Exhibit 10.1

 

Execution Copy

 

 

CREDIT AGREEMENT

 

Dated as of November 13, 2012

 

among

 

BLUEFLY, INC.,

 

as the Lead Borrower

 

For

 

The Borrowers Named Herein

 

The Guarantors Named Herein

 

SALUS CAPITAL PARTNERS, LLC

 

as Administrative Agent and Collateral Agent,

 

and

 

The Other Lenders Party Hereto

 

 

 

 

 

 

Table of Contents

 

      Page         Article I DEFINITIONS AND ACCOUNTING TERMS 1         1.01  
Defined Terms 1         1.02   Other Interpretive Provisions 37         1.03  
Accounting Terms Generally 38         1.04   Rounding 38         1.05   Times of
Day 38         1.06   Letter of Credit Amounts 38         1.07   Currency
Equivalents Generally 39         Article II THE COMMITMENTS AND CREDIT
EXTENSIONS         2.01   Committed Loans; Reserves 39         2.02   Borrowings
of Committed Loans 39         2.03   Letters of Credit 41         2.04  
Reserved 47         2.05   Prepayments 47         2.06   Termination or
Reduction of Commitments 48         2.07   Repayment of Loans 49         2.08  
Interest 49         2.09   Fees 50         2.10   Computation of Interest and
Fees 50         2.11   Evidence of Debt 51         2.12   Payments Generally;
Agent’s Clawback 51         2.13   Sharing of Payments by Lenders 53       2.14
  Settlement Amongst Lenders 54         Article III TAXES, YIELD PROTECTION AND
ILLEGALITY; APPOINTMENT OF LEAD BORROWER         3.01   Taxes 54         3.02  
Reserved 56         3.03   Reserved 56         3.04   Increased Costs 56        
3.05   Reserved 58         3.06   Mitigation Obligations; Replacement of Lenders
58         3.07   Survival 58

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  Table of Contents

 

      Page         3.08   Designation of Lead Borrower as Borrowers’ Agent 58  
      Article IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS         4.01  
Conditions of Initial Credit Extension 59         4.02   Conditions to all
Credit Extensions 62         Article V REPRESENTATIONS AND WARRANTIES        
5.01   Existence, Qualification and Power 63         5.02   Authorization; No
Contravention 64         5.03   Governmental Authorization; Other Consents 64  
      5.04   Binding Effect 64         5.05   Financial Statements; No Material
Adverse Effect 64         5.06   Litigation 65         5.07   No Default 65    
    5.08   Ownership of Property; Liens 65         5.09   Environmental
Compliance 66         5.10   Insurance 66         5.11   Taxes 66         5.12  
ERISA Compliance 67         5.13   Subsidiaries; Equity Interests 67        
5.14   Margin Regulations; Investment Company Act 68         5.15   Disclosure
68         5.16   Compliance with Laws 68         5.17   Intellectual Property;
Licenses, Etc. 68         5.18   Labor Matters 69         5.19   Security
Documents 69         5.20   Solvency 70         5.21   Deposit Accounts; Credit
Card Arrangements 70         5.22   Brokers 70         5.23   Customer and Trade
Relations 70         5.24   Material Contracts 71         5.25   Casualty 71    
    5.26   Business Plan 71

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 Table of Contents

 

  Page      Article VI AFFIRMATIVE COVENANTS         6.01   Financial Statements
71         6.02   Certificates; Other Information 72         6.03   Notices 75  
      6.04   Payment of Obligations 76         6.05   Preservation of Existence,
Etc. 76         6.06   Maintenance of Properties 76         6.07   Maintenance
of Insurance 76         6.08   Compliance with Laws 78         6.09   Books and
Records; Accountants 78         6.10   Inspection Rights 78         6.11   Use
of Proceeds 79         6.12   Additional Loan Parties 79         6.13   Cash
Management 80         6.14   Information Regarding the Collateral 82        
6.15   Physical Inventories 82         6.16   Environmental Laws 82         6.17
  Further Assurances 83         6.18   Compliance with Terms of Leaseholds 83  
      6.19   Material Contracts 84         6.20   Business Plan 84        
Article VII NEGATIVE COVENANTS         7.01   Liens 84         7.02  
Investments 84         7.03   Indebtedness; Disqualified Stock 84         7.04  
Fundamental Changes 84         7.05   Dispositions 85         7.06   Restricted
Payments 85         7.07   Prepayments of Indebtedness 85         7.08   Change
in Nature of Business 85         7.09   Transactions with Affiliates 85        
7.10   Burdensome Agreements 86         7.11   Use of Proceeds 86

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  Table of Contents

 

      Page         7.12   Amendment of Material Documents 86         7.13  
Fiscal Year 87         7.14   Deposit Accounts; Credit Card Processors 87      
  Article VIII EVENTS OF DEFAULT AND REMEDIES           8.01   Events of Default
87         8.02   Remedies Upon Event of Default 90         8.03   Application
of Funds 91         Article IX THE AGENT         9.01   Appointment and
Authority 92         9.02   Rights as a Lender 92         9.03   Exculpatory
Provisions 92         9.04   Reliance by Agent 93         9.05   Delegation of
Duties 94         9.06   Resignation of Agent 94         9.07   Non-Reliance on
Agent and Other Lenders 95         9.08   Reserved 95         9.09   Agent May
File Proofs of Claim 95         9.10   Collateral and Guaranty Matters 96      
  9.11   Notice of Transfer 96         9.12   Reports and Financial Statements
96         9.13   Agency for Perfection 97         9.14   Indemnification of
Agent 97         9.15   Relation among Lenders 98         9.16   Defaulting
Lenders 98         Article X MISCELLANEOUS         10.01   Amendments, Etc. 99  
      10.02   Notices; Effectiveness; Electronic Communications 100        
10.03   No Waiver; Cumulative Remedies 102         10.04   Expenses; Indemnity;
Damage Waiver 102         10.05   Payments Set Aside 104         10.06  
Successors and Assigns 104         10.07   Treatment of Certain Information;
Confidentiality 108

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Table of Contents

 

       Page         10.08   Right of Setoff 109         10.09   Interest Rate
Limitation 109         10.10   Counterparts; Integration; Effectiveness 110    
    10.11   Survival 110         10.12   Severability 110       10.13  
Replacement of Lenders 110         10.14   Governing Law; Jurisdiction; Etc. 111
        10.15   Waiver of Jury Trial 112         10.16   No Advisory or
Fiduciary Responsibility 113         10.17   USA PATRIOT Act Notice 113        
10.18   Foreign Asset Control Regulations 113         10.19   Time of the
Essence 114         10.20   Press Releases 114         10.21   Additional
Waivers 114         10.22   No Strict Construction 116         10.23  
Attachments 116

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SCHEDULES

 

  1.01 Borrowers   1.02 Guarantors   1.03 Existing Letters of Credit   2.01
Commitments and Applicable Percentages   5.01 Loan Parties Organizational
Information   5.08(b)(1) Owned Real Estate   5.08(b)(2) Leased Real Estate  
5.09 Environmental Matters   5.10 Insurance   5.13 Subsidiaries; Other Equity
Investments; Equity Interests in the Borrower   5.17 Intellectual Property
Matters   5.18 Collective Bargaining Agreements   5.21(a) DDAs   5.21(b) Credit
Card Arrangements   5.24 Material Contracts   6.02 Financial and Collateral
Reporting   7.01 Existing Liens   7.02 Existing Investments   7.03 Existing
Indebtedness   7.09 Affiliate Transactions   10.02 Agent’s Office; Certain
Addresses for Notices

 

EXHIBITS

 

    Form of         A Committed Loan Notice   B Revolving Note   C Compliance
Certificate   D Assignment and Assumption   E Borrowing Base Certificate   F
Credit Card Notification   G DDA Notification

 

 

 

 

CREDIT AGREEMENT

 

This CREDIT AGREEMENT (“Agreement”) is entered into as of November 13, 2012,
among BLUEFLY, INC., a Delaware corporation (the “Lead Borrower”), the Persons
named on Schedule 1.01 hereto (collectively, the “Borrowers”), the Persons named
on Schedule 1.02 hereto (collectively, the “Guarantors”), each lender from time
to time party hereto (collectively, the “Lenders” and individually, a “Lender”),
and SALUS CAPITAL PARTNERS, LLC, as Administrative Agent and Collateral Agent.

 

The Borrowers have requested that the Lenders provide a revolving credit
facility and certain other financial accommodations, and the Lenders have
indicated their willingness to lend and the L/C Issuer has indicated its
willingness to issue Letters of Credit, in each case on the terms and conditions
set forth herein.

 

In consideration of the mutual covenants and agreements herein contained, the
parties hereto covenant and agree as follows:

 

Article I
DEFINITIONS AND ACCOUNTING TERMS

 

1.01      Defined Terms. As used in this Agreement, the following terms shall
have the meanings set forth below:

 

“ACH” means automated clearing house transfers.

 

“Accommodation Payment” has the meaning specified in Section 10.21(d).

 

“Account” means “accounts” as defined in the UCC, and also means a right to
payment of a monetary obligation, whether or not earned by performance, (a) for
property that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of, (b) for services rendered or to be rendered, (c) for a
policy of insurance issued or to be issued, (d) for a secondary obligation
incurred or to be incurred, (e) for energy provided or to be provided, (f) for
the use or hire of a vessel under a charter or other contract, (g) arising out
of the use of a credit or charge card or information contained on or for use
with the card, or (h) as winnings in a lottery or other game of chance operated
or sponsored by a state, governmental unit of a state, or person licensed or
authorized to operate the game by a state or governmental unit of a state. The
term “Account” includes health-care-insurance receivables.

 

“Acquisition” means, with respect to any Person, (a) an investment in, or a
purchase of, a Controlling interest in the Equity Interests of any other Person,
(b) a purchase or other acquisition of all or substantially all of the assets or
properties of, another Person or of any business unit of another Person, (c) any
merger or consolidation of such Person with any other Person or other
transaction or series of transactions resulting in the acquisition of all or
substantially all of the assets, or a Controlling interest in the Equity
Interests, of any Person, or (d) any acquisition of any Store locations of any
Person, in each case in any transaction or group of transactions which are part
of a common plan.

 

 

 

 

“Act” shall have the meaning provided in Section 10.17.

 

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Agent.

 

“Affiliate” means, with respect to any Person, (i) another Person that directly,
or indirectly through one or more intermediaries, Controls or is Controlled by
or is under common Control with the Person specified, (ii) any director,
officer, managing member, partner, trustee, or beneficiary of that Person, (iii)
any other Person directly or indirectly holding ten percent (10%) or more of any
class of the Equity Interests of that Person, and (iv) any other Person ten
percent (10%) or more of any class of whose Equity Interests is held directly or
indirectly by that Person.

 

“Agent” means Salus in its capacity as Administrative Agent and Collateral Agent
under any of the Loan Documents, or any successor thereto in such capacities.

 

“Agent Parties” shall have the meaning specified in Section 10.02(c).

 

“Agent’s Office” means the Agent’s address and, as appropriate, account as set
forth on Schedule 10.02, or such other address or account as the Agent may from
time to time notify the Lead Borrower and the Lenders.

 

“Aggregate Commitments” means the Commitments of all of the Lenders. As of the
Closing Date, the Aggregate Commitments are $10,000,000.

 

“Agreement” means this Credit Agreement, as the same may be amended, restated,
supplemented or modified from time to time.

 

“Allocable Amount” has the meaning specified in Section 10.21(d).

 

“Applicable Interest Rate” means the greater of: (a) the Base Rate plus 4.75%,
and (b) 8.00%.

 

“Applicable Lenders” means the Required Lenders, all affected Lenders or all
Lenders, as the context may require.

 

“Applicable Percentage” means with respect to any Lender at any time, the
percentage (carried out to the ninth decimal place) of the Aggregate Commitments
represented by such Lender’s Commitment at such time. If the commitment of each
Lender to make Loans has been terminated pursuant to Section 2.06 or
Section 8.02 or if the Aggregate Commitments have expired, then the Applicable
Percentage of each Lender shall be determined based on the Applicable Percentage
of such Lender most recently in effect, giving effect to any subsequent
assignments. The initial Applicable Percentage of each Lender is set forth
opposite the name of such Lender on Schedule 2.01 or in the Assignment and
Assumption pursuant to which such Lender becomes a party hereto, as applicable.

  

“Appraisal Percentage” means ninety percent (90%).

 

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“Appraised Value” means, with respect to Eligible Inventory, the appraised
orderly liquidation value, net of costs and expenses to be incurred in
connection with any such liquidation, which value is expressed as a percentage
of Cost of Eligible Inventory as set forth in the inventory stock ledger of the
Lead Borrower, which value shall be determined from time to time by the most
recent appraisal undertaken by an independent appraiser engaged by the Agent.

 

“Approved Fund” means any Fund that is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender, (c) an entity or an Affiliate of an entity that
administers or manages a Lender or (d) the same investment advisor or an advisor
under common control with such Lender, Affiliate or advisor, as applicable.

 

“Assignee Group” means two or more assignees that are Affiliates of one another
or two or more Approved Funds managed by the same investment advisor.

 

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 10.06(b)), and accepted by the Agent, in substantially the form of
Exhibit D or any other form approved by the Agent.

 

“Attributable Indebtedness” means, on any date, (a) in respect of any Capital
Lease Obligation of any Person, the capitalized amount thereof that would appear
on a balance sheet of such Person prepared as of such date in accordance with
GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized
amount of the remaining lease or similar payments under the relevant lease or
other applicable agreement or instrument that would appear on a balance sheet of
such Person prepared as of such date in accordance with GAAP if such lease,
agreement or instrument were accounted for as a capital lease.

 

“Audited Financial Statements” means the audited consolidated balance sheet of
the Lead Borrower and its Subsidiaries as of December 31, 2011, and the related
consolidated statements of income or operations, Shareholders’ Equity and cash
flows for the Fiscal Year then ended of the Lead Borrower and its Subsidiaries,
including the notes thereto.

 

“Auto-Extension Letter of Credit” shall have the meaning specified in
Section 2.03(b)(iii).

 

“Availability” means, as of any date of determination thereof by the Agent, the
result, if a positive number, of:

 

(a)          the Maximum Loan Amount,

 

minus

 

(b)          the Total Outstandings.

 

In calculating Availability at any time and for any purpose under this
Agreement, the Lead Borrower shall certify to the Agent that all current
accounts payable and Taxes (other than accounts payable and Taxes being
contested in good faith with adequate reserves established by

 

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the Lead Borrower) are being paid in a manner consistent with the Loan Parties’
business practices in effect on the Closing Date.

 

“Availability Period” means the period from and including the Closing Date to
the earliest of (a) the Maturity Date, (b) the date of termination of the
Aggregate Commitments pursuant to Section 2.06, and (c) the date of termination
of the commitment of each Lender to make Committed Loans and of the obligation
of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.

 

“Availability Block” means an amount equal to $500,000 or, if a Default or Event
of Default exists, such other amount established by the Agent.

 

“Availability Reserves” means, without duplication of any other Reserves or
items to the extent such items are otherwise addressed or excluded through
eligibility criteria, such reserves as the Agent from time to time determines in
its Permitted Discretion as being appropriate (a) to reflect the impediments to
the Agent’s ability to realize upon the Collateral, (b) to reflect claims and
liabilities that the Agent determines will need to be satisfied in connection
with the realization upon the Collateral, (c) to reflect criteria, events,
conditions, contingencies or risks which adversely affect any component of the
Borrowing Base, or the assets, business, financial performance or financial
condition of any Loan Party, or (d) to reflect that a Default or an Event of
Default then exists.

 

“Bank Products” means any services of facilities provided to any Loan Party by
the Agent or any of its Affiliates (but excluding Cash Management Services)
including, without limitation, on account of (a) Swap Contracts, (b) merchant
services constituting a line of credit, (c) leasing, (d) Factored Receivables,
and (e) supply chain finance services, including, without limitation, trade
payable services and supplier accounts receivable purchases.

 

“Base Rate” means a variable rate of interest per annum equal to the prime rate
of interest from time to time published by www.bankrate.com. The applicable
prime rate for any date not set forth therein shall be the rate set forth the
immediately preceding date. In the event that www.bankrate.com ceases to publish
a prime rate or its equivalent, the term “Base Rate” shall mean a variable rate
of interest per annum equal to the highest of the “prime rate”, “reference
rate”, “base rate”, or other similar rate announced from time to time by any of
the three largest banks (based on combined capital and surplus) headquartered in
New York, New York and published in The Wall Street Journal (with the
understanding that any such rate may merely be a reference rate and may not
necessarily represent the lowest or best rate actually charged to any customer
by any such bank or by the Agent or any Lender).

 

“Blocked Account” means the Concentration Account and each other account of the
Loan Parties subject to a Blocked Account Agreement at a Blocked Account Bank.

 

“Blocked Account Agreement” means with respect to an account established by a
Loan Party, an agreement, in form and substance satisfactory to the Agent,
establishing control (as defined in the UCC) of such account by the Agent and
whereby the bank maintaining such account agrees to comply only with the
instructions originated by the Agent without the further consent of any Loan
Party.

 

-4-

 

 

“Blocked Account Bank” means each bank with whom deposit accounts are maintained
in which any funds of any of the Loan Parties from one or more DDAs are
concentrated and with whom a Blocked Account Agreement has been, or is required
to be, executed in accordance with the terms hereof.

 

“Borrower Materials” has the meaning specified in Section 6.02.

 

“Borrowers” has the meaning specified in the introductory paragraph hereto.

 

“Borrowing Base” means, at any time of calculation, an amount equal to:

 

(a)           the face amount of Eligible Credit Card Receivables multiplied by
the Credit Card Advance Rate;

 

plus

 

(b)           the lesser of (i) the Cost of Eligible Inventory, net of Inventory
Reserves, multiplied by the product of Appraisal Percentage multiplied by the
Appraised Value of Eligible Inventory, or (ii) the Cost of Eligible Inventory,
net of Inventory Reserves, multiplied by the Inventory Advance Rate;

 

minus

 

(c)           the Availability Block;

 

minus

 

(d)           the then amount of all Availability Reserves.

 

“Borrowing Base Certificate” means a certificate substantially in the form of
Exhibit E hereto (with such changes therein as may be required by the Agent to
reflect the components of and reserves against the Borrowing Base as provided
for hereunder from time to time), executed and certified as accurate and
complete by a Responsible Officer of the Lead Borrower which shall include
appropriate exhibits, schedules, supporting documentation, and additional
reports as reasonably requested by the Agent.

 

“Business” means selling designer clothing, accessories, beauty goods, and home
goods online, and daily deals related to the foregoing.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state where the Agent’s Office is located.

 

“Business Plan” means, with respect to any Fiscal Year, (i) a detailed forecast
prepared by management of the Borrowers for such Fiscal Year, which shall
include (without limitation) an Availability model, Consolidated income
statement, balance sheet, and statement of cash flow, by month, each prepared in
conformity with GAAP and consistent with the Borrowers’ then current practices,
and such other information (financial or otherwise) as is reasonably

 

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requested by the Agent, and (ii) any revisions to such forecast, in each case in
form and substance satisfactory to the Agent in its discretion. For the
avoidance of doubt, a draft or preliminary plan submitted by the Borrowers to
the Agent shall be deemed the “Business Plan” hereunder until it has been
finalized and accepted by the Borrowers and the Agent. Borrowers have delivered
to Agent a true and complete copy of the initial Business Plan prior to the
Closing Date.

 

“Capital Expenditures” means, with respect to any Person for any period, (a) all
expenditures made (whether made in the form of cash or other property) or costs
incurred for the acquisition or improvement of fixed or capital assets of such
Person (excluding normal replacements and maintenance which are properly charged
to current operations), in each case that are (or should be) set forth as
capital expenditures in a Consolidated statement of cash flows of such Person
for such period, in each case prepared in accordance with GAAP, and (b) Capital
Lease Obligations incurred by a Person during such period.

 

“Capital Lease Obligations” means, with respect to any Person for any period,
the obligations of such Person to pay rent or other amounts under any lease of
(or other arrangement conveying the right to use) real or personal property, or
a combination thereof, which obligations are required to be classified and
accounted for as liabilities on a balance sheet of such Person under GAAP and
the amount of which obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

 

“Cash Collateralize” has the meaning specified in Section 2.03(g). Derivatives
of such term have corresponding meanings.

 

“Cash Management Services” means any cash management services or facilities
provided to any Loan Party by the Agent or any of its Affiliates, including,
without limitation: (a) ACH transactions, (b) controlled disbursement services,
treasury, depository, overdraft, and electronic funds transfer services, (c)
credit or debit cards, (d) credit card processing services, and (e) purchase
cards.

 

“CFC” means a Person that is a controlled foreign corporation under Section 957
of the Code.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, guideline or directive
(whether or not having the force of law) by any Governmental Authority;
provided, however, for the purposes of this Agreement: (x) the Dodd-Frank Wall
Street Reform and Consumer Protection Act and all requests, rules, guidelines or
directives thereunder or issued in connection therewith and (y) all requests,
rules, guidelines or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States regulatory authorities, in each case
pursuant to Basel III, shall in each case be deemed to be a “Change in Law”,
regardless of the date enacted, adopted or issued.

 

-6-

 

 

“Change of Control” means an event or series of events by which:

 

(a)           any “person” or “group” (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, but excluding any employee
benefit plan of such person or its subsidiaries, and any person or entity acting
in its capacity as trustee, agent or other fiduciary or administrator of any
such plan), other than Rho Ventures, L.P., Quantum Industrial Partners, LDC, SFM
Domestic Investments, LLC, Maverick Capital, Ltd. or Prentice Capital
Management, L.P. and/or their respective Affiliates, becomes the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of
1934, except that a person or group shall be deemed to have “beneficial
ownership” of all securities that such person or group has the right to acquire,
whether such right is exercisable immediately or only after the passage of time
(such right, an “option right”)), directly or indirectly, of forty percent (40%)
or more of the Equity Interests of the Lead Borrower entitled to vote for
members of the board of directors or equivalent governing body of the Lead
Borrower on a fully-diluted basis (and taking into account all such Equity
Interests that such “person” or “group” has the right to acquire pursuant to any
option right); or

 

(b)           during any period of twelve (12) consecutive months, a majority of
the members of the board of directors or other equivalent governing body of the
Lead Borrower cease to be composed of individuals (i) who were members of that
board or equivalent governing body on the first day of such period, (ii) whose
election or nomination to that board or equivalent governing body was approved
by individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clauses (i) and (ii)
above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body (excluding, in the case of
both clause (ii) and clause (iii), any individual whose initial nomination for,
or assumption of office as, a member of that board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the board of directors);

 

(c)           a “change of control” as such term is defined in the Subordinated
Debt Documentation; or

 

(d)           the Lead Borrower fails at any time to own, directly or
indirectly, 100% of the Equity Interests of each other Loan Party free and clear
of all Liens (other than the Liens in favor of the Agent), except where such
failure is as a result of a transaction permitted by the Loan Documents.

 

“Closing Date” means the first date all the conditions precedent in Section 4.01
are satisfied or waived in accordance with Section 10.01.

 

“Code” means the Internal Revenue Code of 1986, and the regulations promulgated
thereunder, as amended and in effect.

 

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“Collateral” means any and all “Collateral” or “Mortgaged Property” as defined
in any applicable Security Document and all other property that is or is
intended under the terms of the Security Documents to be subject to Liens in
favor of the Agent.

 

“Collateral Access Agreement” means an agreement reasonably satisfactory in form
and substance to the Agent executed by (a) a bailee or other Person in
possession of Collateral, and (b) any landlord of Real Estate leased by any Loan
Party, pursuant to which such Person (i) acknowledges the Agent’s Lien on the
Collateral, (ii) releases or subordinates such Person’s Liens in the Collateral
held by such Person or located on such Real Estate, (iii) provides the Agent
with reasonable access to the Collateral held by such bailee or other Person or
located in or on such Real Estate, (iv) as to any landlord, provides the Agent
with a reasonable time to sell and dispose of the Collateral from such Real
Estate, and (v) makes such other agreements with the Agent as the Agent may
reasonably require.

 

“Commitment” means, as to each Lender, its obligation to make Committed Loans to
the Borrowers pursuant to Section 2.01 in an aggregate principal amount at any
one time outstanding not to exceed the amount set forth opposite such Lender’s
name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such
Lender becomes a party hereto, as applicable, as such amount may be adjusted
from time to time in accordance with this Agreement.

 

“Committed Borrowing” means a borrowing consisting of simultaneous Committed
Loans made by each of the Lenders pursuant to Section 2.01.

 

“Committed Loan” has the meaning specified in Section 2.01.

 

“Committed Loan Notice” means a notice of a Committed Borrowing, pursuant to
Section 2.02, which, if in writing, shall be substantially in the form of
Exhibit A.

 

“Compliance Certificate” means a certificate substantially in the form of
Exhibit C.

 

“Concentration Account” has the meaning provided in Section 6.13(c).

 

“Consent” means actual consent given by a Lender from whom such consent is
sought; or the passage of seven (7) Business Days from receipt of written notice
to a Lender from the Agent of a proposed course of action to be followed by the
Agent without such Lender giving the Agent written notice of that Lender’s
objection to such course of action.

 

“Consolidated” means, when used to modify a financial term, test, statement, or
report of a Person, the application or preparation of such term, test, statement
or report (as applicable) based upon the consolidation, in accordance with GAAP,
of the financial condition or operating results of such Person and its
Subsidiaries.

 

“Contractual Obligation” means, as to any Person, any provision of any
agreement, instrument or other undertaking to which such Person is a party or by
which it or any of its property is bound.

 

-8-

 

 

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

 

“Cost” means the lower of cost or market value of Inventory, based upon the
Borrowers’ accounting practices, known to the Agent, which practices are in
effect on the Closing Date as such calculated cost is determined from invoices
received by the Borrowers, the Borrowers’ purchase journals or the Borrowers’
stock ledger. “Cost” does not include inventory capitalization costs or other
non-purchase price charges (such as freight) used in the Borrowers’ calculation
of cost of goods sold.

 

“Credit Card Advance Rate” means ninety-five percent (95%).

 

“Credit Card Issuer” shall mean any person (other than a Borrower or other Loan
Party) who issues or whose members issue credit cards, including, without
limitation, MasterCard or VISA bank credit cards or other bank credit cards
issued through MasterCard International, Inc., Visa, U.S.A., Inc. or Visa
International and American Express, Discover, Diners Club, Carte Blanche and
other non-bank credit, including, without limitation, credit cards issued by or
through American Express Travel Related Services Company, Inc., and Novus
Services, Inc. and other issuers approved by the Agent.

 

“Credit Card Processor” shall mean any servicing or processing agent or any
factor or financial intermediary who facilitates, services, processes or manages
the credit authorization, billing transfer and/or payment procedures with
respect to any Borrower’s sales transactions involving credit card or debit card
purchases by customers using credit cards or debit cards issued by any Credit
Card Issuer.

 

“Credit Card Notifications” has the meaning provided in Section 6.13(a)(i).

 

“Credit Card Receivables” means each “Account” (as defined in the UCC) together
with all income, payments and proceeds thereof, owed by a Credit Card Issuer or
Credit Card Processor to a Loan Party resulting from charges by a customer of a
Loan Party on credit or debit cards issued by such issuer in connection with the
sale of goods by a Loan Party, or services performed by a Loan Party, in each
case in the ordinary course of its business.

 

“Credit Extensions” mean each of the following: (a) a Committed Borrowing and
(b) an L/C Credit Extension.

 

“Credit Party” or “Credit Parties” means (a) individually, (i) each Lender and
its Affiliates, (ii) the Agent, (iii) each L/C Issuer, (iv) each beneficiary of
each indemnification obligation undertaken by any Loan Party under any Loan
Document, (v) any other Person to whom Obligations under this Agreement and
other Loan Documents are owing, and (vi) the successors and assigns of each of
the foregoing, and (b) collectively, all of the foregoing.

 

“Credit Party Expenses” means, without limitation, (a) all reasonable
out-of-pocket expenses incurred by the Agent and its Affiliates in connection
with this Agreement and the other Loan Documents, including without limitation
(i) the reasonable fees, charges and

 

-9-

 

 

disbursements of (A) counsel for the Agent, (B) outside consultants for the
Agent, (C) appraisers, (D) commercial finance examinations, and (E) all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of the Obligations, (ii) in connection with (A) the
syndication of the credit facilities provided for herein, (B) the preparation,
negotiation, administration, management, execution and delivery of this
Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (C) the enforcement or protection of
their rights in connection with this Agreement or the Loan Documents or efforts
to monitor, preserve, protect, collect, or enforce the Collateral, or (D) any
workout, restructuring or negotiations in respect of any Obligations, and (b)
with respect to any L/C Issuer, and its Affiliates, all reasonable out-of-pocket
expenses incurred in connection with the issuance, amendment, renewal or
extension of any Letter of Credit or any demand for payment thereunder; and (c)
all customary fees and charges (as adjusted from time to time) of the Agent with
respect to accessing online Loan information and the disbursement of funds (or
the receipt of funds) to or for the account of Loan Parties (whether by wire
transfer or otherwise), together with any out-of-pocket costs and expenses
incurred in connection therewith; and (d) upon the occurrence and during the
continuance of an Event of Default or upon any increase in the amount of the
Aggregate Commitments after the Closing Date, all reasonable out-of-pocket
expenses incurred by the Credit Parties who are not the Agent, a L/C Issuer or
any Affiliate of any of them, provided that such Credit Parties shall be
entitled to reimbursement for no more than one counsel representing all such
Credit Parties (absent a conflict of interest in which case the Credit Parties
may engage and be reimbursed for additional counsel).

