Lender by making or
purchasing an interest in any Commitment or Loan at any time shall be deemed to
have agreed to be bound by such agreement.
10. SUCCESSORS AND ASSIGNS
          10.1 Successors and Assigns. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of each Credit
Party, Agent, Lenders and their respective successors and assigns (including, in
the case of any Credit Party, a debtor-in-possession on behalf of such Credit
Party), except as otherwise provided herein or therein. No Credit Party may
assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents without
the prior express written consent of Agent and Lenders. Any such purported
assignment, transfer, hypothecation or other conveyance by any Credit Party
without the prior express written consent of Agent and Lenders shall be void.
The terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Credit Party, Agent and Lenders with
respect to the transactions contemplated hereby and no Person shall be a third
party beneficiary of any of the terms and provisions of this Agreement or any of
the other Loan Documents.
11. MISCELLANEOUS
          11.1 Complete Agreement; Modification of Agreement. The Loan Documents
constitute the complete agreement between the parties with respect to the
subject matter thereof and may not be modified, altered or amended except as set
forth in Section 11.2. Any letter of interest, commitment letter or fee letter
(other than the GE Capital Fee Letter) or confidentiality agreement, if any,
between any Credit Party and Agent or any Lender or any of their respective
Affiliates, predating this Agreement and relating to a financing of
substantially similar form, purpose or effect shall be superseded by this
Agreement.

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          11.2 Amendments and Waivers.
          (a) Except for actions expressly permitted to be taken by Agent, no
amendment, modification, termination or waiver of any provision of this
Agreement or any other Loan Document, or any consent to any departure by any
Credit Party therefrom, shall in any event be effective unless the same shall be
in writing and signed by Agent and Borrower, and by Requisite Lenders,
Supermajority Revolving Lenders or all affected Lenders, as applicable. Except
as set forth in clauses (b) and (c) below, all such amendments, modifications,
terminations or waivers requiring the consent of any Lenders shall require the
written consent of Requisite Lenders.
          (b) No amendment, modification, termination or waiver of or consent
with respect to any provision of this Agreement that increases the percentage
advance rates set forth in the definition of the Borrowing Base, or that makes
less restrictive the nondiscretionary criteria for exclusion from Eligible
Accounts and Eligible Inventory set forth in Sections 1.6 and 1.7, shall be
effective unless the same shall be in writing and signed by Agent, Supermajority
Revolving Lenders and Borrower. No amendment, modification, termination or
waiver of or consent with respect to any provision of this Agreement that waives
compliance with the conditions precedent set forth in Section 2.2 to the making
of any Loan or the incurrence of any Letter of Credit Obligations shall be
effective unless the same shall be in writing and signed by Agent, Requisite
Lenders and Borrower. Notwithstanding anything contained in this Agreement to
the contrary, no waiver or consent with respect to any Default or any Event of
Default shall be effective for purposes of the conditions precedent to the
making of Loans or the incurrence of Letter of Credit Obligations set forth in
Section 2.2 unless the same shall be in writing and signed by Agent, Requisite
Lenders and Borrower.
          (c) No amendment, modification, termination or waiver shall, unless in
writing and signed by Agent and each Lender directly affected thereby:
(i) increase the principal amount of any Lender’s Commitment (which action shall
be deemed to directly affect all Lenders); (ii) reduce the principal of, rate of
interest on or Fees payable with respect to any Loan or Letter of Credit
Obligations of any affected Lender; (iii) extend any scheduled payment date
(other than payment dates of mandatory prepayments under Section 1.3(b)(ii)-(iv)
or final maturity date of the principal amount of any Loan of any affected
Lender; (iv) waive, forgive, defer, extend or postpone any payment of interest
or Fees as to any affected Lender; (v) release any Guaranty or, except as
otherwise permitted herein or in the other Loan Documents, release, or permit
any Credit Party to sell or otherwise dispose of, any Collateral with a value
exceeding $5,000,000 in the aggregate (which action shall be deemed to directly
affect all Lenders); (vi) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans that shall be required for
Lenders or any of them to take any action hereunder; and (vii) amend or waive
this Section 11.2 or the definitions of the term “Requisite Lenders” or
“Supermajority Revolving Lenders” insofar as such definitions affect the
substance of this Section 11.2. Furthermore, no amendment, modification,
termination or waiver affecting the rights or duties of Agent or L/C Issuer, or
of GE Capital in respect of any Swap Related Reimbursement Obligations, under
this Agreement or any other Loan Document, including any release of any Guaranty
or Collateral requiring a writing signed by all Lenders, shall be effective
unless in writing and signed by Agent or L/C Issuer or GE Capital, as the case
may be, in addition to Lenders required hereinabove to take such action. Each
amendment, modification,

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termination or waiver shall be effective only in the specific instance and for
the specific purpose for which it was given. No amendment, modification,
termination or waiver shall be required for Agent to take additional Collateral
pursuant to any Loan Document. No amendment, modification, termination or waiver
of any provision of any Note shall be effective without the written concurrence
of the holder of that Note. No notice to or demand on any Credit Party in any
case shall entitle such Credit Party or any other Credit Party to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
Section 11.2 shall be binding upon each holder of the Notes at the time
outstanding and each future holder of the Notes.
          (d) If, in connection with any proposed amendment, modification,
waiver or termination (a “Proposed Change”):
               (i) requiring the consent of all affected Lenders, the consent of
Requisite Lenders is obtained, but the consent of other Lenders whose consent is
required is not obtained (any such Lender whose consent is not obtained as
described in this clause (i) and in clauses (ii) and (iii) below being referred
to as a “Non-Consenting Lender”),
               (ii) requiring the consent of Supermajority Revolving Lenders,
the consent of Requisite Lenders is obtained, but the consent of Supermajority
Revolving Lenders is not obtained,
               (iii) requiring the consent of Requisite Lenders, the consent of
Revolving Lenders holding 51% or more of the aggregate Revolving Loan
Commitments is obtained, but the consent of Requisite Lenders is not obtained;
then, so long as Agent is not a Non-Consenting Lender, at Borrower’s request
Agent, or a Person reasonably acceptable to Agent, shall have the right with
Agent’s consent and in Agent’s sole discretion (but shall have no obligation) to
purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders agree
that they shall, upon Agent’s request, sell and assign to Agent or such Person,
all of the Commitments of such Non-Consenting Lenders for an amount equal to the
principal balance of all Loans held by the Non-Consenting Lenders and all
accrued interest and Fees with respect thereto through the date of sale, such
purchase and sale to be consummated pursuant to an executed Assignment
Agreement. It being acknowledged and agreed by the parties hereto that the
requirements for the payment of any prepayment fee shall not be applicable with
respect to any purchase by Agent of all of the Commitments of a Non-Consenting
Lender as set forth in this clause (d).
          (e) Upon payment in full in cash and performance of all of the
Obligations (other than indemnification Obligations), termination of the
Commitments and a release of all claims against Agent and Lenders, and so long
as no suits, actions proceedings, or claims are pending or threatened against
any Indemnified Person asserting any damages, losses or liabilities that are
Indemnified Liabilities, Agent shall deliver to Borrower termination statements,
mortgage releases and other documents necessary or appropriate to evidence the
termination of the Liens securing payment of the Obligations.

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          11.3 Fees and Expenses. Borrower shall reimburse (i) Agent for all
fees, costs and expenses (including the reasonable fees and expenses of all of
its counsel, advisors, consultants and auditors) and (ii) Agent (and, with
respect to clauses (c) and (d) below, all Lenders) for all fees, costs and
expenses, including the reasonable fees, costs and expenses of counsel or other
advisors (including environmental and management consultants and appraisers)
incurred in connection with the negotiation, preparation and filing and/or
recordation of the Loan Documents and incurred in connection with:
          (a) the forwarding to Borrower or any other Person on behalf of
Borrower by Agent of the proceeds of any Loan (including a wire transfer fee of
$25 per wire transfer);
          (b) any amendment, modification or waiver of, or consent with respect
to, or termination of, any of the Loan Documents or Related Transactions
Documents or advice in connection with the syndication and administration of the
Loans made pursuant hereto or its rights hereunder or thereunder;
          (c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, any Credit Party or any other Person
and whether as a party, witness or otherwise) in any way relating to the
Collateral, any of the Loan Documents or any other agreement to be executed or
delivered in connection herewith or therewith, including any litigation,
contest, dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case commenced by or against any or all of the
Credit Parties or any other Person that may be obligated to Agent by virtue of
the Loan Documents, including any such litigation, contest, dispute, suit,
proceeding or action arising in connection with any work-out or restructuring of
the Loans during the pendency of one or more Events of Default; provided that in
the case of reimbursement of counsel for Lenders other than Agent, such
reimbursement shall be limited to one counsel for all such Lenders; provided,
further, that no Person shall be entitled to reimbursement under this clause
(c) in respect of any litigation, contest, dispute, suit, proceeding or action
to the extent any of the foregoing results from such Person’s gross negligence
or willful misconduct;
          (d) any attempt to enforce any remedies of Agent or any Lender against
any or all of the Credit Parties or any other Person that may be obligated to
Agent or any Lender by virtue of any of the Loan Documents, including any such
attempt to enforce any such remedies in the course of any work-out or
restructuring of the Loans during the pendency of one or more Events of Default;
provided, that in the case of reimbursement of counsel for Lenders other than
Agent, such reimbursement shall be limited to one counsel for all such Lenders;
          (e) any workout or restructuring of the Loans during the pendency of
one or more Events of Default; and
          (f) efforts to (i) monitor the Loans or any of the other Obligations,
(ii) evaluate, observe or assess any of the Credit Parties or their respective
affairs, and (iii) verify, protect, evaluate, assess, appraise, collect, sell,
liquidate or otherwise dispose of any of the Collateral;

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including, as to each of clauses (a) through (f) above, all reasonable
attorneys’ and other professional and service providers’ fees arising from such
services and other advice, assistance or other representation, including those
in connection with any appellate proceedings, and all expenses, costs, charges
and other fees incurred by such counsel and others in connection with or
relating to any of the events or actions described in this Section 11.3, all of
which shall be payable, on demand, by Borrower to Agent. Without limiting the
generality of the foregoing, such expenses, costs, charges and fees may include:
fees, costs and expenses of accountants, environmental advisors, appraisers,
investment bankers, management and other consultants and paralegals; court costs
and expenses; photocopying and duplication expenses; court reporter fees, costs
and expenses; long distance telephone charges; air express charges; telegram or
telecopy charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other advisory services.
          11.4 No Waiver. Agent’s or any Lender’s failure, at any time or times,
to require strict performance by the Credit Parties of any provision of this
Agreement or any other Loan Document shall not waive, affect or diminish any
right of Agent or such Lender thereafter to demand strict compliance and
performance herewith or therewith. Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type. Subject to the provisions of Section 11.2, none of the undertakings,
agreements, warranties, covenants and representations of any Credit Party
contained in this Agreement or any of the other Loan Documents and no Default or
Event of Default by any Credit Party shall be deemed to have been suspended or
waived by Agent or any Lender, unless such waiver or suspension is by an
instrument in writing signed by an officer of or other authorized employee of
Agent and the applicable required Lenders and directed to Borrower specifying
such suspension or waiver.
          11.5 Remedies. Agent’s and Lenders’ rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
that Agent or any Lender may have under any other agreement, including the other
Loan Documents, by operation of law or otherwise. Recourse to the Collateral
shall not be required.
          11.6 Severability . Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement or any other Loan Document shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement or such other Loan Document.
          11.7 Conflict of Terms . Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement conflicts with any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
          11.8 Confidentiality . Agent and each Lender agree to use commercially
reasonable efforts (equivalent to the efforts Agent or such Lender applies to
maintain the confidentiality of its own confidential information) to maintain as
confidential all confidential

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information provided to them by the Credit Parties and designated as
confidential following receipt thereof, except that Agent and each Lender may
disclose such information (a) to Persons employed or engaged by Agent or such
Lender; (b) to any bona fide assignee or participant or potential assignee or
participant that has agreed to comply with the covenant contained in this
Section 11.8 (and any such bona fide assignee or participant or potential
assignee or participant may disclose such information to Persons employed or
engaged by them as described in clause (a) above); (c) as required or requested
by any Governmental Authority or reasonably believed by Agent or such Lender to
be compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, on the advise of Agent’s or such Lender’s counsel, is required
by law; (e) in connection with the exercise of any right or remedy under the
Loan Documents or in connection with any Litigation to which Agent or such
Lender is a party; (f) that ceases to be confidential through no fault of Agent
or any Lender; (g) to a Person that is an investor or prospective investor in a
Securitization that agrees that its access to information regarding the Borrower
and the Loans is solely for purposes of evaluating an investment in such
Securitization; or (h) to a Person that is a trustee, collateral manager,
servicer, noteholder or secured party in a Securitization in connection with the
administration, servicing and reporting on the assets serving as collateral for
such Securitization. For purposes of this Section, “Securitization” means a
public or private offering by a Lender or any of its Affiliates or their
respective successors and assigns, of securities which represent an interest in,
or which are collateralized, in whole or in part, by the Loans.
          11.9 GOVERNING LAW . EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK
COUNTY, CITY OF CHICAGO, ILLINOIS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS
PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS;
PROVIDED, THAT AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
COOK COUNTY AND; PROVIDED, FURTHER THAT NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
CREDIT PARTY HEREBY WAIVES ANY OBJECTION THAT

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SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS
ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX I OF THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
SUCH CREDIT PARTY’S ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE UNITED
STATES MAILS, PROPER POSTAGE PREPAID.
          11.10 Notices
          (a) Addresses. All notices, demands, requests, directions and other
communications required or expressly authorized to be made by this Agreement
shall, whether or not specified to be in writing but unless otherwise expressly
specified to be given by any other means, be given in writing and (i) addressed
to (A) the party to be notified and sent to the address or facsimile number
indicated in Annex I, or (B) otherwise to the party to be notified at its
address specified on the signature page of any applicable Assignment Agreement,
(ii) solely with respect to notices to Lenders, posted to Intralinks® (to the
extent such system is available and set up by or at the direction of the Agent
prior to posting) in an appropriate location by uploading such notice, demand,
request, direction or other communication to www.intralinks.com, faxing it to
866-545-6600 with an appropriate bar-coded fax coversheet or using such other
means of posting to Intralinks® as may be available and reasonably acceptable to
the Agent prior to such posting, (iii) solely with respect to notices to
Lenders, posted to any other E-System set up by or at the direction of Agent in
an appropriate location or (iv) addressed to such other address as shall be
notified in writing (A) in the case of Borrower, Agent and Swing Line Lender, to
the other parties hereto and (B) in the case of all other parties, to Borrower
and Agent. Transmission by electronic mail (including E-Fax, even if transmitted
to the fax numbers set forth in clause (i) above) shall not be sufficient or
effective to transmit any such notice under this clause (a) unless such
transmission is an available means to post to any E-System.
          (b) Effectiveness. All communications described in clause (a) above
and all other notices, demands, requests and other communications made in
connection with this Agreement shall be effective and be deemed to have been
received (i) if delivered by hand, upon personal delivery, (ii) if delivered by
overnight courier service, one Business Day after delivery to such courier
service, (iii) if delivered by mail, when deposited in the mails, (iv) if
delivered by facsimile (other than to post to an E-System pursuant to clause
(a)(ii) or (a)(iii) above), upon sender’s receipt of confirmation of proper
transmission, and (v) if delivered by posting to any E-System, on the later of
the date of such posting in an appropriate location and the date access to such
posting is given to the recipient thereof in accordance with the standard
procedures applicable to such E-System. Failure or delay in delivering copies of
any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than Borrower or Agent) designated in Annex I
to receive copies shall in no way adversely affect the