 

“Customs Broker/Carrier Agreement” means an agreement in form and substance
satisfactory to the Agent among a Borrower, a customs broker, freight forwarder,
consolidator or carrier, and the Agent, in which the customs broker, freight
forwarder, consolidator or carrier acknowledges that it has control over and
holds the documents evidencing ownership of the subject Inventory for the
benefit of the Agent and agrees, upon notice from the Agent, to hold and dispose
of the subject Inventory solely as directed by the Agent.

 

“DDA” means each checking, savings or other demand deposit account maintained by
any of the Loan Parties. All funds in each DDA shall be conclusively presumed to
be Collateral and proceeds of Collateral and the Agent and the Lenders shall
have no duty to inquire as to the source of the amounts on deposit in any DDA.

 

“DDA Notification” has the meaning provided therefor in Section 6.13(a)(iii).

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

 

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

 

“Default Rate” means the Applicable Interest Rate plus 3.5%.

 

-10-

 

 

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of
the Committed Loans required to be funded by it hereunder within one (1)
Business Day of the date required to be funded by it hereunder, (b) has
otherwise failed to pay over to the Agent or any other Lender any other amount
required to be paid by it hereunder within one (1) Business Day of the date when
due, (c) has failed or refused to abide by any of its obligations under this
Agreement, or (d) has been deemed insolvent or become the subject of a
bankruptcy or insolvency proceeding.

 

“Deteriorating Lender” means any Defaulting Lender or any Lender as to which (a)
the Agent has a good faith belief that such Lender has defaulted in fulfilling
its obligations under one or more other syndicated credit facilities, or (b) a
Person that Controls such Lender has been deemed insolvent or become the subject
of a bankruptcy, insolvency or similar proceeding.

 

“Disposition” or “Dispose” means the sale, transfer, license, lease or other
disposition (whether in one transaction or in a series of transactions, and
including any sale and leaseback transaction and any sale, transfer, license or
other disposition) of any property (including, without limitation, any Equity
Interests) by any Person (or the granting of any option or other right to do any
of the foregoing), including any sale, assignment, transfer or other disposal,
with or without recourse, of any notes or accounts receivable or any rights and
claims associated therewith.

 

“Disqualified Stock” means any Equity Interest that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is ninety-one (91)
days after the date on which the Loans mature; provided, however, that (i) only
the portion of such Equity Interests which so matures or is mandatorily
redeemable, is so convertible or exchangeable or is so redeemable at the option
of the holder thereof prior to such date shall be deemed to be Disqualified
Stock and (ii) with respect to any Equity Interests issued to any employee or to
any plan for the benefit of employees of the Lead Borrower or its Subsidiaries
or by any such plan to such employees, such Equity Interest shall not constitute
Disqualified Stock solely because it may be required to be repurchased by the
Lead Borrower or one of its Subsidiaries in order to satisfy applicable
statutory or regulatory obligations or as a result of such employee’s
termination, resignation, death or disability and if any class of Equity
Interest of such Person that by its terms authorizes such Person to satisfy its
obligations thereunder by delivery of an Equity Interest that is not
Disqualified Stock, such Equity Interests shall not be deemed to be Disqualified
Stock. Notwithstanding the preceding sentence, any Equity Interest that would
constitute Disqualified Stock solely because the holders thereof have the right
to require a Loan Party to repurchase such Equity Interest upon the occurrence
of a change of control or an asset sale shall not constitute Disqualified Stock.
The amount of Disqualified Stock deemed to be outstanding at any time for
purposes of this Agreement will be the maximum amount that the Lead Borrower and
its Subsidiaries may become obligated to pay upon maturity of, or pursuant to
any mandatory redemption provisions of, such Disqualified Stock or portion
thereof, plus accrued dividends.

 

“Dollars” and “$” mean lawful money of the United States.

 

-11-

 

 

“Eligible Credit Card Receivables” means at the time of any determination
thereof, each Credit Card Receivable that satisfies the following criteria at
the time of creation and continues to meet the same at the time of such
determination: such Credit Card Receivable (i) has been earned by performance
and represents the bona fide amounts due to a Borrower from a Credit Card Issuer
or Credit Card Processor, and in each case originated in the ordinary course of
business of such Borrower, and (ii) in each case is acceptable to the Agent in
its discretion, and is not ineligible for inclusion in the calculation of the
Borrowing Base pursuant to any of clauses (a) through (j) below. Without
limiting the foregoing, to qualify as an Eligible Credit Card Receivable, an
Account shall indicate no Person other than a Borrower as payee or remittance
party. In determining the amount to be so included, the face amount of an
Account shall be reduced by, without duplication, to the extent not reflected in
such face amount, (i) the amount of all accrued and actual discounts, claims,
credits or credits pending, promotional program allowances, price adjustments,
finance charges or other allowances (including any amount that a Borrower may be
obligated to rebate to a customer, a Credit Card Issuer or Credit Card Processor
pursuant to the terms of any agreement or understanding (written or oral)) and
(ii) the aggregate amount of all cash received in respect of such Account but
not yet applied by the Loan Parties to reduce the amount of such Credit Card
Receivable. Except as otherwise agreed by the Agent, any Credit Card Receivable
included within any of the following categories shall not constitute an Eligible
Credit Card Receivable:

 

(a)           any Credit Card Receivable which does not constitute an “Account”
(as defined in the UCC);

 

(b)           Credit Card Receivables that have been outstanding for more than
five (5) Business Days from the date of sale;

 

(c)           Credit Card Receivables (i) that are not subject to a perfected
first priority security interest in favor of the Agent, or (ii) with respect to
which a Borrower does not have good, valid and marketable title thereto, free
and clear of any Lien (other than Liens granted to the Agent pursuant to the
Security Documents);

 

(d)           Credit Card Receivables which are disputed, are with recourse, or
with respect to which a claim, counterclaim, offset or chargeback has been
asserted (to the extent of such claim, counterclaim, offset or chargeback);

 

(e)           Credit Card Receivables as to which the Credit Card Issuer or
Credit Card Processor has the right under certain circumstances to require a
Loan Party to repurchase the Accounts from such Credit Card Issuer or Credit
Card Processor;

 

(f)           Credit Card Receivables due from Credit Card Issuer or Credit Card
Processor of the applicable credit card which is the subject of any bankruptcy
or insolvency proceedings;

 

(g)           Credit Card Receivables which are not a valid, legally enforceable
obligation of the applicable Credit Card Issuer or Credit Card Processor with
respect thereto;

 

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(h)          Credit Card Receivables which do not conform to all
representations, warranties or other provisions in the Loan Documents relating
to Credit Card Receivables;

 

(i)           Credit Card Receivables which are evidenced by “chattel paper” or
an “instrument” of any kind unless such “chattel paper” or “instrument” is in
the possession of the Agent, and to the extent necessary or appropriate,
endorsed to the Agent; or

 

(j)           Credit Card Receivables which do not meet such other reasonable
eligibility criteria for Credit Card Receivables as the Agent may determine.

 

“Eligible Inventory” means, as of the date of determination thereof, without
duplication, items of Inventory of a Borrower that are finished goods,
merchantable and readily saleable to the public in the ordinary course of the
Borrowers’ business and deemed by the Agent in its discretion to be eligible for
inclusion in the calculation of the Borrowing Base, in each case that, except as
otherwise agreed by the Agent, (A) complies with each of the representations and
warranties respecting Inventory made by the Borrowers in the Loan Documents, and
(B) is not excluded as ineligible by virtue of one or more of the criteria set
forth below. Except as otherwise agreed by the Agent, in its discretion, the
following items of Inventory shall not be included in Eligible Inventory:

 

(a)           Inventory that is not solely owned by a Borrower or a Borrower
does not have good and valid title thereto;

 

(b)           Inventory that is leased by or is on consignment to a Borrower or
which is consigned by a Borrower to a Person which is not a Loan Party;

 

(c)           (i) In-Transit Inventory and (ii) Inventory that is not located in
the United States of America (excluding territories or possessions of the United
States);

 

(d)           Inventory that is not located at a location that is owned or
leased by a Borrower, except (i) Inventory in transit between such owned or
leased locations or locations which meet the criteria set forth in clause (ii)
below, or (ii) to the extent that the Borrowers have furnished the Agent with
(A) any UCC financing statements or other documents that the Agent may determine
to be necessary to perfect its security interest in such Inventory at such
location, and (B) a Collateral Access Agreement executed by the Person owning
any such location on terms reasonably acceptable to the Agent;

 

(e)           Inventory that is located: (i) in a distribution center leased by
a Borrower unless the applicable lessor has delivered to the Agent a Collateral
Access Agreement, or (ii) at any leased location in a Landlord Lien State unless
the applicable lessor has delivered to the Agent a Collateral Access Agreement
or the Agent has implemented Reserves for such location;

 

(f)           Inventory that is comprised of goods which (i) are damaged,
defective, “seconds,” or otherwise unmerchantable, (ii) are to be returned to
the vendor, (iii) are obsolete or slow moving, or custom items, work in process,
raw materials, or that constitute samples, spare parts, promotional, marketing,
labels, bags and other packaging

 

-13-

 

 

and shipping materials or supplies used or consumed in a Borrower’s business,
(iv) are seasonal in nature and which have been packed away for sale in the
subsequent season, (v) not in compliance with all standards imposed by any
Governmental Authority having regulatory authority over such Inventory, its use
or sale, or (vi) are bill and hold goods;

 

(g)          Inventory that is not subject to a perfected first priority
security interest in favor of the Agent;

 

(h)          Inventory that is not insured in compliance with the provisions of
Section 5.10 hereof;

 

(i)           Inventory that has been sold but not yet delivered or as to which
a Borrower has accepted a deposit;

 

(j)           Inventory that is subject to any licensing, patent, royalty,
trademark, trade name or copyright agreement with any third party from which any
Borrower or any of its Subsidiaries has received notice of a dispute in respect
of any such agreement that would preclude or restrict the sale of such Inventory
in the ordinary course of business; or

 

(k)          Inventory which is not of the type usually sold in the ordinary
course of the Borrowers’ business, unless and until the Agent has completed or
received (A) an appraisal of such Inventory from appraisers satisfactory to the
Agent and establishes an Inventory Advance Rate and Inventory Reserves (if
applicable) therefor, and otherwise agrees that such Inventory shall be deemed
Eligible Inventory, and (B) such other due diligence as the Agent may require,
all of the results of the foregoing to be reasonably satisfactory to the Agent.

 

“Environmental Laws” means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.

 

“Environmental Liability” means any liability, obligation, damage, loss, claim,
action, suit, judgment, order, fine, penalty, fee, expense, or cost, contingent
or otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of any Borrower, any other Loan
Party or any of their respective Subsidiaries directly or indirectly resulting
from or based upon (a) violation of any Environmental Law, (b) the generation,
use, handling, transportation, storage, treatment or disposal or presence of any
Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.

 

“Equipment” has the meaning set forth in the UCC.

 

“Equity Interests” means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options or other rights

 

-14-

 

 

for the purchase or acquisition from such Person of shares of capital stock of
(or other ownership or profit interests in) such Person, all of the securities
convertible into or exchangeable for shares of capital stock of (or other
ownership or profit interests in) such Person or warrants, rights or options for
the purchase or acquisition from such Person of such shares (or such other
interests), and all of the other ownership or profit interests in such Person
(including partnership, member or trust interests therein), whether voting or
nonvoting, and whether or not such shares, warrants, options, rights or other
interests are outstanding on any date of determination.

 

“ERISA” means the Employee Retirement Income Security Act of 1974.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with the Lead Borrower within the meaning of Section 414(b)
or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Lead Borrower or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Lead Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Sections 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the Lead
Borrower or any ERISA Affiliate.

 

“Event of Default” has the meaning specified in Section 8.01.

 

“Excluded Taxes” means, with respect to the Agent, any Lender, the L/C Issuer or
any other recipient of any payment to be made by or on account of any obligation
of the Loan Parties hereunder, (a) taxes imposed on or measured by its overall
net income (however denominated), and franchise taxes imposed on it (in lieu of
net income taxes), by the jurisdiction (or any political subdivision thereof)
under the laws of which such recipient is organized or in which its principal
office is located or, in the case of any Lender, in which its applicable Lending
Office is located, (b) any branch profits taxes imposed by the United States or
any similar tax imposed by any other jurisdiction in which any Loan Party is
located, (c) in the case of a Foreign Lender (other than an assignee pursuant to
a request by the Lead Borrower under Section 10.13), any withholding tax that is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party hereto (or designates a new Lending Office) or is
attributable to such Foreign Lender’s failure or inability (other than as a
result of a Change in Law) to comply with Section 3.01(e), except to the extent
that such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new Lending Office (or assignment), to receive additional
amounts from the Loan Parties with respect to such withholding tax pursuant to
Section 3.01(a),

 

-15-

 

 

(d) any U.S. federal, state or local backup withholding tax, and (e) any U.S.
federal withholding tax imposed under FATCA.

 

“Executive Order” has the meaning set forth in Section 10.18.

 

“Existing Credit Agreement” means that certain Amended and Restated Credit
Agreement dated as of June 17, 2011 between the Borrowers and Wells Fargo Bank,
National Association.

 

“Existing Letters of Credit” means those letters of credit identified on
Schedule 1.03 which were issued by Wells Fargo Bank, National Association,
together with any extensions thereof.

 

“Extraordinary Receipt” means any cash received by or paid to or for the account
of any Person not in the ordinary course of business, including any tax refunds,
pension plan reversions, proceeds of insurance (other than proceeds of business
interruption insurance to the extent such proceeds constitute compensation for
lost earnings), condemnation awards (and payments in lieu thereof), indemnity
payments and any purchase price adjustments.

 

“Facility Guaranty” means any Guarantee made by a Guarantor in favor of the
Agent and the other Credit Parties, in form and substance reasonably
satisfactory to the Agent, as may be amended, modified, supplemented, renewed,
restated or replaced.

 

“FATCA” means current Section 1471 through 1474 of the Code or any amended
version or successor provision that is substantively similar to and, in each
case, any regulations promulgated thereunder and any interpretation and other
guidance issued in connection therewith.

 

“Factored Receivables” means any Accounts originally owed or owing by a Loan
Party to another Person which have been purchased by or factored with Salus or
any of its Affiliates pursuant to a factoring arrangement or otherwise with the
Person that sold the goods or rendered the services to the Loan Party which gave
rise to such Account.

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided, that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate (rounded
upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Salus on
such day on such transactions as determined by the Agent.

 

“Fee Letter” means the letter agreement, dated as of the Closing Date, among the
Lead Borrower and the Agent.

 

-16-

 

 

“Fiscal Month” means any fiscal month of any Fiscal Year, which month shall
generally end on the last day of each calendar month in accordance with the
fiscal accounting calendar of the Loan Parties.

 

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters
shall generally end on the last day of each March, June, September and December
of such Fiscal Year in accordance with the fiscal accounting calendar of the
Loan Parties.

 

“Fiscal Year” means any period of twelve (12) consecutive months ending on
December 31st of any calendar year.

 

“Foreign Asset Control Regulations” has the meaning set forth in Section 10.18.

 

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Lead Borrower is resident for tax
purposes. For purposes of this definition, the United States, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.

 

“Foreign Vendor” means a Person that sells In-Transit Inventory to a Borrower.

 

“Fronting Fee” has the meaning assigned to such term in Section 2.03(j).

 

“FRB” means the Board of Governors of the Federal Reserve System of the United
States.

 

“Fund” means any Person (other than a natural person) that 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.

 

“GAAP” means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

 

“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central Bank).

 

“Guarantee” means, as to any Person, (a) any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation payable or performable by
another Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect, (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such

 

-17-

 

 

Indebtedness or other obligation, (ii) to purchase or lease property, securities
or services for the purpose of assuring the obligee in respect of such
Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity or level of
income or cash flow of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any Lien on any assets of such Person securing any Indebtedness or other
obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person (or any right, contingent or otherwise, of
any holder of such Indebtedness to obtain any such Lien). The amount of any
Guarantee shall be deemed to be an amount equal to the stated or determinable
amount of the related primary obligation, or portion thereof, in respect of
which such Guarantee is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the
guaranteeing Person in good faith. The term “Guarantee” as a verb has a
corresponding meaning.

 

“Guarantor” means each Subsidiary of the Lead Borrower that shall be required to
execute and deliver a Facility Guaranty pursuant to Section 6.12.

 

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos-containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

 

“Honor Date” means the date of any payment by any L/C Issuer under a Letter of
Credit.

 

“Indebtedness” means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:

 

(a)           all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes, loan
agreements or other similar instruments;

 

(b)           the maximum amount of all direct or contingent obligations of such
Person arising under letters of credit (including standby and commercial),
bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

 

(c)           net obligations of such Person under any Swap Contract;

 

(d)           all obligations of such Person to pay the deferred purchase price
of property or services (other than trade accounts payable in the ordinary
course of business and, in each case, in a manner consistent with the Loan
Parties’ business practices in effect on the Closing Date);

 

(e)           indebtedness (excluding prepaid interest thereon) secured by a
Lien on property owned or being purchased by such Person (including indebtedness
arising under

 

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conditional sales or other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse;

 

(f)          all Attributable Indebtedness of such Person;

 

(g)          all obligations of such Person to purchase, redeem, retire, defease
or otherwise make any payment in respect of any Equity Interest in such Person
or any other Person (including, without limitation, Disqualified Stock, or any
warrant, right or option to acquire such Equity Interest), valued, in the case
of a redeemable preferred interest, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends; and

 

(h)          all Guarantees of such Person in respect of any of the foregoing.

 

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person. The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitees” has the meaning specified in Section 10.04(b).

 

“Information” has the meaning specified in Section 10.07.

 

“Intellectual Property” means all present and future: trade secrets, know-how
and other proprietary information; trademarks, trademark applications, internet
domain names, service marks, trade dress, trade names, business names, designs,
logos, slogans (and all translations, adaptations, derivations and combinations
of the foregoing) indicia and other source and/or business identifiers, and all
registrations or applications for registrations which have heretofore been or
may hereafter be issued thereon throughout the world; copyrights and copyright
applications; (including copyrights for computer programs) and all tangible and
intangible property embodying the copyrights, unpatented inventions (whether or
not patentable); patents and patent applications; industrial design applications
and registered industrial designs; license agreements related to any of the
foregoing and income therefrom; books, records, writings, computer tapes or
disks, flow diagrams, specification sheets, computer software, source codes,
object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; all other
intellectual property; and all common law and other rights throughout the world
in and to all of the foregoing.

 

“Interest Payment Date” means the first day after the end of each month and the
Maturity Date.

 

“Internal Control Event” means a material weakness in, or fraud that involves
management or other employees who have a significant role in, the Lead
Borrower’s and/or its

 

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Subsidiaries’ internal controls over financial reporting, in each case as
described in the Securities Laws.

 

“In-Transit Inventory” means Inventory of a Borrower which is in the possession
of a common carrier and is in transit from a Foreign Vendor of a Borrower from a
location outside of the continental United States to a location of a Borrower
that is within the continental United States.

 

“Inventory” has the meaning given that term in the UCC, and shall also include,
without limitation, all: (a) goods which (i) are leased by a Person as lessor,
(ii) are held by a Person for sale or lease or to be furnished under a contract
of service, (iii) are furnished by a Person under a contract of service, or (iv)
consist of raw materials, work in process, or materials used or consumed in a
business; (b) goods of said description in transit; (c) goods of said
description which are returned, repossessed or rejected; and (d) packaging,
advertising, and shipping materials related to any of the foregoing.

 

“Inventory Advance Rate” means sixty percent (60%).

 

“Inventory Reserves” means such reserves as may be established from time to time
by the Agent in its Permitted Discretion with respect to the determination of
the saleability, at retail, of the Eligible Inventory, which reflect such other
factors as affect the market value of the Eligible Inventory or which reflect
claims and liabilities that the Agent determines will need to be satisfied in
connection with the realization upon the Inventory. Without limiting the
generality of the foregoing, Inventory Reserves may, in the Agent’s Permitted
Discretion, include (but are not limited to) reserves based on:

 

(a)          Obsolescence;

 

(b)          Seasonality;

 

(c)          Shrink;

 

(d)          Imbalance;

 

(e)          Change in Inventory character;

 

(f)          Change in Inventory composition;

 

(g)          Change in Inventory mix;

 

(h)          Markdowns (both permanent and point of sale);

 

(i)          Retail markons and markups inconsistent with prior period practice
and performance, industry standards, current business plans or advertising
calendar and planned advertising events; and

 

(j)          Out-of-date and/or expired Inventory.

 

-20-

 

 

“Investment” means, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of Equity Interests of another Person, (b) a loan, advance or
capital contribution to, Guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or interest in, another Person, or (c) any
Acquisition, or (d) any other investment of money or capital in order to obtain
a profitable return. For purposes of covenant compliance, the amount of any
Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment.

 

“IRS” means the United States Internal Revenue Service.

 

“ISP” means, with respect to any Letter of Credit, the “International Standby
Practices 1998” published by the Institute of International Banking Law &
Practice (or such later version thereof as may be in effect at the time of
issuance).

 

“Issuer Documents” means with respect to any Letter of Credit, the Letter Credit
Application, the Standby Letter of Credit Agreement, and any other document,
agreement and instrument entered into by the applicable L/C Issuer and a
Borrower (or any Subsidiary thereof) or in favor of the applicable L/C Issuer
and relating to any such Letter of Credit.

 

“Joinder” means an agreement, in form and substance satisfactory to the Agent
pursuant to which, among other things, a Person becomes a party to, and bound by
the terms of, this Agreement and/or the other Loan Documents in the same
capacity and to the same extent as either a Borrower or a Guarantor, as the
Agent may determine.

 

“Landlord Lien State” means such state(s) in which a landlord’s claim for rent
may have priority over the Lien of the Agent in any of the Collateral.

 

“Laws” means each international, foreign, Federal, state and local statute,
treaty, rule, guideline, regulation, ordinance, code and administrative or
judicial precedent or authority, including the interpretation or administration
thereof by any Governmental Authority charged with the enforcement,
interpretation or administration thereof, and each applicable administrative
order, directed duty, request, license, authorization and permit of, and
agreement with, any Governmental Authority, in each case whether or not having
the force of law.

 

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance
thereof or extension of the expiry date thereof, or the increase of the amount
thereof.

 

“L/C Issuer” means (a) Salus, (b) any other financial institution that, with the
consent of the Agent (and subject to such financial institution’s entry into
agreements reasonably satisfactory to the Agent), agrees to become an L/C Issuer
for the purpose of issuing Letters of Credit hereunder, and (c) any successor
issuer of Letters of Credit hereunder (which successor may only be a Lender
selected by the Agent in its discretion). Any L/C Issuer may, in its discretion,
arrange for one or more Letters of Credit to be issued by Affiliates of such L/C
Issuer and/or for such Affiliate to act as an advising, transferring, confirming
and/or nominated bank in connection with the issuance or administration of any
such Letter of Credit, in which case the term “L/C Issuer” shall include any
such Affiliate with respect to Letters of Credit issued by such Affiliate.

 

-21-

 

 

“L/C Obligations” means, as at any date of determination, the aggregate undrawn
amount available to be drawn under all outstanding Letters of Credit. For
purposes of computing the amounts available to be drawn under any Letter of
Credit, the amount of such Letter of Credit shall be determined in accordance
with Section 1.06. For all purposes of this Agreement, if on any date of
determination a Letter of Credit has expired by its terms but any amount may
still be drawn thereunder by reason of the operation of any “rule” under the ISP
or any article of UCP 600, such Letter of Credit shall be deemed to be
“outstanding” in the amount so remaining available to be drawn.

 

“Lead Borrower” has the meaning assigned to such term in the preamble of this
Agreement.

 

“Lease” means any agreement, whether written or oral, no matter how styled or
structured, pursuant to which a Loan Party is entitled to the use or occupancy
of any space in a structure, land, improvements or premises for any period of
time.

 

“Lender” has the meaning specified in the introductory paragraph hereto.

 

“Lending Office” means, as to any Lender, the office or offices of such Lender
described as such in such Lender’s Administrative Questionnaire, or such other
office or offices as a Lender may from time to time notify the Lead Borrower and
the Agent.

 

“Letter of Credit” means each Standby Letter of Credit issued hereunder. For the
avoidance of doubt, the Existing Letters of Credit shall not be considered
issued hereunder.

 

“Letter of Credit Application” means an application for the issuance or
amendment of a Letter of Credit in the form from time to time in use by the
applicable L/C Issuer.

 

“Letter of Credit Expiration Date” means the day that is seven days prior to the
Maturity Date then in effect (or, if such day is not a Business Day, the next
preceding Business Day).

 

“Letter of Credit Sublimit” means an amount equal to $5,000,000. The Letter of
Credit Sublimit is part of, and not in addition to, the Aggregate Commitments. A
permanent reduction of the Aggregate Commitments shall not require a
corresponding pro rata reduction in the Letter of Credit Sublimit; provided,
however, that if the Aggregate Commitments are reduced to an amount less than
the Letter of Credit Sublimit, then the Letter of Credit Sublimit shall be
reduced to an amount equal to (or, at Lead Borrower’s option, less than) the
Aggregate Commitments.

 

“Lien” means (a) any mortgage, deed of trust, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge, or
preference, priority or other security interest or preferential arrangement in
the nature of a security interest of any kind or nature whatsoever (including
any conditional sale, Capital Lease Obligation, Synthetic Lease Obligation, or
other title retention agreement, any easement, right of way or other encumbrance
on title to real property, and any financing lease having substantially the same
economic effect as any of the foregoing) and (b) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.

 

-22-

 

 

“Liquidation” means the exercise by the Agent of those rights and remedies
accorded to the Agent under the Loan Documents and applicable Law as a creditor
of the Loan Parties with respect to the realization on the Collateral, including
(after the occurrence and during the continuation of an Event of Default) the
conduct by the Loan Parties acting with the consent of the Agent, of any public,
private or “going out of business”, “store closing”, or other similarly themed
sale or other disposition of the Collateral for the purpose of liquidating the
Collateral. Derivations of the word “Liquidation” (such as “Liquidate”) are used
with like meaning in this Agreement.

 

“Loan” means any extension of credit by a Lender to the Borrowers under Article
II in the form of a Committed Loan or otherwise.

 

“Loan Account” has the meaning assigned to such term in Section 2.11(a).

 

“Loan Documents” means this Agreement, each Note, each Issuer Document, the Fee
Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the DDA
Notifications, the Credit Card Notifications, the Security Documents, each
Facility Guaranty, the Subordination Agreement, and any other instrument or
agreement now or hereafter executed and delivered in connection herewith, or in
connection with any transaction arising out of any Cash Management Services and
Bank Products provided by the Agent or any of its Affiliates, each as amended
and in effect from time to time.

 

“Loan Parties” means, collectively, the Borrowers and each Guarantor.

 

“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, liabilities (actual
or contingent) or condition (financial or otherwise) of any Loan Party or the
Lead Borrower and its Subsidiaries taken as a whole; (b) a material impairment
of the ability of any Loan Party to perform its obligations under any Loan
Document to which it is a party; or (c) a material impairment of the rights and
remedies of the Agent or any Lender under any Loan Document or a material
adverse effect upon the legality, validity, binding effect or enforceability
against any Loan Party of any Loan Document to which it is a party. In
determining whether any individual event would result in a Material Adverse
Effect, notwithstanding that such event in and of itself does not have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then existing events would result
in a Material Adverse Effect.

 

“Material Contract” means (a) the contracts listed on Schedule 5.24 and (b) any
other contract or agreement on which the Loan Parties’ business is substantially
dependent.

 

“Material Indebtedness” means the Subordinated Indebtedness and any other
Indebtedness (other than the Obligations) of the Loan Parties in an aggregate
principal amount exceeding $250,000. For purposes of determining the amount of
Material Indebtedness at any time, (a) the amount of the obligations in respect
of any Swap Contract at such time shall be calculated at the Swap Termination
Value thereof, (b) undrawn committed or available amounts shall be included, and
(c) all amounts owing to all creditors under any combined or syndicated credit
arrangement shall be included.

 

“Maturity Date” means November 13, 2015.

 

-23-

 

 

“Maximum Loan Amount” means, at any time of determination, the lesser of (a) the
Aggregate Commitments and (b) the Borrowing Base.

 

“Maximum Rate” has the meaning provided therefor in Section 10.09.

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

 

“Mortgages” means each and every fee and leasehold mortgage or deed of trust,
security agreement and assignment by and between the Loan Party owning or
holding the leasehold interest in the Real Estate encumbered thereby in favor of
the Agent.

 

“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which the Lead Borrower or any ERISA Affiliate
makes or is obligated to make contributions, or during the preceding five plan
years, has made or been obligated to make contributions.

 

“Net Proceeds” means (a) with respect to any Disposition by any Loan Party or
any of its Subsidiaries, or any Extraordinary Receipt received or paid to the
account of any Loan Party or any of its Subsidiaries, the excess, if any, of (i)
the sum of cash and cash equivalents received in connection with such
transaction (including any cash or cash equivalents received by way of deferred
payment pursuant to, or by monetization of, a note receivable or otherwise, but
only as and when so received) over (ii) the sum of (A) the principal amount of
any Indebtedness that is secured by the applicable asset by a Lien permitted
hereunder which is senior to the Agent’s Lien on such asset and that is required
to be repaid (or to establish an escrow for the future repayment thereof) in
connection with such transaction (other than Indebtedness under the Loan
Documents), and (B) the reasonable and customary out-of-pocket expenses incurred
by such Loan Party or such Subsidiary in connection with such transaction
(including, without limitation, appraisals, and brokerage, legal, title and
recording or transfer tax expenses and commissions) paid by any Loan Party to
third parties (other than Affiliates)); and

 

(b)          with respect to the sale or issuance of any Equity Interest by any
Loan Party or any of its Subsidiaries, or the incurrence or issuance of any
Indebtedness by any Loan Party or any of its Subsidiaries, the excess of (i) the
sum of the cash and cash equivalents received in connection with such
transaction over (ii) the underwriting discounts and commissions, and other
reasonable and customary out-of-pocket expenses, incurred by such Loan Party or
such Subsidiary in connection therewith.

 

“Non-Extension Notice Date” has the meaning specified in Section 2.03(b)(iii).

 

“Note” means a promissory note made by the Borrowers in favor of a Lender
evidencing Committed Loans made by such Lender, substantially in the form of
Exhibit B, as each may be amended, restated, supplemented or modified from time
to time.

 

“Obligations” means (a) all advances to, and debts (including principal,
interest, fees, costs, and expenses), liabilities, obligations, covenants,
indemnities, and duties of, any Loan Party arising under any Loan Document or
otherwise with respect to any Loan or Letter of Credit (including payments in
respect of reimbursement of disbursements, interest thereon and obligations to
provide cash collateral therefor), whether direct or indirect (including those

 

-24-

 

 

acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter arising and including interest, fees, costs, expenses and
indemnities that accrue after the commencement by or against any Loan Party or
any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such
Person as the debtor in such proceeding, regardless of whether such interest,
fees, costs, expenses and indemnities are allowed claims in such proceeding, and
(b) any Other Liabilities.

 

“Organization Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; (c) with respect to any
partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity, and (d) in each case, all shareholder or other
equity holder agreements, voting trusts and similar arrangements to which such
Person is a party or which is applicable to its Equity Interests and all other
arrangements relating to the Control or management of such Person.

 

“Other Liabilities” means (a) any obligation on account of (i) any Cash
Management Services furnished to any of the Loan Parties or any of their
Subsidiaries and/or (ii) any transaction with the Agent or any of its Affiliates
that arises out of any Bank Product entered into with any Loan Party and any
such Person, as each may be amended from time to time.

 

“Other Taxes” means all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any
payment made hereunder or under any other Loan Document or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
other Loan Document.

 

“Outstanding Amount” means, without duplication, (i) with respect to Committed
Loans on any date, the aggregate outstanding principal amount thereof after
giving effect to any borrowings and prepayments or repayments of Committed Loans
occurring on such date; and (ii) with respect to any L/C Obligations on any
date, the amount of such L/C Obligations on such date after giving effect to any
L/C Credit Extension occurring on such date and any other changes in the
aggregate amount of the L/C Obligations as of such date.

 

“Overadvance” means a Credit Extension to the extent that, immediately after its
having been made, Availability is less than zero.

 

“Participant” has the meaning specified in Section 10.06(d).

 

“Participation Register” has the meaning provided therefor in Section 10.06(d).

 

“Payment Conditions” means, at the time of determination with respect to any
specified transaction or payment, that (a) no Default or Event of Default then
exists or would arise as a result of entering into such transaction or the
making of such payment, and (b) after giving effect to such transaction or
payment, the Pro Forma Availability Condition has been satisfied. Prior to

 

-25-

 

 

undertaking any transaction or payment which is subject to the Payment
Conditions, the Loan Parties shall deliver to the Agent evidence of satisfaction
of the conditions contained in clause (b) above on a basis (including, without
limitation, giving due consideration to results for prior periods) satisfactory
to the Agent.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Pension Plan” means any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by the Lead Borrower
or any ERISA Affiliate or to which the Lead Borrower or any ERISA Affiliate
contributes or has an obligation to contribute, or in the case of a multiple
employer or other plan described in Section 4064(a) of ERISA, has made
contributions at any time during the immediately preceding five plan years.

 

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

 

“Permitted Disposition” means any of the following:

 

(a)          Dispositions of inventory in the ordinary course of business;

 

(b)          bulk sales of other dispositions of the Inventory of the Borrowers
not in the ordinary course of business at arm’s length, provided, that such
Inventory dispositions shall not exceed (i) $100,000 in any Fiscal Year of the
Lead Borrower with respect to dispositions of Eligible Inventory, or (ii)
$750,000 in any Fiscal Year of the Lead Borrower with respect to dispositions of
Inventory which is not Eligible Inventory;

 

(c)          non-exclusive licenses of Intellectual Property of a Loan Party or
any of its Subsidiaries in the ordinary course of business and on commercially
reasonable terms;

 

(d)          Dispositions of Equipment in the ordinary course of business that
is substantially worn, damaged, obsolete or, in the judgment of a Loan Party, no
longer useful or necessary in its business or that of any Subsidiary and is
replaced with similar property having at least equivalent value;

 

(e)          abandonment of Intellectual Property rights in the ordinary course
of business, which are not material to the operation of the Business;

 

(f)          sales, transfers and Dispositions among the Loan Parties or by any
Subsidiary to a Loan Party; and

 

(g)          sales, transfers and Dispositions by any Subsidiary which is not a
Loan Party to another Subsidiary that is not a Loan Party.

 

“Permitted Encumbrances” means:

 

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(a)          Liens imposed by law for Taxes that are not yet due or are being
contested in compliance with Section 6.04;

 

(b)          carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s
and other like Liens imposed by applicable Law, arising in the ordinary course
of business and securing obligations that are not overdue or are being contested
in compliance with Section 6.04;

 

(c)          Pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations, other than any Lien imposed by ERISA;

 

(d)          Deposits to secure the performance of bids, trade contracts and
leases (other than Indebtedness), statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;

 

(e)          Liens in respect of judgments that would not constitute an Event of
Default hereunder;

 

(f)          Easements, covenants, conditions, restrictions, building code laws,
zoning restrictions, rights-of-way and similar encumbrances on real property
imposed by law or arising in the ordinary course of business that do not secure
any monetary obligations and do not materially detract from the value of the
affected property or materially interfere with the ordinary conduct of business
of a Loan Party and such other minor title defects or survey matters that are
disclosed by current surveys that, in each case, do not materially interfere
with the current use of the real property;

 

(g)          Liens existing on the Closing Date and listed on Schedule 7.01 and
any Permitted Refinancings thereof;

 

(h)          Liens securing Subordinated Debt and any Permitted Refinancings
thereof;

 

(i)          Liens on fixed or capital assets acquired by any Loan Party which
are permitted under clause (c) of the definition of Permitted Indebtedness so
long as (i) such Liens and the Indebtedness secured thereby are incurred prior
to or within one hundred and twenty (120) days after such acquisition, (ii) the
Indebtedness secured thereby does not exceed the cost of acquisition of such
fixed or capital assets and (iii) such Liens shall not extend to any other
property or assets of the Loan Parties;

 

(j)          Liens in favor of the Agent;

 

(k)          Statutory Liens of landlords and lessors in respect of rent not in
default;

 

(l)          Possessory Liens in favor of brokers and dealers arising in
connection with the acquisition or disposition of Investments owned as of the
Closing Date and Permitted Investments, provided that such liens (a) attach only
to such Investments and (b) secure only obligations incurred in the ordinary
course and arising in connection with

 

-27-

 

 

the acquisition or disposition of such Investments and not any obligation in
connection with margin financing;

 

(m)          Liens arising solely by virtue of any statutory or common law
provisions relating to banker’s liens, liens in favor of securities
intermediaries, rights of setoff or similar rights and remedies as to deposit
accounts or securities accounts or other funds maintained with depository
institutions or securities intermediaries;

 

(n)          Liens on unearned insurance premiums securing the payment of
financed insurance premiums so long as such financed amounts are promptly paid;
provided that such Liens extend only to such insurance premiums or loss payment
or similar payment from any insurance provider in an amount not in excess of any
unpaid financed premiums;

 

(o)          Liens arising from precautionary UCC filings regarding “true”
operating leases or, to the extent permitted under the Loan Documents, the
consignment of goods to a Loan Party;

 

(p)          Liens on cash collateral to secure obligations with respect to the
Existing Letters of Credit; and

 

(q)          Liens in favor of customs and revenues authorities imposed by
applicable Law (A) arising in the ordinary course of business in connection with
the importation of goods and securing obligations that are being contested in
good faith by appropriate proceedings, (B) the applicable Loan Party or
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (C) such contest effectively suspends collection of the
contested obligation and enforcement of any Lien securing such obligation.

 

“Permitted Indebtedness” means each of the following as long as no Default or
Event of Default exists or would arise from the incurrence thereof:

 

(a)          Indebtedness outstanding on the Closing Date and listed on Schedule
7.03 and any Permitted Refinancing thereof;

 

(b)          Indebtedness of any Loan Party to any other Loan Party;

 

(c)          Purchase money Indebtedness of any Loan Party to finance the
acquisition of any personal property consisting solely of fixed or capital
assets, including Capital Lease Obligations, and any Indebtedness assumed in
connection with the acquisition of any such assets or secured by a Lien on any
such assets prior to the acquisition thereof, and Permitted Refinancings
thereof; provided, however, that the aggregate principal amount of Indebtedness
permitted by this clause (c) shall not exceed $250,000 at any time outstanding;
provided, further, that if requested by the Agent, the Loan Parties shall cause
the holders of such Indebtedness to enter into a Collateral Access Agreement on
terms reasonably satisfactory to the Agent;

 

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(d)          obligations (contingent or otherwise) of any Loan Party or any
Subsidiary thereof existing or arising under any Swap Contract, provided that
such obligations are (or were) entered into by such Person in the ordinary
course of business for the purpose of directly mitigating risks associated with
fluctuations in interest rates or foreign exchange rates, and not for purposes
of speculation or taking a “market view”; provided, that the aggregate Swap
Termination Value thereof shall not exceed $100,000 at any time outstanding;

 

(e)          Indebtedness due under the Subordinated Debt Documentation;

 

(f)          Indebtedness consisting of contingent liabilities under bankers’
acceptances, bank guaranties, surety bonds and similar instruments incurred in
the ordinary course of business;

 

(g)          Unsecured Subordinated Debt on terms and conditions acceptable to
the Required Lenders in their sole discretion, provided that the maturity date
of such Subordinated Debt shall be at least one hundred and eighty (180) days
following the Maturity Date (after taking into account any extension thereof);

 

(h)          Indebtedness consisting of intercompany loans and advances
permitted by Section 7.02;

 

(i)          the Obligations;

 

(j)          obligations with respect to the Existing Letters of Credit; and

 

(k)          Indebtedness not otherwise specifically described herein in an
aggregate principal amount not to exceed $250,000 at any time outstanding.

 

“Permitted Investments” means each of the following as long as no Default or
Event of Default exists or would arise from the making of such Investment:

 

(a)          Investments existing on the Closing Date, and set forth on Schedule
7.02, but not any increase in the amount thereof or any other modification of
the terms thereof;

 

(b)          (i) Investments by any Loan Party and its Subsidiaries in their
respective Subsidiaries outstanding on the Closing Date, and (ii) additional
Investments by any Loan Party and its Subsidiaries in Loan Parties;

 

(c)          Investments consisting of extensions of credit in the nature of
accounts receivable or notes receivable arising from the grant of trade credit
in the ordinary course of business, and Investments received in satisfaction or
partial satisfaction thereof from financially troubled account debtors to the
extent reasonably necessary in order to prevent or limit loss;

 

(d)          Guarantees constituting Permitted Indebtedness;

 

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(e)          Investments by any Loan Party in Swap Contracts entered into in the
ordinary course of business and for bona fide business (and not speculative)
purposes to protect against fluctuations in interest rates in respect of the
Obligations;

 

(f)          Investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;

 

(g)          Investments consisting of (i) intercompany loans by and among the
Loan Parties so long as the Agent has a first priority, perfected Lien in such
intercompany loans and has received a promissory note evidencing such
intercompany loans (if the Agent so requests), together with transfer powers
executed in blank in connection therewith and (ii) intercompany loans made by
any Subsidiary to any Loan Party on terms and conditions acceptable to the
Agent, including the Agent’s receipt of a subordination agreement with respect
thereto, in form and substance acceptable to the Required Lenders;

 

(h)          advances to officers, directors and employees of the Loan Parties
and Subsidiaries in the ordinary course of business in an amount not to exceed
$25,000 to any individual at any time or in an aggregate amount not to exceed
$100,000 at any time outstanding, in each case for travel, entertainment,
relocation and analogous ordinary business purposes; and

 

(i)          Capital contributions made by any Loan Party to another Loan Party.

 

“Permitted Overadvance” means an Overadvance made by the Agent, in its
discretion, which (i) is made to maintain, protect or preserve the Collateral
and/or the Credit Parties’ rights under the Loan Documents or which is otherwise
for the benefit of the Credit Parties; (ii) is made to enhance the likelihood
of, or to maximize the amount of, repayment of any Obligation; or (iii) is made
to pay any other amount chargeable to any Loan Party hereunder; provided,
however, that the foregoing shall not result in any claim or liability against
the Agent (regardless of the amount of any Overadvance) for Unintentional
Overadvances and such Unintentional Overadvances shall not reduce the amount of
Permitted Overadvances allowed hereunder; provided, further, that in no event
shall the Agent make an Overadvance, if after giving effect thereto, the
principal amount of the Credit Extensions would exceed the Aggregate Commitments
(as in effect prior to any termination of the Commitments pursuant to
Section 2.06 hereof).

 

“Permitted Refinancing” means, with respect to any Person, any Indebtedness
issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund (collectively, to “Refinance”), the
Indebtedness being Refinanced (or previous refinancings thereof constituting a
Permitted Refinancing); provided, that (a) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing does not exceed the
principal amount (or accreted value, if applicable) of the Indebtedness so
Refinanced (plus unpaid accrued interest and premiums thereon and underwriting
discounts, defeasance costs, fees, commissions and expenses), (b) the weighted
average life to maturity of such Permitted Refinancing is greater than or equal
to the weighted average life to maturity of the Indebtedness

 

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being Refinanced (c) such Permitted Refinancing shall not require any scheduled
principal payments due prior to the Maturity Date in excess of, or prior to, the
scheduled principal payments due prior to such Maturity Date for the
Indebtedness being Refinanced, (d) if the Indebtedness being Refinanced is
subordinated in right of payment to the Obligations under this Agreement, such
Permitted Refinancing shall be subordinated in right of payment to such
Obligations on terms at least as favorable to the Credit Parties as those
contained in the documentation governing the Indebtedness being Refinanced, (e)
no Permitted Refinancing shall have direct or indirect obligors who were not
also obligors of the Indebtedness being Refinanced, or greater guarantees or
security, than the Indebtedness being Refinanced, (f) such Permitted Refinancing
shall be otherwise on terms not materially less favorable to the Credit Parties
than those contained in the documentation governing the Indebtedness being
Refinanced, including, without limitation, with respect to financial and other
covenants and events of default, (g) the interest rate applicable to any such
Permitted Refinancing shall not exceed the then applicable market interest rate,
and (h) at the time thereof, no Default or Event of Default shall have occurred
and be continuing.

 

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, limited partnership,
Governmental Authority or other entity.

 

“Plan” means any “employee benefit plan” (as such term is defined in Section
3(3) of ERISA) established by the Lead Borrower or, with respect to any such
plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA
Affiliate.

 

“Prepayment Event” means:

 

(a)          Any Disposition (including pursuant to a sale and leaseback
transaction) of any property or asset of a Loan Party in an amount in excess of
$100,000;

 

(b)          Any casualty or other insured damage to, or any taking under power
of eminent domain or by condemnation or similar proceeding of (and payments in
lieu thereof), any property or asset of a Loan Party in an amount in excess of
$100,000, unless (i) the proceeds therefrom are required to be paid to the
holder of a Lien on such property or asset having priority over the Lien of the
Agent or (ii) the proceeds therefrom are deposited into a segregated account and
utilized for purposes of replacing or repairing the assets in respect of which
such proceeds, awards or payments were received within 180 days of the
occurrence of the damage to or loss of the assets being repaired or replaced;

 

(c)          The issuance by a Loan Party of any Equity Interests, other than
any such issuance of Equity Interests as a compensatory issuance to any
employee, director, or consultant (including under any option plan);

 

(d)          The incurrence by a Loan Party of any Indebtedness for borrowed
money; or

 

(e)          The receipt by any Loan Party of any Extraordinary Receipts.

 

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“Pro Forma Availability Condition” shall mean, for any date of calculation with
respect to any transaction or payment, the Pro Forma Excess Availability
following, and after giving effect to, such transaction or payment, will be
equal to or greater than $1,000,000.

 

“Pro Forma Excess Availability” shall mean, for any date of calculation, after
giving pro forma effect to the transaction or payment then to be consummated,
the projected Availability as of the end of each Fiscal Month during any
subsequent projected twelve (12) Fiscal Months.

 

“Real Estate” means all Leases and all land, together with the buildings,
structures, parking areas, and other improvements thereon, now or hereafter
owned by any Loan Party, including all easements, rights-of-way, and similar
rights relating thereto and all leases, tenancies, and occupancies thereof.

 

“Receipts and Collections” has the meaning specified in Section 6.13(c).

 

“Register” has the meaning specified in Section 10.06(c).

 

“Registered Public Accounting Firm” has the meaning specified by the Securities
Laws and shall be independent of the Lead Borrower and its Subsidiaries as
prescribed by the Securities Laws.

 

“Related Parties” means, with respect to any Person, such Person’s Affiliates
and the partners, directors, officers, employees, agents and advisors of such
Person and of such Person’s Affiliates.

 

“Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the thirty (30) day notice period has been
waived.

 

“Reports” has the meaning provided in Section 9.12(b).

 

“Request for Credit Extension” means (a) with respect to a Committed Borrowing
of Committed Loans, a Committed Loan Notice, and (b) with respect to an L/C
Credit Extension, a Letter of Credit Application and, if required by the
applicable L/C Issuer, a Standby Letter of Credit Agreement.

 

“Required Lenders” means, as of any date of determination, a Lender or Lenders
(and during the continuance of an Event of Default, at least two Lenders if
there is more than one Lender) holding more than fifty percent (50%) of the
Aggregate Commitments or, if the Aggregate Commitments and the obligation of the
L/C Issuer to make L/C Credit Extensions have been terminated pursuant to
Section 8.02, a Lender or Lenders (and during the continuance of an Event of
Default, at least two Lenders if there is more than one Lender) holding in the
aggregate more than fifty percent (50%) of the sum of the Total Outstandings;
provided, that the Commitment of, and the portion in the aggregate of the Total
Outstandings held or deemed held by, any Defaulting Lender or Deteriorating
Lender shall be excluded for purposes of making a determination of Required
Lenders.

 

“Reserves” means all Inventory Reserves and Availability Reserves.

 

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“Responsible Officer” means the chief executive officer, president, chief
financial officer, treasurer or assistant treasurer of a Loan Party or any of
the other individuals designated in writing to the Agent by an existing
Responsible Officer of a Loan Party as an authorized signatory of any
certificate or other document to be delivered hereunder. Any document delivered
hereunder that is signed by a Responsible Officer of a Loan Party shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such Loan Party and such
Responsible Officer shall be conclusively presumed to have acted on behalf of
such Loan Party.

 

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock or other Equity
Interest of any Person or any of its Subsidiaries, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, defeasance,
acquisition, cancellation or termination of any such capital stock or other
Equity Interest, or on account of any return of capital to such Person’s
stockholders, partners or members (or the equivalent of any thereof), or any
option, warrant or other right to acquire any such dividend or other
distribution or payment. Without limiting the foregoing, “Restricted Payments”
with respect to any Person shall also include all payments made by such Person
with any proceeds of a dissolution or liquidation of such Person.

 

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc. and any successor thereto.

 

“Salus” means Salus Capital Partners, LLC and its successors.

 

“Salus Entity” has the meaning provided in Section 10.06(i).

 

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

 

“SEC” means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.

 

“Securities Laws” means the Securities Act of 1933, the Securities Exchange Act
of 1934, Sarbanes-Oxley, and the applicable accounting and auditing principles,
rules, standards and practices promulgated, approved or incorporated by the SEC
or the PCAOB.

 

“Security Agreement” means the Security Agreement dated as of the Closing Date
among the Loan Parties and the Agent, as the same now exists or may hereafter be
amended, modified, supplemented, renewed, restated or replaced.

 

“Security Documents” means the Security Agreement, the Blocked Account
Agreements, the Mortgages, the DDA Notifications, the Credit Card Notifications,
and each other security agreement or other instrument or document executed and
delivered to the Agent pursuant to this Agreement or any other Loan Document
granting a Lien to secure any of the Obligations.

 

“Settlement Date” has the meaning provided in Section 2.14(a).

 

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“Shareholders’ Equity” means, as of any date of determination, consolidated
shareholders’ equity of the Lead Borrower and its Subsidiaries as of that date
determined in accordance with GAAP.

 

“Shrink” means Inventory which has been lost, misplaced, stolen, or is otherwise
unaccounted for.

 

“Solvent” and “Solvency” means, with respect to any Person on a particular date,
that on such date (a) at fair valuation, all of the properties and assets of
such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair saleable value of the
properties and assets of such Person is not less than the amount that would be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person’s ability to pay as such debts mature, and (e)
such Person is not engaged in a business or a transaction, and is not about to
engage in a business or transaction, for which such Person’s properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. The amount of all guarantees at any time shall be computed as the
amount that, in light of all the facts and circumstances existing at the time,
can reasonably be expected to become an actual or matured liability.

 

“Spot Rate” has the meaning given to such term in Section 1.07 hereof.

 

“Standby Letter of Credit” means any Letter of Credit that is not a commercial
letter of credit and that (a) is used in lieu or in support of performance
guaranties or performance, surety or similar bonds (excluding appeal bonds)
arising in the ordinary course of business, (b) is used in lieu or in support of
stay or appeal bonds, (c) supports the payment of insurance premiums for
reasonably necessary casualty insurance carried by any of the Loan Parties, or
(d) supports payment or performance for identified purchases or exchanges of
products or services in the ordinary course of business.

 

“Standby Letter of Credit Agreement” means the Standby Letter of Credit
Agreement relating to the issuance of a Standby Letter of Credit in the form
from time to time in use by the applicable L/C Issuer.

 

“Stated Amount” means at any time the maximum amount for which a Letter of
Credit may be honored.

 

“Store” means any retail store (which may include any real property, fixtures,
equipment, inventory and other property related thereto) operated, or to be
operated, by any Loan Party.

 

“Subordinated Debt Documentation” means that certain Note and Warrant Purchase
Agreement dated as of August 13, 2012 among Bluefly, Inc., Rho Ventures VI, L.P.
(“Rho”) and Prentice Consumer Partners LP (“Prentice”), pursuant to which
Bluefly, Inc. has issued (a) $1,500,000 of secured subordinated convertible
notes in favor of Rho and (b) $1,500,000 of

 

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secured subordinated notes in favor of Prentice, and all documents, instruments
and agreements executed in connection therewith.

 

“Subordinated Indebtedness” means Indebtedness due under the Subordinated Debt
Documentation and all other unsecured Indebtedness which is expressly
subordinated in right of payment to the prior payment in full of the Obligations
and which is in form and on terms approved in writing by the Agent.

 

“Subordination Agreement” means that certain Intercreditor Agreement dated as of
the date hereof by and among the Credit Parties, Rho and Prentice.

 

“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
Equity Interests having ordinary voting power for the election of directors or
other governing body are at the time beneficially owned, or the management of
which is otherwise controlled, directly, or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise specified, all
references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a
Subsidiary or Subsidiaries of a Loan Party .

 

“Swap Contract” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a “Master Agreement”), including
any such obligations or liabilities under any Master Agreement.

 

“Swap Termination Value” means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include a Lender or any Affiliate of a
Lender).

 

“Synthetic Lease Obligation” means the monetary obligation of a Person under (a)
a so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property (including sale and leaseback
transactions), in each case, creating

 

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obligations that do not appear on the balance sheet of such Person but which,
upon the application of any Debtor Relief Laws to such Person, would be
characterized as the indebtedness of such Person (without regard to accounting
treatment).

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable
thereto.

 

“Termination Date” means the earliest to occur of (i) the Maturity Date, (ii)
the date on which the maturity of the Obligations is accelerated (or deemed
accelerated) and the Commitments are irrevocably terminated (or deemed
terminated) in accordance with Article VIII, or (iii) the termination of the
Commitments in accordance with the provisions of Section 2.06(a) hereof.

 

“Termination Fee” has the meaning set forth in Section 2.09(b).

 

“Total Outstandings” means the aggregate Outstanding Amount of all Committed
Loans.

 

“Trading with the Enemy Act” has the meaning set forth in Section 10.18.

 

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in
effect from time to time in the State of New York; provided, however, that if a
term is defined in Article 9 of the Uniform Commercial Code differently than in
another Article thereof, the term shall have the meaning set forth in Article 9
of the Uniform Commercial Code; provided, further, that, if by reason of
mandatory provisions of law, perfection, or the effect of perfection or
non-perfection, of a security interest in any Collateral or the availability of
any remedy hereunder is governed by the Uniform Commercial Code as in effect in
a jurisdiction other than the State of New York, “Uniform Commercial Code” means
the Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such perfection or effect of perfection or
non-perfection or availability of such remedy, as the case may be.

 

“UCP 600” means the rules of the Uniform Customs and Practice for Documentary
Credits, as most recently published by the International Chamber of Commerce and
in effect as of July 1, 2007 (or such later version thereof as may be in effect
at the time of issuance).

 

“UFCA” has the meaning specified in Section 10.21(d).

 

“UFTA” has the meaning specified in Section 10.21(d).

 

“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan’s assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.

 

“Unintentional Overadvance” means an Overadvance which, to the Agent’s
knowledge, did not constitute an Overadvance when made but which has become an
Overadvance resulting from changed circumstances beyond the control of the
Credit Parties, including, without

 

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limitation, a reduction in the Appraised Value of property or assets included in
the Borrowing Base or misrepresentation by the Loan Parties.

 

“United States” and “U.S.” mean the United States of America.

 

1.02         Other Interpretive Provisions. With reference to this Agreement and
each other Loan Document, unless otherwise specified herein or in such other
Loan Document:

 

(a)          The definitions of terms herein shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words “include,” “includes” and “including” shall be deemed to be followed
by the phrase “without limitation.” The word “will” shall be construed to have
the same meaning and effect as the word “shall.” Unless the context requires
otherwise, (i) any definition of or reference to any agreement, instrument or
other document (including any Organization Document) shall be construed as
referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein or in any other Loan
Document), (ii) any reference herein to any Person shall be construed to include
such Person’s successors and assigns, (iii) the words “herein,” “hereof” and
“hereunder,” and words of similar import when used in any Loan Document, shall
be construed to refer to such Loan Document in its entirety and not to any
particular provision thereof, (iv) all references in a Loan Document to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, the Loan Document in
which such references appear, (v) any reference to any law shall include all
statutory and regulatory provisions consolidating, amending replacing or
interpreting such law and any reference to any law or regulation shall, unless
otherwise specified, refer to such law or regulation as amended, modified or
supplemented from time to time, and (vi) the words “asset” and “property” shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

 

(b)          In the computation of periods of time from a specified date to a
later specified date, the word “from” means “from and including;” the words “to”
and “until” each mean “to but excluding;” and the word “through” means “to and
including.”

 

(c)          Section headings herein and in the other Loan Documents are
included for convenience of reference only and shall not affect the
interpretation of this Agreement or any other Loan Document.

 

(d)          Any reference herein or in any other Loan Document to the
satisfaction, repayment, or payment in full of the Obligations shall mean the
repayment in Dollars in full in cash or immediately available funds (or, in the
case of contingent reimbursement obligations with respect to Letters of Credit
and Bank Products (other than Swap Contracts) and any other contingent
Obligations, providing Cash Collateralization or other collateral as may be
requested by the Agent) of all of the Obligations (including the payment of any
termination amount then applicable (or which would or could become applicable as
a result of the repayment of the other Obligations) under Swap Contracts) other
than (i) unasserted contingent indemnification

 

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Obligations, (ii) any Obligations relating to Bank Products (other than Swap
Contracts) that, at such time, are allowed by the applicable Bank Product
provider to remain outstanding without being required to be repaid or Cash
Collateralized or otherwise collateralized as may be requested by the Agent, and
(iii) any Obligations relating to Swap Contracts that, at such time, are allowed
by the applicable provider of such Swap Contracts to remain outstanding without
being required to be repaid.

 

1.03         Accounting Terms Generally.

 

(a)          Generally. All accounting terms not specifically or completely
defined herein shall be construed in conformity with, and all financial data
(including financial ratios and other financial calculations) required to be
submitted pursuant to this Agreement shall be prepared in conformity with, GAAP
applied on a consistent basis, as in effect from time to time, except as
otherwise specifically prescribed herein.