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effectiveness of such notice, demand, request, consent, approval, declaration or
other communication. The giving of any notice required hereunder may be waived
in writing by the party entitled to receive such notice.
          (c) Electronic Transmissions, Authorization. Subject to the provisions
of Section 11.10(a), each of the Agent, the Credit Parties, the Lenders, the L/C
Issuers and each of their Related Persons is authorized (but not required) to
transmit, post or otherwise make or communicate, in its sole discretion,
Electronic Transmissions in connection with any Loan Document and the
transactions contemplated therein. Each of the Credit Parties, Agent and the
Lenders hereby acknowledges and agrees that the use of Electronic Transmissions
is not necessarily secure and that there are risks associated with such use,
including risks of interception, disclosure and abuse and each indicates it
assumes and accepts such risks by hereby authorizing the transmission of
Electronic Transmissions.
          (d) Signatures. Subject to the provisions of Section 11.10(a), (i)(A)
no posting to any E-System shall be denied legal effect merely because it is
made electronically, (B) each E-Signature on any such posting shall be deemed
sufficient to satisfy any requirement for a “signature” and (C) each such
posting shall be deemed sufficient to satisfy any requirement for a “writing”,
in each case including pursuant to any Loan Document, any applicable provision
of any UCC, the federal Uniform Electronic Transactions Act, the Electronic
Signatures in Global and National Commerce Act and any substantive or procedural
requirement of law governing such subject matter, (ii) each such posting that is
not readily capable of bearing either a signature or a reproduction of a
signature may be signed, and shall be deemed signed, by attaching to, or
logically associating with such posting, an E-Signature, upon which each of
Agent, the Lenders and the Credit Parties may rely and assume the authenticity
thereof, (iii) each such posting containing a signature, a reproduction of a
signature or an E-Signature shall, for all intents and purposes, have the same
effect and weight as a signed paper original and (iv) each party hereto or
beneficiary hereto agrees not to contest the validity or enforceability of any
posting on any E-System or E-Signature on any such posting under the provisions
of any applicable requirement of law requiring certain documents to be in
writing or signed; provided, however, that nothing herein shall limit such
party’s or beneficiary’s right to contest whether any posting to any E-System or
E-Signature has been altered after transmission.
          (e) Separate Agreements. All uses of an E-System shall be governed by
and subject to, in addition to this Section 11.11, separate terms and conditions
posted or referenced in such E-System and related contractual obligations
executed by Agent, the Lenders and Credit Parties in connection with the use of
such E-System.
          11.11 Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
          11.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
          11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST

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QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE
PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING
SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY
CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
          11.14 Press Releases and Related Matters. Each Credit Party executing
this Agreement agrees that neither it nor its Affiliates will in the future
issue any press releases or other public disclosure using the name of GE Capital
or its affiliates or referring to this Agreement, the other Loan Documents or
the Related Transactions Documents without at least 2 Business Days’ prior
notice to GE Capital and without the prior written consent of GE Capital unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will consult
with GE Capital before issuing such press release or other public disclosure.
Each Credit Party consents to the publication by Agent or any Lender of a
tombstone or similar advertising material relating to the financing transactions
contemplated by this Agreement. Agent or such Lender shall provide a draft of
any such tombstone or similar advertising material to each Credit Party for
review and comment prior to the publication thereof. Agent reserves the right to
provide to industry trade organizations information necessary and customary for
inclusion in league table measurements.
          11.15 Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Credit Party for liquidation or reorganization, should any Credit Party
become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of any Credit Party’s assets, and shall continue to be
effective or to be reinstated, as the case may be, if at any time payment and
performance of the Obligations, or any part thereof, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or returned
by any obligee of the Obligations, whether as a “voidable preference,”
“fraudulent conveyance,” or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
          11.16 Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 11.9 and 11.13, with its counsel.
          11.17 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent

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or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.
          11.18 Compliance with Federal Law. Each Credit Party shall (a) ensure,
and cause each Subsidiary to ensure, that no Person who owns a controlling
interest in or otherwise controls such Credit Party or such Subsidiary is or
shall be listed on the Specially Designated Nationals and Blocked Person List or
other similar lists maintained by the Office of Foreign Assets Control (“OFAC”),
the Department of the Treasury or included in any Executive Orders, (b) not use
or permit the use of the proceeds of the Loans to violate any of the foreign
asset control regulations of OFAC or any enabling statute or Executive Order
relating thereto, and (c) comply, and cause each Subsidiary to comply, with all
applicable Bank Secrecy Act laws and regulations, as amended.
          11.19 Customer Identification — USA Patriot Act Notice. Each Lender
and the Agent (for itself and not on behalf of any other party) hereby notifies
the Credit Parties that, pursuant to the requirements of the USA Patriot Act,
Title III of Pub. L. 107-56, signed into law October 26, 2001 (the “Patriot
Act”), it is required to obtain, verify and record information that identifies
the Credit Parties, which information includes the name and address of the
Credit Parties and other information that will allow such Lender or the Agent,
as applicable, to identify the Credit Parties in accordance with the Patriot
Act.
12. AMENDMENT AND RESTATEMENT
          12.1 Interrelationship with the Existing Credit Agreement. As stated
in the preamble hereof, this Agreement is intended to amend and restate the
provisions of the Existing Credit Agreement and, except as expressly modified
herein, (x) all of the terms and provisions of the Existing Credit Agreement
shall continue to apply for the period prior to the Closing Date, including any
determinations of payment dates, interest rates, Events of Default or any amount
that may be payable to Agent or the Lenders, (y) the Obligations under the
Existing Credit Agreement shall continue to be paid or prepaid on or prior to
the Closing Date, and shall from and after the Closing Date continue to be owing
and be subject to the terms of this Agreement and (z) this Agreement shall not
be deemed to evidence or result in a novation or repayment of the Revolving
Loans under the Existing Credit Agreement and reborrowing hereunder, but
Obligations under the Existing Credit Agreement and Liens securing payment and
performance thereof shall in all respects be continuing as Obligations under
this Agreement and Liens securing payment and performance thereof. All
references in the other Loan Documents and the Loan Documents executed in
connection with the Existing Credit Agreement to (i) the Existing Credit
Agreement or the “Credit Agreement” shall be deemed to include references to
this Agreement and (ii) the “Lenders” or a “Lender” or to the “Agent” shall mean
such terms as defined in this Agreement. All Obligations of the Borrower under
the Existing Credit Agreement shall be governed by this Agreement from and after
the Closing Date. The Loan Documents delivered in connection with this Agreement
shall supersede the corresponding Loan Documents delivered in connection with
the Existing Credit Agreement. The Loan Documents executed in connection with
the Existing Credit Agreement that are not superseded by corresponding Loan
Documents executed and delivered in connection with this Agreement shall remain
in full force and effect. All references to the Existing Credit Agreement in the
Loan

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Documents executed in connection with the Existing Credit Agreement that are not
expressly superseded by deliveries of such new Loan Documents shall be deemed to
refer to this Agreement.
[Signature Pages Follow]

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          IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.

            NAVARRE CORPORATION, as Borrower
      By:           Name:           Title:           GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
      By:           Duly Authorized Signatory   

[Signature Page to Fourth Amended and Restated Credit Agreement]

S-1

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     IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above by below Persons in their capacity as Credit Parties not as
Borrower.

            ENCORE SOFTWARE, INC., as Credit Party
      By:           Name:           Title:           BCI ECLIPSE COMPANY, LLC,
as Credit Party
      By:           Name:           Title:        

            FUNIMATION PRODUCTIONS LTD., as Credit Party

By: Navarre CP, LLC, its General Partner

    By:           Name:           Title:        

            ANIMEONLINE, LTD (F/K/A THE FUNIMATION STORE LTD.), as Credit Party
 
By: Navarre CS, LLC, its General Partner
      By:           Name:           Title:           NAVARRE CP, LLC, as Credit
Party
      By:           Name:           Title:           NAVARRE CLP, LLC, as Credit
Party
      By:           Name:           Title:      

[Signature Page to Fourth Amended and Restated Credit Agreement]

S-2

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            NAVARRE CS, LLC, as Credit Party
      By:           Name:           Title:           NAVARRE LOGISTICAL
SERVICES, INC., as Credit Party
      By:           Name:           Title:           NAVARRE DIGITAL SERVICES,
INC., as Credit Party
      By:           Name:           Title:           NAVARRE ONLINE FULFILLMENT
SERVICES, INC., as Credit Party
      By:           Name:           Title:           NAVARRE DISTRIBUTION
SERVICES, INC., as Credit Party
      By:           Name:           Title:           NAVARRE ENTERTAINMENT
MEDIA, INC., as Credit Party
      By:           Name:           Title:      

[Signature Page to Fourth Amended and Restated Credit Agreement]

S-3

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            FUNIMATION CHANNEL, INC., as Credit Party
      By:           Name:           Title:      

[Signature Page to Fourth Amended and Restated Credit Agreement]

S-4

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ANNEX A (Recitals)
to
CREDIT AGREEMENT
DEFINITIONS
          Capitalized terms used in the Loan Documents shall have (unless
otherwise provided elsewhere in the Loan Documents) the following respective
meanings and all references to Sections, Exhibits, Schedules or Annexes in the
following definitions shall refer to Sections, Exhibits, Schedules or Annexes of
or to the Agreement:
          “Account Debtor” means any Person who may become obligated to any
Credit Party under, with respect to, or on account of, an Account, Chattel Paper
or General Intangibles (including a payment intangible).
          “Accounting Changes” has the meaning ascribed thereto in Annex G.
          “Accounts” means all “accounts,” as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party, including (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper or Instruments), (including
any such obligations that may be characterized as an account or contract right
under the Code), (b) all of each Credit Party’s rights in, to and under all
purchase orders or receipts for goods or services, (c) all of each Credit
Party’s rights to any goods represented by any of the foregoing (including
unpaid sellers’ rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods), (d) all rights
to payment due to any Credit Party for property sold, leased, licensed, assigned
or otherwise disposed of, for a policy of insurance issued or to be issued, for
a secondary obligation incurred or to be incurred, for energy provided or to be
provided, for the use or hire of a vessel under a charter or other contract,
arising out of the use of a credit card or charge card, or for services rendered
or to be rendered by such Credit Party or in connection with any other
transaction (whether or not yet earned by performance on the part of such Credit
Party), (e) all healthcare insurance receivables, and (f) all collateral
security of any kind, now or hereafter in existence, given by any Account Debtor
or other Person with respect to any of the foregoing.
          “Advance” means any Revolving Credit Advance or Swing Line Advance, as
the context may require.
          “Affiliate” means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, 5% or more of the Stock having ordinary voting
power in the election of directors of such Person, (b) each Person that
controls, is controlled by or is under common control with such Person, (c) each
of such Person’s officers, directors, joint venturers and partners and (d) in
the case of Borrower, the immediate family members, spouses and lineal
descendants of individuals who are Affiliates of Borrower. For the purposes of
this definition, “control” of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management

Annex A-1

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or policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that the term “Affiliate” shall specifically
exclude Agent and each Lender.
          “Agent” means GE Capital in its capacity as Agent for Lenders or its
successor appointed pursuant to Section 9.7.
          “Agreement” means the Fourth Amended and Restated Credit Agreement
dated as of the Closing Date by and among Borrower, the other Credit Parties
party thereto, GE Capital, as Agent and Lender and the other Lenders from time
to time party thereto, as the same may be amended, supplemented, restated or
otherwise modified from time to time (including, without limitation, by any
joinder agreement thereto by any New Credit Party).
          “animeOnline” means animeOnline, Ltd. (f/k/a The FUNimation Store
Ltd.), a Texas limited partnership.
          “Appendices” has the meaning ascribed to it in the recitals to the
Agreement.
          “Applicable L/C Margin” means the per annum fee, from time to time in
effect, payable with respect to outstanding Letter of Credit Obligations as
determined by reference to Section 1.5(a).
          “Applicable Margins” means collectively the Applicable L/C Margin, the
Applicable Unused Line Fee Margin, the Applicable Revolver Index Margin and the
Applicable Revolver LIBOR Margin.
          “Applicable Percentage” has the meaning ascribed to it in
Section 1.9(c).
          “Applicable Revolver Index Margin” means the per annum interest rate
margin from time to time in effect and payable in addition to the Index Rate
applicable to the Revolving Loan, as determined by reference to Section 1.5(a).
          “Applicable Revolver LIBOR Margin” means the per annum interest rate
from time to time in effect and payable in addition to the LIBOR Rate applicable
to the Revolving Loan, as determined by reference to Section 1.5(a).
          “Applicable Unused Line Fee Margin” means the per annum fee, from time
to time in effect, payable in respect of Borrower’s non-use of committed funds
pursuant to Section 1.9(b), which fee is determined by reference to
Section 1.5(a).
          “Approved Fund” means, with respect to any Lender, any Person (other
than a natural Person) that (a) is or will be engaged in making, purchasing,
holding or otherwise investing in commercial loans and similar extensions of
credit in the ordinary course of its business and (b) is advised or managed by
(i) such Lender, (ii) any Affiliate of such Lender or (iii) any Person (other
than an individual) or any Affiliate of any Person (other than an individual)
that administers or manages such Lender.
          “Approved Obligor” shall mean each Person which the Agent has notified
the Borrower in writing from time to time constitutes an “Approved Obligor” for
the purposes of this

Annex A-2

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Agreement. As of the Closing Date, each of Costco Wholesale Corporation, Sam’s
Club, Best Buy Co., Inc., Target Stores, Inc., Circuit City Stores, Inc. and
Wal-Mart Stores, Inc. constitutes an Approved Obligor.
          “Assignment Agreement” has the meaning ascribed to it in
Section 9.1(a).
          “Bankruptcy Code” means the provisions of Title 11 of the United
States Code, 11 U.S.C. §§ 101 et seq.
          “BCI Eclipse” means BCI Eclipse Company, LLC, a Minnesota limited
liability company, a wholly-owned Subsidiary of Borrower.
          “BCI Eclipse Purchase Agreement” means that certain Asset Purchase
Agreement, dated as of November 3, 2003, by and among Borrower, BCI Eclipse as
buyer, BCI Eclipse, LLC, a New York limited liability company as seller and the
Members (as defined therein) named therein (together with any exhibits,
schedules and any other annexes or supplements thereto and as in effect as of
November 3, 2003 and as amended or otherwise modified in a manner not prohibited
by the Credit Agreement.
          “Blocked Accounts” has the meaning ascribed to it in Annex C.
          “Borrower” has the meaning ascribed thereto in the preamble to the
Agreement.
          “Borrowing Availability” means as of any date of determination the
lesser of (i) the Maximum Amount and (ii) the Borrowing Base, in each case, less
the sum of the Revolving Loan and Swing Line Loan then outstanding.
          “Borrowing Base” means, as of any date of determination by Agent, from
time to time, an amount equal to the sum at such time of:
          (a) the product of (x) the lesser of 85% and the Eligible Accounts
Dilution Percentage at such time multiplied by (y) the book value of Eligible
Accounts;
          (b) the lesser of (i) 50% of the Eligible Inventory of the Eligible
Credit Parties valued at the lower of cost (FIFO) or market or (ii) 85% of the
Orderly Liquidation Value of the Eligible Inventory of the Eligible Credit
Parties;
          (c) the lesser of (i) the Eligible Investment Funds Amount or (ii) 95%
of the Eligible Investment Funds.
in each case less the Minimum Excess Availability Reserve less any additional
Reserves established by Agent from time to time; provided however that at no
time shall the amount of the Borrowing Base attributable to the Eligible
Accounts arising from the Publishing Business shall exceed 25% of the aggregate
Borrowing Base attributable to Eligible Accounts; provided further that at no
time shall the amount of the Borrowing Base attributable to the Eligible
Inventory of Eligible Credit Parties exceed $15,000,000 (provided that at all
times following the occurrence of a Triggering Event, such amount shall be
reduced, on the first day of each Fiscal Quarter, to an amount not less than
$5,000,000 and equal to $15,000,000 minus the product of (i)

Annex A-3

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$1,250,000 multiplied by (ii) the number of Fiscal Quarters which have commenced
since the occurrence of the Triggering Event). As used herein, “Triggering
Event” occurs if the Fixed Charge Coverage Ratio (as defined in Annex G hereto)
for the 12 month period then ended (i) as of the last day of the Fiscal Quarters
ending June 30, 2007, September 30, 2007 and December 31, 2007 is less than
1.00:1 or (ii) as of the last day of the Fiscal Quarter ending March 31, 2008
and any Fiscal Quarter ending thereafter is less than 1.25:1. The value of any
Eligible Accounts denominated in Canadian Dollars shall be included in the
Borrowing Base using such Accounts’ Dollar Amount.
          “Borrowing Base Certificate” means a certificate to be executed and
delivered from time to time by Borrower in the form attached to the Agreement as
Exhibit 4.1(b).
          “Business Day” means any day that is not a Saturday, a Sunday or a day
on which banks are required or permitted to be closed in the States of Illinois
and/or New York and in reference to LIBOR Loans shall mean any such day that is
also a LIBOR Business Day.
          “Canadian Dollars” means the lawful currency of Canada.
          “Capital Expenditures” means, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under GAAP.
          “Capital Lease” means, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.
          “Capital Lease Obligation” means, with respect to any Capital Lease of
any Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.
          “Cash Collateral Account” has the meaning ascribed to it Annex B.
          “Cash Equivalents” has the meaning ascribed to it in Annex B.
          “Cash Management Systems” has the meaning ascribed to it in
Section 1.8.
          “Change of Control” means any of the following: (a) other than the
holders of the Borrower’s capital Stock as of the Closing Date, any person or
group of persons (within the meaning of the Securities Exchange Act of 1934)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 20% or more of the issued and outstanding shares of
capital Stock of the Borrower having the right to vote for the election of
directors of the Borrower under ordinary circumstances; (b) during any period of
twelve consecutive calendar months, individuals who at the beginning of such
period constituted the board of directors of the Borrower (together with any new
directors whose election by the board of directors of the