 

(b)          Changes in GAAP. If at any time any change in GAAP would affect the
computation of any financial ratio or requirement set forth in any Loan
Document, and either the Lead Borrower or the Required Lenders shall so request,
the Agent, the Lenders and the Lead Borrower shall negotiate in good faith to
amend such ratio or requirement to preserve the original intent thereof in light
of such change in GAAP (subject to the approval of the Required Lenders);
provided, that until so amended, (i) such ratio or requirement shall continue to
be computed in accordance with GAAP prior to such change therein and (ii) the
Lead Borrower shall provide to the Agent and the Lenders financial statements
and other documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.

 

1.04         Rounding. Any financial ratios required to be maintained by the
Borrowers pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed herein and
rounding the result up or down to the nearest number (with a rounding-up if
there is no nearest number).

 

1.05         Times of Day. Unless otherwise specified, all references herein to
times of day shall be references to Eastern time (daylight or standard, as
applicable).

 

1.06         Letter of Credit Amounts. Unless otherwise specified, all
references herein to the amount of a Letter of Credit at any time shall be
deemed to be the Stated Amount of such Letter of Credit in effect at such time;
provided, however, that with respect to any Letter of Credit that, by its terms
or the terms of any Issuer Documents related thereto, provides for one or more
automatic increases in the Stated Amount thereof, the amount of such Letter of
Credit shall be deemed to be the maximum Stated Amount of such Letter of Credit
after giving effect to all such increases, whether or not such maximum Stated
Amount is in effect at such time.

 

1.07         Currency Equivalents Generally. Any amount specified in this
Agreement (other than in Article II, Article IX and Article X) or any of the
other Loan Documents to be in Dollars shall also include the equivalent of such
amount in any currency other than Dollars, such

 

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equivalent amount thereof in the applicable currency to be determined by the
Agent at such time on the basis of the Spot Rate (as defined below) for the
purchase of such currency with Dollars. For purposes of this Section 1.07, the
“Spot Rate” for a currency means the rate determined by the Agent to be the rate
quoted by the Person acting in such capacity as the spot rate for the purchase
by such Person of such currency with another currency through its principal
foreign exchange trading office at approximately 11:00 a.m. on the date two
Business Days prior to the date of such determination; provided that the Agent
may obtain such spot rate from another financial institution designated by the
Agent if the Person acting in such capacity does not have as of the date of
determination a spot buying rate for any such currency.

 

Article II
THE COMMITMENTS AND CREDIT EXTENSIONS

 

2.01         Committed Loans; Reserves.

 

(a)          Subject to the terms and conditions set forth herein, each Lender
severally agrees to make loans (each such loan, a “Committed Loan”) to the
Borrowers from time to time, on any Business Day during the Availability Period
on which the Agent’s offices are open to conduct business, in an aggregate
amount not to exceed at any time outstanding the lesser of (x) the amount of
such Lender’s Commitment, or (y) such Lender’s Applicable Percentage of the
Borrowing Base; subject in each case to the following limitations:

 

(i)          after giving effect to any Committed Borrowing, the Total
Outstandings shall not exceed the Maximum Loan Amount;

 

(ii)         after giving effect to any Committed Borrowing, the aggregate
Outstanding Amount of the Committed Loans of any Lender shall not exceed the
lesser of (A) such Lender’s Commitment and (B) such Lender’s Applicable
Percentage of the Borrowing Base; and

 

(iii)        the Outstanding Amount of all L/C Obligations shall not at any time
exceed the Letter of Credit Sublimit.

 

Within the limits of each Lender’s Commitment, and subject to the other terms
and conditions hereof, the Borrowers may borrow under this Section 2.01, prepay
under Section 2.05, and reborrow Committed Loans under this Section 2.01.

 

(b)          The Inventory Reserves and Availability Reserves as of the Closing
Date are set forth in the Borrowing Base Certificate delivered pursuant to
Section 4.01(c) hereof.

 

(c)          The Agent shall have the right, at any time and from time to time
after the Closing Date in its Permitted Discretion to establish, modify or
eliminate Reserves.

 

2.02         Borrowings of Committed Loans.

 

(a)          The Committed Loans shall be Loans and Obligations for all purposes
of this Agreement and the other Loan Documents.

 

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(b)          Each Committed Borrowing shall be made upon the Lead Borrower’s
irrevocable written notice to the Agent via a Request for Credit Extension,
which notice must be received by the Agent not later than 12:00 p.m. on the
requested day of any Committed Borrowing appropriately completed and signed by a
Responsible Officer of the Lead Borrower. Each Request for Credit Extension
shall include the most recently submitted Borrowing Base Certificate submitted
by the Lead Borrower to the Agent pursuant to Section 6.02(c) and shall specify
(i) the requested date of the Committed Borrowing (which shall be a Business
Day), and (ii) the principal amount of Committed Loans to be borrowed.

 

(c)          Following receipt of a Request for Credit Extension, the Agent
shall promptly notify each Lender of the amount of its Applicable Percentage of
the applicable Committed Loans. Each Lender shall make the amount of its
Committed Loan available to the Agent in immediately available funds at the
Agent’s Office not later than 2:00 p.m. on the Business Day specified in the
applicable Request for Credit Extension. Upon satisfaction of the applicable
conditions set forth in Section 4.02 (and, if such Committed Borrowing is the
initial Committed Borrowing, Section 4.01), the Agent shall make all funds so
received available to the Borrowers in like funds by no later than 4:00 p.m. on
the day of receipt by the Agent by wire transfer of such funds in accordance
with instructions provided to the Agent by the Lead Borrower.

 

(d)          The Agent, without the request of the Lead Borrower, may advance
any interest, fee, service charge (including direct wire fees), Credit Party
Expenses, or other payment to which any Credit Party is entitled from the Loan
Parties pursuant hereto or any other Loan Document and may charge the same to
the Loan Account notwithstanding that an Overadvance may result thereby. The
Agent shall advise the Lead Borrower of any such advance or charge promptly
after the making thereof. Such action on the part of the Agent shall not
constitute a waiver of the Agent’s rights and the Borrowers’ obligations under
Section 2.05(b). Any amount which is added to the principal balance of the Loan
Account as provided in this Section 2.02(d) shall bear interest at the interest
rate then and thereafter applicable to the Loans.

 

(e)          At any time that any Loans are outstanding, the Agent shall notify
the Lead Borrower and the Lenders of any change in Salus’s prime rate used in
determining the Base Rate promptly following the public announcement of such
change.

 

(f)          The Agent, the Lenders and the L/C Issuer shall have no obligation
to make any Loan or to provide any Letter of Credit if an Overadvance would
result. The Agent may, in its discretion, make Permitted Overadvances without
the consent of the Borrowers, the Lenders and the L/C Issuer and the Borrowers
and each Lender and L/C Issuer shall be bound thereby. A Permitted Overadvance
is for the account of the Borrowers and shall constitute a Loan and an
Obligation and shall be repaid by the Borrowers in accordance with the
provisions of Section 2.05(b). The making of any such Permitted Overadvance on
any one occasion shall not obligate the Agent or any Lender to make or permit
any Permitted Overadvance on any other occasion or to permit such Permitted
Overadvances to remain outstanding. The Agent shall have no liability for, and
no Loan Party or Credit Party shall have the right to, or shall, bring any claim
of any kind whatsoever against the Agent with respect to Unintentional
Overadvances regardless of the amount of any such Overadvance(s).

 

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2.03         Letters of Credit.

 

(a)          The Letter of Credit Commitment.

 

(i)          Subject to the terms and conditions set forth herein, each L/C
Issuer shall from time to time on any Business Day during the period from the
Closing Date until the Letter of Credit Expiration Date, issue Letters of Credit
for the account of the Borrowers, and amend or extend Letters of Credit
previously issued by it, in accordance with Section 2.03(b) below, and honor
drawings under the Letters of Credit; provided, that after giving effect to any
L/C Credit Extension with respect to any Letter of Credit and any Committed
Loans made in accordance with Section 2.03(g) below, (x) the Total Outstandings
shall not exceed the Maximum Loan Amount, (y) the aggregate Outstanding Amount
of the Committed Loans of any Lender shall not exceed such Lender’s Commitment,
and (z) the Outstanding Amount of the L/C Obligations shall not exceed the
Letter of Credit Sublimit. Each request by the Lead Borrower for the issuance or
amendment of a Letter of Credit shall be deemed to be a representation by the
Borrowers that the L/C Credit Extension so requested complies with the
conditions set forth in the proviso to the preceding sentence. Within the
foregoing limits, and subject to the terms and conditions hereof, the Borrowers’
ability to obtain Letters of Credit shall be fully revolving, and accordingly
the Borrowers may, during the foregoing period, obtain Letters of Credit to
replace Letters of Credit that have expired or that have been drawn upon and
reimbursed.

 

(ii)         No Letter of Credit shall be issued if:

 

(A)         subject to Section (b)(iii), the expiry date of such requested
Letter of Credit would occur more than twelve months after the date of issuance
or last extension, unless the Required Lenders have approved such expiry date;
or

 

(B)         the expiry date of such requested Letter of Credit would occur after
the Letter of Credit Expiration Date, unless all the Lenders have approved such
expiry date.

 

(iii)        No Letter of Credit shall be issued without the prior consent of
the Agent if:

 

(A)         any order, judgment or decree of any Governmental Authority or
arbitrator shall by its terms purport to enjoin or restrain the applicable L/C
Issuer from issuing such Letter of Credit, or any Law applicable to the
applicable L/C Issuer or any request or directive (whether or not having the
force of law) from any Governmental Authority with jurisdiction over the
applicable L/C Issuer shall prohibit, or request that the applicable L/C Issuer
refrain from, the issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon the applicable L/C Issuer with respect
to such Letter of Credit any restriction, reserve or capital requirement (for
which the applicable L/C Issuer is not otherwise compensated hereunder) not in
effect on the Closing Date, or shall impose upon the applicable L/C Issuer any

 

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unreimbursed loss, cost or expense which was not applicable on the Closing Date
and which the applicable L/C Issuer in good faith deems material to it;

 

(B)         the issuance of such Letter of Credit would violate one or more
policies of the applicable L/C Issuer applicable to letters of credit generally;

 

(C)         except as otherwise agreed by the Agent and the applicable L/C
Issuer, such Letter of Credit is in an initial Stated Amount less than $50,000;

 

(D)         such Letter of Credit is to be denominated in a currency other than
Dollars; provided, that if the applicable L/C Issuer, with the consent of the
Agent, issues a Letter of Credit denominated in a currency other than Dollars,
all reimbursements by the Borrowers of the honoring of any drawing under such
Letter of Credit shall be paid in Dollars based on the Spot Rate; or

 

(E)         such Letter of Credit contains any provisions for automatic
reinstatement of the Stated Amount after any drawing thereunder.

 

(iv)        The applicable L/C Issuer shall not amend any Letter of Credit if
(A) such L/C Issuer would not be permitted at such time to issue such Letter of
Credit in its amended form under the terms hereof or (B) the beneficiary of such
Letter of Credit does not accept the proposed amendment to such Letter of
Credit.

 

(v)         Each L/C Issuer shall have all of the benefits and immunities (A)
provided to the Agent in Article IX with respect to any acts taken or omissions
suffered by such L/C Issuer in connection with Letters of Credit issued by it or
proposed to be issued by it and Issuer Documents pertaining to such Letters of
Credit as fully as if the term “Agent” as used in Article IX included such L/C
Issuer with respect to such acts or omissions, and (B) as additionally provided
herein with respect to such L/C Issuer.

 

(b)          Procedures for Issuance and Amendment of Letters of Credit;
Auto-Extension Letters of Credit.

 

(i)          Each Letter of Credit shall be issued or amended, as the case may
be, upon the request of the Lead Borrower delivered to the applicable L/C Issuer
(with a copy to the Agent) in the form of a Letter of Credit Application,
appropriately completed and signed by a Responsible Officer of the Lead
Borrower. Such Letter of Credit Application must be received by such L/C Issuer
and the Agent not later than 11:00 a.m. at least two Business Days (or such
other date and time as the Agent and such L/C Issuer may agree in a particular
instance in their sole discretion) prior to the proposed issuance date or date
of amendment, as the case may be. In the case of a request for an initial
issuance of a Letter of Credit, such Letter of Credit Application shall specify
in form and detail satisfactory to the Agent and such L/C Issuer: (A) the
proposed issuance date of the requested Letter of Credit (which shall be a
Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name
and address of the beneficiary thereof; (E) the documents to be presented by
such beneficiary in case of any drawing thereunder; (F) the full text of any
certificate to be presented by such beneficiary in case of any drawing
thereunder; and (G) such other matters as the Agent or such L/C Issuer may
require. In

 

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the case of a request for an amendment of any outstanding Letter of Credit, such
Letter of Credit Application shall specify in form and detail satisfactory to
the Agent and the applicable L/C Issuer (A) the Letter of Credit to be amended;
(B) the proposed date of amendment thereof (which shall be a Business Day); (C)
the nature of the proposed amendment; and (D) such other matters as the Agent or
such L/C Issuer may require. Additionally, the Lead Borrower shall furnish to
the applicable L/C Issuer and the Agent such other documents and information
pertaining to such requested Letter of Credit issuance or amendment, and any
Issuer Documents (including, if requested by the applicable L/C Issuer, a
Standby Letter of Credit Agreement), as the applicable L/C Issuer or the Agent
may reasonably require.

 

(ii)         Promptly after receipt of any Letter of Credit Application, the
applicable L/C Issuer will confirm with the Agent (by telephone or in writing)
that the Agent has received a copy of such Letter of Credit Application from the
Lead Borrower and, if not, such L/C Issuer will provide the Agent with a copy
thereof. Unless the applicable L/C Issuer has received written notice from any
Lender, the Agent or any Loan Party, at least one Business Day prior to the
requested date of issuance or amendment of the applicable Letter of Credit, that
one or more applicable conditions contained in Article IV shall not then be
satisfied or unless such L/C Issuer would not be permitted, or would have no
obligation, at such time to issue such Letter of Credit under the terms hereof
(by reason of the provisions of clause (ii) or (iii) of Section 2.03(a) or
otherwise), then, subject to the terms and conditions hereof, such L/C Issuer
shall, on the requested date, issue a Letter of Credit for the account of the
applicable Borrower or enter into the applicable amendment, as the case may be,
in each case in accordance such the L/C Issuer’s usual and customary business
practices.

 

(iii)        If the Lead Borrower so requests in any applicable Letter of Credit
Application, the applicable L/C Issuer may, in its sole and absolute discretion,
agree to issue a Standby Letter of Credit that has automatic extension
provisions (each, an “Auto-Extension Letter of Credit”); provided, that any such
Auto-Extension Letter of Credit must permit the applicable L/C Issuer to prevent
any such extension at least once in each twelve-month period (commencing with
the date of issuance of such Standby Letter of Credit) by giving prior notice to
the beneficiary thereof not later than a day (the “Non-Extension Notice Date”)
in each such twelve-month period to be agreed upon at the time such Standby
Letter of Credit is issued. Unless otherwise directed by the Agent or the
applicable L/C Issuer, the Lead Borrower shall not be required to make a
specific request to the Agent or the applicable L/C Issuer for any such
extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders
shall be deemed to have authorized (but may not require) the applicable L/C
Issuer to permit the extension of such Standby Letter of Credit at any time to
an expiry date not later than the Letter of Credit Expiration Date; provided,
however, that the Agent shall instruct the applicable L/C Issuer not to permit
any such extension if (A) the applicable L/C Issuer has determined that it would
not be permitted, or would have no obligation, at such time to issue such
Standby Letter of Credit in its revised form (as extended) under the terms
hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a)
or otherwise), or (B) the applicable L/C Issuer has received notice (which may
be by telephone or in writing) on or before the day that is five Business Days
before the Non-Extension Notice Date (1) from

 

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the Agent that the Required Lenders have elected not to permit such extension or
(2) from the Agent, any Lender or the Lead Borrower that one or more of the
applicable conditions specified in Section 4.02 is not then satisfied, and in
each such case directing the applicable L/C Issuer not to permit such extension.

 

(iv)        Promptly after its delivery of any Letter of Credit or any amendment
to a Letter of Credit to an advising bank with respect thereto or to the
beneficiary thereof, the applicable L/C Issuer will also deliver to the Lead
Borrower and the Agent a true and complete copy of such Letter of Credit or
amendment.

 

(c)           Drawings. Upon receipt from the beneficiary of any Letter of
Credit of any notice of a drawing under such Letter of Credit, the applicable
L/C Issuer shall notify the Lead Borrower and the Agent thereof not less than
two (2) Business Days prior to the Honor Date; provided, however, that any
failure to give or delay in giving such notice shall not relieve the Borrowers
of their obligation to reimburse the applicable L/C Issuer with respect to any
such payment. Any notice given by the applicable L/C Issuer or the Agent
pursuant to this Section 2.03(c) may be given by telephone if immediately
confirmed in writing; provided, that the lack of such an immediate confirmation
shall not affect the conclusiveness or binding effect of such notice.

 

(d)           Reserved.

 

(e)           Obligations Absolute. The obligation of the Borrowers to reimburse
the applicable L/C Issuer for each drawing under each Letter of Credit shall be
absolute, unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances, including
the following:

 

(i)          any lack of validity or enforceability of such Letter of Credit,
this Agreement, or any other Loan Document;

 

(ii)         the existence of any claim, counterclaim, setoff, defense or other
right that the Borrowers or any Subsidiary may have at any time against any
beneficiary or any transferee of such Letter of Credit (or any Person for whom
any such beneficiary or any such transferee may be acting), the applicable L/C
Issuer or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by such Letter of Credit or any agreement or
instrument relating thereto, or any unrelated transaction;

 

(iii)        any draft, demand, certificate or other document presented under
such 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; or any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under such Letter of Credit;

 

(iv)        any payment by the applicable L/C Issuer under such Letter of Credit
against presentation of a draft or certificate that does not strictly comply
with the terms of such Letter of Credit; or any payment made by the applicable
L/C Issuer under such Letter of Credit to any Person purporting to be a trustee
in bankruptcy, debtor-in-

 

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possession, assignee for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any transferee of such
Letter of Credit, including any arising in connection with any proceeding under
any Debtor Relief Law;

 

(v)         any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Borrowers or
any of their Subsidiaries; or

 

(vi)        the fact that any Default or Event of Default shall have occurred
and be continuing.

 

The Lead Borrower shall promptly examine a copy of each Letter of Credit and
each amendment thereto that is delivered to it and, in the event of any claim of
noncompliance with the Lead Borrower’s instructions or other irregularity, the
Lead Borrower will immediately notify the Agent and the applicable L/C Issuer.
The Borrowers shall be conclusively deemed to have waived any such claim against
the applicable L/C Issuer and its correspondents unless such notice is given as
aforesaid.

 

(f)           Role of L/C Issuer. Each Lender and the Borrowers agree that, in
paying any drawing under a Letter of Credit, the applicable L/C Issuer shall not
have any responsibility to obtain any document (other than any sight draft,
certificates and documents expressly required by the Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document. None of the
applicable L/C Issuer, the Agent, any of their respective Related Parties nor
any correspondent, participant or assignee of the applicable L/C Issuer shall be
liable to any Lender for (i) any action taken or omitted in connection herewith
at the request or with the approval of the Lenders or the Required Lenders, as
applicable; (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; (iii) any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit or any error in interpretation of technical
terms; or (iv) the due execution, effectiveness, validity or enforceability of
any document or instrument related to any Letter of Credit or Issuer Document.
The Borrowers hereby assume all risks of the acts or omissions of any
beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Borrowers’ pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. None of the
applicable L/C Issuer, the Agent, any of their respective Related Parties nor
any correspondent, participant or assignee of the applicable L/C Issuer shall be
liable or responsible for any of the matters described in clauses (i) through
(v) of Section 2.03(d) or for any action, neglect or omission under or in
connection with any Letter of Credit or Issuer Documents, including, without
limitation, the issuance or any amendment of any Letter of Credit, the failure
to issue or amend any Letter of Credit, or the honoring or dishonoring of any
demand under any Letter of Credit, and such action or neglect or omission will
bind the Borrowers; provided, however, that anything in such clauses to the
contrary notwithstanding, the Borrowers may have a claim against the applicable
L/C Issuer, and the applicable L/C Issuer may be liable to the Borrowers, to the
extent, but only to the extent, of any direct, as opposed to

 

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consequential, exemplary or punitive damages suffered by the Borrowers which the
Borrowers prove were caused by the applicable L/C Issuer’s willful misconduct or
gross negligence or the applicable L/C Issuer’s willful failure to pay under any
Letter of Credit after the presentation to it by the beneficiary of a sight
draft and certificate(s) strictly complying with the terms and conditions of a
Letter of Credit; provided, further, that any claim against the applicable L/C
Issuer by the Borrowers for any loss suffered or incurred by the Borrowers shall
be reduced by an amount equal to the sum of (i) the amount (if any) saved by the
Borrowers as a result of the breach or other wrongful conduct that allegedly
caused such loss, and (ii) the amount (if any) of the loss that would have been
avoided had the Borrowers taken all reasonable steps to mitigate such loss,
including, without limitation, by enforcing their rights against any beneficiary
and, in case of a claim of wrongful dishonor, by specifically and timely
authorizing the applicable L/C Issuer to cure such dishonor. In furtherance and
not in limitation of the foregoing, the applicable L/C Issuer may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary
(or the applicable L/C Issuer may refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit and may disregard any requirement in a Letter of Credit that
notice of dishonor be given in a particular manner and any requirement that
presentation be made at a particular place or by a particular time of day), and
the applicable L/C Issuer shall not be responsible for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason. The applicable L/C Issuer shall not be responsible
for the wording of any Letter of Credit (including, without limitation, any
drawing conditions or any terms or conditions that are ineffective, ambiguous,
inconsistent, unduly complicated or reasonably impossible to satisfy),
notwithstanding any assistance the applicable L/C Issuer may provide to the
Borrowers with drafting or recommending text for any Letter of Credit
Application or with the structuring of any transaction related to any Letter of
Credit, and the Borrowers hereby acknowledge and agree that any such assistance
will not constitute legal or other advice by the applicable L/C Issuer or any
representation or warranty by the applicable L/C Issuer that any such wording or
such Letter of Credit will be effective. Without limiting the foregoing, the
applicable L/C Issuer may, as it deems appropriate, modify or alter and use in
any Letter of Credit the terminology contained on the Letter of Credit
Application for such Letter of Credit.

 

(g)          Cash Collateral. The Borrowers shall immediately Cash
Collateralize, with the proceeds of Committed Loans, the Outstanding Amount of
all L/C Obligations with respect to all Letters of Credit upon the issuance
thereof. In furtherance thereof, on the date of issuance of each Letter of
Credit hereunder the Borrowers shall request a Committed Borrowing to be
disbursed on such date in order to Cash Collateralize the Outstanding Amount of
all L/C Obligations with respect to such Letter of Credit in accordance with
this Section 2.03(g). Sections 2.05 and 8.02(c) set forth certain additional
requirements to deliver Cash Collateral hereunder. For purposes of this
Section 2.03, Section 2.05 and Section 8.02(c), “Cash Collateralize” means to
pledge and deposit with or deliver to the applicable L/C Issuer for its benefit,
as collateral for the applicable L/C Obligations, cash or deposit account
balances in an amount equal to 100% (or such other percentage acceptable to the
applicable L/C Issuer) of the Outstanding Amount of such L/C Obligations (other
than L/C Obligations with respect to Letters of Credit denominated in a currency
other than Dollars, which L/C Obligations shall be Cash Collateralized in an
amount equal to 105% (or such other percentage acceptable to the applicable

 

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L/C Issuer) of the Outstanding Amount of such L/C Obligations), pursuant to
documentation in form and substance satisfactory to the Agent and the applicable
L/C Issuer (which documents are hereby Consented to by the Lenders). Cash
Collateral shall be maintained in an interest bearing account established with
the applicable L/C Issuer. If at any time the Agent or the applicable L/C Issuer
reasonably determines that any funds held as Cash Collateral are subject to any
right or claim of any Person other than the Agent or the applicable L/C Issuer
or that the total amount of such funds is less than the aggregate Outstanding
Amount of all L/C Obligations, the Borrowers will, forthwith upon demand by the
Agent, pay to the Agent, as additional funds to be deposited as Cash Collateral,
an amount equal to the excess of (x) such aggregate Outstanding Amount over (y)
the total amount of funds, if any, then held as Cash Collateral that the Agent
reasonably determines to be free and clear of any such right and claim. Upon the
drawing of any Letter of Credit for which funds are on deposit as Cash
Collateral, such funds shall be applied, to the extent permitted under
applicable Laws, to reimburse the applicable L/C Issuer and, to the extent not
so applied, shall thereafter be applied to satisfy other Obligations.

 

(h)          Applicability of ISP and UCP 600. Unless otherwise expressly agreed
by the applicable L/C Issuer and the Lead Borrower when a Letter of Credit is
issued, the rules of the ISP and the UCP 600 shall apply.

 

(i)          Reserved.

 

(j)          Fronting Fee and Documentary and Processing Charges Payable to L/C
Issuer. The Borrowers shall pay directly to the applicable L/C Issuer, for its
own account, a customary fronting fee (the “Fronting Fee”) computed on the daily
amount available to be drawn under such Letter of Credit and on a monthly basis
in arrears. Such Fronting Fees shall be due and payable on the first day after
the end of each month, commencing with the first such date to occur after the
issuance of such Letter of Credit, on the Letter of Credit Expiration Date and
thereafter on demand. For purposes of computing the daily amount available to be
drawn under any Letter of Credit, the amount of the Letter of Credit shall be
determined in accordance with Section 1.06. In addition, the Borrowers shall pay
directly to the applicable L/C Issuer, for its own account, the customary
issuance, presentation, amendment and other processing fees and other standard
costs and charges, of the applicable L/C Issuer relating to letters of credit as
from time to time in effect. Such customary fees and standard costs and charges
are due and payable on demand and are nonrefundable.

 

(k)          Conflict with Issuer Documents. In the event of any conflict
between the terms hereof and the terms of any Issuer Document, the terms hereof
shall control.

 

2.04        Reserved.

 

2.05        Prepayments.

 

(a)          Subject to Section 2.09(b), the Borrowers may, upon irrevocable
notice from the Lead Borrower to the Agent, at any time or from time to time
voluntarily prepay Loans in whole or in part without premium or penalty.

 

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(b)          If for any reason the Total Outstandings at any time exceed the
Maximum Loan Amount as then in effect, the Borrowers shall immediately prepay
the Committed Loans in an aggregate amount equal to such excess.

 

(c)          Upon the expiration of any Letter of Credit or any Existing Letter
of Credit, or any reduction in the amount of any Letter of Credit or any
Existing Letter of Credit, the Borrowers shall immediately prepay the Committed
Loans then outstanding with the cash collateral held by the applicable issuer
thereof on account of such Letter of Credit or Existing Letter of Credit in an
amount equal to (i) in the case of the expiration of such Letter of Credit or
Existing Letter of Credit, the aggregate amount of cash collateral held by the
applicable issuer thereof on account of such Letter of Credit or Existing Letter
of Credit prior to giving effect to such prepayment, and (ii) in the case of any
reduction in the amount of such Letter of Credit or Existing Letter of Credit,
(A) the aggregate amount of cash collateral held by the applicable issuer
thereof on account of such Letter of Credit or Existing Letter of Credit prior
to giving effect to such prepayment minus (ii) the amount of cash collateral
required to cash collateralize the aggregate undrawn amount available to be
drawn on such Letter of Credit or Existing Letter of Credit, after giving effect
to the reduction thereof, in accordance with Section 2.03(g).

 

(d)          The Borrowers shall prepay the Loans and Cash Collateralize the L/C
Obligations (to the extent that any such L/C Obligations are not already Cash
Collateralized) with proceeds and collections received by the Loan Parties in
accordance with the provisions of Section 6.13 hereof.

 

(e)          The Borrowers shall prepay the Loans and Cash Collateralize the L/C
Obligations (to the extent that any such L/C Obligations are not already Cash
Collateralized) in an amount equal to the Net Cash Proceeds received by a Loan
Party on account of a Prepayment Event. In furtherance of the foregoing, such
Net Cash Proceeds shall be transferred to a Blocked Account in accordance with
Section 6.13. Any prepayment of the Loans pursuant to this Section 2.05(e) shall
not result in a reduction of the Aggregate Commitments.

 

(f)          Prepayments made pursuant to Section 2.05 (c), (d) and (e) above,
first, shall be applied ratably to the outstanding Committed Loans, second,
shall be used to Cash Collateralize the remaining L/C Obligations (to the extent
that any such L/C Obligations are not already Cash Collateralized), and, third,
the amount remaining, if any, may be retained by the Borrowers for use in the
ordinary course of its business. Upon the drawing of any Letter of Credit that
has been Cash Collateralized, the funds held as Cash Collateral shall be applied
(without any further action by or notice to or from the Borrowers or any other
Loan Party) to reimburse the applicable L/C Issuer.

 

2.06        Termination or Reduction of Commitments.

 

(a)          The Borrowers may, upon irrevocable notice from the Lead Borrower
to the Agent, terminate the Aggregate Commitments or the Letter of Credit
Sublimit or from time to time permanently reduce the Aggregate Commitments or
the Letter of Credit Sublimit; provided, that (i) any such notice shall be
received by the Agent not later than 11:00 a.m. five Business Days prior to the
date of termination or reduction, (ii) any such partial reduction shall be in an
aggregate amount of $1,000,000 or any whole multiple of $500,000 in excess
thereof,

 

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and (iii) the Borrowers shall not terminate or reduce (A) the Aggregate
Commitments if, after giving effect thereto and to any concurrent prepayments
hereunder, the Total Outstandings would exceed the Aggregate Commitments, and
(B) the Letter of Credit Sublimit if, after giving effect thereto, the
Outstanding Amount of L/C Obligations would exceed the Letter of Credit
Sublimit.

 

(b)          If, after giving effect to any reduction of the Aggregate
Commitments, the Letter of Credit Sublimit exceeds the amount of the Aggregate
Commitments, such Letter of Credit Sublimit shall be automatically reduced by
the amount of such excess.

 

(c)          The Agent will promptly notify the Lenders of any termination or
reduction of the Letter of Credit Sublimit or the Aggregate Commitments under
this Section 2.06. Upon any reduction of the Aggregate Commitments, the
Commitment of each Lender shall be reduced by such Lender’s Applicable
Percentage of such reduction amount. All fees (including, without limitation,
commitment fees and Termination Fees) and interest in respect of the Aggregate
Commitments accrued until the effective date of any termination of the Aggregate
Commitments shall be paid on the effective date of such termination.

 

2.07        Repayment of Loans. The Borrowers shall repay to the Lenders on the
Termination Date the aggregate principal amount of Committed Loans outstanding
on such date.

 

2.08        Interest.

 

(a)          Subject to the provisions of Section 2.08(b) below, each Committed
Loan shall bear interest on the outstanding principal amount thereof from the
applicable borrowing date at a rate per annum equal to the Applicable Interest
Rate.

 

(b)          (i)          If any amount payable under any Loan Document is not
paid when due (without regard to any applicable grace periods), whether at
stated maturity, by acceleration or otherwise, such amount shall thereafter bear
interest at a fluctuating interest rate per annum at all times equal to the
Default Rate to the fullest extent permitted by applicable Laws for so long as
such Default or Event of Default is continuing.

 

(ii)         If any other Event of Default occurs and is continuing, then the
Agent may notify the Lead Borrower that all outstanding Obligations shall
thereafter bear interest at a fluctuating interest rate per annum for so long as
such Event of Default is continuing equal to the Default Rate and thereafter
such Obligations shall bear interest at the Default Rate to the fullest extent
permitted by applicable Laws.

 

(iii)        Accrued and unpaid interest on past due amounts (including interest
on past due interest) shall be due and payable upon demand.

 

(c)          Interest on each Loan shall be due and payable in arrears on each
Interest Payment Date applicable thereto and at such other times as may be
specified herein. Interest hereunder shall be due and payable in accordance with
the terms hereof before and after judgment, and before and after the
commencement of any proceeding under any Debtor Relief Law.

 

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2.09        Fees. In addition to certain fees described in Section 2.03(j):

 

(a)          Commitment Fee. The Borrowers shall pay to the Agent, for the
account of each Lender in accordance with its Applicable Percentage, a
commitment fee calculated on a per annum basis equal to three-quarters of one
percent (0.75%) times the average daily amount by which the Aggregate
Commitments exceed the Total Outstandings. The commitment fee shall accrue at
all times during the Availability Period, including at any time during which one
or more of the conditions in Article IV is not met, and shall be calculated and
due and payable monthly in arrears on the first day after the end of each month,
commencing with the first such date to occur after the Closing Date, and on the
last day of the Availability Period.

 

(b)          Termination Fee. In the event that the Termination Date occurs, for
any reason, prior to the Maturity Date, or in the event that the Borrowers
reduce (but do not terminate) the Aggregate Commitments prior to the Maturity
Date, the Borrowers shall pay to the Agent, for the ratable benefit of the
Lenders, a fee (the “Termination Fee”) in respect of amounts which are or become
payable by reason thereof equal to the following: (i) three percent (3%) of the
Commitments then in effect (without regard to any termination thereof) or of the
amount of any reduction in the Aggregate Commitments, as applicable, if the
Termination Date or reduction shall occur at any time on or before the first
anniversary of the Closing Date; and (ii) one percent (1%) of the Commitments
then in effect (without regard to any termination thereof) or of the amount of
any reduction in the Aggregate Commitments, as applicable, if the Termination
Date or reduction shall occur at any time after the first anniversary of the
Closing Date. All parties to this Agreement agree and acknowledge that the
Lenders will have suffered damages on account of the early termination of this
Agreement or any portion of the Commitments and that, in view of the difficulty
in ascertaining the amount of such damages, the Termination Fee constitutes
reasonable compensation and liquidated damages to compensate the Lenders on
account thereof.

 

(c)          Collateral Monitoring Fee. The Borrowers shall pay to the Agent,
for the ratable benefit of the Lenders, a fee in the amount of $3,000 per month
(the “Collateral Monitoring Fee”). All Collateral Monitoring Fees payable
pursuant to this Section 2.09(c) through the Maturity Date shall be fully earned
on the Closing Date and, once paid, shall not be refundable for any reason
whatsoever, and shall be paid in monthly installments equal to $3,000 on the
first day of each calendar month commencing on December 1, 2012; provided that
on the Closing Date, the Borrower shall pay to the Lender an amount equal to
$100 multiplied by the number of days in the month of November 2012 remaining as
of such date. Any unpaid balance of the Collateral Monitoring Fee outstanding on
the Termination Date shall be paid on the Termination Date.

 

(d)          Other Fees. The Borrowers shall pay to the Agent for its own
account fees in the amounts and at the times specified in the Fee Letter. Such
fees shall be fully earned when paid and shall not be refundable for any reason
whatsoever.

 

2.10        Computation of Interest and Fees. All computations of fees and
interest shall be made on the basis of a 360-day year and actual days elapsed.
Interest shall accrue on each Loan for the day on which the Loan is made. For
purposes of the calculation of interest on the Loans and the Outstanding Amount,
all payments made by or on account of the Borrowers shall

 

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be deemed to have been applied to the Loans one (1) Business Day after receipt
of such payments by the Agent (as such receipt is determined pursuant to Section
2.12). Each determination by the Agent of an interest rate or fee hereunder
shall be conclusive and binding for all purposes, absent manifest error.

 

2.11        Evidence of Debt.

 

(a)          The Credit Extensions made by each Lender shall be evidenced by one
or more accounts or records maintained by the Agent (the “Loan Account”) in the
ordinary course of business. In addition, each Lender may record in such
Lender’s internal records, an appropriate notation evidencing the date and
amount of each Loan from such Lender, each payment and prepayment of principal
of any such Loan, and each payment of interest, fees and other amounts due in
connection with the Obligations due to such Lender. The accounts or records
maintained by the Agent and each Lender shall be conclusive absent manifest
error of the amount of the Credit Extensions made by the Lenders to the
Borrowers and the interest and payments thereon. Any failure to so record or any
error in doing so shall not, however, limit or otherwise affect the obligation
of the Borrowers hereunder to pay any amount owing with respect to the
Obligations. In the event of any conflict between the accounts and records
maintained by any Lender and the accounts and records of the Agent in respect of
such matters, the accounts and records of the Agent shall control in the absence
of manifest error. Upon the request of any Lender made through the Agent, the
Borrowers shall execute and deliver to such Lender (through the Agent) a Note,
which shall evidence such Lender’s Committed Loans, in addition to such accounts
or records. Each Lender may attach schedules to its Note and endorse thereon the
date, amount and maturity of its Loans and payments with respect thereto. Upon
receipt of an affidavit of a Lender as to the loss, theft, destruction or
mutilation of such Lender’s Note and upon cancellation of such Note, the
Borrowers will issue, in lieu thereof, a replacement Note in favor of such
Lender, in the same principal amount thereof and otherwise of like tenor.

 

(b)          Agent shall render monthly statements regarding the Loan Account to
the Lead Borrower including principal, interest, fees, and including an
itemization of all charges and expenses constituting Credit Party Expenses
owing, and such statements, absent manifest error, shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrowers and the Credit Parties unless, within thirty (30) days after receipt
thereof by the Lead Borrower, the Lead Borrower shall deliver to Agent written
objection thereto describing the error or errors contained in any such
statements.

 

2.12        Payments Generally; Agent’s Clawback.

 

(a)          General. All payments to be made by the Borrowers shall be made
without condition or deduction for any counterclaim, defense, recoupment or
setoff. Except as otherwise expressly provided herein, all payments by the
Borrowers hereunder shall be made to the Agent, for the account of the
respective Lenders to which such payment is owed, at the Agent’s Office in
Dollars and in immediately available funds not later than 2:00 p.m. on the date
specified herein. The Agent will promptly distribute to each Lender its
Applicable Percentage (or other applicable share as provided herein) of such
payment in like funds as received by wire transfer to such Lender’s Lending
Office. All payments received by the Agent shall be deemed received on the next
succeeding Business Day and any applicable interest or fee shall continue to

 

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accrue and shall be calculated pursuant to Section 2.10. If any payment to be
made by the Borrowers shall come due on a day other than a Business Day, payment
shall be made on the next following Business Day, and such extension of time
shall be reflected in computing interest or fees, as the case may be.

 

(b)          (i)          Funding by Lenders; Presumption by Agent. Unless the
Agent shall have received notice from a Lender prior to 12:00 noon on the date
of such Committed Borrowing that such Lender will not make available to the
Agent such Lender’s share of such Committed Borrowing, the Agent may assume that
such Lender has made such share available on such date in accordance with and at
the time required by Section 2.02 and may, in reliance upon such assumption,
make available to the Borrowers a corresponding amount. In such event, if a
Lender has not in fact made its share of the applicable Committed Borrowing
available to the Agent, then the applicable Lender and the Borrowers severally
agree to pay to the Agent forthwith on demand such corresponding amount in
immediately available funds with interest thereon, for each day from and
including the date such amount is made available to the Borrowers to but
excluding the date of payment to the Agent, at (A) in the case of a payment to
be made by such Lender, the greater of the Federal Funds Rate and a rate
determined by the Agent in accordance with banking industry rules on interbank
compensation plus any administrative processing or similar fees customarily
charged by the Agent in connection with the foregoing, and (B) in the case of a
payment to be made by the Borrowers, the interest rate applicable to the
Committed Loans. If the Borrowers and such Lender shall pay such interest to the
Agent for the same or an overlapping period, the Agent shall promptly remit to
the Borrowers the amount of such interest paid by the Borrowers for such period.
If such Lender pays its share of the applicable Committed Borrowing to the
Agent, then the amount so paid shall constitute such Lender’s Committed Loan
included in such Committed Borrowing. Any payment by the Borrowers shall be
without prejudice to any claim the Borrowers may have against a Lender that
shall have failed to make such payment to the Agent.

 

(ii)         Payments by Borrowers; Presumptions by Agent. Unless the Agent
shall have received notice from the Lead Borrower prior to the time at which any
payment is due to the Agent for the account of the Lenders or the applicable L/C
Issuer hereunder that the Borrowers will not make such payment, the Agent may
assume that the Borrowers have made such payment on such date in accordance
herewith and may, in reliance upon such assumption, distribute to the Lenders or
the applicable L/C Issuer, as the case may be, the amount due. In such event, if
the Borrowers have not in fact made such payment, then each of the Lenders or
the applicable L/C Issuer, as the case may be, severally agrees to repay to the
Agent forthwith on demand the amount so distributed to such Lender or the
applicable L/C Issuer, in immediately available funds with interest thereon, for
each day from and including the date such amount is distributed to it to but
excluding the date of payment to the Agent, at the greater of the Federal Funds
Rate and a rate determined by the Agent in accordance with banking industry
rules on interbank compensation.

 

A notice of the Agent to any Lender or the Lead Borrower with respect to any
amount owing under this subsection (b) shall be conclusive, absent manifest
error.

 

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(c)          Failure to Satisfy Conditions Precedent. If any Lender makes
available to the Agent funds for any Loan to be made by such Lender as provided
in the foregoing provisions of this Article II, and such funds are not made
available to the Borrowers by the Agent because the conditions to the applicable
Credit Extension set forth in Article IV are not satisfied or waived in
accordance with the terms hereof (subject to the provisions of the last
paragraph of Section 4.02 hereof), the Agent shall return such funds (in like
funds as received from such Lender) to such Lender, without interest.

 

(d)          Obligations of Lenders Several. The obligations of the Lenders
hereunder to make Committed Loans and to make payments hereunder are several and
not joint. The failure of any Lender to make any Committed Loan or to make any
payment hereunder on any date required hereunder shall not relieve any other
Lender of its corresponding obligation to do so on such date, and no Lender
shall be responsible for the failure of any other Lender to so make its
Committed Loan or to make its payment hereunder.

 

(e)          Funding Source. Nothing herein shall be deemed to obligate any
Lender to obtain the funds for any Loan in any particular place or manner or to
constitute a representation by any Lender that it has obtained or will obtain
the funds for any Loan in any particular place or manner.

 

2.13        Sharing of Payments by Lenders. If any Credit Party shall, by
exercising any right of setoff or counterclaim or otherwise, obtain payment in
respect of any principal of, interest on, or other amounts with respect to, any
of the Obligations resulting in such Lender receiving payment of a proportion of
the aggregate amount of such Obligations greater than its pro rata share thereof
as provided herein (including as in contravention of the priorities of payment
set forth in Section 8.03), then the Credit Party receiving such greater
proportion shall (a) notify the Agent of such fact, and (b) purchase (for cash
at face value) participations in the Obligations of the other Credit Parties or
make such other adjustments as shall be equitable, so that the benefit of all
such payments shall be shared by the Credit Parties ratably and in the
priorities set forth in Section 8.03, provided that:

 

(i)          if any such participations or subparticipations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations or subparticipations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest; and

 

(ii)         the provisions of this Section shall not be construed to apply to
(x) any payment made by the Loan Parties pursuant to and in accordance with the
express terms of this Agreement or (y) any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Committed Loans to any assignee or participant, other than to the Borrowers or
any Subsidiary thereof (as to which the provisions of this Section shall apply).

 

Each Loan Party consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against such
Loan Party rights of setoff and counterclaim with

 

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respect to such participation as fully as if such Lender were a direct creditor
of such Loan Party in the amount of such participation.

 

2.14         Settlement Amongst Lenders.

 

(a)          The amount of each Lender’s Applicable Percentage of outstanding
Committed Loans shall be computed weekly (or more frequently in the Agent’s
discretion) and shall be adjusted upward or downward based on all Committed
Loans and repayments of Committed Loans received by the Agent as of 3:00 p.m. on
the first Business Day (such date, the “Settlement Date”) following the end of
the period specified by the Agent.

 

(b)          The Agent shall deliver to each of the Lenders promptly after a
Settlement Date a summary statement of the amount of outstanding Committed Loans
for the period and the amount of repayments received for the period. As
reflected on the summary statement, (i) the Agent shall transfer to each Lender
its Applicable Percentage of repayments, and (ii) each Lender shall transfer to
the Agent (as provided below) or the Agent shall transfer to each Lender, such
amounts as are necessary to insure that, after giving effect to all such
transfers, the amount of Committed Loans made by each Lender shall be equal to
such Lender’s Applicable Percentage of all Committed Loans outstanding as of
such Settlement Date. If the summary statement requires transfers to be made to
the Agent by the Lenders and is received prior to 1:00 p.m. on a Business Day,
such transfers shall be made in immediately available funds no later than 3:00
p.m. that day; and, if received after 1:00 p.m., then no later than 3:00 p.m. on
the next Business Day. The obligation of each Lender to transfer such funds is
irrevocable, unconditional and without recourse to or warranty by the Agent. If
and to the extent any Lender shall not have so made its transfer to the Agent,
such Lender agrees to pay to the Agent, forthwith on demand such amount,
together with interest thereon, for each day from such date until the date such
amount is paid to the Agent, equal to the greater of the Federal Funds Rate and
a rate determined by the Agent in accordance with banking industry rules on
interbank compensation plus any administrative, processing, or similar fees
customarily charged by the Agent in connection with the foregoing.

 

Article III
TAXES, YIELD PROTECTION AND ILLEGALITY;
APPOINTMENT OF LEAD BORROWER

 

3.01        Taxes.

 

(a)          Payments Free of Taxes. Any and all payments by or on account of
any obligation of the Borrowers hereunder or under any other Loan Document shall
be made free and clear of and without reduction or withholding for any
Indemnified Taxes or Other Taxes, provided that if the Borrowers shall be
required by applicable law to deduct any Indemnified Taxes (including any Other
Taxes) from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Agent, the Lender
or the applicable L/C Issuer, as the case may be, receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrowers shall make such deductions and (iii) the

 

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Borrowers shall timely pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.

 

(b)          Payment of Other Taxes by the Borrowers. Without limiting the
provisions of subsection (a) above, the Borrowers shall timely pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(c)          Indemnification by the Loan Parties. The Loan Parties shall
indemnify the Agent, each Lender and each L/C Issuer, within ten (10) days after
demand therefor, for the full amount of any Indemnified Taxes or Other Taxes
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) paid by the Agent, such
Lender or such L/C Issuer, as the case may be, and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate setting forth in
reasonable detail the amount and basis of calculating of such payment or
liability delivered to the Lead Borrower by a Lender or a L/C Issuer (with a
copy to the Agent), or by the Agent on its own behalf or on behalf of the Agent,
a Lender or a L/C Issuer, shall be conclusive absent manifest error.

 

(d)          Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrowers to a Governmental Authority,
the Lead Borrower shall deliver to the Agent the original or a certified copy of
a receipt issued by such Governmental Authority evidencing such payment, a copy
of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Agent.

 

(e)          Status of Lenders. Any Foreign Lender that is entitled to an
exemption from or reduction of withholding tax under the law of the jurisdiction
in which any Borrower is resident for tax purposes, or any treaty to which such
jurisdiction is a party, with respect to payments hereunder or under any other
Loan Document shall deliver to the Lead Borrower (with a copy to the Agent), at
the time or times prescribed by applicable law or reasonably requested by the
Lead Borrower or the Agent, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate of withholding. Such delivery shall be provided
on the Closing Date and on or before such documentation expires or becomes
obsolete or after the occurrence of an event requiring a change in the
documentation most recently delivered. In addition, any Lender, if requested by
the Lead Borrower or the Agent, shall deliver such other documentation
prescribed by applicable law or reasonably requested by the Lead Borrower or the
Agent as will enable the Lead Borrower or the Agent to determine whether or not
such Lender is subject to backup withholding or information reporting
requirements.

 

Without limiting the generality of the foregoing, in the event that any Borrower
is resident for tax purposes in the United States, any Foreign Lender shall
deliver to the Lead Borrower and the Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
request of the Lead Borrower or the Agent, but only if such Foreign Lender is
legally entitled to do so), whichever of the following is applicable:

 

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(i)          duly completed copies of Internal Revenue Service Form W-8BEN
claiming eligibility for benefits of an income tax treaty to which the United
States is a party,

 

(ii)         duly completed copies of Internal Revenue Service Form W-8ECI,

 

(iii)        in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under section 881(c) of the Code, (x) a
certificate to the effect that such Foreign Lender is not (A) a “bank” within
the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder”
of the Borrowers within the meaning of section 881(c)(3)(B) of the Code, or (C)
a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code
and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or

 

(iv)        any other form prescribed by applicable law as a basis for claiming
exemption from or a reduction in United States Federal withholding tax duly
completed together with such supplementary documentation as may be prescribed by
applicable law to permit the Lead Borrower to determine the withholding or
deduction required to be made.

 

(f)           Treatment of Certain Refunds. If the Agent, any Lender or any L/C
Issuer determines, in its sole discretion, that it has received a refund of any
Taxes or Other Taxes as to which it has been indemnified by the Borrowers or
with respect to which the Borrowers have paid additional amounts pursuant to
this Section, it shall pay to the Borrowers an amount equal to such refund (but
only to the extent of indemnity payments made, or additional amounts paid, by
the Borrowers under this Section with respect to the Taxes or Other Taxes giving
rise to such refund), net of all out-of-pocket expenses of the Agent, such
Lender or such L/C Issuer, as the case may be, incurred in connection with
obtaining such refund and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund), provided that the
Borrowers, upon the request of the Agent, such Lender or such L/C Issuer, agree
to repay the amount paid over to the Borrowers (plus any penalties, interest or
other charges imposed by the relevant Governmental Authority) to the Agent, such
Lender or such L/C Issuer in the event the Agent, such Lender or such L/C Issuer
is required to repay such refund to such Governmental Authority. This subsection
shall not be construed to require the Agent, any Lender or any L/C Issuer to
make available its tax returns (or any other information relating to its taxes
that it deems confidential) to the Borrowers or any other Person.

 

3.02         Reserved.

 

3.03         Reserved.

 

3.04         Increased Costs.

 

(a)           Increased Costs Generally. If any Change in Law shall:

 

(i)          impose, modify or deem applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of,
deposits with

 

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or for the account of, or credit extended or participated in by, any Lender or
any L/C Issuer;

 

(ii)         subject any Lender or any L/C Issuer to any tax of any kind
whatsoever with respect to this Agreement or any Letter of Credit, or change the
basis of taxation of payments to such Lender or such L/C Issuer in respect
thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and
the imposition of, or any change in the rate of, any Excluded Tax payable by
such Lender or such L/C Issuer); or

 

(iii)        impose on any Lender or any L/C Issuer any other condition, cost or
expense affecting this Agreement or any Letter of Credit;

 

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Loan (or of maintaining its obligation to
make any such Loan), or to increase the cost to such L/C Issuer of issuing or
maintaining any Letter of Credit (or of maintaining its obligation to issue any
Letter of Credit), or to reduce the amount of any sum received or receivable by
such Lender or such L/C Issuer hereunder (whether of principal, interest or any
other amount) then, upon request of such Lender or such L/C Issuer, the
Borrowers will pay to such Lender or such L/C Issuer, as the case may be, such
additional amount or amounts as will compensate such Lender or such L/C Issuer,
as the case may be, for such additional costs incurred or reduction suffered.

 

(b)          Capital Requirements. If any Lender or any L/C Issuer determines
that any Change in Law affecting such Lender or such L/C Issuer or any Lending
Office of such Lender or such Lender’s or such L/C Issuer’s holding company, if
any, regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender’s or such L/C Issuer’s capital or on the capital
of such Lender’s or such L/C Issuer’s holding company, if any, as a consequence
of this Agreement, the Commitments of such Lender or the Loans made by such
Lender, or the Letters of Credit issued by such L/C Issuer, to a level below
that which such Lender or such L/C Issuer or such Lender’s or such L/C Issuer’s
holding company could have achieved but for such Change in Law (taking into
consideration such Lender’s or such L/C Issuer’s policies and the policies of
such Lender’s or such L/C Issuer’s holding company with respect to capital
adequacy), then from time to time the Borrowers will pay to such Lender or such
L/C Issuer, as the case may be, such additional amount or amounts as will
compensate such Lender or such L/C Issuer or such Lender’s or such L/C Issuer’s
holding company for any such reduction suffered.

 

(c)          Certificates for Reimbursement. A certificate of a Lender or a L/C
Issuer setting forth the amount or amounts necessary to compensate such Lender
or such L/C Issuer or its holding company, as the case may be, as specified in
subsection (a) or (b) of this Section and delivered to the Lead Borrower shall
be conclusive absent manifest error. The Borrowers shall pay such Lender or such
L/C Issuer, as the case may be, the amount shown as due on any such certificate
within ten (10) days after receipt thereof.

 

(d)          Delay in Requests. Failure or delay on the part of any Lender or
any L/C Issuer to demand compensation pursuant to the foregoing provisions of
this Section shall not constitute a waiver of such Lender’s or such L/C Issuer’s
right to demand such compensation,

 

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provided that the Borrowers shall not be required to compensate a Lender or a
L/C Issuer pursuant to the foregoing provisions of this Section for any
increased costs incurred or reductions suffered more than nine months prior to
the date that such Lender or such L/C Issuer, as the case may be, notifies the
Lead Borrower of the Change in Law giving rise to such increased costs or
reductions and of such Lender’s or such L/C Issuer’s intention to claim
compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the nine-month period
referred to above shall be extended to include the period of retroactive effect
thereof).

 

3.05         Reserved.

 

3.06         Mitigation Obligations; Replacement of Lenders.

 

(a)          Designation of a Different Lending Office. If any Lender requests
compensation under Section 3.04, or the Borrowers are required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 3.01, then such Lender shall use reasonable
efforts to designate a different Lending Office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 3.01 or 3.04, as the case may be, in the future, and (ii) in each
case, would not subject such Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Lender. The Borrowers hereby
agree to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

 

(b)          Replacement of Lenders. If any Lender requests compensation under
Section 3.04, or if the Borrowers are required to pay any additional amount to
any Lender or any Governmental Authority for the account of any Lender pursuant
to Section 3.01, the Borrowers may replace such Lender in accordance with
Section 10.13.

 

3.07         Survival. All of the Borrowers’ obligations under this Article III
shall survive termination of the Aggregate Commitments and repayment of the
Committed Loans and all other Obligations hereunder.

 

3.08         Designation of Lead Borrower as Borrowers’ Agent.

 

(a)          Each Borrower hereby irrevocably designates and appoints the Lead
Borrower as such Borrower’s agent to obtain Credit Extensions, the proceeds of
which shall be available to each Borrower for such uses as are permitted under
this Agreement. As the disclosed principal for its agent, each Borrower shall be
obligated to each Credit Party on account of Credit Extensions so made as if
made directly by the applicable Credit Party to such Borrower, notwithstanding
the manner by which such Credit Extensions are recorded on the books and records
of the Lead Borrower and of any other Borrower. In addition, each Loan Party
other than the Borrowers hereby irrevocably designates and appoints the Lead
Borrower as such Loan Party’s agent to represent such Loan Party in all respects
under this Agreement and the other Loan Documents.

 

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(b)          Each Borrower recognizes that credit available to it hereunder is
in excess of and on better terms than it otherwise could obtain on and for its
own account and that one of the reasons therefor is its joining in the credit
facility contemplated herein with all other Borrowers. Consequently, each
Borrower hereby assumes and agrees to discharge all Obligations of each of the
other Borrowers.

 

(c)          The Lead Borrower shall act as a conduit for each Borrower
(including itself, as a “Borrower”) on whose behalf the Lead Borrower has
requested a Credit Extension. Neither the Agent nor any other Credit Party shall
have any obligation to see to the application of such proceeds therefrom.

 

Article IV
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

4.01         Conditions of Initial Credit Extension. The obligation of each L/C
Issuer and each Lender to make its initial Credit Extension hereunder is subject
to satisfaction of the following conditions precedent:

 

(a)          The Agent’s receipt of the following, each of which shall be
originals, telecopies or other electronic image scan transmission (e.g., “pdf”
or “tif ” via e-mail) (followed promptly by originals) unless otherwise
specified, each properly executed by a Responsible Officer of the signing Loan
Party or the Lenders, as applicable, each dated the Closing Date (or, in the
case of certificates of governmental officials, a recent date before the Closing
Date) and each in form and substance satisfactory to the Agent:

 

(i)          executed counterparts of this Agreement sufficient in number for
distribution to the Agent, each Lender and the Lead Borrower;

 

(ii)         a Note executed by the Borrowers in favor of each Lender requesting
a Note;

 

(iii)        such certificates of resolutions or other action, incumbency
certificates and/or other certificates of Responsible Officers of each Loan
Party as the Agent may require evidencing (A) the authority of such Loan Party
to enter into this Agreement and the other Loan Documents to which such Loan
Party is a party or is to become a party and (B) the identity, authority and
capacity of each Responsible Officer thereof authorized to act as a Responsible
Officer in connection with this Agreement and the other Loan Documents to which
such Loan Party is a party or is to become a party;

 

(iv)        copies of the Organization Documents of each Loan Party and such
other documents and certifications as the Agent may reasonably require to
evidence that each Loan Party is duly organized or formed, and that each Loan
Party is validly existing, in good standing and qualified to engage in business
in each jurisdiction where its ownership, lease or operation of properties or
the conduct of its business requires such qualification, except to the extent
that failure to so qualify in such jurisdiction could not reasonably be expected
to have a Material Adverse Effect;

 

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(v)         a favorable opinion of Dechert LLP, counsel to the Loan Parties,
addressed to the Agent and each Lender, as to such matters concerning the Loan
Parties and the Loan Documents as the Agent may reasonably request;

 

(vi)        a certificate signed by a Responsible Officer of the Lead Borrower
certifying (A) that the conditions specified in Sections 4.02(a) and 4.02(b)
have been satisfied, (B) that there has been no event or circumstance since the
date of the Audited Financial Statements that has had or could be reasonably
expected to have, either individually or in the aggregate, a Material Adverse
Effect, (C) to the Solvency of the Loan Parties as of the Closing Date after
giving effect to the transactions contemplated hereby, and (D) either that (1)
no consents, licenses or approvals are required in connection with the
execution, delivery and performance by such Loan Party and the validity against
such Loan Party of the Loan Documents to which it is a party, or (2) that all
such consents, licenses and approvals have been obtained and are in full force
and effect;

 

(vii)       evidence that all insurance required to be maintained pursuant to
the Loan Documents and all endorsements in favor of the Agent required under the
Loan Documents have been obtained and are in effect;

 

(viii)      a payoff letter from the lenders under the Existing Credit Agreement
satisfactory in form and substance to the Agent evidencing that the Existing
Credit Agreement has been or concurrently with the Closing Date is being
terminated, all obligations thereunder are being paid in full, and all Liens
securing obligations under the Existing Credit Agreement have been or
concurrently with the Closing Date are being released;

 

(ix)         the Security Documents and certificates evidencing any stock being
pledged thereunder, together with undated stock powers executed in blank, each
duly executed by the applicable Loan Parties;

 

(x)          all other Loan Documents, each duly executed by the applicable Loan
Parties;

 

(xi)         (A)         appraisals (based on net liquidation value) by a third
party appraiser acceptable to the Agent of all Inventory of the Loan Parties,
the results of which are satisfactory to the Agent and (B) a written report
regarding the results of a commercial finance examination of the Loan Parties,
which shall be satisfactory to the Agent;

 

(xii)        results of searches or other evidence reasonably satisfactory to
the Agent (in each case dated as of a date reasonably satisfactory to the Agent)
indicating the absence of Liens on the assets of the Loan Parties, except for
Permitted Encumbrances and Liens for which termination statements and releases,
satisfactions and discharges of any mortgages, and releases or subordination
agreements satisfactory to the Agent are being tendered concurrently with such
extension of credit or other arrangements

 

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satisfactory to the Agent for the delivery of such termination statements and
releases, satisfactions and discharges have been made;

 

(xiii)       (A)         all documents and instruments, including Uniform
Commercial Code financing statements, required by law or reasonably requested by
the Agent to be filed, registered or recorded to create or perfect the first
priority Liens intended to be created under the Loan Documents and all such
documents and instruments shall have been so filed, registered or recorded to
the satisfaction of the Agent, (B) the DDA Notifications, Credit Card
Notifications, and Blocked Account Agreements required pursuant to Section 6.13
hereof, (C) control agreements with respect to the Loan Parties’ securities and
investment accounts, and (D) Collateral Access Agreements as required by the
Agent; and

 

(xiv)      such other assurances, certificates, documents, consents or opinions
as the Agent reasonably may require.