Annex A-4

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Borrower or whose nomination for election by the Stockholders of the Borrower
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason other than death or disability to constitute a majority of the directors
then in office; or (c) Borrower ceases to own and control all of the economic
and voting rights associated with all of the outstanding capital Stock of any of
its Subsidiaries.
          “Charges” means all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including taxes owed to the PBGC at the
time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations,
(c) the employees, payroll, income or gross receipts of any Credit Party,
(d) any Credit Party’s ownership or use of any properties or other assets, or
(e) any other aspect of any Credit Party’s business.
          “Chattel Paper” means any “chattel paper,” as such term is defined in
the Code, including electronic chattel paper, now owned or hereafter acquired by
any Credit Party, wherever located.
          “Closing Checklist” means the schedule, including all appendices,
exhibits or schedules thereto, listing certain documents and information to be
delivered in connection with the Agreement, the other Loan Documents and the
transactions contemplated thereunder, substantially in the form attached hereto
as Annex D.
          “Closing Date” means March 22, 2007.
          “Code” means the Uniform Commercial Code as the same may, from time to
time, be enacted and in effect in the State of Illinois; provided, that to the
extent that the Code is used to define any term herein or in any Loan Document
and such term is defined differently in different Articles or Divisions of the
Code, the definition of such term contained in Article or Division 9 shall
govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of, or
remedies with respect to, Agent’s or any Lender’s Lien on any Collateral is
governed by the Uniform Commercial Code as enacted and in effect in a
jurisdiction other than the State of Illinois, the term “Code” shall mean the
Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such
provisions.
          “Collateral” means the property covered by the Security Agreement, the
Mortgages and the other Collateral Documents and any other property, real or
personal, tangible or intangible, now existing or hereafter acquired, that may
at any time be or become subject to a security interest or Lien in favor of
Agent, on behalf of itself and Lenders, to secure the Obligations.
          “Collateral Documents” means the Security Agreements, the Guaranties,
the Pledge Agreements, the Mortgages, the Patent Security Agreements, the
Trademark Security Agreements, the Copyright Security Agreements and all similar
agreements entered into

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guaranteeing payment of, or granting a Lien upon property as security for
payment of, the Obligations.
          “Collateral Reports” means the reports with respect to the Collateral
referred to in Annex F.
          “Collection Account” means that certain account of Agent, account
number 502-328-54 in the name of Agent at Deutsche Bank Trust Company Americas
in New York, New York ABA No. 021 001 033, or such other account as may be
specified in writing by Agent as the “Collection Account.”
          “Commitment Termination Date” means the earliest of (a) March 22,
2010, (b) the date of termination of Lenders’ obligations to make Advances and
to incur Letter of Credit Obligations or permit existing Loans to remain
outstanding pursuant to Section 8.2(b), and (c) the date of indefeasible
prepayment in full by Borrower of the Loans and the cancellation and return (or
stand-by guarantee) of all Letters of Credit or the cash collateralization of
all Letter of Credit Obligations pursuant to Annex B, and the permanent
reduction of the Commitments to zero dollars ($0).
          “Commitments” shall mean the Revolving Loan Commitment.
          “Compliance Certificate” has the meaning ascribed to it in Annex E.
          “Concentration Account” has the meaning ascribed to it in Annex C.
          “Contingent Obligation” means, as applied to any Person, any direct or
indirect liability of that Person: (i) with respect to Guaranteed Indebtedness
and with respect to any Indebtedness, lease, dividend or other obligation of
another Person if the purpose or intent of the Person incurring such liability,
or the effect thereof, is to provide assurance to the obligee of such liability
that such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; (ii) with
respect to any letter of credit issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings; (iii) under
any foreign exchange contract, currency swap agreement, interest rate swap
agreement (including, without limitation, Interest Rate Agreements) or other
similar agreement or arrangement designed to alter the risks of that Person
arising from fluctuations in currency values or interest rates, (iv) any
agreement, contract or transaction involving commodity options or future
contracts, (v) to make take-or-pay or similar payments if required regardless of
nonperformance by any other party or parties to an agreement, or (vi) pursuant
to any agreement to purchase, repurchase or otherwise acquire any obligation or
any property constituting security therefor, to provide funds for the payment or
discharge of such obligation or to maintain the solvency, financial condition or
any balance sheet item or level of income of another. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if not a fixed and determined amount, the
maximum amount so guaranteed.
          “Contracts” means all “contracts,” as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, in any event,
including all contracts,

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undertakings, or agreements (other than rights evidenced by Chattel Paper,
Documents or Instruments) in or under which any Credit Party may now or
hereafter have any right, title or interest, including any agreement relating to
the terms of payment or the terms of performance of any Account.
          “Control Letter” means a letter agreement between Agent and (i) the
issuer of uncertificated securities with respect to uncertificated securities in
the name of any Credit Party, (ii) a securities intermediary with respect to
securities, whether certificated or uncertificated, securities entitlements and
other financial assets held in a securities account in the name of any Credit
Party, (iii) a futures commission merchant or clearing house, as applicable,
with respect to commodity accounts and commodity contracts held by any Credit
Party, whereby, among other things, the issuer, securities intermediary or
futures commission merchant disclaims any security interest in the applicable
financial assets, acknowledges the Lien of Agent, on behalf of itself and
Lenders, on such financial assets, and agrees to follow the instructions or
entitlement orders of Agent without further consent by the affected Credit
Party.
          “Copyright License” means any and all rights now owned or hereafter
acquired by any Credit Party under any written agreement granting any right to
use any Copyright or Copyright registration.
          “Copyright Security Agreements” means the Copyright Security
Agreements made in favor of Agent, on behalf of itself and Lenders, by each
applicable Credit Party.
          “Copyrights” means all of the following now owned or hereafter adopted
or acquired by any Credit Party: (a) all copyrights and General Intangibles of
like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright Office
or in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.
          “Credit Parties” means Borrower and its Subsidiaries.
          “Currency Exchange Convention” shall mean a procedure as specified
from time to time by Agent to value in Dollars the obligations or assets of the
Borrower or its Affiliates that are originally measured in Canadian Dollars by
using the spot price for Canadian Dollars as determined by Agent in its sole
discretion for the preceding business day.
          “Default” means any event that, with the passage of time or notice or
both, would, unless cured or waived, become an Event of Default.
          “Default Rate” has the meaning ascribed to it in Section 1.5(d).
          “Deposit Accounts” means all “deposit accounts” as such term in
defined in the Code, now or hereafter held in the name of any Credit Party.
          “Disbursement Accounts” has the meaning ascribed to it in Annex C.

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          “Disclosure Schedules” means the Schedules prepared by Borrower and
denominated as Disclosure Schedules (3.1) through (6.7) in the Index to the
Agreement.
          “Documents” means any “documents,” as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located.
          “Dollar Amount” means, in respect of any amount, the sum of (a) such
portion, if any, of such amount denominated in Dollars; and (b) to the extent
that a portion of such amount is denominated in Canadian Dollars, the amount in
Dollars calculated by Lender using the Currency Exchange Convention in effect on
the Business Day of determination (and calculated based upon 97% of the
applicable amount of Canadian Dollars).
          “Dollars” or “$” means lawful currency of the United States of
America.
          “EBITDA” means, with respect to any Person for any fiscal period,
without duplication, an amount equal to (a) consolidated net income of such
Person for such period, determined in accordance with GAAP, minus (b) the sum of
(i) income tax credits, (ii) interest income, (iii) gain from extraordinary
items for such period, (iv) any aggregate net gain (but not any aggregate net
loss) during such period arising from the sale, exchange or other disposition of
capital assets by such Person (including any fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the disposition of fixed
assets and all securities), (v) any other non-cash gains that have been added in
determining consolidated net income, in each case to the extent included in the
calculation of net income of such Person for such period in accordance with
GAAP, but without duplication and (vi) amounts paid on behalf of or for the
benefit of Goldhil Media, Tower Records or any trust, trustee or fund relating
thereto or successor to any of the foregoing, plus (c) the sum of (i) any
provision for income taxes, (ii) Interest Expense, (iii) loss from extraordinary
items for such period, (iv) depreciation and amortization for such period (other
than amortization with respect to Vendor Advances), (v) amortized debt discount
for such period, (vi) the amount of any deduction to consolidated net income as
the result of any grant to any members of the management of such Person of any
Stock and (vii) write-offs of Accounts owing to Borrower from (x) Goldhil Media
in the aggregate amount no to exceed $2,100,000 and (y) Tower Records in the
aggregate amount no to exceed $1,900,000, in each case to the extent included in
the calculation of consolidated net income of such Person for such period in
accordance with GAAP, but without duplication. For purposes of this definition,
the following items shall be excluded in determining consolidated net income of
a Person: (1) the income (or deficit) of any other Person accrued prior to the
date it became a Subsidiary of, or was merged or consolidated into, such Person
or any of such Person’s Subsidiaries; (2) the income (or deficit) of any other
Person (other than a Subsidiary) in which such Person has an ownership interest,
except to the extent any such income has actually been received by such Person
in the form of cash dividends or distributions; (3) the undistributed earnings
of any Subsidiary of such Person to the extent that the declaration or payment
of dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary; (4) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
income accrued during such period; (5) any write-up of any asset; (6) any net
gain from the collection of the proceeds of life insurance policies; (7) any net
gain arising from the acquisition of any securities, or the extinguishment,
under GAAP, of any Indebtedness, of such Person, (8) in the case of a successor

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to such Person by consolidation or merger or as a transferee of its assets, any
earnings of such successor prior to such consolidation, merger or transfer of
assets, and (9) any deferred credit representing the excess of equity in any
Subsidiary of such Person at the date of acquisition of such Subsidiary over the
cost to such Person of the investment in such Subsidiary.
          “E-Fax” means any system used to receive or transmit faxes
electronically.
          “Electronic Transmission” means each document, instruction,
authorization, file, information and any other communication transmitted, posted
or otherwise made or communicated by e-mail or E-Fax, or otherwise to or from an
E-System or other equivalent service.
          “Eligible Accounts” has the meaning ascribed to it in Section 1.6 of
the Agreement.
          “Eligible Accounts Dilution Percentage” means at any time an amount,
expressed as a percentage, equal to (i) ninety percent (90%) minus (ii) the
Eligible Accounts Dilution Ratio.
          “Eligible Accounts Dilution Ratio” means, at any time, the ratio
(expressed as a percentage) computed as of the last day of the then most
recently completed Fiscal Month of (a) the Eligible Accounts Historical Dilution
as of the last day of the 12-month period on such day, divided by (b) the
Historical Sales for the 12-month period ended on such day.
          “Eligible Accounts Historical Dilution” means, with respect to all
Eligible Accounts during any given period, the portion of such Eligible Accounts
which (a) were reduced or canceled as a result of (and without limitation of)
(i) any defective, rejected or returned merchandise or services or any failure
by any Eligible Credit Party to deliver any merchandise or perform any services
or otherwise perform under the underlying contract, purchase order, invoice or
other similar document, (ii) any change in or cancellation of any of the terms
of such contract, purchase order, invoice or document or any cash discounts,
credits, rebates, volume discounts, cooperative advertising expenses, royalty
payments, warranties, price protection arrangements, write-offs, billing errors,
retroactive price adjustment or any other adjustment which reduces the amount
payable by Account Debtors on the related Eligible Accounts, or (iii) any setoff
in respect of any claim by Account Debtors on the related Eligible Accounts
(whether such claim arises out of the same or a related transaction or an
unrelated transaction) or (b) are subject to any disputes, offset, counterclaim
or defense, setoffs, chargebacks, inventory transfers, allowances for early
payments and other similar allowances that are reflected on the books of any
Eligible Credit Party and made or coordinated with the usual practices of any
Eligible Credit Party thereof, but in each case only to the extent of such
defense, setoff, chargeback, transfer or allowance.
          “Eligible Certificate of Deposit” means a certificate of deposit
(i) in which the Agent has a first priority perfected security interest subject
to no other Liens, (ii) issued by a Person acceptable to the Agent and
(iii) held in an account for which an account control agreement in form and
substance satisfactory to the Agent has been executed and delivered by all
parties thereto.

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          “Eligible Credit Parties” means each of the Borrower, Encore Software,
BCI Eclipse, FUNimation Productions, AnimeOnline, Navarre Logistical, Navarre
Digital, Navarre Online, Navarre Distribution, Navarre Entertainment and
FUNimation Channel and any New Credit Party (subject to the terms and conditions
of Section 6.1 hereof as to a New Credit Party).
          “Eligible Inventory” has the meaning ascribed to it in Section 1.7 of
the Agreement.
          “Eligible Investment Funds” means the aggregate amount of cash and
Permitted Cash Equivalents (valued at the fair market value thereof) (i) which
are on deposit or credited to a segregated investment account or bank account
subject to the control of the Agent and which the Agent has agreed in writing
constitutes the “Eligible Investment Account” for the purposes hereof and
(ii) which the Agent has, to secure the Obligations, pursuant to a control
agreement in form and substance satisfactory to Agent, a first priority
perfected security interest (subject to no other Liens) (provided, that the
Agent will agree, pursuant to documentation acceptable to the Agent, to permit
the withdrawal of cash from such Eligible Investment Account in the amounts, at
the time and upon the request of the Persons, set forth on Schedule A-1).
          “Eligible Investment Funds Amount” means (i) at all times prior to
March 31, 2008, $4,000,000; (ii) at all times on and after March 31, 2008 but
prior to March 31, 2009, $2,346,667; and (iii) at all times on and after
March 31, 2009, $800,001.
          “Encore Software” means Encore Software, Inc. (f/k/a Encore Software
Corporation), a Minnesota corporation.
          “Environmental Laws” means all applicable federal, state, local and
foreign laws, statutes, ordinances, codes, rules, standards and regulations, now
or hereafter in effect, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or administrative
order, consent decree, order or judgment, imposing liability or standards of
conduct for or relating to the regulation and protection of human health,
safety, the environment and natural resources (including ambient air, surface
water, groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species and vegetation). Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§
9601 et seq.) (“CERCLA”); the Hazardous Materials Transportation Authorization
Act of 1994 (49 U.S.C. §§ 5101 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. §§ 136 et seq.); the Solid Waste Disposal Act (42
U.S.C. §§ 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. §§ 2601 et
seq.); the Clean Air Act (42 U.S.C. §§ 7401 et seq.); the Federal Water
Pollution Control Act (33 U.S.C. §§ 1251 et seq.); the Occupational Safety and
Health Act (29 U.S.C. §§ 651 et seq.); and the Safe Drinking Water Act (42
U.S.C. §§ 300(f) et seq.), and any and all regulations promulgated thereunder,
and all analogous state, local and foreign counterparts or equivalents and any
transfer of ownership notification or approval statutes.
          “Environmental Liabilities” means, with respect to any Person, all
liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and

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expenses (including all reasonable fees, disbursements and expenses of counsel,
experts and consultants), fines, penalties, sanctions and interest incurred as a
result of or related to any claim, suit, action, investigation, proceeding or
demand by any Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute or common law, including
any arising under or related to any Environmental Laws, Environmental Permits,
or in connection with any Release or threatened Release or presence of a
Hazardous Material whether on, at, in, under, from or about or in the vicinity
of any real or personal property.
          “Environmental Permits” means all permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Authority
under any Environmental Laws.
          “Equipment” means all “equipment,” as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located and,
in any event, including all such Credit Party’s machinery and equipment,
including processing equipment, conveyors, machine tools, data processing and
computer equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor, all
substitutes for any of the foregoing, fuel therefor, and all manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.
          “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulations promulgated thereunder.
          “ERISA Affiliate” means, with respect to any Credit Party, any trade
or business (whether or not incorporated) that, together with such Credit Party,
are treated as a single employer within the meaning of Sections 414(b), (c),
(m) or (o) of the IRC.
          “ERISA Event” means, with respect to any Credit Party or any ERISA
Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to a
Title IV Plan; (b) the withdrawal of any Credit Party or ERISA Affiliate from a
Title IV Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the
complete or partial withdrawal of any Credit Party or any ERISA Affiliate from
any Multiemployer Plan; (d) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title
IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit Party
or ERISA Affiliate to make when due required contributions to a Multiemployer
Plan or Title IV Plan unless such failure is cured within 30 days; (g) any other
event or condition that might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan or Multiemployer Plan or for the imposition of
liability under Section 4069 or 4212(c) of ERISA; (h) the termination of a
Multiemployer Plan under Section 4041A of ERISA or the reorganization or
insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA; or

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(i) the loss of a Qualified Plan’s qualification or tax exempt status; or
(j) the termination of a Plan described in Section 4064 of ERISA.
          “ESOP” means a Plan that is intended to satisfy the requirements of
Section 4975(e)(7) of the IRC.
          “E-Signature” means the process of attaching to or logically
associating with an Electronic Transmission an electronic symbol, encryption,
digital signature or process (including the name or an abbreviation of the name
of the party transmitting the Electronic Transmission) with the intent to sign,
authenticate or accept such Electronic Transmission.
          “E-System” means any electronic system, including Intralinks® and any
other Internet or extranet-based site, whether such electronic system is owned,
operated or hosted by Agent, any of its Affiliates, or any of such Person’s
respective officers, directors, employees, attorneys, agents and representatives
or any other Person, providing for access to data protected by passcodes or
other security system.
          “Event of Default” has the meaning ascribed to it in Section 8.1.
          “Existing Credit Agreement” has the meaning ascribed to it in the
recitals to the Agreement.
          “Fair Labor Standards Act” means the Fair Labor Standards Act, 29
U.S.C. §201 et seq.
          “Federal Funds Rate” means, for any day, a floating rate equal to the
weighted average of the rates on overnight federal funds transactions among
members of the Federal Reserve System, as determined by Agent in its sole
discretion, which determination shall be final, binding and conclusive (absent
manifest error).
          “Federal Reserve Board” means the Board of Governors of the Federal
Reserve System.
          “Fees” means any and all fees payable to Agent or any Lender pursuant
to the Agreement or any of the other Loan Documents.
          “Financial Covenants” means the financial covenants set forth in Annex
G.
          “Financial Statements” means the consolidated and consolidating income
statements, statements of cash flows and balance sheets of Borrower delivered in
accordance with Section 3.4 and Annex E.
          “Fiscal Month” means any of the monthly accounting periods of
Borrower.
          “Fiscal Quarter” means any of the quarterly accounting periods of
Borrower, ending on March 31, June 30, September 30, and December 31 of each
year.
          “Fiscal Year” means any of the annual accounting periods of Borrower
ending on March 31 of each year.

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          “Fixed Charge Coverage Ratio” has the meaning ascribed to it in clause
(b) of Annex G.
          “Fixtures” means all “fixtures” as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party.
          “Funded Debt” means, with respect to any Person, without duplication,
all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness and that by its terms matures more than one
year from, or is directly or indirectly renewable or extendible at such Person’s
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capital Lease Obligations, current
maturities of long-term debt, revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and also including, in the case of
Borrower, the Obligations and, without duplication, Guaranteed Indebtedness
consisting of guaranties of Funded Debt of other Persons.
          “FUNimation Acquisition” means the acquisition by Navarre CP, Navarre
CLP and Navarre CS of all of the partnership interests in the FUNimation
Companies pursuant to and in accordance with the FUNimation Acquisition
Documents.
          “FUNimation Acquisition Documents” means the FUNimation Purchase
Agreement and all other agreements, documents, opinions, certificates and other
instruments executed or delivered pursuant thereto or in connection therewith,
each as in effect on the date hereof.
          “FUNimation Channel” means FUNimation Channel, Inc., a Minnesota
corporation.
          “FUNimation Companies” means, collectively, FUNimation Productions and
AnimeOnline.
          “FUNimation Purchase Agreement” means that certain Partnership
Interest Purchase Agreement, dated as of January 10, 2005, by and among the
Sellers (as defined therein), the Seller Representative (as defined therein),
the FUNimation Companies, Navarre CP, Navarre CLP, Navarre CS and the Borrower
(including all schedules, exhibits, amendments, supplements, modifications
and/or assignments delivered pursuant thereto or in connection therewith), as in
effect on the date hereof.
          “FUNimation Productions” means FUNimation Productions Ltd., a Texas
limited partnership.
          “GAAP” means generally accepted accounting principles in the United
States of America, consistently applied, as such term is further defined in
Annex G to the Agreement.
          “GE Capital” means General Electric Capital Corporation, a Delaware
corporation.

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          “GE Capital Fee Letter” means that certain third amended and restated
letter, dated as of the Closing Date, between GE Capital and Borrower with
respect to certain Fees to be paid from time to time by Borrower to GE Capital.
          “General Intangibles” means “general intangibles,” as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
including all right, title and interest that such Credit Party may now or
hereafter have in or under any Contract, all payment intangibles, customer
lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor
and reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or
Trademark License), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key man and business interruption insurance, and all unearned
premiums), uncertificated securities, chooses in action, deposit, checking and
other bank accounts, rights to receive tax refunds and other payments, rights to
receive dividends, distributions, cash, Instruments and other property in
respect of or in exchange for pledged Stock and Investment Property, rights of
indemnification, all books and records, correspondence, credit files, invoices
and other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of such
Credit Party or any computer bureau or service company from time to time acting
for such Credit Party.
          “Goods” means any “goods” as defined in the Code, now owned or
hereafter acquired by any Credit Party, wherever located, including embedded
software to the extent included in “goods” as defined in the Code, manufactured
homes, standing timber that is cut and removed for sale and unborn young of
animals.
          “Governmental Authority” means any nation or government, any state or
other political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
          “Guaranteed Indebtedness” means, as to any Person, any obligation of
such Person guaranteeing, providing comfort or otherwise supporting any
Indebtedness, lease, dividend, or other obligation (“primary obligation”) of any
other Person (the “primary obligor”) in any manner, including any obligation or
arrangement of such Person to (a) purchase or repurchase any such primary
obligation, (b) advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet condition of the primary obligor, (c) purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, (d) protect the beneficiary of such arrangement from
loss (other than product warranties given in the ordinary course of business) or
(e) indemnify the owner of such primary obligation against loss in respect
thereof. The amount of any Guaranteed Indebtedness at any time shall be deemed
to be an amount equal to the lesser

Annex A-14

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at such time of (x) the stated or determinable amount of the primary obligation
in respect of which such Guaranteed Indebtedness is incurred and (y) the maximum
amount for which such Person may be liable pursuant to the terms of the
instrument embodying such Guaranteed Indebtedness, or, if not stated or
determinable, the maximum reasonably anticipated liability (assuming full
performance) in respect thereof.
          “Guaranties” means, that certain Second Amended and Restated Guaranty
dated as of the Closing Date by and among the Credit Parties signatory thereto
and Agent, on behalf of itself and Lenders, together with each joinder agreement
thereto by any New Credit Party, and each other guaranty executed by any
Guarantor in favor of Agent and Lenders in respect of the Obligations.
          “Guarantors” means each Subsidiary of Borrower and each other Person,
if any, that executes a guaranty or other similar agreement in favor of Agent,
for itself and the ratable benefit of Lenders, in connection with the
transactions contemplated by the Agreement and the other Loan Documents.
          “Hazardous Material” means any substance, material or waste that is
regulated by, or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance that is (a) defined as a
“solid waste,” “hazardous waste,” “hazardous material,” “hazardous substance,”
“extremely hazardous waste,” “restricted hazardous waste,” “pollutant,”
“contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or
other similar term or phrase under any Environmental Laws, or (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s),
or any radioactive substance.
          “Hedging Reserve” shall mean a Reserve determined by the Agent in its
reasonable credit judgment and giving effect to (i) the aggregate amount owing
to Borrower by a counterparty to an Interest Rate Agreement, less the amount
Borrower owes such counterparty thereunder, and the (ii) the aggregate
outstanding Swap Related Reimbursement Obligations, in each case based on a
mark-to-market analysis and with due regard to recent market volatility as of
the last Business Day of the month (or if not available, the nearest prior
Business Day for which such evaluation is available).
          “Historical Sales” means, for any period, the aggregate amount of
gross sales of the Eligible Credit Parties which generated one or more Eligible
Accounts during such period.
          “Indebtedness” means, with respect to any Person, without duplication
(a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property payment for which is deferred 6 months or more, but
excluding obligations to trade creditors incurred in the ordinary course of
business that are unsecured and not overdue by more than 6 months unless being
contested in good faith, (b) all reimbursement and other obligations with
respect to letters of credit, bankers’ acceptances and surety bonds, whether or
not matured, (c) all obligations evidenced by notes, bonds, debentures or
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations and the present
value (discounted at the Index Rate as in effect

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on the Closing Date) of future rental payments under all synthetic leases,
(f) all obligations of such Person under commodity purchase or option agreements
or other commodity price hedging arrangements, in each case whether contingent
or matured, (g) all obligations of such Person under any foreign exchange
contract, currency swap agreement, interest rate swap, cap or collar agreement
or other similar agreement or arrangement designed to alter the risks of that
Person arising from fluctuations in currency values or interest rates, in each
case whether contingent or matured, (h) all Indebtedness referred to above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property or other
assets (including accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness, (i) “earnouts” and similar payment obligations excluding bonus,
phantom stock or other similar compensation payments owed to employees, or
officers and incurred in the ordinary course of business, and (j) the
Obligations.
          “Indemnified Liabilities” has the meaning ascribed to it in
Section 1.13.
          “Indemnified Person” has the meaning ascribed to it in Section 1.13.
          “Index Rate” means, for any day, a floating rate equal to the higher
of (i) the rate publicly quoted from time to time by The Wall Street Journal as
the “base rate on corporate loans posted by at least 75% of the nation’s 30
largest banks” (or, if The Wall Street Journal ceases quoting a base rate of the
type described, the highest per annum rate of interest published by the Federal
Reserve Board in Federal Reserve statistical release H.15 (519) entitled
“Selected Interest Rates” as the Bank prime loan rate or its equivalent), and
(ii) the Federal Funds Rate plus 50 basis points per annum. Each change in any
interest rate provided for in the Agreement based upon the Index Rate shall take
effect at the time of such change in the Index Rate.
          “Index Rate Loan” means a Loan or portion thereof bearing interest by
reference to the Index Rate.
          “Instruments” means all “instruments,” as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located,
and, in any event, including all certificated securities, all certificates of
deposit, and all promissory notes and other evidences of indebtedness, other
than instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
          “Intellectual Property” means any and all Licenses, Patents,
Copyrights, Trademarks, and the goodwill associated with such Trademarks.
          “Intercompany Note” has the meaning ascribed to it in Section 6.3(a).
          “Interest Expense” means, with respect to any Person for any fiscal
period, interest expense (whether cash or non-cash) of such Person determined in
accordance with GAAP for the relevant period ended on such date, including
interest expense with respect to any Funded Debt of such Person and interest
expense for the relevant period that has been capitalized on the balance sheet
of such Person.

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          “Interest Payment Date” means (a) as to any Index Rate Loan, the first
Business Day of each month to occur while such Loan is outstanding, and (b) as
to any LIBOR Loan, the last day of the applicable LIBOR Period; provided, that
in the case of any LIBOR Period greater than three months in duration, interest
shall be payable at three month intervals and on the last day of such LIBOR
Period; and provided further that, in addition to the foregoing, each of (x) the
date upon which all of the Commitments have been terminated and the Loans have
been paid in full and (y) the Commitment Termination Date shall be deemed to be
an “Interest Payment Date” with respect to any interest that has then accrued
under the Agreement.
          “Interest Rate Agreement” means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or similar agreement
or arrangement (i) designed to protect Borrower against fluctuations in interest
rates hereunder or under the Second Lien Credit Agreement, (ii) entered into
between Borrower and one or more Lenders (or any Affiliates thereof) and
(iii) which the Agent has acknowledged in writing constitutes an “Interest Rate
Agreement” for the purposes of this Agreement.
          “Inventory” means any “inventory,” as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located, and
in any event including inventory, merchandise, goods and other personal property
that are held by or on behalf of any Credit Party for sale or lease or are
furnished or are to be furnished under a contract of service, or that constitute
raw materials, work in process, finished goods, returned goods, supplies or
materials of any kind, nature or description used or consumed or to be used or
consumed in such Credit Party’s business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including all supplies
and embedded software.
          “Investment Property” means all “investment property” as such term is
defined in the Code now owned or hereafter acquired by any Credit Party,
wherever located, including (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Credit Party,
including the rights of such Credit Party to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts of any Credit Party;
(iv) all commodity contracts of any Credit Party; and (v) all commodity accounts
held by any Credit Party.
          “IRC” means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder.
          “IRS” means the Internal Revenue Service.
          “L/C Issuer” has the meaning ascribed to it in Annex B.
          “L/C Sublimit” has the meaning ascribed to in it Annex B.
          “Lenders” means GE Capital, the other Lenders named on the signature
pages of the Agreement, (and, if any such Person shall decide to assign all or
any portion of the Obligations, such term shall include any assignee of such
Person); provided, that for the purposes

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of (i) the definitions of “Interest Rate Agreement”, and “Obligations”,
(ii) Sections 9.2, 9.3, 9.4, 9.5 and 9.7 of this Agreement and (iii) the
granting and perfection of security interests, liens, mortgages and other
encumbrances under or pursuant to one or more Loan Documents, each Qualified
Counterparty shall be deemed to be a Lender (it being agreed that no such
Qualified Counterparty shall have the right to vote on or consent to any matter
requiring a vote or consent of one or more Lenders).
          “Letter of Credit Fee” has the meaning ascribed to it in Annex B.
          “Letter of Credit Obligations” means all outstanding obligations
incurred by Agent and Lenders at the request of Borrower, whether direct or
indirect, contingent or otherwise, due or not due, in connection with the
issuance of Letters of Credit by Agent or another L/C Issuer or the purchase of
a participation as set forth in Annex B with respect to any Letter of Credit.
The amount of such Letter of Credit Obligations shall equal the maximum amount
that may be payable by Agent or Lenders thereupon or pursuant thereto.
          “Letter of Credit Rights” means “letter-of-credit rights” as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party,
including rights to payment or performance under a letter of credit, whether or
not such Credit Party, as beneficiary, has demanded or is entitled to demand
payment or performance.
          “Letters of Credit” means documentary or standby letters of credit
issued for the account of Borrower by any L/C Issuer, and bankers’ acceptances
issued by Borrower, for which Agent and Lenders have incurred Letter of Credit
Obligations. The term does not include a Swap Related L/C.
          “Leverage Ratio” means, as of any date, the ratio of (i) the sum of
(x) the average amount of Revolving Loans for the then immediately preceding
30 day period ending on such date plus (y) the aggregate amount of all other
Indebtedness of the Borrower and its Subsidiaries on a consolidated basis in
accordance with GAAP as of such date to (ii) EBITDA for the four Fiscal Quarter
period ending on such date.
          “LIBOR Business Day” means a Business Day on which banks in the City
of London are generally open for interbank or foreign exchange transactions.
          “LIBOR Loan” means a Loan or any portion thereof bearing interest by
reference to the LIBOR Rate.
          “LIBOR Period” means, with respect to any LIBOR Loan, each period
commencing on a LIBOR Business Day selected by Borrower pursuant to the
Agreement and ending one, two or three months thereafter, as selected by
Borrower’s irrevocable notice to Agent as set forth in Section 1.5(e); provided,
that the foregoing provision relating to LIBOR Periods is subject to the
following:
     (a) if any LIBOR Period would otherwise end on a day that is not a LIBOR
Business Day, such LIBOR Period shall be extended to the next succeeding LIBOR
Business Day unless the result of such extension would be to carry such LIBOR
Period