 

(b)          After giving effect to (i) the first funding under the Loans, (ii)
any charges to the Loan Account made in connection with the establishment of the
credit facility contemplated hereby and (iii) all Letters of Credit to be issued
at, or immediately subsequent to, such establishment, Availability shall be not
less than $1,000,000.

 

(c)          The Agent shall have received a Borrowing Base Certificate dated
the Closing Date, relating to the week ended on November 2, 2012, and executed
by a Responsible Officer of the Lead Borrower.

 

(d)          The Agent shall be reasonably satisfied that any financial
statements delivered to it fairly present the business and financial condition
of the Loan Parties and that there has been no Material Adverse Effect since the
date of the Audited Financial Statements.

 

(e)          The Agent shall have received and be satisfied with the Borrowers’
Business Plan and such other information (financial or otherwise) reasonably
requested by the Agent.

 

(f)          The Agent shall have received evidence that the Borrowers have
entered into agreements with Wells Fargo Bank, National Association with respect
to the Existing Letters of Credit (which agreements shall be reasonably
satisfactory to the Agent) and that the Borrowers have made arrangements
satisfactory to the Agent to cash collateralize the outstanding amount of all
obligations with respect to the Existing Letters of Credit on the Closing Date.

 

(g)          There shall not be pending any litigation or other proceeding, the
result of which, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

 

(h)          There shall not have occurred any default of any Material Contract
of any Loan Party.

 

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(i)          The consummation of the transactions contemplated hereby shall not
violate any applicable Law or any Organization Document.

 

(j)          All fees and expenses required to be paid to the Agent on or before
the Closing Date shall have been paid in full, and all fees and expenses
required to be paid to the Lenders on or before the Closing Date shall have been
paid in full.

 

(k)          The Borrowers shall have paid all fees, charges and disbursements
of counsel to the Agent to the extent invoiced prior to or on the Closing Date,
plus such additional amounts of such fees, charges and disbursements as shall
constitute its reasonable estimate of such fees, charges and disbursements
incurred or to be incurred by it through the Closing Date (provided that such
estimate shall not thereafter preclude a final settling of accounts between the
Borrowers and the Agent).

 

(l)          The Agent and the Lenders shall have completed satisfactory
background checks of the Loan Parties’ shareholders and management and shall
have received all documentation and other information required by regulatory
authorities under applicable “know your customer” and anti-money laundering
rules and regulations, including without limitation the USA PATRIOT Act.

 

(m)          No material changes in governmental regulations or policies
affecting any Loan Party or any Credit Party shall have occurred prior to the
Closing Date since September 30, 2012.

 

(n)          There shall not have occurred any disruption or material adverse
change in the United States financial or capital markets in general that has
had, in the reasonable opinion of the Agent, a material adverse effect on the
market for loan syndications or adversely affecting the syndication of the Loans
since September 30, 2012.

 

(o)          The Closing Date shall have occurred on or before November 30,
2012. The Agent shall notify the Lead Borrower and the Lenders of the Closing
Date, and such notice shall be conclusive and binding on the Loan Parties.

 

Without limiting the generality of the provisions of Section 9.04, for purposes
of determining compliance with the conditions specified in this Section 4.01,
each Lender that has signed this Agreement shall be deemed to have Consented to,
approved or accepted or to be satisfied with, each document or other matter
required thereunder to be Consented to or approved by or acceptable or
satisfactory to a Lender unless the Agent shall have received notice from such
Lender prior to the proposed Closing Date specifying its objection thereto.

 

4.02         Conditions to all Credit Extensions. The obligation of each Lender
to honor any Request for Credit Extension and each L/C Issuer to issue each
Letter of Credit is subject to the following conditions precedent:

 

(a)          The representations and warranties of each other Loan Party
contained in Article V or in any other Loan Document, or which are contained in
any document furnished at any time under or in connection herewith or therewith,
shall be true and correct in all material respects on and as of the date of such
Credit Extension, except (i) to the extent that such

 

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representations and warranties specifically refer to an earlier date, in which
case they shall be true and correct in all material respects as of such earlier
date and (ii) for purposes of this Section 4.02, the representations and
warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed
to refer to the most recent statements furnished pursuant to clauses (a) and
(b), respectively, of Section 6.01;

 

(b)          No Default or Event of Default shall exist and be continuing, or
would result from such proposed Credit Extension or from the application of the
proceeds thereof;

 

(c)          The Agent and, if applicable, the applicable L/C Issuer shall have
received a Request for Credit Extension in accordance with the requirements
hereof;

 

(d)          No event or circumstance which could reasonably be expected to
result in a Material Adverse Effect shall have occurred; and

 

(e)          No Overadvance shall result from such Credit Extension.

 

Each Request for Credit Extension submitted by the Borrower shall be deemed to
be a representation and warranty by the Borrowers that the conditions specified
in Sections 4.02(a) and (b) have been satisfied on and as of the date of the
applicable Credit Extension. The conditions set forth in this Section 4.02 are
for the sole benefit of the Credit Parties but until the Required Lenders
otherwise direct the Agent to cease making Committed Loans and direct each L/C
Issuer to cease issuing Letters of Credit, the Lenders will fund their
Applicable Percentage of all Committed Loans whenever made, which are requested
by the Lead Borrower and which, notwithstanding the failure of the Loan Parties
to comply with the provisions of this Article IV, agreed to by the Agent;
provided, however, the making of any such Loans or the issuance of any Letters
of Credit shall not be deemed a modification or waiver by any Credit Party of
the provisions of this Article IV on any future occasion or a waiver of any
rights or the Credit Parties as a result of any such failure to comply.

 

Article V
REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties to enter into this Agreement and to make Loans and
to issue Letters of Credit hereunder, each Loan Party represents and warrants to
the Agent and the other Credit Parties that:

 

5.01         Existence, Qualification and Power. Each Loan Party and each
Subsidiary thereof (a) is a corporation, limited liability company, partnership
or limited partnership, duly incorporated, organized or formed, validly existing
and, where applicable, in good standing under the Laws of the jurisdiction of
its incorporation, organization, or formation, (b) has all requisite power and
authority and all requisite governmental licenses, permits, authorizations,
consents and approvals to (i) own or lease its assets and carry on its business
and (ii) execute, deliver and perform its obligations under the Loan Documents
to which it is a party, and (c) is duly qualified and is licensed and, where
applicable, in good standing under the Laws of each jurisdiction where its
ownership, lease or operation of properties or the conduct of its business
requires such qualification or license; except in each case referred to in
clause (b)(i) or (c), to the extent that failure to do so could not reasonably
be expected to have a Material Adverse Effect.

 

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Schedule 5.01 annexed hereto sets forth, as of the Closing Date, each Loan
Party’s name as it appears in official filings in its state of incorporation or
organization, its state of incorporation or organization, organization type,
organization number, if any, issued by its state of incorporation or
organization, and its federal employer identification number.

 

5.02         Authorization; No Contravention. The execution, delivery and
performance by each Loan Party of each Loan Document to which such Person is or
is to be a party has been duly authorized by all necessary corporate or other
organizational action, and does not and will not (a) contravene the terms of any
of such Person's Organization Documents; (b) conflict with or result in any
breach, termination, or contravention of, or constitute a default under (i) any
Material Contract or any Material Indebtedness to which such Person is a party
or affecting such Person or the properties of such Person or any of its
Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental
Authority or any arbitral award to which such Person or its property is subject
that would reasonably be expected to result in a Material Adverse Effect; (c)
result in or require the creation of any Lien upon any asset of any Loan Party
(other than Liens in favor of the Agent under the Security Documents) that would
reasonably be expected to result in a Material Adverse Effect; or (d) violate
any Law in any material respect.

 

5.03         Governmental Authorization; Other Consents. No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with the execution, delivery or performance by, or enforcement
against, any Loan Party of this Agreement or any other Loan Document, except for
(a) the perfection or maintenance of the Liens created under the Security
Documents (including the first priority nature thereof) or (b) such as have been
obtained or made and are in full force and effect.

 

5.04         Binding Effect. This Agreement has been, and each other Loan
Document, when delivered, will have been, duly executed and delivered by each
Loan Party that is party thereto. This Agreement constitutes, and each other
Loan Document when so delivered will constitute, a legal, valid and binding
obligation of such Loan Party, enforceable against each Loan Party that is party
thereto in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.

 

5.05         Financial Statements; No Material Adverse Effect.

 

(a)          The Audited Financial Statements were prepared in accordance with
GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein; (ii) fairly present the financial condition
of the Lead Borrower and its Subsidiaries as of the date thereof and their
results of operations for the period covered thereby in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein; and (iii) show all Material Indebtedness and other
liabilities, direct or contingent, of the Lead Borrower and its Subsidiaries as
of the date thereof, including liabilities for taxes, material commitments and
Indebtedness.

 

(b)          The unaudited Consolidated and consolidating balance sheet of the
Lead Borrower and its Subsidiaries dated June 30, 2012, and the related
Consolidated and

 

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consolidating statements of income or operations, Shareholders’ Equity and cash
flows for the Fiscal Quarter ended on that date (i) were prepared in accordance
with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein, and (ii) fairly present the financial
condition of the Lead Borrower and its Subsidiaries as of the date thereof and
their results of operations for the period covered thereby, subject, in the case
of clauses (i) and (ii), to the absence of footnotes and to normal year-end
audit adjustments.

 

(c)          Since the date of the Audited Financial Statements, there has been
no event or circumstance, either individually or in the aggregate, that has had
or could reasonably be expected to have a Material Adverse Effect.

 

(d)          To the best knowledge of the Lead Borrower, no Internal Control
Event exists or has occurred since the date of the Audited Financial Statements
that has resulted in or could reasonably be expected to result in a misstatement
in any material respect of the Borrowing Base or that, either individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

(e)          The Business Plan of the Lead Borrower and its Subsidiaries
delivered pursuant to Section 6.01(d) was prepared in good faith on the basis of
the assumptions stated therein, which assumptions were fair in light of the
conditions existing at the time of delivery thereof, and represented, at the
time of delivery, the Loan Parties’ best estimate of its future financial
performance (it being understood that such forecasted financial information is
subject to significant uncertainties and contingencies, many of which are beyond
the control of the Loan Parties, that no assurance is given that any particular
forecasts will be realized, that actual results may differ and that such
differences may be material).

 

5.06         Litigation. There are no actions, suits, proceedings, claims or
disputes pending or, to the knowledge of the Loan Parties, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental
Authority, by or against any Loan Party or any of its Subsidiaries or against
any of its properties or revenues that (a) purport to affect or pertain to this
Agreement or any other Loan Document, or any of the transactions contemplated
hereby, or (b) either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

 

5.07         No Default. No Loan Party or any Subsidiary is in default in any
material respect under or with respect to any Material Contract and no Loan
Party or any Subsidiary is in default under or with respect to any Material
Indebtedness. No Default or Event of Default has occurred and is continuing or
would result from the consummation of the transactions contemplated by this
Agreement or any other Loan Document.

 

5.08         Ownership of Property; Liens.

 

(a)          Each of the Loan Parties and each Subsidiary thereof has good
record and marketable title in fee simple to or valid leasehold interests in,
all Real Estate necessary or used in the ordinary conduct of its business,
except for such defects in title as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each of the Loan

 

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Parties and each Subsidiary has good and marketable title to, valid leasehold
interests in, or valid licenses to use all personal property and assets material
to the ordinary conduct of its business.

 

(b)          Schedule 5.08(b)(1) sets forth the address (including street
address, county and state) of all Real Estate that is owned by the Loan Parties
and each of their Subsidiaries, together with a list of the holders of any
mortgage or other Lien thereon as of the Closing Date. Each Loan Party and each
of its Subsidiaries has good, marketable and insurable fee simple title to the
Real Estate owned by such Loan Party or such Subsidiary, free and clear of all
Liens, other than Permitted Encumbrances. Schedule 5.08(b)(2) sets forth the
address (including street address, county and state) of all Leases of the Loan
Parties, together with a list of the lessor and its contact information with
respect to each such Lease as of the Closing Date. To the knowledge of the Loan
Parties, each of such Leases is in full force and effect and the Loan Parties
are not in default of the material terms thereof.

 

(c)          The property of each Loan Party and each of its Subsidiaries is
subject to no Liens, other than Permitted Encumbrances.

 

(d)          Schedule 7.02 sets forth a complete and accurate list of all
Investments held by any Loan Party or any Subsidiary of a Loan Party on the
Closing Date, showing as of the Closing Date the amount, obligor or issuer and
maturity, if any, thereof.

 

(e)          Schedule 7.03 sets forth a complete and accurate list of all
Indebtedness of each Loan Party or any Subsidiary of a Loan Party on the Closing
Date, showing as of the Closing Date the amount, obligor or issuer and maturity
thereof.

 

5.09         Environmental Compliance. Except as specifically disclosed in
Schedule 5.09, no Loan Party or any Subsidiary thereof (i) has failed to comply
with any Environmental Law or to obtain, maintain or comply with any permit,
license or other approval required under any Environmental Law, (ii) has become
subject to any Environmental Liability, (iii) has received notice of any claim
with respect to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability, except, in each case, as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

 

5.10         Insurance. The properties of the Loan Parties and their
Subsidiaries are insured with financially sound and reputable insurance
companies which are not Affiliates of the Loan Parties, in such amounts, with
such deductibles and covering such risks (including, without limitation,
workmen’s compensation, public liability, business interruption and property
damage insurance) as are customarily carried by companies engaged in similar
businesses and owning similar properties in localities where the Loan Parties or
the applicable Subsidiary operates. Schedule 5.10 sets forth a description of
all insurance maintained by or on behalf of the Loan Parties and their
Subsidiaries as of the Closing Date. Each insurance policy listed on Schedule
5.10 is in full force and effect and all premiums in respect thereof that are
due and payable have been paid.

 

5.11         Taxes. The Loan Parties and their Subsidiaries have filed all
Federal, state and other income tax returns and reports, and all other material
tax returns and reports, required to be filed, and have paid all Federal, state
and other income taxes, and all other material taxes,

 

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assessments, fees and other governmental charges, levied or imposed upon them or
their properties, income or assets otherwise due and payable, except those which
are being contested in good faith by appropriate proceedings being diligently
conducted, for which adequate reserves have been provided in accordance with
GAAP, and which contest effectively suspends the collection of the contested
obligation and the enforcement of any Lien securing such obligation. There is no
proposed tax assessment against any Loan Party or any Subsidiary that would, if
made, have a Material Adverse Effect. No Loan Party or any Subsidiary thereof is
a party to any tax sharing agreement.

 

5.12        ERISA Compliance.

 

(a)          Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal or state Laws. Each
Plan that is intended to qualify under Section 401(a) of the Code has received a
favorable determination letter from the IRS or an application for such a letter
is currently being processed by the IRS with respect thereto and, to the best
knowledge of the Lead Borrower, nothing has occurred which would prevent, or
cause the loss of, such qualification. The Loan Parties and each ERISA Affiliate
have made all required contributions to each Plan subject to Section 412 of the
Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan. No Lien imposed under the Code or ERISA exists or is likely
to arise on account of any Plan.

 

(b)          There are no pending or, to the best knowledge of the Lead
Borrower, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan that could reasonably be expected to have a
Material Adverse Effect. There has been no prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan that has resulted
or could reasonably be expected to result in a Material Adverse Effect.

 

(c)          (i)          No ERISA Event has occurred or is reasonably expected
to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability (and no event has occurred which, with the
giving of notice under Section 4219 of ERISA, would result in such liability)
under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and
(v) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction
that could be subject to Sections 4069 or 4212(c) of ERISA.

 

5.13        Subsidiaries; Equity Interests. The Loan Parties have no
Subsidiaries other than those specifically disclosed in Part (a) of Schedule
5.13, which Schedule sets forth the legal name, jurisdiction of incorporation or
formation and authorized Equity Interests of each such Subsidiary. All of the
outstanding Equity Interests in such Subsidiaries have been validly issued, are
fully paid and non-assessable and are owned by a Loan Party (or a Subsidiary of
a Loan Party) in the amounts specified on Part (a) of Schedule 5.13 free and
clear of all Liens except for those created under the Security Documents. Except
as set forth in Schedule 5.13, there are no outstanding rights to purchase any
Equity Interests in any Subsidiary. The Loan Parties have no

 

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equity investments in any other corporation or entity other than those
specifically disclosed in Part(b) of Schedule 5.13. All of the outstanding
Equity Interests in the Loan Parties have been validly issued, and are fully
paid and non-assessable and are owned in the amounts specified on Part (c) of
Schedule 5.13 free and clear of all Liens except for those created under the
Security Documents and any Permitted Encumbrances. The copies of the
Organization Documents of each Loan Party and each amendment thereto provided
pursuant to Section 4.01 are true and correct copies of each such document, each
of which is valid and in full force and effect.

 

5.14        Margin Regulations; Investment Company Act.

 

(a)          No Loan Party is engaged or will be engaged, principally or as one
of its important activities, in the business of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the FRB), or extending
credit for the purpose of purchasing or carrying margin stock. None of the
proceeds of the Credit Extensions shall 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 Credit
Extensions to be considered a “purpose credit” within the meaning of Regulations
T, U, or X issued by the FRB.

 

(b)          None of the Loan Parties or any Subsidiary is or is required to be
registered as an “investment company” under the Investment Company Act of 1940.

 

5.15        Disclosure. Each Loan Party has disclosed to the Agent and the
Lenders all agreements, instruments and corporate or other restrictions to which
it or any of its Subsidiaries is subject, and all other matters known to it,
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect. No report, financial statement, certificate or
other information furnished (whether in writing or orally) by or on behalf of
any Loan Party to the Agent or any Lender in connection with the transactions
contemplated hereby and the negotiation of this Agreement or delivered hereunder
or under any other Loan Document (in each case, as modified or supplemented by
other information so furnished) contains any material misstatement of fact or
omits to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided that, with respect to projected financial information, the Loan Parties
represent only that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time.

 

5.16        Compliance with Laws. Each of the Loan Parties and each Subsidiary
is in compliance (a) in all material respects with the requirements of all Laws
and all orders, writs, injunctions and decrees applicable to it or to its
properties, except in such instances in which (i) such requirement of Law or
order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (ii) the failure to comply
therewith, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect, and (b) with Sections 10.17 and
10.18 hereof.

 

5.17        Intellectual Property; Licenses, Etc. The Loan Parties and their
Subsidiaries own, or possess the right to use, all of the Intellectual Property,
licenses, permits and other authorizations that are reasonably necessary for the
operation of their respective businesses,

 

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without conflict with the rights of any other Person. To the best knowledge of
the Lead Borrower, no slogan or other advertising device, product, process,
method, substance, part or other material now employed, or now contemplated to
be employed, by any Loan Party or any Subsidiary infringes upon any rights held
by any other Person, except any such infringement that could not reasonably be
expected to have a Material Adverse Effect. Except as specifically disclosed in
Schedule 5.17, no claim or litigation regarding any of the foregoing is pending
or, to the best knowledge of the Lead Borrower, threatened, which, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

 

5.18         Labor Matters. As of the Closing Date, there are no strikes,
lockouts, slowdowns or other material labor disputes against any Loan Party or
any Subsidiary thereof pending or, to the knowledge of any Loan Party,
threatened. The hours worked by and payments made to employees of the Loan
Parties comply with the Fair Labor Standards Act and any other applicable
federal, state, local or foreign Law dealing with such matters except to the
extent that any such violation could not reasonably be expected to have a
Material Adverse Effect. No Loan Party or any of its Subsidiaries has incurred
any liability or obligation under the Worker Adjustment and Retraining Act or
similar state Law. All material payments due from any Loan Party and its
Subsidiaries, or for which any claim may be made against any Loan Party or any
of its Subsidiaries, on account of wages and employee health and welfare
insurance and other benefits, have been paid or properly accrued in accordance
with GAAP as a liability on the books of such Loan Party. Except as set forth on
Schedule 5.18, no Loan Party or any Subsidiary is a party to or bound by any
collective bargaining agreement. There are no representation proceedings pending
or, to any Loan Party’s knowledge, threatened to be filed with the National
Labor Relations Board, and no labor organization or group of employees of any
Loan Party or any Subsidiary has made a pending demand for recognition. There
are no complaints, unfair labor practice charges, grievances, arbitrations,
unfair employment practices charges or any other claims or complaints against
any Loan Party or any Subsidiary pending or, to the knowledge of any Loan 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 of any employee of any Loan Party or any of its
Subsidiaries which, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. The consummation of the transactions
contemplated by the Loan Documents will not give rise to any right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which any Loan Party or any of its
Subsidiaries is bound.

 

5.19         Security Documents.

 

(a)          The Security Agreement creates in favor of the Agent, for the
benefit of the Secured Parties referred to therein, a legal, valid, continuing
and enforceable security interest in the Collateral (as defined in the Security
Agreement), the enforceability of which is subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law. The financing statements,
releases and other filings are in appropriate form and have been or will be
filed in the offices specified in Schedule II of the Security Agreement. Upon
such filings and/or the obtaining of “control” (as defined in the UCC), the
Agent will have a perfected Lien on, and security interest in, to and under all
right, title and interest of the grantors thereunder in all Collateral that may
be perfected by filing,

 

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recording or registering a financing statement or analogous document (including
without limitation the proceeds of such Collateral subject to the limitations
relating to such proceeds in the UCC) or by obtaining control, under the UCC (in
effect on the date this representation is made) in each case prior and superior
in right to any other Person.

 

(b)          When the Security Agreement (or a short form thereof) is filed in
the United States Patent and Trademark Office and the United States Copyright
Office and when financing statements, releases and other filings in appropriate
form are filed in the offices specified in Schedule II of the Security
Agreement, the Agent shall have a fully perfected Lien on, and security interest
in, all right, title and interest of the applicable Loan Parties in the
Intellectual Property (as defined in the Security Agreement) in which a security
interest may be perfected by filing, recording or registering a security
agreement, financing statement or analogous document in the United States Patent
and Trademark Office or the United States Copyright Office, as applicable, in
each case prior and superior in right to any other Person (it being understood
that subsequent recordings in the United States Patent and Trademark Office and
the United States Copyright Office may be necessary to perfect a Lien on
registered trademarks, trademark applications and copyrights acquired by the
Loan Parties after the Closing Date).

 

5.20         Solvency. After giving effect to the transactions contemplated by
this Agreement, and before and after giving effect to each Credit Extension, the
Loan Parties, on a Consolidated basis, are Solvent. No transfer of property has
been or will be made by any Loan Party and no obligation has been or will be
incurred by any Loan Party in connection with the transactions contemplated by
this Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of any Loan Party.

 

5.21         Deposit Accounts; Credit Card Arrangements.

 

(a)          Annexed hereto as Schedule 5.21(a) is a list of all DDAs maintained
by the Loan Parties as of the Closing Date, which Schedule includes, with
respect to each DDA (i) the name and address of the depository; (ii) the account
number(s) maintained with such depository; (iii) a contact person at such
depository, and (iv) the identification of each Blocked Account Bank.

 

(b)          Annexed hereto as Schedule 5.21(b) is a list describing all
arrangements as of the Closing Date to which any Loan Party is a party with
respect to the processing and/or payment to such Loan Party of the proceeds of
any credit card charges and debit card charges for sales made by such Loan
Party.

 

5.22         Brokers. No broker or finder brought about the obtaining, making or
closing of the Loans or transactions contemplated by the Loan Documents, and no
Loan Party or Affiliate thereof has any obligation to any Person in respect of
any finder’s or brokerage fees in connection therewith.

 

5.23         Customer and Trade Relations. There exists no actual or, to the
knowledge of any Loan Party, threatened, termination or cancellation of, or any
material adverse modification

 

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or change in the business relationship of any Loan Party with any supplier
material to its operations that could reasonably be expected to result in a
Material Adverse Effect.

 

5.24         Material Contracts. Schedule 5.24 sets forth all Material Contracts
to which any Loan Party is a party or is bound as of the Closing Date. The Loan
Parties have delivered true, correct and complete copies of such Material
Contracts to the Agent on or before the Closing Date. As of the Closing Date,
the Loan Parties have not received any notice of the intention of any other
party thereto to terminate any Material Contract. Following the Closing Date,
the Loan Parties have not received any notice of the intention of any other
party thereto to terminate any Material Contract (except to the extent that such
Material Contract is terminated in accordance with its terms and, unless the
failure to do so could not reasonably be expected to have a Material Adverse
Effect, the Loan Parties make reasonable arrangements for a suitable replacement
of the same).

 

5.25         Casualty. Neither the businesses nor the properties of any Loan
Party or any of its Subsidiaries are affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether or not
covered by insurance) that, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.

 

5.26         Business Plan. The Borrowers are operating their business in a
manner consistent in all material respects with the Business Plan most recently
delivered pursuant to Section 6.01(d) and accepted by the Agent in its
discretion.