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into another calendar month in which event such LIBOR Period shall end on the
immediately preceding LIBOR Business Day;
     (b) any LIBOR Period that would otherwise extend beyond the Commitment
Termination Date shall end 2 LIBOR Business Days prior to such date;
     (c) any LIBOR Period that begins on the last LIBOR 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 LIBOR Period) shall end on the last
LIBOR Business Day of a calendar month;
     (d) Borrower shall select LIBOR Periods so as not to require a payment or
prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and
     (e) Borrower shall select LIBOR Periods so that there shall be no more than
5 separate LIBOR Loans in existence at any one time.
          “LIBOR Rate” means for each LIBOR Period, a rate of interest
determined by Agent equal to:
     (a) the offered rate for deposits in United States Dollars for the
applicable LIBOR Period that appears on Reuters Screen LIBOR01 Page as of
11:00 a.m. (London time), on the second full LIBOR Business Day next preceding
the first day of such LIBOR Period (unless such date is not a Business Day, in
which event the next succeeding Business Day will be used); divided by
     (b) a number equal to 1.0 minus the aggregate (but without duplication) of
the rates (expressed as a decimal fraction) of reserve requirements in effect on
the day that is 2 LIBOR Business Days prior to the beginning of such LIBOR
Period (including basic, supplemental, marginal and emergency reserves under any
regulations of the Federal Reserve Board or other Governmental Authority having
jurisdiction with respect thereto, as now and from time to time in effect) for
Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Federal Reserve Board that are required to be maintained by
a member bank of the Federal Reserve System.
     If such interest rates shall cease to be available from Telerate News
Service, the LIBOR Rate shall be determined from such financial reporting
service or other information as shall be mutually acceptable to Agent and
Borrower.
          “License” means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by any Credit Party.
          “Lien” means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to

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give, any financing statement perfecting a security interest under the Code or
comparable law of any jurisdiction).
          “Litigation” has the meaning ascribed to it in Section 3.13.
          “Loan Account” has the meaning ascribed to it in Section 1.12.
          “Loan Documents” means the Agreement, the Notes, the Collateral
Documents, the Master Standby Agreement, each Interest Rate Agreement and all
other agreements, instruments, documents and certificates identified in the
Closing Checklist executed and delivered to, or in favor of, Agent or any
Lenders and including all other pledges, powers of attorney, consents,
assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, or
any employee of any Credit Party, and delivered to Agent or any Lender in
connection with the Agreement or the transactions contemplated thereby. Any
reference in the Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to the
Agreement or such Loan Document as the same may be in effect at any and all
times such reference becomes operative.
          “Loans” means the Revolving Loan and the Swing Line Loan.
          “Lock Boxes” has the meaning ascribed to it in Annex C.
          “Major Labels” means Sony Music Entertainment, Inc., EMI Music
Distribution, a division of Capitol Records, Inc., BMG Music, Universal Music
and Video Distribution, Inc. and AOL-Time Warner, Inc.
          “Margin Stock” has the meaning ascribed to it in Section 3.10.
          “Master Standby Agreement” means the Master Agreement for Standby
Letters of Credit dated as of October 3, 2001 between Borrower, as Applicant,
and GE Capital, as Issuer.
          “Material Adverse Effect” means a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of any
Credit Party, (b) Borrower’s ability to pay any of the Loans or any of the other
Obligations in accordance with the terms of the Agreement, (c) the Collateral or
Agent’s Liens, on behalf of itself and Lenders, on the Collateral or the
priority of such Liens, or (d) Agent’s or any Lender’s rights and remedies under
the Agreement and the other Loan Documents. Without limiting the generality of
the foregoing, any event or occurrence adverse to one or more Credit Parties
which results or could reasonably be expected to result in costs and/or
liabilities or loss of revenues, individually, or in the aggregate, to any
Credit Party in any 30-day period in excess of the lesser of $2,000,000 and 10%
of Borrowing Availability as of any date of determination or 10% of the lesser
of the Maximum Amount or the Borrowing Base at any date of determination shall
constitute a Material Adverse Effect.
          “Maximum Amount” means, as of any date of determination, an amount
equal to the Revolving Loan Commitment of all Lenders as of that date.

Annex A-20

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          “Minimum Excess Availability Reserve” shall mean a special Reserve
established by Agent on the Closing Date and maintained by Agent in an amount at
all times equal to $5,000,000.
          “Minnesota Real Estate” means the Real Estate owned by Borrower
located in the County of Hennepin and the State of Minnesota and as further
described on Exhibit A hereto.
          “Minnesota Sale-Leaseback Documents” means that certain Sale, Purchase
and Build to Suit Agreement, dated effective as of August 14, 2003 between
Borrower, as seller and NL Ventures IV, L.P., as buyer, as further amended by
the First Amendment to Sale, Purchase and Build to Suit Agreement dated as of
October 9, 2003 among the parties thereto, and all other agreements,
instruments, documents and certificates executed and delivered in connection
therewith, as in effect as of October 9, 2003 and as amended or otherwise
modified in a manner permitted hereunder.
          “Mortgages” means each of the mortgages, deeds of trust, leasehold
mortgages, leasehold deeds of trust, collateral assignments of leases or other
real estate security documents delivered by any Credit Party to Agent on behalf
of itself and Lenders with respect to the Real Property owned by a Credit Party,
all in form and substance reasonably satisfactory to Agent.
          “Multiemployer Plan” means a “multiemployer plan” as defined in
Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is
making, is obligated to make or has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
          “Navarre CP” means Navarre CP, LLC, a Minnesota limited liability
company, which is a wholly-owned Subsidiary of Borrower.
          “Navarre CLP” means Navarre CLP, LLC, a Minnesota limited liability
company, which is a wholly-owned Subsidiary of Borrower.
          “Navarre CS” means Navarre CS, LLC, a Minnesota limited liability
company, which is a wholly-owned Subsidiary of Borrower.
          “Navarre Digital” means Navarre Digital Services, Inc., a Minnesota
corporation.
          “Navarre Distribution” means Navarre Distribution Services, Inc., a
Minnesota corporation.
          “Navarre Entertainment” means Navarre Entertainment Media, Inc. a
Minnesota corporation.
          “Navarre Logistical” means Navarre Logistical Services, Inc., a
Minnesota corporation.
          “Navarre Online” means Navarre Online Fulfillment Services, Inc., a
Minnesota corporation.

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          “Net Vendor Advances” for any period means the positive difference, if
any, between (i) the aggregate amount of Vendor Advances made during such period
minus (ii) the aggregate amount of repayments made by Vendors in respect of
Vendor Advances made to such Vendors.
          “New Credit Party” has the meaning ascribed to it in Section 6.1.
          “Non-Funding Lender” has the meaning ascribed to it in
Section 9.9(a)(ii).
          “Notes” means the Revolving Notes.
          “Notice of Conversion/Continuation” has the meaning ascribed to it in
Section 1.5(e).
          “Notice of Revolving Credit Advance” has the meaning ascribed to it in
Section 1.1(a).
          “Obligations” means all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Credit
Party to Agent or any Lender, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or not evidenced by
any note, agreement or other instrument, arising under the Agreement or any of
the other Loan Documents. This term includes all principal, interest (including
all interest that accrues after the commencement of any case or proceeding by or
against any Credit Party in bankruptcy, whether or not allowed in such case or
proceeding), obligations under Interest Rate Agreements, Swap Related
Reimbursement Obligations, Fees, Charges, expenses, attorneys’ fees and any
other sum chargeable to any Credit Party under the Agreement or any of the other
Loan Documents.
          “Orderly Liquidation Value” means, with respect to any Eligible
Inventory at any time, the net amount that will be obtained upon an orderly
liquidation sale of such Eligible Inventory, as determined in accordance with
the then most recent appraisal which was acceptable to the Agent.
          “Patent License” means rights under any written agreement now owned or
hereafter acquired by any Credit Party granting any right with respect to any
invention on which a Patent is in existence.
          “Patent Security Agreements” means the Patent Security Agreements made
in favor of Agent, on behalf of itself and Lenders, by each applicable Credit
Party.
          “Patents” means all of the following in which any Credit Party now
holds or hereafter acquires any interest: (a) all letters patent of the United
States or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or of any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State or any other country, and (b) all reissues, continuations,
continuations-in-part or extensions thereof.

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          “PBGC” means the Pension Benefit Guaranty Corporation.
          “Pension Plan” means a Plan described in Section 3(2) of ERISA.
          “Permitted Cash Equivalents” means (i) marketable direct obligations
issued or unconditionally guaranteed by the United States of America or any
agency thereof maturing within one year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor’s Ratings Group or Moody’s Investors Service, Inc., (iii) certificates of
deposit maturing no more than one year from the date of creation thereof issued
by (A) the Business Bank, a Minnesota corporation, or (B) commercial banks
incorporated under the laws of the United States of America, each having
combined capital, surplus and undivided profits of not less than $300,000,000
and having a senior unsecured rating of “A” or better by a nationally recognized
rating agency (an “A Rated Bank”), (iv) time deposits maturing no more than
30 days from the date of creation thereof with A Rated Banks and (v) investments
in mutual funds that invest solely in one or more of the investments described
in clauses (i) through (iv) above.
          “Permitted Encumbrances” means the following encumbrances: (a) Liens
for taxes or assessments or other governmental Charges not yet due and payable
or which are being contested in accordance with Section 5.2(b); (b) pledges or
deposits of money securing statutory obligations under workmen’s compensation,
unemployment insurance, social security or public liability laws or similar
legislation (excluding Liens under ERISA); (c) pledges or deposits of money
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers’, mechanics’
or similar liens arising in the ordinary course of business, so long as such
Liens attach only to Equipment, Fixtures and/or Real Estate; (e) carriers’,
warehousemen’s, suppliers’ or other similar possessory liens arising in the
ordinary course of business and securing liabilities in an outstanding aggregate
amount not in excess of $100,000 at any time, so long as such Liens attach only
to Inventory; (f) deposits securing, or in lieu of, surety, appeal or customs
bonds in proceedings to which any Credit Party is a party; (g) any attachment or
judgment lien not constituting an Event of Default under Section 8.1(j);
(h) zoning restrictions, easements, licenses, or other restrictions on the use
of any Real Estate or other minor irregularities in title (including leasehold
title) thereto, so long as the same do not materially impair the use, value, or
marketability of such Real Estate; (i) presently existing or hereafter created
Liens in favor of Agent, on behalf of Lenders; and (j) Liens expressly permitted
under clauses (b) and (c) of Section 6.7 of the Agreement.
          “Person” means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, other entity or
government (whether federal, state, county, city, municipal, local, foreign, or
otherwise, including any instrumentality, division, agency, body or department
thereof).
          “Plan” means, at any time, an “employee benefit plan,” as defined in
Section 3(3) of ERISA, that any Credit Party or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any Credit Party.

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          “Pledge Agreements” means each pledge agreement entered into by any
Credit Party in favor of the Agent and/or the Lenders.
          “Pro Forma” means the unaudited consolidated and consolidating
financial statements of Borrower and its Subsidiaries as of November 30, 2006
after giving pro forma effect to the Related Transactions.
          “Pro Rata Share” means with respect to all matters relating to any
Lender, (a) with respect to the Revolving Loan, the percentage obtained by
dividing (i) the Revolving Loan Commitment of that Lender by (ii) the aggregate
Revolving Loan Commitments of all Lenders, and (b) with respect to all Loans,
the percentage obtained by dividing (i) the aggregate Commitments of that Lender
by (ii) the aggregate Commitments of all Lenders, and (e) with respect to all
Loans on and after the Commitment Termination Date, the percentage obtained by
dividing (i) the aggregate outstanding principal balance of the Loans held by
that Lender, by (ii) the outstanding principal balance of the Loans held by all
Lenders.
          “Proceeds” means “proceeds,” as such term is defined in the Code,
including (a) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to any Credit Party from time to time with respect to any of
the Collateral, (b) any and all payments (in any form whatsoever) made or due
and payable to any Credit Party from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority (or any Person acting under
color of governmental authority), (c) any claim of any Credit Party against
third parties (i) for past, present or future infringement of any Patent or
Patent License, or (ii) for past, present or future infringement or dilution of
any Copyright, Copyright License, Trademark or Trademark License, or for injury
to the goodwill associated with any Trademark or Trademark License, (d) any
recoveries by any Credit Party against third parties with respect to any
litigation or dispute concerning any of the Collateral including claims arising
out of the loss or nonconformity of, interference with the use of, defects in,
or infringement of rights in, or damage to, Collateral, (e) all amounts
collected on, or distributed on account of, other Collateral, including
dividends, interest, distributions and Instruments with respect to Investment
Property and pledged Stock, and (f) any and all other amounts, rights to payment
or other property acquired upon the sale, lease, license, exchange or other
disposition of Collateral and all rights arising out of Collateral.
          “Projections” means Borrower’s forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, all prepared on a Subsidiary by
Subsidiary or division-by-division basis, if applicable, and otherwise
consistent with the historical Financial Statements of Borrower, together with
appropriate supporting details and a statement of underlying assumptions.
          “Publishing Business” means any businesses of Encore Software, BCI
Eclipse and the FUNimation Companies as presently conducted as of the Closing
Date and any similar businesses of any other Credit Party that may be conducted
in the future.
          “Qualified Assignee” means any Lender, any Affiliate of any Lender
and, with respect to any Lender an Approved Fund.

Annex A-24

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          “Qualified Counterparty” means a Person which (i) is an Affiliate of a
Lender and (ii) has entered into an agreement, in form and substance to the
Agent, pursuant to which such Person has, among other things, appointed the
Agent as its agent and agreed to be bound by certain provisions of the Loan
Documents.
          “Qualified Plan” means a Pension Plan that is intended to be
tax-qualified under Section 401(a) of the IRC.
          “Real Estate” has the meaning ascribed to it in Section 3.6.
          “Related Person” means, with respect to any Person, each Affiliate of
such Person and each director, officer, employee, agent, trustee,
representative, attorney, accountant and each insurance, environmental, legal,
financial and other advisor (including those retained in connection with the
satisfaction or attempted satisfaction of any condition set forth in Section 2)
and other consultants and agents of or to such Person or any of its Affiliates,
together with, if such Person is the Agent, each other Person or individual
designated, nominated or otherwise mandated by or helping the Agent pursuant to
the provisions of any Loan Document.
          “Refunded Swing Line Loan” has the meaning ascribed to it in Section
1.1(b)(iii).
          “Related Transactions” means the borrowing on the Closing Date under
the Revolving Loan and the Second Lien Loan, and the payment of all fees, costs
and expenses associated with all of the foregoing and the execution and delivery
of all of the Related Transactions Documents.
          “Related Transactions Documents” means the Loan Documents, the Second
Lien Credit Agreement, and all other agreements, documents, opinions,
certificates and other instruments executed or delivered pursuant to, or in
connection with, the Related Transactions.
          “Release” means any release, threatened release, spill, emission,
leaking, pumping, pouring, emitting, emptying, escape, injection, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Material in the indoor or outdoor environment, including the movement of
Hazardous Material through or in the air, soil, surface water, ground water or
property.
          “Requisite Lenders” means Lenders having more than 66 2/3% of the
Commitments (or, with respect to any facility for which the Commitment has been
terminated, the outstanding principal amount of the applicable Loans) of all
Lenders.
          “Reserves” means, with respect to the Borrowing Base of Borrower
(a) reserves established by Agent from time to time against Eligible Inventory
pursuant to Section 5.9, (b) reserves established pursuant to Section 5.4(d),
and (c) such other reserves against Eligible Accounts, Eligible Inventory or
Borrowing Availability of Borrower that Agent may, in its reasonable credit
judgment for reasons relating to any Credit Party, any Credit Party’s business
or industry and/or the Agent’s ability to collect or realize the full value of
any Collateral, establish from time to time. Without limiting the generality of
the foregoing, Reserves established to ensure the payment of accrued Interest
Expenses shall be deemed to be a reasonable exercise of Agent’s credit judgment
and Reserves shall include any Hedging Reserve.

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          “Restricted Payment” mean, with respect to any Credit Party (a) the
declaration or payment of any dividend or the incurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of Stock; (b) any payment on account of the purchase, redemption,
defeasance, sinking fund or other retirement of such Credit Party’s Stock or any
other payment or distribution made in respect thereof, either directly or
indirectly; (c) any payment or prepayment of principal of, premium, if any, or
interest, fees or other charges on or with respect to, and any redemption,
purchase, retirement, defeasance, sinking fund or similar payment and any claim
for rescission with respect to, any Subordinated Debt; (d) any payment made to
redeem, purchase, repurchase or retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire Stock of such Credit
Party now or hereafter outstanding; (e) any payment of a claim for the
rescission of the purchase or sale of, or for material damages arising from the
purchase or sale of, any shares of such Credit Party’s Stock or of a claim for
reimbursement, indemnification or contribution arising out of or related to any
such claim for damages or rescission; (f) any payment, loan, contribution, or
other transfer of funds or other property to any Stockholder of such Credit
Party other than payment of compensation in the ordinary course of business to
Stockholders who are employees of such Credit Party; (g) any payment of
management fees (or other fees of a similar nature) by such Credit Party to any
Stockholder of such Credit Party or its Affiliates, (h) any payment of any
Earnout Amount (as defined in the BCI Eclipse Purchase Agreement) or similar
payment pursuant to the BCI Eclipse Purchase Agreement, and (i) any payment of
any Performance Payments (as defined in the FUNimation Purchase Agreement) or
similar payment pursuant to the FUNimation Purchase Agreement.
          “Retiree Welfare Plan” means, at any time, a Welfare Plan that
provides for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant’s termination of employment,
other than continuation coverage provided pursuant to Section 4980B of the IRC
and at the sole expense of the participant or the beneficiary of the
participant.
          “Revolving Credit Advance” has the meaning ascribed to it in Section
1.1(a)(i).
          “Revolving Lenders” means, as of any date of determination, Lenders
having a Revolving Loan Commitment.
          “Revolving Loan” means, at any time, the sum of (i) the aggregate
amount of Revolving Credit Advances outstanding to Borrower plus (ii) the
aggregate Letter of Credit Obligations incurred on behalf of Borrower. Unless
the context otherwise requires, references to the outstanding principal balance
of the Revolving Loan shall include the outstanding balance of Letter of Credit
Obligations.
          “Revolving Loan Commitment” means (a) as to any Revolving Lender, the
aggregate commitment of such Revolving Lender to make Revolving Credit Advances
or incur Letter of Credit Obligations as set forth on Annex J to the Agreement
or in the most recent Assignment Agreement executed by such Revolving Lender and
(b) as to all Revolving Lenders, the aggregate commitment of all Revolving
Lenders to make Revolving Credit Advances or incur Letter of Credit Obligations,
which aggregate commitment shall be Ninety Five Million

Annex A-26

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Dollars ($95,000,000) on the Closing Date, as such amount may be adjusted, if at
all, from time to time in accordance with the Agreement.
          “Revolving Note” has the meaning ascribed to it in Section 1.1(a)(ii).
          “Second Lien Credit Agreement” means that certain Credit Agreement,
dated as of the date hereof, by and among Borrower, Monroe Capital Advisors, LLC
as agent for the lenders thereunder, and the lenders from time to time party
thereto, as amended, restated, supplemented or otherwise modified in a manner
permitted hereby.
          “Second Lien Intercreditor Agreement” means that certain Intercreditor
Agreement, dated as of the date hereof by and among the Borrower, the Guarantors
(as defined therein), the Agent and the Second Lien Agent (as defined therein),
as amended, restated, supplemented and otherwise modified from time to time.
          “Second Lien Loan” means that certain term loan in the original
principal amount of Fifteen Million Dollars ($15,000,000) made to Borrower
pursuant to the Second Lien Credit Agreement.
          “Security Agreements” means that certain Second Amended and Restated
Security Agreement dated as of the Closing Date by and among the Credit Parties
signatory thereto and Agent, on behalf of itself and Lenders together with each
joinder agreement thereto by any New Credit Party, and each other Security
Agreement to be entered into by and among Agent, on behalf of itself and
Lenders, and any other Credit Party.
          “Software” means all “software” as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party, other than software
embedded in any category of Goods, including all computer programs and all
supporting information provided in connection with a transaction related to any
program.
          “Solvent” means, with respect to any Person on a particular date, that
on such date (a) the fair value of the property of such Person is greater than
the total amount of liabilities, including contingent liabilities, of such
Person; (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person’s ability to pay as such debts and liabilities mature; and
(d) such Person is not engaged in a business or transaction, and is not about to
engage in a business or transaction, for which such Person’s property would
constitute an unreasonably small capital. The amount of contingent liabilities
(such as litigation, guaranties and pension plan liabilities) at any time shall
be computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can be reasonably be expected
to become an actual or matured liability.
          “SPV” means any special purpose funding vehicle identified as such in
a writing by any Lender to the Agent.
          “Stock” means all shares, options, warrants, general or limited
partnership interests, membership interests or other equivalents (regardless of
how designated) of or in a

Annex A-27

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corporation, partnership, limited liability company or equivalent entity 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 Securities and Exchange Commission under the
Securities Exchange Act of 1934).
          “Stockholder” means, with respect to any Person, each holder of Stock
of such Person.
          “Subordinated Debt” means debt which is subordinated to any or all of
the Obligations.”
          “Subsidiary” means, with respect to any Person, (a) any corporation of
which an aggregate of more than 50% of the outstanding Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of 50% or more of such Stock whether by proxy, agreement,
operation of law or otherwise, and (b) any partnership or limited liability
company in which such Person and/or one or more Subsidiaries of such Person
shall have an interest (whether in the form of voting or participation in
profits or capital contribution) of more than 50% or of which any such Person is
a general partner or may exercise the powers of a general partner. Unless the
context otherwise requires, each reference to a Subsidiary shall be a reference
to a Subsidiary of the Borrower.
          “Supermajority Revolving Lenders” means Lenders having (a) 80% or more
of the Revolving Loan Commitments of all Lenders, or (b) if the Revolving Loan
Commitments have been terminated, 80% or more of the aggregate outstanding
amount of the Revolving Loan (with the Swing Line Loan being attributed to the
Lender making such Loan), and Letter of Credit Obligations.
          “Supporting Obligations” means all “supporting obligations” as such
term is defined in the Code, including letters of credit and guaranties issued
in support of Accounts, Chattel Paper, Documents, General Intangibles,
Instruments, or Investment Property.
          “Swap Related L/C” means a letter of credit or other credit
enhancement provided by GE Capital to the extent supporting the payment
obligations by Borrower under an interest rate protection or hedging agreement
or transaction (including, but not limited to, interest rate swaps, caps,
collars, floors and similar transactions) designed to protect or manage exposure
to the fluctuations in the interest rates applicable to any of the Loans, and
which agreement or transaction Borrower entered into as the result of a specific
referral pursuant to which GE Capital, GE Corporate Financial Services, Inc. or
any other Affiliate of GE Capital had arranged for Borrower to enter into such
agreement or transaction. The term includes a Swap Related L/C as it may be
increased from time to time fully to support Borrower’s payment obligations
under any and all such interest rate protection or hedging agreements or
transactions.

Annex A-28

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          “Swap Related Reimbursement Obligation” has the meaning ascribed to it
in Section 1.2A.
          “Swing Line Advance” has the meaning ascribed to it in
Section 1.1(b)(i).
          “Swing Line Availability” has the meaning ascribed to it in
Section 1.1(b)(i).
          “Swing Line Commitment” means, as to the Swing Line Lender, the
commitment of the Swing Line Lender to make Swing Line Advances as set forth on
Annex J to the Agreement, which commitment constitutes a subfacility of the
Revolving Loan Commitment of the Swing Line Lender.
          “Swing Line Lender” means GE Capital.
          “Swing Line Loan” means at any time, the aggregate amount of Swing
Line Advances outstanding to Borrower.
          “Swing Line Note” has the meaning ascribed to it in
Section 1.1(b)(ii).
          “Taxes” means taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income of Agent or a Lender by the jurisdictions under
the laws of which Agent and Lenders are organized or conduct business or any
political subdivision thereof.
          “Termination Date” means the date on which (a) the Loans have been
indefeasibly repaid in full, (b) all other Obligations under the Agreement and
the other Loan Documents have been completely discharged, (c) all Letter of
Credit Obligations have been cash collateralized, cancelled or backed by standby
letters of credit in accordance with Annex B, and (d) Borrower shall not have
any further right to borrow any monies under the Agreement.
          “Texas Real Estate Sale Transaction” has the meaning assigned to it in
Section 6.8.
          “Title IV Plan” means a Pension Plan (other than a Multiemployer
Plan), that is covered by Title IV of ERISA, and that any Credit Party or ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.
          “Trademark License” means rights under any written agreement now owned
or hereafter acquired by any Credit Party granting any right to use any
Trademark.
          “Trademark Security Agreements” means the Trademark Security
Agreements made in favor of Agent, on behalf of Lenders, by each applicable
Credit Party.
          “Trademarks” means all of the following now owned or hereafter adopted
or acquired by any Credit Party: (a) all trademarks, trade names, corporate
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature

Annex A-29

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(whether registered or unregistered), all registrations and recordings thereof,
and all applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof; (b) all
reissues, extensions or renewals thereof; and (c) all goodwill associated with
or symbolized by any of the foregoing.
          “Unfunded Pension Liability” means, at any time, the aggregate amount,
if any, of the sum of (a) the amount by which the present value of all accrued
benefits under each Title IV Plan exceeds the fair market value of all assets of
such Title IV Plan allocable to such benefits in accordance with Title IV of
ERISA, all determined as of the most recent valuation date for each such Title
IV Plan using the actuarial assumptions for funding purposes in effect under
such Title IV Plan, and (b) for a period of 5 years following a transaction
which might reasonably be expected to be covered by Section 4069 of ERISA, the
liabilities (whether or not accrued) that could be avoided by any Credit Party
or any ERISA Affiliate as a result of such transaction.
          “Vendor” means a Person who (i) supplies goods to any Credit Party
which become Inventory of such Credit Party or (ii) provides a license to permit
a Credit Party to sell specific goods or for specified use of intellectual
property.
          “Vendor Advance Expense” shall mean any expense including write-offs,
recoupments, amortization or similar recognition of expenses relating to a
reduction in any Vendor Advance.
          “Vendor Advances” shall mean all prepayments, advances, licensing fees
or royalties (i) paid by one or more Credit Parties to one or more Vendors in
respect of goods or Intellectual Property not yet then provided to a Credit
Party and (ii) which are intended to be repaid or earned in the future upon the
sale by a Credit Party of the applicable goods or specified use of intellectual
property.
          “Welfare Plan” means a Plan described in Section 3(i) of ERISA.
          Rules of construction with respect to accounting terms used in the
Agreement or the other Loan Documents shall be as set forth in Annex G. All
other undefined terms contained in any of the Loan Documents shall, unless the
context indicates otherwise, have the meanings provided for by the Code to the
extent the same are used or defined therein; in the event that any term is
defined differently in different Articles or Divisions of the Code, the
definition contained in Article or Division 9 shall control. Unless otherwise
specified, references in the Agreement or any of the Appendices to a Section,
subsection or clause refer to such Section, subsection or clause as contained in
the Agreement. The words “herein,” “hereof” and “hereunder” and other words of
similar import refer to the Agreement as a whole, including all Annexes,
Exhibits and Schedules, as the same may from time to time be amended, restated,
modified or supplemented, and not to any particular section, subsection or
clause contained in the Agreement or any such Annex, Exhibit or Schedule.
          Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine,

Annex A-30

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feminine or neuter gender shall include the masculine, feminine and neuter
genders. The words “including”, “includes” and “include” shall be deemed to be
followed by the words “without limitation”; the word “or” is not exclusive;
references to Persons include their respective successors and assigns (to the
extent and only to the extent permitted by the Loan Documents) or, in the case
of governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of the same and any successor statutes and regulations. Whenever
any provision in any Loan Document refers to the knowledge (or an analogous
phrase) of any Credit Party, such words are intended to signify that such Credit
Party has actual knowledge or awareness of a particular fact or circumstance or
that such Credit Party, if it had exercised reasonable diligence, would have
known or been aware of such fact or circumstance.

Annex A-31

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ANNEX B (Section 1.2)
to
CREDIT AGREEMENT
LETTERS OF CREDIT
          (a) Issuance. Subject to the terms and conditions of the Agreement,
Agent and Revolving Lenders agree to incur, from time to time prior to the
Commitment Termination Date, upon the request of Borrower and for Borrower’s
account, Letter of Credit Obligations by causing Letters of Credit to be issued
by GE Capital or a Subsidiary thereof or a bank or other legally authorized
Person selected by or acceptable to Agent in its sole discretion (each, an “L/C
Issuer”) for Borrower’s account and guaranteed by Agent; provided, that if the
L/C Issuer is a Revolving Lender, then such Letters of Credit shall not be
guaranteed by Agent but rather each Revolving Lender shall, subject to the terms
and conditions hereinafter set forth, purchase (or be deemed to have purchased)
risk participations in all such Letters of Credit issued with the written
consent of Agent, as more fully described in paragraph (b)(ii) below. The
aggregate amount of all such Letter of Credit Obligations shall not at any time
exceed the least of (i) Ten Million Dollars ($10,000,000) (the “L/C Sublimit”),
(ii) the Maximum Amount less the aggregate outstanding principal balance of the
Revolving Credit Advances and the Swing Line Loan, and (iii) the Borrowing Base
less the aggregate outstanding principal balance of the Revolving Credit
Advances and the Swing Line Loan. No such Letter of Credit shall have an expiry
date that is more than one year following the date of issuance thereof, unless
otherwise determined by Agent in its sole discretion, and neither Agent nor
Revolving Lenders shall be under any obligation to incur Letter of Credit
Obligations in respect of, or purchase risk participations in, any Letter of
Credit having an expiry date that is later than the Commitment Termination Date.
          (b)(i) Advances Automatic; Participations. In the event that Agent or
any Revolving Lender shall make any payment on or pursuant to any Letter of
Credit Obligation, such payment shall then be deemed automatically to constitute
a Revolving Credit Advance under Section 1.1(a) of the Agreement regardless of
whether a Default or Event of Default has occurred and is continuing and
notwithstanding Borrower’s failure to satisfy the conditions precedent set forth
in Section 2, and each Revolving Lender shall be obligated to pay its Pro Rata
Share thereof in accordance with the Agreement. The failure of any Revolving
Lender to make available to Agent for Agent’s own account its Pro Rata Share of
any such Revolving Credit Advance or payment by Agent under or in respect of a
Letter of Credit shall not relieve any other Revolving Lender of its obligation
hereunder to make available to Agent its Pro Rata Share thereof, but no
Revolving Lender shall be responsible for the failure of any other Revolving
Lender to make available such other Revolving Lender’s Pro Rata Share of any
such payment.
               (ii) If it shall be illegal or unlawful for Borrower to incur
Revolving Credit Advances as contemplated by paragraph (b)(i) above because of
an Event of Default described in Sections 8.1(h) or (i) or otherwise or if it
shall be illegal or unlawful for any Revolving Lender to be deemed to have
assumed a ratable share of the reimbursement obligations owed to an L/C Issuer,
or if the L/C Issuer is a Revolving Lender, then (i) immediately and without
further action whatsoever, each Revolving Lender shall be deemed to have
irrevocably and unconditionally purchased from Agent (or such L/C Issuer, as the
case may be) an undivided interest and participation equal to such Revolving
Lender’s Pro Rata Share