 

Article VI
AFFIRMATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or other
Obligation hereunder shall remain unpaid or unsatisfied (other than contingent
indemnification obligations for which a claim has not been asserted), or any
Letter of Credit shall remain outstanding, the Loan Parties shall, and shall
(except in the case of the covenants set forth in Sections 6.01, 6.02, and 6.03)
cause each Subsidiary to:

 

6.01         Financial Statements. Deliver to the Agent, in form and detail
satisfactory to the Agent:

 

(a)          as soon as available, but in any event within ninety (90) days
after the end of each Fiscal Year of the Lead Borrower, a Consolidated and
consolidating balance sheet of the Lead Borrower and its Subsidiaries as at the
end of such Fiscal Year, and the related Consolidated and consolidating
statements of income or operations, Shareholders’ Equity and cash flows for such
Fiscal Year, setting forth in each case in comparative form the figures for the
previous Fiscal Year, all in reasonable detail and prepared in accordance with
GAAP, such Consolidated statements to be audited and accompanied by a report and
unqualified opinion of a Registered Public Accounting Firm of nationally
recognized standing reasonably acceptable to the Agent, which report and opinion
shall be prepared in accordance with generally accepted auditing standards and
shall not be subject to any “going concern” or like qualification or exception
or any qualification or exception as to the scope of such audit, and such
consolidating

 

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statements to be certified by a Responsible Officer of the Lead Borrower to the
effect that such statements are fairly stated in all material respects when
considered in relation to the consolidated financial statements of the Lead
Borrower and its Subsidiaries;

 

(b)          as soon as available, but in any event within forty-five (45) days
after the end of each of the Fiscal Quarters of each Fiscal Year of the Lead
Borrower, a Consolidated and consolidating balance sheet of the Lead Borrower
and its Subsidiaries as at the end of such Fiscal Quarter, and the related
Consolidated and consolidating statements of income or operations, Shareholders’
Equity and cash flows for such Fiscal Quarter and for the portion of the Lead
Borrower’s Fiscal Year then ended, setting forth in each case in comparative
form the figures for (A) such period set forth in the projections delivered
pursuant to Section 6.01(d) hereof, (B) the corresponding Fiscal Quarter of the
previous Fiscal Year and (C) the corresponding portion of the previous Fiscal
Year, all in reasonable detail, such Consolidated statements to be certified by
a Responsible Officer of the Lead Borrower as fairly presenting the financial
condition, results of operations, Shareholders’ Equity and cash flows of the
Lead Borrower and its Subsidiaries as of the end of such Fiscal Quarter in
accordance with GAAP, subject only to normal year-end audit adjustments and the
absence of footnotes, and such consolidating statements to be certified by a
Responsible Officer of the Lead Borrower to the effect that such statements are
fairly stated in all material respects when considered in relation to the
consolidated financial statements of the Lead Borrower and its Subsidiaries;

 

(c)          as soon as available, but in any event within thirty (30) days
after the end of each of the Fiscal Months of each Fiscal Year of the Lead
Borrower, a Consolidated and consolidating balance sheet of the Lead Borrower
and its Subsidiaries as at the end of such Fiscal Month, and the related
Consolidated and consolidating statements of income or operations, Shareholders’
Equity and cash flows for such Fiscal Month and for the portion of the Lead
Borrower’s Fiscal Year then ended, setting forth in each case in comparative
form the figures for (A) such period set forth in the projections delivered
pursuant to Section 6.01(d) hereof, (B) the corresponding Fiscal Month of the
previous Fiscal Year and (C) the corresponding portion of the previous Fiscal
Year, all in reasonable detail, such consolidated statements to be certified by
a Responsible Officer of the Lead Borrower as fairly presenting the financial
condition, results of operations, Shareholders’ Equity and cash flows of the
Lead Borrower and its Subsidiaries as of the end of such Fiscal Month in
accordance with GAAP, subject only to normal quarterly and year-end audit
adjustments and the absence of footnotes and such consolidating statements to be
certified by a Responsible Officer of the Lead Borrower to the effect that such
statements are fairly stated in all material respects when considered in
relation to the consolidated financial statements of the Lead Borrower and its
Subsidiaries;

 

(d)          as soon as available, but in any event no more than fifteen (15)
days before the end of each Fiscal Year of the Lead Borrower, the Business Plan
of the Lead Borrower and its Subsidiaries on a monthly basis for the immediately
following Fiscal Year (including the Fiscal Year in which the Maturity Date
occurs), and as soon as available, any significant revisions to the Business
Plan with respect to such Fiscal Year.

 

6.02         Certificates; Other Information. Deliver to the Agent, in form and
detail satisfactory to the Agent:

 

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(a)          concurrently with the delivery of the financial statements referred
to in Section 6.01(a), a certificate of its Registered Public Accounting Firm
certifying such financial statements and stating that in making the examination
necessary for their certification of such financial statements, such Registered
Public Accounting Firm has not obtained any knowledge of the existence of any
Default or Event of Default or, if any such Default or Event of Default shall
exist, stating the nature and status of such event;

 

(b)          concurrently with the delivery of the financial statements referred
to in Sections 6.01(a) and 6.01(b) and 6.01(c) (commencing with the delivery of
the financial statements for the Fiscal Month ended October 31, 2012), (i) a
duly completed Compliance Certificate signed by a Responsible Officer of the
Lead Borrower, and in the event of any change in generally accepted accounting
principles used in the preparation of such financial statements, the Lead
Borrower shall also provide a statement of reconciliation conforming such
financial statements to GAAP, and (ii) in the case of Section 6.01(a) and
6.01(b), a copy of management’s discussion and analysis with respect to such
financial statements provided that any management’s discussion and analysis
prepared in connection with the financial statements for the fourth Fiscal
Quarter of each Fiscal Year shall not be required to be as comprehensive in
scope and detail as is customary for one provided in a Form 10-Q report);

 

(c)          on the Tuesday of each week (or, if such day is not a Business Day,
on the next succeeding Business Day), a Borrowing Base Certificate showing the
Borrowing Base as of the close of business as of the last day of the immediately
preceding week (provided that the Appraised Value percentage applied to the
Eligible Inventory set forth in each Borrowing Base Certificate shall be the
percentage set forth in the most recent appraisal obtained by the Agent pursuant
to Section 6.10 hereof for the applicable month in which such Borrowing Base
Certificate is delivered), each Borrowing Base Certificate to be certified as
complete and correct by a Responsible Officer of the Lead Borrower and
accompanied by all applicable system generated documentation supporting the
information contained within the Borrowing Base Certificate, including but not
limited to inventory reporting inclusive of inventory mix by category and/or
department and, where applicable, accounts receivable detail documentation and
any additional documentation reasonable requested by the Agent;

 

(d)          promptly upon receipt or delivery thereof, copies of any detailed
audit reports, management letters or recommendations submitted to the board of
directors (or the audit committee of the board of directors) of any Loan Party
by its Registered Public Accounting Firm in connection with the accounts or
books of the Loan Parties or any Subsidiary, or any audit of any of them,
including, without limitation, specifying any Internal Control Event;

 

(e)          promptly after the same are available, copies of each annual
report, proxy or financial statement or other report or communication sent to
the stockholders of the Loan Parties, and copies of all annual, regular,
periodic and special reports and registration statements which any Loan Party
may file or be required to file with the SEC under Section 13 or 15(d) of the
Securities Exchange Act of 1934 or with any national securities exchange, and in
any case not otherwise required to be delivered to the Agent pursuant hereto;

 

(f)          The financial and collateral reports described on Schedule 6.02
hereto, at the times set forth in such Schedule;

 

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(g)          promptly after the furnishing thereof, copies of any statement or
report furnished to any holder of debt securities of any Loan Party or any
Subsidiary thereof pursuant to the terms of any indenture, loan or credit or
similar agreement and not otherwise required to be furnished to the Agent
pursuant to Section 6.01 or any other clause of this Section 6.02;

 

(h)          as soon as available, but in any event within thirty (30) days
after the end of each Fiscal Year of the Loan Parties, a report summarizing the
insurance coverage (specifying type, amount and carrier) in effect for each Loan
Party and its Subsidiaries and containing such additional information as the
Agent, or any Lender through the Agent, may reasonably specify;

 

(i)          promptly after the Agent’s request therefor, copies of all Material
Contracts and documents evidencing Material Indebtedness;

 

(j)          promptly, and in any event within five (5) Business Days after
receipt thereof by any Loan Party or any Subsidiary thereof, copies of each
notice or other correspondence received from any Governmental Authority
(including, without limitation, the SEC (or comparable agency in any applicable
non-U.S. jurisdiction)) concerning any proceeding with, or investigation or
possible investigation or other inquiry by such Governmental Authority regarding
financial or other operational results of any Loan Party or any Subsidiary
thereof or any other matter which could reasonably expected to have a Material
Adverse Effect; and

 

(k)          promptly, such additional information regarding the business
affairs, financial condition or operations of any Loan Party or any Subsidiary,
or compliance with the terms of the Loan Documents, as the Agent or any Lender
may from time to time reasonably request.

 

Documents required to be delivered pursuant to Sections 6.01(a), 6.01(b) or
6.01(c) or Section 6.02(d) (to the extent any such documents are included in
materials otherwise filed with the SEC) may be delivered electronically and if
so delivered, shall be deemed to have been delivered on the date (i) on which
the Lead Borrower posts such documents, or provides a link thereto on the Lead
Borrower’s website on the Internet at the website address listed on Schedule
10.02; or (ii) on which such documents are posted on the Lead Borrower’s behalf
on an Internet or intranet website, if any (including the SEC’s EDGAR website),
to which each Lender and the Agent have access (whether a commercial,
third-party website or whether sponsored by the Agent); provided, that: (i) the
Lead Borrower shall deliver paper copies of such documents to the Agent or any
Lender that requests the Lead Borrower to deliver such paper copies until a
written request to cease delivering paper copies is given by the Agent or such
Lender and (ii) the Lead Borrower shall notify the Agent and each Lender (by
telecopier or electronic mail) of the posting of any such documents and provide
to the Agent by electronic mail electronic versions (i.e., soft copies) of such
documents. Notwithstanding anything contained herein, in every instance the Lead
Borrower shall be required to provide paper copies of the Compliance
Certificates required by Section 6.02(b) to the Agent. The Agent shall have no
obligation to request the delivery or to maintain copies of the documents
referred to above, and in any event shall have no responsibility to monitor
compliance by the Loan Parties with any such request for delivery, and each
Lender shall be solely responsible for requesting delivery to it or maintaining
its copies of such documents.

 

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The Loan Parties hereby acknowledge that the Agent will make available to the
Lenders and each L/C Issuer materials and/or information provided by or on
behalf of the Loan Parties hereunder (collectively, “Borrower Materials”).

 

6.03         Notices. Promptly notify the Agent upon any Responsible Officer
obtaining knowledge:

 

(a)          of the occurrence of any Default or Event of Default;

 

(b)          of any matter that has resulted or could reasonably be expected to
result in a Material Adverse Effect;

 

(c)          of any breach or non-performance of, or any default under, a
Material Contract in any material respect or with respect to Material
Indebtedness of any Loan Party or any Subsidiary thereof;

 

(d)          of any dispute, litigation, investigation, proceeding or suspension
between any Loan Party or any Subsidiary thereof and any Governmental Authority
or the commencement of, or any material development in, any material litigation
or proceeding affecting any Loan Party or any Subsidiary thereof, including
pursuant to any applicable Environmental Laws;

 

(e)          of the occurrence of any ERISA Event;

 

(f)          of any material change in accounting policies or financial
reporting practices by any Loan Party or any Subsidiary thereof;

 

(g)          of any change in any Loan Party’s president, chief executive
officer or chief financial officer;

 

(h)          of the discharge by any Loan Party of its present Registered Public
Accounting Firm or any withdrawal or resignation by such Registered Public
Accounting Firm;

 

(i)          of any collective bargaining agreement or other labor contract to
which a Loan Party becomes a party, or the application for the certification of
a collective bargaining agent;

 

(j)          of the filing of any Lien for unpaid Taxes against any Loan Party
in excess of $50,000;

 

(k)          of any casualty or other insured damage to any material portion of
the Collateral or the commencement of any action or proceeding for the taking of
any interest in a material portion of the Collateral under power of eminent
domain or by condemnation or similar proceeding or if any material portion of
the Collateral is damaged or destroyed; and

 

(l)          of any decision by any Loan Party not to pay rent, or the failure
by any Loan Party to pay rent, at any distribution centers or warehouses or any
of such Loan Party’s other locations.

 

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Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of the Lead Borrower setting forth details of the occurrence
referred to therein and stating what action the Lead Borrower has taken and
proposes to take with respect thereto. Each notice pursuant to Section 6.03(a)
shall describe with particularity any and all provisions of this Agreement and
any other Loan Document that have been breached.

 

6.04         Payment of Obligations. Pay and discharge as the same shall become
due and payable, all its obligations and liabilities, including (a) all tax
liabilities, assessments and governmental charges or levies upon it or its
properties or assets, (b) all lawful claims (including, without limitation,
claims of landlords, warehousemen, customs brokers, freight forwarders,
consolidators and carriers) which, if unpaid, would by law become a Lien upon
its property, and (c) all Indebtedness, as and when due and payable, but subject
to any subordination provisions contained in any instrument or agreement
evidencing such Indebtedness, except, in each case, where (i) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (ii)
such Loan Party has set aside on its books adequate reserves with respect
thereto in accordance with GAAP, (iii) such contest effectively suspends
collection of the contested obligation and enforcement of any Lien securing such
obligation, and (iv) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect. Nothing contained
herein shall be deemed to limit the rights of the Agent with respect to
determining Reserves pursuant to this Agreement.

 

6.05         Preservation of Existence, Etc. Preserve, renew and maintain in
full force and effect its legal existence and good standing under the Laws of
the jurisdiction of its organization or formation except in a transaction
permitted by Section 7.04 or 7.05; (b) take all reasonable action to maintain
all rights, privileges, permits, licenses and franchises necessary or desirable
in the normal conduct of its business, except to the extent that failure to do
so could not reasonably be expected to have a Material Adverse Effect; and (c)
preserve or renew all of its Intellectual Property, except to the extent such
Intellectual Property is no longer necessary in the conduct of the business of
the Loan Parties.

 

6.06         Maintenance of Properties. (a) Maintain, preserve and protect all
of its material properties and equipment necessary in the operation of its
business in good working order and condition, ordinary wear and tear excepted;
and (b) make all necessary repairs thereto and renewals and replacements thereof
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect.

 

6.07         Maintenance of Insurance.

 

(a)          Maintain with financially sound and reputable insurance companies
reasonably acceptable to the Agent not Affiliates of the Loan Parties, insurance
with respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business
and operating in the same or similar locations or as is required by applicable
Law, of such types and in such amounts as are customarily carried under similar
circumstances by such other Persons and as are reasonably acceptable to the
Agent.

 

(b)          Cause fire and extended coverage policies maintained with respect
to any Collateral to be endorsed or otherwise amended to include (i) a
non-contributing mortgage clause

 

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(regarding improvements to Real Estate) and lenders’ loss payable clause
(regarding personal property), in form and substance satisfactory to the Agent,
which endorsements or amendments shall provide that the insurer shall pay all
proceeds otherwise payable to the Loan Parties under the policies directly to
the Agent, (ii) a provision to the effect that none of the Loan Parties, Credit
Parties or any other Person shall be a co-insurer and (iii) such other
provisions as the Agent may reasonably require from time to time to protect the
interests of the Credit Parties.

 

(c)          Cause commercial general liability policies to be endorsed to name
the Agent as an additional insured.

 

(d)          Cause business interruption policies to name the Agent as a loss
payee and to be endorsed or amended to include (i) a provision that, from and
after the Closing Date, the insurer shall pay all proceeds otherwise payable to
the Loan Parties under the policies directly to the Agent, (ii) a provision to
the effect that none of the Loan Parties, the Agent, any Lender or any other
Credit Party shall be a co insurer and (iii) such other provisions as the Agent
may reasonably require from time to time to protect the interests of the Credit
Parties.

 

(e)          Cause each such policy referred to in this Section 6.07 to also
provide that it shall not be canceled, modified or not renewed (i) by reason of
nonpayment of premium except upon not less than ten (10) days’ prior written
notice thereof by the insurer to the Agent (giving the Agent the right to cure
defaults in the payment of premiums) or (ii) for any other reason except upon
not less than thirty (30) days’ prior written notice thereof by the insurer to
the Agent.

 

(f)          Deliver to the Agent, prior to the cancellation, modification or
non-renewal of any such policy of insurance, a copy of a renewal or replacement
policy (or other evidence of renewal of a policy previously delivered to the
Agent, including an insurance binder) together with evidence satisfactory to the
Agent of payment of the premium therefor.

 

(g)          [Reserved.]

 

(h)          Maintain for themselves and their Subsidiaries, a Directors and
Officers insurance policy, and a “Blanket Crime” policy including employee
dishonesty, forgery or alteration, theft, disappearance and destruction, robbery
and safe burglary, property, and computer fraud coverage with responsible
companies in such amounts as are customarily carried by business entities
engaged in similar businesses similarly situated, and will upon request by the
Agent furnish the Agent certificates evidencing renewal of each such policy.

 

(i)          Permit any representatives that are designated by the Agent to
inspect the insurance policies maintained by or on behalf of the Loan Parties
and to inspect books and records related thereto and any properties covered
thereby.

 

(j)          None of the Credit Parties, or their agents or employees shall be
liable for any loss or damage insured by the insurance policies required to be
maintained under this Section 6.07. Each Loan Party shall look solely to its
insurance companies or any other parties other than the Credit Parties for the
recovery of such loss or damage and such insurance companies shall have no
rights of subrogation against any Credit Party or its agents or employees. If,
however, the insurance policies do not provide waiver of subrogation rights

 

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against such parties, as required above, then the Loan Parties hereby agree, to
the extent permitted by law, to waive their right of recovery, if any, against
the Credit Parties and their agents and employees. The designation of any form,
type or amount of insurance coverage by any Credit Party under this Section 6.07
shall in no event be deemed a representation, warranty or advice by such Credit
Party that such insurance is adequate for the purposes of the business of the
Loan Parties or the protection of their properties.

 

6.08        Compliance with Laws. Comply in all material respects with the
requirements of all Laws and all orders, writs, injunctions and decrees
applicable to it or to its business or property, except in such instances in
which (a) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted and with
respect to which adequate reserves have been set aside and maintained by the
Loan Parties in accordance with GAAP, (b) such contest effectively suspends
enforcement of the contested Laws, and (c) the failure to comply therewith could
not reasonably be expected to have a Material Adverse Effect.

 

6.09        Books and Records; Accountants.

 

(a)          (i) Maintain proper books of record and account, in which full,
true and correct entries in conformity with GAAP consistently applied shall be
made of all financial transactions and matters involving the assets and business
of the Loan Parties or such Subsidiary, as the case may be; and (ii) maintain
such books of record and account in material conformity with all applicable
requirements of any Governmental Authority having regulatory jurisdiction over
the Loan Parties or such Subsidiary, as the case may be.

 

(b)          At all times retain a Registered Public Accounting Firm which is
reasonably satisfactory to the Agent. Each Loan Party authorizes the Agent to
communicate directly with such Loan Party’s independent certified public
accountants and authorizes such accountants to disclose to the Agent any and all
financial statements and other supporting financial documents and schedules
including copies of any management letter with respect to the business,
financial condition and other affairs of such Loan Party (provided that the Loan
Parties shall have the opportunity to participate in any such communication so
long as no Default or Event of Default has occurred and is continuing). At the
request of the Agent, each Loan Party shall deliver a letter addressed to such
accountants authorizing them to communicate directly with the Agent in
accordance with the foregoing.

 

6.10        Inspection Rights.

 

(a)          Permit representatives and independent contractors of the Agent to
visit and inspect any of its properties, to examine its corporate, financial and
operating records, and make copies thereof or abstracts therefrom, and to
discuss its affairs, finances and accounts with its directors, officers, and
Registered Public Accounting Firm, and permit the Agent or professionals
(including investment bankers, consultants, accountants and lawyers) retained by
the Agent to conduct evaluations of the Business Plan, forecasts and cash flows,
all at the expense of the Loan Parties and at such reasonable times during
normal business hours and as often as may be reasonably desired, upon reasonable
advance notice to the Lead Borrower; provided, however, that when a Default or
Event of Default occurs and is continuing the Agent

 

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(or any of its representatives or independent contractors) may do any of the
foregoing at the expense of the Loan Parties at any time during normal business
hours and without advance notice.

 

(b)          Upon the request of the Agent after reasonable prior notice, permit
the Agent or professionals (including investment bankers, consultants,
accountants and lawyers) retained by the Agent to conduct commercial finance
examinations and other evaluations, including, without limitation, of (i) the
Lead Borrower’s practices in the computation of the Borrowing Base, (ii) the
assets included in the Borrowing Base and related financial information such as,
but not limited to, sales, gross margins, payables, accruals and reserves, and
(iii) the Business Plan. The Loan Parties acknowledge that the Agent may, in its
discretion, undertake up to two (2) commercial finance examinations each Fiscal
Year at the Loan Parties’ expense. Notwithstanding the foregoing, the Agent may
cause additional commercial finance examinations to be undertaken (A) as it in
its discretion deems necessary or appropriate, at its own expense or, (B) if
required by Law or if a Default or Event of Default shall have occurred and be
continuing, at the expense of the Loan Parties.

 

(c)          Upon the request of the Agent after reasonable prior notice, permit
the Agent or professionals (including appraisers) retained by the Agent to
conduct appraisals of the Collateral, including, without limitation, the assets
included in the Borrowing Base. The Loan Parties acknowledge that the Agent may,
in its discretion, undertake up to one (1) inventory appraisal each Fiscal
Quarter at the Loan Parties’ expense. Notwithstanding the foregoing, the Agent
may cause additional appraisals to be undertaken (A) as it in its discretion
deems necessary or appropriate, at its own expense or, (B) if required by Law or
if a Default or Event of Default shall have occurred and be continuing, at the
expense of the Loan Parties.

 

6.11         Use of Proceeds. Use the proceeds of the Credit Extensions (a) to
finance the acquisition of working capital assets of the Borrowers, including
the purchase of inventory and equipment, in each case in the ordinary course of
business, (b) to refinance all Indebtedness of the Loan Parties under the
Existing Credit Agreement in full, (c) to Cash Collateralize the Outstanding
Amount of L/C Obligations with respect to Letters of Credit and the Existing
Letters of Credit, and (d) for general corporate purposes of the Loan Parties,
in each case to the extent expressly permitted under applicable Law and the Loan
Documents.

 

6.12         Additional Loan Parties. Notify the Agent at the time that any
Person becomes a Subsidiary, and in each case promptly thereafter (and in any
event within fifteen (15) days), cause any such Person (a) which is not a CFC,
to (i) become a Loan Party by executing and delivering to the Agent a Joinder to
this Agreement or a Joinder to the Facility Guaranty or such other documents as
the Agent shall deem appropriate for such purpose, (ii) grant a Lien to the
Agent on such Person’s assets of the same type that constitute Collateral to
secure the Obligations, and (iii) deliver to the Agent documents of the types
referred to in clauses (iii) and (iv) of Section 4.01(a) and upon the reasonable
request of the Agent favorable opinions of counsel to such Person (which shall
cover, among other things, the legality, validity, binding effect and
enforceability of the documentation referred to in clause (a)), and (b) if any
Equity Interests or Indebtedness of such Person are owned by or on behalf of any
Loan Party, to pledge such Equity Interests and promissory notes evidencing such
Indebtedness (except that, if such Subsidiary is a CFC, the Equity Interests of
such Subsidiary to be pledged may be limited to 65%

 

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of the outstanding voting Equity Interests of such Subsidiary and 100% of the
non-voting Equity Interests of such Subsidiary), in each case in form, content
and scope reasonably satisfactory to the Agent. In no event shall compliance
with this Section 6.12 waive or be deemed a waiver or Consent to any transaction
giving rise to the need to comply with this Section 6.12 if such transaction was
not otherwise expressly permitted by this Agreement or constitute or be deemed
to constitute, with respect to any Subsidiary, an approval of such Person as a
Borrower or permit the inclusion of any acquired assets in the computation of
the Borrowing Base.

 

6.13        Cash Management.

 

(a)          On or prior to the Closing Date:

 

(i)          deliver to the Agent copies of notifications (each, a “Credit Card
Notification”) substantially in the form attached hereto as Exhibit F which have
been executed on behalf of such Loan Party and delivered to such Loan Party’s
Credit Card Issuers and Credit Card Processors listed on Schedule 5.21(b);

 

(ii)         enter into a Blocked Account Agreement satisfactory in form and
substance to the Agent with each Blocked Account Bank; and

 

(iii)        at the request of the Agent, deliver to the Agent copies of
notifications (each, a “DDA Notification”) substantially in the form attached
hereto as Exhibit G which have been executed on behalf of such Loan Party and
delivered to each depository institution listed on Schedule 5.21(a).

 

(b)          From and after the Closing Date, the Loan Parties shall ACH or wire
transfer to a Blocked Account no less frequently than daily, whether or not
there are then any outstanding Obligations, all of the following:

 

(i)          all amounts on deposit in each DDA (net of any minimum balance, not
to exceed $2,500.00, as may be required to be kept in the subject DDA by the
depository institution at which such DDA is maintained);

 

(ii)         all payments due from Credit Card Processors and Credit Card
Issuers and proceeds of all credit card charges;

 

(iii)        all cash receipts from the Disposition of Inventory and other
assets (whether or not constituting Collateral);

 

(iv)        all proceeds of Accounts; and

 

(v)         all Net Proceeds, and all other cash payments received by a Loan
Party from any Person or from any source or on account of any Disposition or
other transaction or event, including, without limitation, any Prepayment Event.

 

(c)          Each Blocked Account Agreement shall require the ACH or wire
transfer no less frequently than daily (and whether or not there are then any
outstanding Obligations) to the concentration account controlled by the Agent at
Wells Fargo Bank, National Association

 

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(the “Concentration Account”), of all cash receipts and collections received by
each Loan Party from all sources (the “Receipts and Collections”), including,
without limitation, the following:

 

(i)          the then entire ledger balance of each Blocked Account (net of any
minimum balance, not to exceed $2,500.00, as may be required to be kept in the
subject Blocked Account by the Blocked Account Bank);

 

(ii)         all amounts required to be deposited into the Blocked Accounts
pursuant to clause (b) above; and

 

(iii)        any other cash amounts received by any Loan Party from any other
source, on account of any type of transaction or event;

 

provided, however, the Agent may, in its sole discretion, permit the Loan
Parties to have one or more “intermediate” Blocked Account Agreements, whereby
such agreements would provide, upon notice from the Agent, the ACH or wire
transfer no less frequently than daily (and whether or not there are then any
outstanding Obligations) all Receipts and Collections to another Blocked
Account, as opposed to the Concentration Account.

 

(d)          The Concentration Account shall at all times be under the sole
dominion and control of the Agent and all funds therein shall be wired to an
account specified by Agent no less frequently than daily for application to the
Obligations in accordance with the immediately following sentence. The Agent
shall cause all funds received by it from the Concentration Account to be
applied to the Obligations, which amounts shall be applied to the Obligations in
the order proscribed in either Section 2.05(f) or Section 8.03 of this
Agreement, as applicable. The Loan Parties hereby acknowledge and agree that (i)
the Loan Parties have no right of withdrawal from the Concentration Account, and
(ii) the funds on deposit in the Concentration Account shall at all times be
collateral security for all of the Obligations. Subject to the immediately
following sentence, in the event that, notwithstanding the provisions of this
Section 6.13, any Loan Party receives or otherwise has dominion and control of
any such cash receipts or collections, such receipts and collections shall be
held in trust by such Loan Party for the Agent, shall not be commingled with any
of such Loan Party’s other funds or deposited in any account of such Loan Party
and shall, not later than the Business Day after receipt thereof, be deposited
into the Concentration Account or dealt with in such other fashion as such Loan
Party may be instructed by the Agent. So long as no Default or Event of Default
shall have occurred and be continuing, there are no outstanding Obligations
(other than Obligations with respect to Letters of Credit that have been Cash
Collateralized in accordance with Section 2.03(g)) and all Letters of Credit
have been Cash Collateralized in accordance with the terms hereof, the Agent
shall cause all funds in the Concentration Account to be transferred to an
account controlled by the Borrowers.

 

(e)          Upon the request of the Agent, the Loan Parties shall cause bank
statements and/or other reports to be delivered to the Agent not less often than
monthly, accurately setting forth all amounts deposited in each Blocked Account
to ensure the proper transfer of funds as set forth above.

 

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(f)          If the Agent does not require DDA Notifications to be delivered on
the Closing Date in accordance with Section 6.13(a) above, then the Loan Parties
shall, upon the request of the Agent at any time after the Closing Date, deliver
to the Agent copies of DDA Notifications, which have been executed on behalf of
the applicable Loan Party and delivered to each depository institution listed on
Schedule 5.21(a).

 

6.14        Information Regarding the Collateral. Furnish to the Agent at least
thirty (30) days prior written notice of any change in: (i) any Loan Party’s
name or in any trade name used to identify it in the conduct of its business or
in the ownership of its properties; (ii) the location of any Loan Party’s chief
executive office, its principal place of business, any office in which it
maintains books or records relating to Collateral owned by it or any office or
facility at which a material portion of the Collateral owned by it is located
(including the establishment of any such new office or facility); (iii) any Loan
Party’s organizational structure or jurisdiction of incorporation or formation;
or (iv) any Loan Party’s Federal Taxpayer Identification Number or
organizational identification number assigned to it by its state of
organization. The Loan Parties agree not to effect or permit any change referred
to in the preceding sentence unless all filings have been made under the UCC or
otherwise that are required in order for the Agent to continue at all times
following such change to have a valid, legal and perfected first priority
security interest in all the Collateral for its own benefit and the benefit of
the other Credit Parties.

 

6.15        Physical Inventories.

 

(a)          Cause not less than one (1) cycle count to be undertaken, at the
expense of the Loan Parties, in each Fiscal Year consistent with past practices,
conducted by such inventory takers as are satisfactory to the Agent and
following such methodology as is consistent with the methodology used in the
immediately preceding inventory or as otherwise may be reasonably satisfactory
to the Agent. The Agent, at the expense of the Loan Parties, may observe each
scheduled physical count of Inventory which is undertaken on behalf of any Loan
Party.

 

(b)          Permit the Agent, in its discretion, if any Default or Event of
Default occurs and is continuing, to cause additional such inventories to be
taken as the Agent determines (each, at the expense of the Loan Parties).

 

6.16        Environmental Laws. Except, in each case, where failure to do so
could not reasonably be expected to result, individually or in the aggregate, in
a Material Adverse Effect, (a) Conduct its operations and keep and maintain its
Real Estate in material compliance with all Environmental Laws; (b) obtain and
renew all environmental permits necessary for its operations and properties; and
(c) implement any and all investigation, remediation, removal and response
actions that are appropriate or necessary to maintain the value and
marketability of the Real Estate or to otherwise comply with Environmental Laws
pertaining to the presence, generation, treatment, storage, use, disposal,
transportation or release of any Hazardous Materials on, at, in, under, above,
to, from or about any of its Real Estate, provided, however, that neither a Loan
Party nor any of its Subsidiaries shall be required to undertake any such
cleanup, removal, remedial or other action to the extent that its obligation to
do so is being contested in good faith and by proper proceedings and adequate
reserves have been set aside and are being maintained by the Loan Parties with
respect to such circumstances in accordance with GAAP.