Annex B-1

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(based on the Revolving Loan Commitments) of the Letter of Credit Obligations in
respect of all Letters of Credit then outstanding and (ii) thereafter,
immediately upon issuance of any Letter of Credit, each Revolving Lender shall
be deemed to have irrevocably and unconditionally purchased from Agent (or such
L/C Issuer, as the case may be) an undivided interest and participation in such
Revolving Lender’s Pro Rata Share (based on the Revolving Loan Commitments) of
the Letter of Credit Obligations with respect to such Letter of Credit on the
date of such issuance. Each Revolving Lender shall fund its participation in all
payments or disbursements made under the Letters of Credit in the same manner as
provided in the Agreement with respect to Revolving Credit Advances.
          (c) Cash Collateral. (i) If Borrower is required to provide cash
collateral for any Letter of Credit Obligations pursuant to the Agreement prior
to the Commitment Termination Date, Borrower will pay to Agent for the ratable
benefit of itself and Revolving Lenders cash or cash equivalents acceptable to
Agent (“Cash Equivalents”) in an amount equal to 110% of the maximum amount then
available to be drawn under each applicable Letter of Credit outstanding. Such
funds or Cash Equivalents shall be held by Agent in a cash collateral account
(the “Cash Collateral Account”) maintained at a bank or financial institution
acceptable to Agent. The Cash Collateral Account shall be in the name of
Borrower and shall be pledged to, and subject to the control of, Agent, for the
benefit of Agent and Lenders, in a manner satisfactory to Agent. Borrower hereby
pledges and grants to Agent, on behalf of itself and Lenders, a security
interest in all such funds and Cash Equivalents held in the Cash Collateral
Account from time to time and all proceeds thereof, as security for the payment
of all amounts due in respect of the Letter of Credit Obligations and other
Obligations, whether or not then due. The Agreement, including this Annex B,
shall constitute a security agreement under applicable law.
          (ii) If any Letter of Credit Obligations, whether or not then due and
payable, shall for any reason be outstanding on the Commitment Termination Date,
Borrower shall either (A) provide cash collateral therefor in the manner
described above, or (B) cause all such Letters of Credit and guaranties thereof,
if any, to be canceled and returned, or (C) deliver a stand-by letter (or
letters) of credit in guarantee of such Letter of Credit Obligations, which
stand-by letter (or letters) of credit shall be of like tenor and duration (plus
30 additional days) as, and in an amount equal to 110% of the aggregate maximum
amount then available to be drawn under, the Letters of Credit to which such
outstanding Letter of Credit Obligations relate and shall be issued by a Person,
and shall be subject to such terms and conditions, as are be satisfactory to
Agent in its sole discretion.
          (iii) From time to time after funds are deposited in the Cash
Collateral Account by Borrower, whether before or after the Commitment
Termination Date, Agent may apply such funds or Cash Equivalents then held in
the Cash Collateral Account to the payment of any amounts, and in such order as
Agent may elect, as shall be or shall become due and payable by Borrower to
Agent and Lenders with respect to such Letter of Credit Obligations of Borrower
and, upon the satisfaction in full of all Letter of Credit Obligations of
Borrower, to any other Obligations then due and payable.
          (iv) Neither Borrower nor any Person claiming on behalf of or through
Borrower shall have any right to withdraw any of the funds or Cash Equivalents
held in the Cash

Annex B-2

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Collateral Account, except that upon the termination of all Letter of Credit
Obligations and the payment of all amounts payable by Borrower to Agent and
Lenders in respect thereof, any funds remaining in the Cash Collateral Account
shall be applied to other Obligations then due and owing and upon payment in
full of such Obligations, any remaining amount shall be paid to Borrower or as
otherwise required by law. Interest earned on deposits in the Cash Collateral
Account shall be for the account of Agent.
          (d) Fees and Expenses. Borrower agrees to pay to Agent for the benefit
of Revolving Lenders, as compensation to such Lenders for Letter of Credit
Obligations incurred hereunder, (i) all costs and expenses incurred by Agent or
any Lender on account of such Letter of Credit Obligations, and (ii) for each
month during which any Letter of Credit Obligation shall remain outstanding, a
fee (the “Letter of Credit Fee”) in an amount equal to the Applicable L/C Margin
multiplied by the maximum amount available from time to time to be drawn under
the applicable Letter of Credit. Such fee shall be paid to Agent for the benefit
of the Revolving Lenders in arrears, on the first day of each month and on the
Commitment Termination Date. In addition, Borrower shall pay to any L/C Issuer,
on demand, such fees (including all per annum fees), charges and expenses of
such L/C Issuer in respect of the issuance, negotiation, acceptance, amendment,
transfer and payment of such Letter of Credit or otherwise payable pursuant to
the application and related documentation under which such Letter of Credit is
issued.
          (e) Request for Incurrence of Letter of Credit Obligations. Borrower
shall give Agent at least 2 Business Days’ prior written notice requesting the
incurrence of any Letter of Credit Obligation. The notice shall be accompanied
by the form of the Letter of Credit (which shall be acceptable to the L/C
Issuer) and a completed Application for Standby Letter of Credit or Application
for Documentary Letter of Credit as applicable in the form Exhibit B-1 or B-2
attached hereto. Notwithstanding anything contained herein to the contrary,
Letter of Credit applications by Borrower and approvals by Agent and the L/C
Issuer may be made and transmitted pursuant to electronic codes and security
measures mutually agreed upon and established by and among Borrower, Agent and
the L/C Issuer.
          (f) Obligation Absolute. The obligation of Borrower to reimburse Agent
and Revolving Lenders for payments made with respect to any Letter of Credit
Obligation shall be absolute, unconditional and irrevocable, without necessity
of presentment, demand, protest or other formalities, and the obligations of
each Revolving Lender to make payments to Agent with respect to Letters of
Credit shall be unconditional and irrevocable. Such obligations of Borrower and
Revolving Lenders shall be paid strictly in accordance with the terms hereof
under all circumstances including the following:
     (i) any lack of validity or enforceability of any Letter of Credit or the
Agreement or the other Loan Documents or any other agreement;
     (ii) the existence of any claim, setoff, defense or other right that
Borrower or any of its Affiliates or any Lender may at any time have against a
beneficiary or any transferee of any Letter of Credit (or any Persons or
entities for whom any such transferee may be acting), Agent, any Lender, or any
other Person, whether in connection with the Agreement, the Letter of Credit,
the transactions contemplated herein or therein

Annex B-3

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or any unrelated transaction (including any underlying transaction between
Borrower or any of its Affiliates and the beneficiary for which the Letter of
Credit was procured);
     (iii) any draft, demand, certificate or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
     (iv) payment by Agent (except as otherwise expressly provided in paragraph
(g)(ii)(C) below) or any L/C Issuer under any Letter of Credit or guaranty
thereof against presentation of a demand, draft or certificate or other document
that does not comply with the terms of such Letter of Credit or such guaranty;
     (v) any other circumstance or event whatsoever, that is similar to any of
the foregoing; or
     (vi) the fact that a Default or an Event of Default has occurred and is
continuing.
          (g) Indemnification; Nature of Lenders’ Duties. (i) In addition to
amounts payable as elsewhere provided in the Agreement, Borrower hereby agrees
to pay and to protect, indemnify, and save harmless Agent and each Lender from
and against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys’ fees and allocated costs
of internal counsel) that Agent or any Lender may incur or be subject to as a
consequence, direct or indirect, of (A) the issuance of any Letter of Credit or
guaranty thereof, or (B) the failure of Agent or any Lender seeking
indemnification or of any L/C Issuer to honor a demand for payment under any
Letter of Credit or guaranty thereof as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto government or
Governmental Authority, in each case other than to the extent solely as a result
of the gross negligence or willful misconduct of Agent or such Lender (as
finally determined by a court of competent jurisdiction).
          (ii) As between Agent and any Lender and Borrower, Borrower assumes
all risks of the acts and omissions of, or misuse of any Letter of Credit by
beneficiaries of any Letter of Credit. In furtherance and not in limitation of
the foregoing, to the fullest extent permitted by law neither Agent nor any
Lender shall be responsible for: (A) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document issued by any party in connection
with the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason; (C) failure of
the beneficiary of any Letter of Credit to comply fully with conditions required
in order to demand payment under such Letter of Credit; provided, that in the
case of any payment by Agent under any Letter of Credit or guaranty thereof,
Agent shall be liable to the extent such payment was made solely as a result of
its gross negligence or willful misconduct (as finally determined by a court of
competent jurisdiction) in determining that the demand for payment under such
Letter of Credit or guaranty thereof complies on its face with any applicable
requirements for a demand for payment under such

Annex B-4

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Letter of Credit or guaranty thereof; (D) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they may be in cipher; (E) errors in
interpretation of technical terms; (F) any loss or delay in the transmission or
otherwise of any document required in order to make a payment under any Letter
of Credit or guaranty thereof or of the proceeds thereof; (G) the credit of the
proceeds of any drawing under any Letter of Credit or guaranty thereof; and
(H) any consequences arising from causes beyond the control of Agent or any
Lender. None of the above shall affect, impair, or prevent the vesting of any of
Agent’s or any Lender’s rights or powers hereunder or under the Agreement.
          (iii) Nothing contained herein shall be deemed to limit or to expand
any waivers, covenants or indemnities made by Borrower in favor of any L/C
Issuer in any letter of credit application, reimbursement agreement or similar
document, instrument or agreement between Borrower and such L/C Issuer,
including an Application and Agreement for Documentary Letter of Credit or a
Master Documentary Agreement and a Master Standby Agreement entered into with
Agent.

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ANNEX C (Section 1.8)
to
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEM
          Borrower shall, and shall cause its Subsidiaries to, establish and
maintain the Cash Management Systems described below:
          (a) On or before the Closing Date and until the Termination Date,
Borrower shall (i) establish lock boxes (“Lock Boxes”) or, at Agent’s
discretion, blocked accounts (“Blocked Accounts”) at one or more of the banks
set forth in Disclosure Schedule (3.19), and shall request in writing and
otherwise take such reasonable steps to ensure that all Account Debtors forward
payment directly to such Lock Boxes, and (ii) deposit and cause its Subsidiaries
to 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 cash, checks, drafts
or other similar items of payment relating to or constituting payments made in
respect of any and all Collateral (whether or not otherwise delivered to a Lock
Box) into one or more Blocked Accounts in Borrower’s name or any such
Subsidiary’s name and at a bank identified in Disclosure Schedule (3.19) (each,
a “Relationship Bank”). On or before the Closing Date, Borrower shall have
established a concentration account in its name (the “Concentration Account”)
(which account may be the same as one of the Blocked Accounts) at the bank that
shall be designated as the Concentration Account bank for Borrower in Disclosure
Schedule (3.19) (the “Concentration Account Bank”) (which bank may be one of the
Relationship Banks) which bank shall be reasonably satisfactory to Agent.
          (b) Borrower may maintain, in its name, an account (each a
“Disbursement Account” and collectively, the “Disbursement Accounts”) at a bank
acceptable to Agent into which Agent shall, from time to time, deposit proceeds
of Revolving Credit Advances and Swing Line Advances made to Borrower pursuant
to Section 1.1 for use by Borrower in accordance with the provisions of
Section 1.4.
          (c) On or before the Closing Date (or such later date as Agent shall
consent to in writing), the Concentration Account Bank, each bank where a
Disbursement Account is maintained and all other Relationship Banks, shall have
entered into tri-party blocked account agreements with Agent, for the benefit of
itself and Lenders, and Borrower and Subsidiaries thereof, as applicable, in
form and substance reasonably acceptable to Agent, which shall become operative
on or prior to the Closing Date. Each such blocked account agreement shall
provide, among other things, that (i) all items of payment deposited in such
account and proceeds thereof deposited in the Concentration Account are held by
such bank as agent or bailee-in-possession for Agent, on behalf of itself and
Lenders, (ii) the bank executing such agreement has no rights of setoff or
recoupment or any other claim against such account, as the case may be, other
than for payment of its service fees and other charges directly related to the
administration of such account and for returned checks or other items of
payment, and (iii) from and after the Closing Date (A) with respect to banks at
which a Blocked Account is maintained, if such Blocked Account is not also the
Concentration Account, such bank agrees to forward

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immediately all amounts in each Blocked Account to the Concentration Account
Bank and to commence the process of daily sweeps from such Blocked Account into
the Concentration Account and (B) with respect to the Concentration Account
Bank, such bank agrees to immediately forward all amounts received in the
Concentration Account to the Collection Account through daily sweeps from such
Concentration Account into the Collection Account. Borrower shall not, and shall
not cause or permit any Subsidiary thereof to, accumulate or maintain cash in
Disbursement Accounts or payroll accounts as of any date of determination in
excess of checks outstanding against such accounts as of that date and amounts
necessary to meet minimum balance requirements.
          (d) So long as no Default or Event of Default has occurred and is
continuing, Borrower may amend Disclosure Schedule (3.19) to add or replace a
Relationship Bank, Lock Box or Blocked Account or to replace any Concentration
Account or any Disbursement Account; provided, that (i) Agent shall have
consented in writing in advance to the opening of such account or Lock Box with
the relevant bank and (ii) prior to the time of the opening of such account or
Lock Box, Borrower or its Subsidiaries, as applicable, and such bank shall have
executed and delivered to Agent a tri-party blocked account agreement, in form
and substance reasonably satisfactory to Agent. Borrower shall close any of its
accounts (and establish replacement accounts in accordance with the foregoing
sentence) promptly and in any event within 30 days following notice from Agent
that the creditworthiness of any bank holding an account is no longer acceptable
in Agent’s reasonable judgment, or as promptly as practicable and in any event
within 60 days following notice from Agent that the operating performance, funds
transfer or availability procedures or performance with respect to accounts or
Lock Boxes of the bank holding such accounts or Agent’s liability under any
tri-party blocked account agreement with such bank is no longer acceptable in
Agent’s reasonable judgment.
          (e) The Lock Boxes, Blocked Accounts, Disbursement Accounts and the
Concentration Account shall be cash collateral accounts, with all cash, checks
and other similar items of payment in such accounts securing payment of the
Loans and all other Obligations, and in which Borrower and each Subsidiary
thereof shall have granted a Lien to Agent, on behalf of itself and Lenders,
pursuant to the Security Agreement.
          (f) All amounts deposited in the Collection Account shall be deemed
received by Agent in accordance with Section 1.10 and shall be applied (and
allocated) by Agent in accordance with Section 1.11. In no event shall any
amount be so applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account.
          (g) Borrower shall and shall cause its Related Persons to (i) hold in
trust for Agent, for the benefit of itself and Lenders, all checks, cash and
other items of payment received by Borrower or any such Related Person, and
(ii) within 1 Business Day after receipt by Borrower or any such Related Person
of any checks, cash or other items of payment, deposit the same into a Blocked
Account. Borrower and each Related Person thereof acknowledges and agrees that
all cash, checks or other items of payment constituting proceeds of Collateral
are part of the Collateral. All proceeds of the sale or other disposition of any
Collateral, shall be deposited directly into Blocked Accounts.

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ANNEX D (Section 2.1(a))
to
CREDIT AGREEMENT
CLOSING CHECKLIST
[TO BE ATTACHED]

Annex D-1

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ANNEX E (Section 4.1(a))
to
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS — REPORTING
          Borrower shall deliver or cause to be delivered to Agent or to Agent
and Lenders, as indicated, the following:
          (a) Monthly Financials. To Agent and Lenders, within 30 days after the
end of each Fiscal Month (45 days after the end of each Fiscal Month ending on
or about March 31, June 30, September 30 or December 31; provided, however, that
with respect to such Fiscal Months, the Borrower shall deliver to the Agent and
the Lenders drafts of the financial statements otherwise required by this
sentence within 30 days after the end of each such Fiscal Month), financial
information regarding Borrower and its Subsidiaries, certified by the Chief
Financial Officer of Borrower, consisting of consolidated and consolidating
(i) unaudited balance sheets as of the close of such Fiscal Month and the
related statements of income and cash flows for that portion of the Fiscal Year
ending as of the close of such Fiscal Month and (ii) unaudited statements of
income and cash flows for such Fiscal Month, setting forth in comparative form
the figures for the corresponding period in the prior year and the figures
contained in the Projections for such Fiscal Year, all prepared in accordance
with GAAP (subject to normal year-end adjustments). Such financial information
shall be accompanied by (A) if such month is the last month of a Fiscal Quarter,
a statement in reasonable detail (each, a “Compliance Certificate”) showing the
calculations used in determining compliance with each Financial Covenant that is
tested for a period ending on the last day of such Fiscal Quarter and (B) the
certification of the Chief Financial Officer of Borrower that (i) such financial
information presents fairly in accordance with GAAP (subject to normal year-end
adjustments) the financial position and results of operations of Borrower and
its Subsidiaries, on a consolidated and consolidating basis, in each case as at
the end of such Fiscal Month and for that portion of the Fiscal Year then ended
and (ii) any other information presented is true, correct and complete in all
material respects and that there was no Default or Event of Default in existence
as of such time or, if a Default or Event of Default shall have occurred and be
continuing, describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default.
          (b) Operating Plan. To Agent and Lenders, as soon as available, but
not later than 30 days before the end of each Fiscal Year, an annual proposed
operating plan for Borrower for the following Fiscal Year (and when available,
any subsequent updates thereto approved by the Board of Directors of Borrower),
which for the following Fiscal Year, (i) includes a statement of all of the
material assumptions on which such plan is based, (ii) includes monthly balance
sheets and a monthly budget for the following year and (iii) integrates sales,
gross profits, operating expenses, operating profit, cash flow projections and
Borrowing Availability projections, all prepared on the same basis and in
similar detail as that on which operating results are reported (and in the case
of cash flow projections, representing management’s good faith estimates of
future financial performance based on historical performance), and including
plans for personnel, Capital Expenditures and facilities.

Annex E-1

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          (c) Annual Audited Financials. To Agent and Lenders, within 75 days
after the end of each Fiscal Year, audited Financial Statements for Borrower and
its Subsidiaries on a consolidated and (unaudited) consolidating basis,
consisting of balance sheets and statements of income and retained earnings and
cash flows, setting forth in comparative form in each case the figures for the
previous Fiscal Year, which Financial Statements shall be prepared in accordance
with GAAP and certified without qualification, by an independent certified
public accounting firm of national standing or otherwise acceptable to Agent.
Such Financial Statements shall be accompanied by (i) a statement prepared in
reasonable detail showing the calculations used in determining compliance with
each of the Financial Covenants, and (ii) the certification of the Chief
Executive Officer or Chief Financial Officer of Borrower that all such Financial
Statements present fairly in accordance with GAAP the financial position,
results of operations and statements of cash flows of Borrower and its
Subsidiaries on a consolidated and consolidating basis, as at the end of such
Fiscal Year and for the period then ended, and that there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default has occurred and is continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default.
          (d) Management Letters. To Agent and Lenders, within 5 Business Days
after receipt thereof by any Credit Party, copies of all management letters,
exception reports or similar letters or reports received by such Credit Party
from its independent certified public accountants.
          (e) Default Notices. To Agent and Lenders, as soon as practicable, and
in any event within 5 Business Days after an executive officer of Borrower has
actual knowledge of the existence of any Default, Event of Default or other
event that has had a Material Adverse Effect, telephonic or telecopied notice
specifying the nature of such default or event of default or other event,
including the anticipated effect thereof, which notice, if given telephonically,
shall be promptly confirmed in writing on the next Business Day.
          (f) SEC Filings and Press Releases. To Agent and Lenders, promptly
upon their becoming available, copies of: (i) all Financial Statements, reports,
notices and proxy statements made publicly available by any Credit Party to its
security holders; (ii) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by any Credit Party with any
securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority; and (iii) all press releases and
other statements made available by any Credit Party to the public concerning
material changes or developments in the business of any such Person.
          (g) Equity Notices. To Agent, as soon as practicable, copies of all
material written notices given or received by any Credit Party with respect to
any Stock of such Person.
          (h) Supplemental Schedules. To Agent, supplemental disclosures, if
any, required by Section 5.6.
          (i) Litigation. To Agent in writing, promptly upon learning thereof,
notice of any Litigation commenced or threatened against any Credit Party that
(i) seeks damages in excess of $100,000, (ii) seeks injunctive relief, (iii) is
asserted or instituted against any Plan, its fiduciaries or its assets or
against any Credit Party or ERISA Affiliate in connection with any

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Plan, (iv) alleges criminal misconduct by any Credit Party, (v) alleges the
violation of any law regarding, or seeks remedies in connection with, any
Environmental Liabilities; or (vi) involves any product recall. In addition,
within 15 days after the end of each Fiscal Quarter, the Borrower shall provide
the Agent with a summary of all litigation set forth on Disclosure Schedule 3.13
or for which the Agent is otherwise to be notified pursuant to this clause (i).
          (j) Insurance Notices. To Agent, disclosure of losses or casualties
required by Section 5.4.
          (k) Lease Default Notices. To Agent, within 2 Business Days after
receipt thereof, copies of (i) any and all default notices received under or
with respect to any leased location or public warehouse where Collateral is
located, and (ii) such other notices or documents as Agent may reasonably
request.
          (l) Lease Amendments. To Agent, within 2 Business Days after receipt
thereof, copies of all material amendments to real estate leases.
          (m) Vendor Advances Disclosure Schedule. To Agent, not later than
forty five (45) days after the end of each Fiscal Quarter a schedule, in form
and with such detail as is satisfactory to the Agent listing (i) all new Vendor
Advances made by Credit Parties, reductions to any Vendor Advances, write-off
payments made with respect to any Vendor Advances and net monthly closing
balances of Vendor Advances by each Vendor and in the aggregate, in each case,
on a month-by-month basis during such Fiscal Quarter and (ii) all outstanding
Vendor Advances made by Credit Parties as of the end of such Fiscal Quarter.
          (n) Agreements relating to Vendor Advances, Supply Agreements,
Purchase Agreements and Customer Agreements. To Agent, within 10 Business Days
after receipt thereof, copies of (i) all amendments to any material agreements
relating to Vendor Advances, material supply agreements, material purchase
agreements and material customer agreements (ii) any new material agreement
relating to Vendor Advances, material supply agreement, material purchase
agreement and material customer agreement.
          (o) Second Lien Notices. To Agent, as soon as practicable, copies of
all written notices provided or received by a Credit Party under or with respect
to the Second Lien Credit Agreement and related documents.
          (p) Other Documents. To Agent and Lenders, such other financial and
other information respecting any Credit Party’s business or financial condition
as Agent or any Lender shall, from time to time, reasonably request.

Annex E-3

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ANNEX F (Section 4.1(b))
to
CREDIT AGREEMENT
COLLATERAL REPORTS
          Borrower shall deliver or cause to be delivered the following:
          (a) To Agent, upon its request, and in any event no less frequently
than five (5) Business Days after the end of each Fiscal Month (together with a
copy of all or any part of the following reports requested by any Lender in
writing after the Closing Date), each of the following reports, each of which
shall be prepared by the Borrower as of the last day of the immediately
preceding Fiscal Month or the date two (2) days prior to the date of any such
request:
     (i) a Borrowing Base Certificate with respect to Borrower, accompanied by
such supporting detail and documentation as shall be requested by Agent in its
reasonable discretion (and the Borrowing Base Certificate delivered with respect
to the last Fiscal Month of each Fiscal Quarter shall set forth in reasonable
detail the basis for the continuance of, or any change in, the Applicable
Margins pursuant to Section 1.5 hereof);
     (ii) with respect to Borrower, a summary of Inventory and a perpetual
Inventory report, in each case by location and type in each case accompanied by
such supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;
     (iii) with respect to Borrower, a monthly trial balance showing Accounts
outstanding aged from invoice date as follows: 1 to 30 days, 31 to 60 days, 61
to 90 days and 91 days or more, accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion; and
     (iv) an aging of accounts payable;
          (b) To Agent, at the time of delivery of each of the monthly Financial
Statements delivered pursuant to Annex E:
     (i) a reconciliation of the most recent Borrowing Base, general ledger and
month-end Accounts and Inventory reports of Borrower to Borrower’s general
ledger and monthly Financial Statements delivered pursuant to such Annex E, in
each case accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion;
     (ii) a reconciliation of the perpetual inventory by location to Borrower’s
most recent Borrowing Base Certificate, general ledger and monthly Financial
Statements delivered pursuant to Annex E, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;

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     (iii) an aging of accounts payable and a reconciliation of that accounts
payable aging to Borrower’s general ledger and monthly Financial Statements
delivered pursuant to Annex E, in each case accompanied by such supporting
detail and documentation as shall be requested by Agent in its reasonable
discretion; and
     (iv) a reconciliation of the outstanding Loans as set forth in the monthly
Loan Account statement provided by Agent to Borrower’s general ledger and
monthly Financial Statements delivered pursuant to Annex E, in each case
accompanied by such supporting detail and documentation as shall be requested by
Agent in its reasonable discretion;
     (v) a “roll forward” report with respect to Accounts in form satisfactory
to Agent;
     (vi) a reconciliation of Vendor Advances to Borrower’s general ledger and
monthly Financial Statements delivered pursuant to Annex E, in each case
accompanied by such supporting detail and documentation as shall be requested by
Agent in its reasonable discretion;
     (vi) copies of the regular monthly bank statements provided to Borrower
with respect to the Eligible Investment Account;
          (c) To Agent, at the time of delivery of each of the annual Financial
Statements delivered pursuant to Annex E, (i) a listing of government contracts
of Borrower subject to the Federal Assignment of Claims Act of 1940; and (ii) a
list of any applications for the registration of any Patent, Trademark or
Copyright filed by any Credit Party with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency in
the prior Fiscal Quarter;
          (d) Borrower, at its own expense, shall deliver to Agent the results
of each physical verification, if any, that Borrower or any of its Subsidiaries
may in their discretion have made, or caused any other Person to have made on
their behalf, of all or any portion of their Inventory (and, if a Default or an
Event of Default has occurred and be continuing, Borrower shall, upon the
request of Agent, conduct, and deliver the results of, such physical
verifications as Agent may require);
          (e) Borrower, at its own expense shall deliver to Agent, if requested
by Agent, not more frequently than three times each year, an appraisal of the
Inventory of Credit Parties, prepared by an appraiser acceptable to Agent, and
Borrower, at its own expense, shall deliver to Agent such appraisals of its
assets as Agent may request at any time after the occurrence and during the
continuance of an Event of Default, such appraisals to be conducted by an
appraiser, and in form and substance reasonably satisfactory to Agent; and
          (f) Such other reports, statements and reconciliations with respect to
the Borrowing Base or Collateral or Obligations of any or all Credit Parties as
Agent shall from time to time request in its reasonable discretion.

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ANNEX G (Section 6.10)
to
CREDIT AGREEMENT
FINANCIAL COVENANTS
          Borrower shall not breach or fail to comply with any of the following
financial covenants, each of which shall be calculated in accordance with GAAP
consistently applied:
          (a) Maximum Capital Expenditures. Borrower and its Subsidiaries on a
consolidated basis shall not make Capital Expenditures during the following
periods that exceed in the aggregate the amounts set forth opposite each of such
periods:

          Period   Maximum Capital Expenditures per Period
Fiscal Year ending on or about March 31, 2007
  $ 7,900,000  
Fiscal Year ending on or about March 31, 2008
  $ 9,500,000  
Fiscal Year ending on or about March 31, 2009
       
and each Fiscal Year ending thereafter
  $ 3,000,000  

          (b) Minimum Fixed Charge Coverage Ratio. Borrower and its Subsidiaries
shall have on a consolidated basis, as of the last day of the Fiscal Quarter
ending on June 30, 2007 and as of the last day of each Fiscal Quarter
thereafter, for the 12 month period then ended, a ratio (the “Fixed Charge
Coverage Ratio”) of (A) the sum of (i) EBITDA plus (ii) the aggregate of all
Vendor Advance Expenses for such period, plus (iii) interest income received
during such period minus (iii) Capital Expenditures during such period (other
than Capital Expenditures financed other than with the proceeds of Loans), minus
(iv) income taxes paid in cash during such period, minus (v) the aggregate of
all Vendor Advances made during such period to (B) the sum of, without
duplication, (i) the aggregate of all Interest Expense paid or accrued during
such period, plus (ii) scheduled payments of principal with respect to
Indebtedness during such period (other than scheduled principal payments made by
Borrower during such period with respect to Term Loan B (as defined and under
the Existing Credit Agreement) pursuant to the Existing Credit Agreement), plus,
(iii) all Restricted Payments made by a Credit Party during such period (other
than Restricted Payments (a) made to another Credit Party or (b) which have
caused EBITDA to be reduced for such period) of at least the ratio set forth
below opposite such Fiscal Quarter:

      Fiscal Quarter Ending   Ratio  
June 30, 2007
  0.90 :1
September 30, 2007
  0.90 :1
December 31, 2007
  0.90 :1
March 31, 2008
  1.10 :1
June 30, 2008 and each Fiscal Quarter ending thereafter
  1.50:1

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          (c) Indebtedness to EBITDA. Borrower and its Subsidiaries shall have
on a consolidated basis, as of the last day of each Fiscal Quarter a Leverage
Ratio of not greater than the ratio set forth below opposite such Fiscal
Quarter:

      Fiscal Quarter Ending   Ratio  
June 30, 2007
  3.25:1
September 30, 2007
  3.00:1
December 31, 2007
  3.00:1
March 31, 2008
  2.75:1
June 30, 2008
  2.75:1
September 30, 2008
  2.50:1
December 31, 2008
  2.50:1
March 31, 2009 and each Fiscal Quarter ending thereafter
  2.25:1

          (d) Minimum EBITDA. Borrower and its Subsidiaries shall have on a
consolidated basis, as of the last day of the Fiscal Quarter ending on June 30 ,
2007 and as of the last day of each Fiscal Quarter thereafter, for the 12 month
period then ended, EBITDA of at least the amount set forth below opposite such
Fiscal Quarter:

          Fiscal Quarter Ending   Amount  
June 30, 2007
  $ 32,000,000  
September 30, 2007
  $ 32,000,000  
December 31, 2007
  $ 34,000,000  
 
       
March 31, 2008
  $ 34,000,000  
 
       
June 30, 2008
  $ 35,000,000  
September 30, 2008
  $ 35,000,000  
December 31, 2008
  $ 36,000,000  
March 31, 2009
  $ 36,000,000  
June 30, 2009
  $ 37,000,000  
September 30, 2009
  $ 37,000,000  
December 31, 2009 and each Fiscal Quarter ending thereafter
  $ 38,000,000  

          Unless otherwise specifically provided herein, any accounting term
used in the Agreement shall have the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be computed
in accordance with GAAP consistently applied. That certain items or computations
are explicitly modified by the phrase “in accordance with GAAP” shall in no way
be construed to limit the foregoing. If any “Accounting Changes” (as defined
below) occur and such changes result in a change in the calculation of the
financial

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covenants, standards or terms used in the Agreement or any other Loan Document,
then Borrower, Agent and Lenders agree to enter into negotiations in order to
amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating
Borrower’s and its Subsidiaries’ financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been made;
provided, however, that the agreement of Requisite Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders.
“Accounting Changes” means (i) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions),
(ii) changes in accounting principles concurred in by Borrower’s certified
public accountants; (iii) purchase accounting adjustments under A.P.B. 16 or 17
and EITF 88-16, and the application of the accounting principles set forth in
FASB 109, including the establishment of reserves pursuant thereto and any
subsequent reversal (in whole or in part) of such reserves; and (iv) the
reversal of any reserves established as a result of purchase accounting
adjustments. If Agent, Borrower and Requisite Lenders agree upon the required
amendments, then after appropriate amendments have been executed and the
underlying Accounting Change with respect thereto has been implemented, any
reference to GAAP contained in the Agreement or in any other Loan Document
shall, only to the extent of such Accounting Change, refer to GAAP, consistently
applied after giving effect to the implementation of such Accounting Change. If
Agent, Borrower and Requisite Lenders cannot agree upon the required amendments
within 30 days following the date of implementation of any Accounting Change,
then all Financial Statements delivered and all calculations of financial
covenants and other standards and terms in accordance with the Agreement and the
other Loan Documents shall be prepared, delivered and made without regard to the
underlying Accounting Change. For purposes of Section 8.1, a breach of a
Financial Covenant contained in this Annex G shall be deemed to have occurred as
of any date of determination by Agent or as of the last day of any specified
measurement period, regardless of when the Financial Statements reflecting such
breach are delivered to Agent.

Annex G-3

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ANNEX H (Section 9.9(a))
to
CREDIT AGREEMENT
LENDERS’ WIRE TRANSFER INFORMATION

         
Name:
  General Electric Capital Corporation
Bank:
  Deutsche Bank Trust Company Americas
 
  New York, New York
ABA #:
  021001033  
Account #:
  50232854  
Account Name:
  GECC/CAF Depository
Reference:
  CFN5947

Annex H-1

 

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ANNEX I (Section 11.10)
to
CREDIT AGREEMENT
NOTICE ADDRESSES

     
(A)
  If to Agent or GE Capital, at
General Electric Capital Corporation
500 West Monroe Street
12th Floor
Chicago, Illinois 60661
Attention: Navarre Account Manager
Telecopier No.: (312) 463-3855
Telephone No.: (312) 441-6119
 
   
 
  with copies to:
 
   
 
  Latham & Watkins
5800 Sears Tower
Chicago, Illinois 60606
Attention: Jeffrey G. Moran
Telecopier No.: 312-993-9767
Telephone No.: 312-876-7700
 
   
 
  and
 
   
 
  General Electric Capital Corporation
401 Merritt 7
Norwalk CT 06851
Attention: Corporate Counsel-Commercial Finance
Telecopier No.: (203) 956-4001
Telephone No.: 203-229-1800
 
   
(B)
  If to Borrower or any Credit Party, at
 
  Navarre Corporation
7400 49th Avenue North
New Hope, MN 55428
Attention: CFO
Telecopier No.: 763-504-1107
Telephone No.: 763-450-2406

Annex I-1

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ANNEX J (from Annex A — Commitments definition)
to
CREDIT AGREEMENT
Lenders:
General Electric Capital Corporation:
Revolving Loan Commitment
(including a Swing Line Commitment
of $5,000,000)
$95,000,000

Annex J-1