 

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6.17        Further Assurances.

 

(a)          Execute any and all further documents, financing statements,
agreements and instruments, and take all such further actions (including the
filing and recording of financing statements and other documents), that may be
required under any applicable Law, or which the Agent may reasonably request, to
effectuate the transactions contemplated by the Loan Documents or to grant,
preserve, protect or perfect the Liens created or intended to be created by the
Security Documents or the validity or priority of any such Lien, all at the
expense of the Loan Parties. The Loan Parties also agree to provide to the
Agent, from time to time upon request, evidence reasonably satisfactory to the
Agent as to the perfection and priority of the Liens created or intended to be
created by the Security Documents.

 

(b)          If any material assets are acquired by any Loan Party after the
Closing Date (other than assets constituting Collateral under the Security
Documents that become subject to the perfected first-priority Lien under the
Security Documents upon acquisition thereof), notify the Agent thereof, and the
Loan Parties will cause such assets to be subjected to a Lien securing the
Obligations and will take such actions as shall be necessary or shall be
requested by the Agent to grant and perfect such Liens, including actions
described in paragraph (a) of this Section 6.17, all at the expense of the Loan
Parties. In no event shall compliance with this Section 6.17 waive or be deemed
a waiver or Consent to any transaction giving rise to the need to comply with
this Section 6.17 if such transaction was not otherwise expressly permitted by
this Agreement or constitute or be deemed to constitute Consent to the inclusion
of any acquired assets in the computation of the Borrowing Base.

 

(c)          Upon the request of the Agent, use commercially reasonable efforts
to cause each of its customs brokers, freight forwarders, consolidators and/or
carriers to deliver an agreement (including, without limitation, a Customs
Broker/Carrier Agreement) to the Agent covering such matters and in such form as
the Agent may reasonably require.

 

(d)          Upon the request of the Agent, use commercially reasonable efforts
to cause any of its landlords to deliver a Collateral Access Agreement to the
Agent in such form as the Agent may reasonably require.

 

6.18        Compliance with Terms of Leaseholds. Except as otherwise expressly
permitted hereunder, (a) make all payments and otherwise perform all material
obligations in respect of all Leases to which any Loan Party or any of its
Subsidiaries is a party, keep such Leases in full force and effect, except to
the extent that any such failure could not reasonably be expected to have a
Material Adverse Effect, (b) not allow such Leases to lapse or be terminated or
any rights to renew such Leases to be forfeited or cancelled (except to the
extent that such Person elects to terminate, lapse, forfeit or cancel the same
in accordance with its terms and so notifies the Agent and, unless the failure
to do so could not reasonably be expected to have a Material Adverse Effect,
makes reasonable arrangements for a suitable replacement of the same), (c)
notify the Agent of any material default by any party with respect to such
Leases and cooperate with the Agent in all respects to cure any such default,
and (d) cause each of its Subsidiaries to do the foregoing.

 

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6.19         Material Contracts. (a) Perform and observe all the material terms
and provisions of each Material Contract to be performed or observed by it, (b)
maintain each such Material Contract in full force and effect (except to the
extent that such Person elects to terminate the same in accordance with its
terms and so notifies the Agent and, unless the failure to do so could not
reasonably be expected to have a Material Adverse Effect, makes reasonable
arrangements for a suitable replacement of the same), (c) enforce each such
Material Contract in accordance with its terms, except for any failure to
enforce the same that could not reasonably be expected to have a Material
Adverse Effect, (d) upon request of the Agent, make to each other party to each
such Material Contract such demands and requests for information and reports or
for action as any Loan Party or any of its Subsidiaries is entitled to make
under such Material Contract, and (e) cause each of its Subsidiaries to do the
foregoing.

 

6.20         Business Plan. Generally operate the business of the Borrowers in
all material respects in a manner consistent with the Business Plan most
recently delivered pursuant to Section 6.01(d) hereof and accepted by the Agent
in its discretion, provided that such operation does not guarantee that actual
results will match the estimates contained in the Business Plan.

 

Article VII
NEGATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or other
Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding (other than contingent indemnification obligations for
which a claim has not been asserted), no Loan Party shall, nor shall it permit
any Subsidiary to, directly or indirectly:

 

7.01         Liens. Create, incur, assume or suffer to exist any Lien upon any
of its property, assets or revenues, whether now owned or hereafter acquired or
sign or file or suffer to exist under the UCC or any similar Law or statute of
any jurisdiction a financing statement that names any Loan Party or any
Subsidiary thereof as debtor; sign or suffer to exist any security agreement
authorizing any Person thereunder to file such financing statement; sell any of
its property or assets subject to an understanding or agreement (contingent or
otherwise) to repurchase such property or assets with recourse to it or any of
its Subsidiaries; or assign or otherwise transfer any accounts or other rights
to receive income, other than, as to all of the above, Permitted Encumbrances.

 

7.02         Investments. Make any Investments, except Permitted Investments.

 

7.03         Indebtedness; Disqualified Stock. (a) Create, incur, assume,
guarantee, suffer to exist or otherwise become or remain liable with respect to,
any Indebtedness, except Permitted Indebtedness; (b) issue Disqualified Stock,
or (c) issue and sell any other Equity Interests unless such Equity Interests
shall be issued solely by the Lead Borrower and not by a Subsidiary of a Loan
Party.

 

7.04         Fundamental Changes. Merge, dissolve, liquidate, consolidate with
or into another Person, (or agree to do any of the foregoing), except that, so
long as no Default or Event of Default shall have occurred and be continuing
prior to or immediately after giving effect to any action described below or
would result therefrom:

 

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(a)          any Subsidiary which is not a Loan Party may merge with (i) a Loan
Party, provided that the Loan Party shall be the continuing or surviving Person,
or (ii) any one or more other Subsidiaries which are not Loan Parties, provided
that when any wholly-owned Subsidiary is merging with another Subsidiary, the
wholly-owned Subsidiary shall be the continuing or surviving Person;

 

(b)          any Subsidiary which is a Loan Party may merge into any Subsidiary
which is a Loan Party or into a Borrower, provided that in any merger involving
a Borrower, such Borrower shall be the continuing or surviving Person; and

 

(c)          any CFC that is not a Loan Party may merge into any CFC that is not
a Loan Party.

 

7.05        Dispositions. Make any Disposition or enter into any agreement to
make any Disposition, except Permitted Dispositions.

 

7.06        Restricted Payments. Declare or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
except that:

 

(a)          each Subsidiary of a Loan Party may make Restricted Payments to any
Loan Party;

 

(b)          the Loan Parties and each Subsidiary may declare and make dividend
payments or other distributions payable solely in the common stock or other
common Equity Interests of such Person; and

 

(c)          the Loan Parties and each Subsidiary may make repurchases of common
stock deemed to occur upon “cashless” exercise of stock options or warrants.

 

7.07         Prepayments of Indebtedness. Prepay, redeem, purchase, defease or
otherwise satisfy prior to the scheduled maturity thereof in any manner any
Indebtedness, or make any payment in violation of any subordination terms of any
Subordinated Indebtedness, except (a) payment in respect of the Obligations, (b)
as long as no Default or Event of Default then exists, regularly scheduled or
mandatory repayments, repurchases, redemptions or defeasances of (i) Permitted
Indebtedness (other than Subordinated Indebtedness), and (ii) so long as the
Payment Conditions are satisfied, Subordinated Indebtedness in accordance with
the Business Plan and the subordination terms thereof or the applicable
subordination agreement relating thereto, and (b) Permitted Refinancings of any
such Indebtedness.

 

7.08         Change in Nature of Business. Engage in any line of business
substantially different from the Business conducted by the Loan Parties and
their Subsidiaries on the Closing Date or any business substantially related or
incidental thereto.

 

7.09         Transactions with Affiliates. Enter into, renew, extend or be a
party to any transaction of any kind with any Affiliate of any Loan Party,
whether or not in the ordinary course of business, other than on fair and
reasonable terms substantially as favorable to the Loan Parties or such
Subsidiary as would be obtainable by the Loan Parties or such Subsidiary at the
time in a comparable arm’s length transaction with a Person other than an
Affiliate, provided that

 

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the foregoing restriction shall not apply to (a) a transaction between or among
the Loan Parties, (b) transactions described on Schedule 7.09 hereto, (c)
advances for commissions, travel and other similar purposes in the ordinary
course of business to directors, officers and employees, (d) the issuance of
Equity Interests in the Lead Borrower to any officer, director, employee or
consultant of the Lead Borrower or any of its Subsidiaries, (e) any Restricted
Payment permitted by Section 7.06, (f) the payment of reasonable fees and
out-of-pocket costs to directors, and compensation, insurance and employee
benefit arrangements paid to, and indemnities provided for the benefit of,
directors, officers or employees of the Lead Borrower or any of its
Subsidiaries, and (f) any issuances of securities of the Lead Borrower (other
than Disqualified Stock and other Equity Interests not permitted hereunder) or
other payments, awards or grants in cash, securities or otherwise pursuant to,
or the funding of, employment agreements, stock options and stock ownership
plans (in each case in respect of Equity Interests in the Lead Borrower) of the
Lead Borrower or any of its Subsidiaries.

 

7.10         Burdensome Agreements. Enter into or permit to exist any
Contractual Obligation (other than this Agreement or any other Loan Document)
that (a) limits the ability (i) of any Subsidiary to make Restricted Payments or
other distributions to any Loan Party or to otherwise transfer property to or
invest in a Loan Party, (ii) of any Subsidiary to Guarantee the Obligations,
(iii) of any Subsidiary to make or repay loans to a Loan Party, or (iv) of the
Loan Parties or any Subsidiary to create, incur, assume or suffer to exist Liens
on property of such Person in favor of the Agent; provided, however, that this
clause (iv) shall not prohibit (A) any negative pledge incurred or provided in
favor of any holder of Indebtedness permitted under clauses (c) or (f) of the
definition of Permitted Indebtedness solely to the extent any such negative
pledge relates to the property financed by or the subject of such Indebtedness,
(B) customary anti-assignment provisions in licenses and other contracts entered
into in the ordinary course of business restricting the assignment thereof or in
contracts for the Disposition of any assets or any Subsidiary permitted under
this Agreement, provided that the restrictions in any such contract shall apply
only to the assets or Subsidiary that is subject to such contract or to be
Disposed of, (C) provisions in leases of real property that prohibit mortgages
or pledges of the lessee's interest under such lease or restricting subletting
or assignment of such lease; (D) any encumbrance or restriction contained in any
agreement of a Person acquired in a Permitted Investment, which encumbrance or
restriction was in existence at the time of such Permitted Investment (but not
created in connection therewith or in contemplation thereof) and which
encumbrance or restriction is not applicable to any Person or the properties or
assets of any Person, other than the Person or the property and assets of the
Person so acquired, or (E) customary provisions in joint venture agreements and
other similar agreements applicable to joint ventures to the extent such joint
ventures are permitted hereunder.

 

7.11         Use of Proceeds. Use the proceeds of any Credit Extension, whether
directly or indirectly, and whether immediately, incidentally or ultimately, (a)
to purchase or carry margin stock (within the meaning of Regulation U of the
FRB) or to extend credit to others for the purpose of purchasing or carrying
margin stock or to refund Indebtedness originally incurred for such purpose; or
(b) for purposes other than those permitted under this Agreement.

 

7.12         Amendment of Material Documents. Amend, modify or waive any of a
Loan Party’s rights under (a) its Organization Documents in a manner adverse to
the Credit Parties, or (b) any Material Contract or Material Indebtedness (other
than on account of any refinancing

 

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thereof otherwise permitted hereunder) to the extent that such amendment,
modification or waiver would result in a Default or Event of Default under any
of the Loan Documents, would be materially adverse to the Credit Parties or
otherwise would be reasonably likely to have a Material Adverse Effect.

 

7.13         Fiscal Year. Change the Fiscal Year of any Loan Party, or the
accounting policies or reporting practices of the Loan Parties, except as
required by GAAP.

 

7.14         Deposit Accounts; Credit Card Processors. Open new DDAs or Blocked
Accounts unless the Loan Parties shall have delivered to the Agent appropriate
DDA Notifications (to the extent requested by Agent pursuant to the provisions
of Section 6.13(a)(iii) hereof) or Blocked Account Agreements consistent with
the provisions of Section 6.13 and otherwise satisfactory to the Agent. No Loan
Party shall maintain any bank accounts or enter into any agreements with Credit
Card Issuers or Credit Card Processors other than the ones expressly
contemplated herein or in Section 6.13 hereof.

 

Article VIII
EVENTS OF DEFAULT AND REMEDIES

 

8.01        Events of Default. Any of the following shall constitute an “Event
of Default”:

 

(a)          Non-Payment. The Borrowers or any other Loan Party fails to pay
when and as required to be paid herein, (i) any amount of principal of any Loan
or any L/C Obligation, or deposit any funds as Cash Collateral in respect of L/C
Obligations, or (ii) any interest on any Loan or on any L/C Obligation, or any
fee due hereunder, or (iii) any other amount payable hereunder or under any
other Loan Document; or

 

(b)          Specific Covenants. (i) Any Loan Party fails to perform or observe
any term, covenant or agreement contained in any of Section 6.01, 6.02, 6.03
(other than as set forth in Section 8.01(c) below), 6.05, 6.07, 6.10, 6.11, 6.13
or 6.14 or Article VII; or (ii) any Guarantor fails to perform or observe any
term, covenant or agreement contained in the Facility Guaranty; or

 

(c)          Other Defaults. Any Loan Party fails to perform or observe (i) any
covenant or agreement contained in any of Sections 6.03(d), (f), (g) or (i) on
its part to be performed or observed and such failure continues for five (5)
days, or (ii) any other covenant or agreement (not specified in subsection (a),
(b) or (c)(i) above) contained in any Loan Document on its part to be performed
or observed and such failure continues for twenty (20) days; or

 

(d)          Representations and Warranties. Any representation, warranty,
certification or statement of fact made or deemed made by or on behalf of any
Borrower or any other Loan Party herein, in any other Loan Document, or in any
document delivered in connection herewith or therewith (including, without
limitation, any Borrowing Base Certificate) shall be incorrect or misleading in
any material respect when made or deemed made; or

 

(e)          Cross-Default. (i) Any Loan Party or any Subsidiary thereof (A)
fails to make any payment when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) in respect of any Material
Indebtedness (including undrawn committed or

 

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available amounts and including amounts owing to all creditors under any
combined or syndicated credit arrangement) and such failure continues after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Material Indebtedness, or (B) fails to observe or perform any
other agreement or condition relating to any such Material Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event occurs, the effect of which default or other event
is to cause, or to permit the holder or holders of such Material Indebtedness or
the beneficiary or beneficiaries of any Guarantee thereof (or a trustee or agent
on behalf of such holder or holders or beneficiary or beneficiaries) to cause,
with the giving of notice if required, such Indebtedness to be demanded or to
become due or to be repurchased, prepaid, defeased or redeemed (automatically or
otherwise), or an offer to repurchase, prepay, defease or redeem such
Indebtedness to be made, prior to its stated maturity, or such Guarantee to
become payable or cash collateral in respect thereof to be demanded; or (ii)
there occurs under any Swap Contract an Early Termination Date (as defined in
such Swap Contract) resulting from (A) any event of default under such Swap
Contract as to which a Loan Party or any Subsidiary thereof is the Defaulting
Party (as defined in such Swap Contract) or (B) any Termination Event (as so
defined) under such Swap Contract as to which a Loan Party or any Subsidiary
thereof is an Affected Party (as so defined) and, in either event, the Swap
Termination Value owed by the Loan Party or such Subsidiary as a result thereof
is greater than $250,000; or

 

(f)          Insolvency Proceedings, Etc. Any Loan Party or any of its
Subsidiaries institutes or consents to the institution of any proceeding under
any Debtor Relief Law, or makes an assignment for the benefit of creditors; or
applies for or consents to the appointment of any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer for it or for all or
any material part of its property; or a proceeding shall be commenced or a
petition filed, without the application or consent of such Person, seeking or
requesting the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer is appointed and the appointment
continues undischarged, undismissed or unstayed for sixty (60) calendar days or
an order or decree approving or ordering any of the foregoing shall be entered;
or any proceeding under any Debtor Relief Law relating to any such Person or to
all or any material part of its property is instituted without the consent of
such Person and continues undismissed or unstayed for sixty (60) calendar days,
or an order for relief is entered in any such proceeding; or

 

(g)          Inability to Pay Debts; Attachment. (i) Any Loan Party or any
Subsidiary thereof becomes unable or admits in writing its inability or fails
generally to pay its debts as they become due in the ordinary course of
business, or (ii) any writ or warrant of attachment or execution or similar
process is issued or levied against all or any material part of the property of
any such Person and is not released, vacated or fully bonded within ten (10)
days after its issuance or levy; or

 

(h)          Judgments. There is entered against any Loan Party or any
Subsidiary thereof (i) one or more judgments or orders for the payment of money
in an aggregate amount (as to all such judgments and orders) exceeding $250,000
(to the extent not covered by independent third-party insurance as to which the
insurer is rated at least “A” by A.M. Best Company, has been notified of the
potential claim and does not dispute coverage), or (ii) any one or more
non-monetary judgments that have, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect and, in either case,
(A) enforcement

 

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proceedings are commenced by any creditor upon such judgment or order, which are
not bonded or stayed pending appeal or (B) there is a period of ten (10)
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, is not in effect; or

 

(i)          ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or
Multiemployer Plan which has resulted or could reasonably be expected to result
in liability of any Loan Party under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $250,000 or
which would reasonably likely result in a Material Adverse Effect, or (ii) a
Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of
any applicable grace period, any installment payment with respect to its
withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in
an aggregate amount in excess of $250,000 or which would reasonably likely
result in a Material Adverse Effect; or

 

(j)          Invalidity of Loan Documents. (i) Any provision of any Loan
Document, at any time after its execution and delivery and for any reason other
than as expressly permitted hereunder or thereunder or satisfaction in full of
all the Obligations, ceases to be in full force and effect; or any Loan Party or
any other Person contests in any manner the validity or enforceability of any
provision of any Loan Document; or any Loan Party denies that it has any or
further liability or obligation under any provision of any Loan Document, or
purports to revoke, terminate or rescind any provision of any Loan Document or
seeks to avoid, limit or otherwise adversely affect any Lien purported to be
created under any Security Document; or (ii) any Lien purported to be created
under any Security Document shall cease to be, or shall be asserted by any Loan
Party or any other Person not to be, a valid and perfected Lien on any
Collateral, with the priority required by the applicable Security Document; or

 

(k)          Change of Control. There occurs any Change of Control; or

 

(l)          Cessation of Business. Except as otherwise expressly permitted
hereunder, any Loan Party shall take any action to suspend the operation of its
business in the ordinary course, liquidate all or a material portion of its
assets, or employ an agent or other third party to conduct a program of
closings, liquidations or “Going-Out-Of-Business” sales of any material portion
of its business; or

 

(m)          Loss of Collateral. There occurs any uninsured loss to any material
portion of the Collateral; or

 

(n)          Indictment. The indictment or institution of any legal process or
proceeding against, any Loan Party or any Subsidiary thereof, under any federal,
state, municipal, and other criminal statute, rule, regulation, order, or other
requirement having the force of law for a felony;

 

(o)          Guaranty. The termination or attempted termination of any Facility
Guaranty except as expressly permitted hereunder or under any other Loan
Document;

 

(p)          Subordination. (i) The subordination provisions of the documents
evidencing or governing any Subordinated Indebtedness (the “Subordinated
Provisions”) shall,

 

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in whole or in part, terminate, cease to be effective or cease to be legally
valid, binding and enforceable against any holder of the applicable Subordinated
Indebtedness; (ii) any Borrower or any other Loan Party shall, directly or
indirectly, disavow or contest in any manner (A) the effectiveness, validity or
enforceability of any of the Subordination Provisions, (B) that the
Subordination Provisions exist for the benefit of the Credit Parties, or (C)
that all payments of principal of or premium and interest on the applicable
Subordinated Indebtedness, or realized from the liquidation of any property of
any Loan Party, shall be subject to any of the Subordination Provisions; or
(iii) any event of default under the Subordinated Debt Documentation; or

 

(q)          Material Adverse Effect. A Material Adverse Effect shall occur.

 

8.02        Remedies Upon Event of Default. If any Event of Default occurs and
is continuing, the Agent may, or, at the request of the Required Lenders shall,
take any or all of the following actions:

 

(a)          declare the Commitments of each Lender to make Committed Loans and
any obligation of any L/C Issuer to make L/C Credit Extensions to be terminated,
whereupon such Commitments and obligation shall be terminated;

 

(b)          declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other Obligations to be immediately
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Loan Parties;

 

(c)          require that the Loan Parties Cash Collateralize the L/C
Obligations (to the extent not already Cash Collateralized);

 

(d)          to the extent permitted by applicable Law, capitalize any accrued
and unpaid interest by adding such amount to the outstanding principal balance
of the Loans, at which time such capitalized amount shall bear interest at the
Default Rate;

 

(e)          whether or not the maturity of the Obligations shall have been
accelerated pursuant hereto, proceed to protect, enforce and exercise all rights
and remedies of the Credit Parties under this Agreement, any of the other Loan
Documents or applicable Law, including, but not limited to, by suit in equity,
action at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Agreement and the
other Loan Documents or any instrument pursuant to which the Obligations are
evidenced, and, if such amount shall have become due, by declaration or
otherwise, proceed to enforce the payment thereof or any other legal or
equitable right of the Credit Parties;

 

provided, however, that upon the occurrence of any Event of Default with respect
to any Loan Party or any Subsidiary thereof under Section 8.01(f), the
obligation of each Lender to make Loans and any obligation of each L/C Issuer to
make L/C Credit Extensions shall automatically terminate, the unpaid principal
amount of all outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable, and the obligation of the Loan
Parties to Cash Collateralize the L/C Obligations as aforesaid shall
automatically become effective, in each case without further act of the Agent or
any Lender.

 

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No remedy herein is intended to be exclusive of any other remedy and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or any other provision of Law.

 

8.03         Application of Funds. After the exercise of remedies provided for
in Section 8.02 (or after the Loans have automatically become immediately due
and payable and the L/C Obligations have automatically been required to be Cash
Collateralized as set forth in the proviso to Section 8.02), any amounts
received on account of the Obligations shall be applied by the Agent in the
following order, in each case whether or not such Obligations are allowed or
allowable in any bankruptcy or insolvency proceeding or under any Debtor Relief
Law:

 

First, to payment of that portion of the Obligations (excluding the Other
Liabilities) constituting fees, indemnities, Credit Party Expenses and other
amounts (including fees, charges and disbursements of counsel to the Agent and
amounts payable under Article III) payable to the Agent;

 

Second, to payment of that portion of the Obligations (excluding the Other
Liabilities) constituting indemnities, Credit Party Expenses, and other amounts
(other than principal, interest and fees) payable to the Lenders and any L/C
Issuer (including fees, charges and disbursements of counsel to the respective
Lenders and L/C Issuers and amounts payable under Article III), ratably among
them in proportion to the amounts described in this clause Second payable to
them;

 

Third, to the extent not previously reimbursed by the Lenders, to payment to the
Agent of that portion of the Obligations constituting principal and accrued and
unpaid interest on any Permitted Overadvances;

 

Fourth, to payment of that portion of the Obligations constituting accrued and
unpaid interest on the Loans and other Obligations, and fees (excluding any
Termination Fees), ratably among the Lenders and L/C Issuers in proportion to
the respective amounts described in this clause Fourth payable to them;

 

Fifth, to payment of that portion of the Obligations constituting unpaid
principal of the Committed Loans, ratably among the Lenders in proportion to the
respective amounts described in this clause Fifth held by them;

 

Sixth, to the Agent for the account of the L/C Issuers, to Cash Collateralize
that portion of L/C Obligations (to the extent not already Cash Collateralized)
comprised of the aggregate undrawn amount of Letters of Credit;

 

Seventh, to payment of all other Obligations (including without limitation the
cash collateralization of unliquidated indemnification obligations, but
excluding any Other Liabilities, ratably among the Credit Parties in proportion
to the respective amounts described in this clause Seventh held by them

 

Eighth, to payment of that portion of the Obligations arising from Cash
Management Services to the extent secured by the Security Documents, ratably
among

 

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the Credit Parties in proportion to the respective amounts described in this
clause Eighth held by them;

 

Ninth, to payment of all other Obligations arising from Bank Products to the
extent secured under the Security Documents, ratably among the Credit Parties in
proportion to the respective amounts described in this clause Tenth held by
them; and

 

Last, the balance, if any, after all of the Obligations have been indefeasibly
paid in full, to the Loan Parties or as otherwise required by Law.

 

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate
undrawn amount of Letters of Credit pursuant to clause Sixth above shall be
applied to satisfy drawings under such Letters of Credit as they occur. Subject
to Section 2.05(c), if any amount remains on deposit as Cash Collateral after
all Letters of Credit have either been fully drawn or expired, such remaining
amount shall be applied to the other Obligations, if any, in the order set forth
above.

 

Article IX
THE AGENT

 

9.01         Appointment and Authority. Each of the Lenders hereby irrevocably
appoints Salus to act on its behalf as the Agent hereunder and under the other
Loan Documents and authorizes the Agent to take such actions on its behalf and
to exercise such powers as are delegated to the Agent by the terms hereof or
thereof (including, without limitation, acquiring, holding and enforcing any and
all Liens on Collateral granted by any of the Loan Parties to secure any of the
Obligations), together with such actions and powers as are reasonably incidental
thereto. The provisions of this Article are solely for the benefit of the Agent,
the Lenders and the L/C Issuers, and no Loan Party or any Subsidiary thereof
shall have rights as a third party beneficiary of any of such provisions.

 

9.02         Rights as a Lender. The Person serving as the Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though they were not the Agent and the term
“Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the
context otherwise requires, include the Person serving as the Agent hereunder in
its individual capacity. Such Person and its Affiliates may accept deposits
from, lend money to, act as the financial advisor or in any other advisory
capacity for and generally engage in any kind of business with the Loan Parties
or any Subsidiary or other Affiliate thereof as if such Person were not the
hereunder and without any duty to account therefor to the Lenders.

 

9.03         Exculpatory Provisions. The Agent shall not have any duties or
obligations except those expressly set forth herein and in the other Loan
Documents. Without limiting the generality of the foregoing, the Agent:

 

(a)          shall not be subject to any fiduciary or other implied duties,
regardless of whether a Default or Event of Default has occurred and is
continuing;

 

(b)          shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby or

 

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by the other Loan Documents that the Agent is required to exercise as directed
in writing by the Required Lenders (or such other number or percentage of the
Lenders as shall be expressly provided for herein or in the other Loan
Documents), provided that the Agent shall not be required to take any action
that, in its opinion or the opinion of its counsel, may expose the Agent to
liability or that is contrary to any Loan Document or applicable law; and

 

(c)          shall not, except as expressly set forth herein and in the other
Loan Documents, have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to the Loan Parties or any of its
Affiliates that is communicated to or obtained by the Person serving as the
Agent or any of its Affiliates in any capacity.

 

The Agent shall not be liable for any action taken or not taken by it (i) with
the Consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary, or as the Agent shall believe
in good faith shall be necessary, under the circumstances as provided in
Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or
willful misconduct as determined by a final and non-appealable judgment of a
court of competent jurisdiction.

 

The Agent shall not be deemed to have knowledge of any Default or Event of
Default unless and until notice describing such Default or Event of Default is
given to the Agent by the Loan Parties, a Lender or a L/C Issuer. Upon the
occurrence of a Default or Event of Default, the Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Applicable Lenders. Unless and until the Agent shall have received such
direction, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to any such Default or Event of
Default as it shall deem advisable in the best interest of the Credit Parties.
In no event shall the Agent be required to comply with any such directions to
the extent that the Agent believes that its compliance with such directions
would be unlawful.

 

The Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with
this Agreement or any other Loan Document, (ii) the contents of any certificate,
report or other document delivered hereunder or thereunder or in connection
herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein
or the occurrence of any Default or Event of Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document or the creation,
perfection or priority of any Lien purported to be created by the Security
Documents, (v) the value or the sufficiency of any Collateral, or (vi) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Agent.

 

9.04         Reliance by Agent. The Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing
(including, but not limited to, any electronic message, Internet or intranet
website posting or other distribution) believed by it to be genuine and to have
been signed, sent or otherwise authenticated by the proper Person. The Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to have been made by the proper

 

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Person, and shall not incur any liability for relying thereon. In determining
compliance with any condition hereunder to the making of a Loan, or the issuance
of a Letter of Credit, that by its terms must be fulfilled to the satisfaction
of a Lender or a L/C Issuer, the Agent may presume that such condition is
satisfactory to such Lender or such L/C Issuer unless the Agent shall have
received written notice to the contrary from such Lender or such L/C Issuer
prior to the making of such Loan or the issuance of such Letter of Credit. The
Agent may consult with legal counsel (who may be counsel for any Loan Party),
independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with the advice of
any such counsel, accountants or experts.

 

9.05         Delegation of Duties. The Agent may perform any and all of its
duties and exercise its rights and powers hereunder or under any other Loan
Document by or through any one or more sub agents appointed by the Agent. The
Agent and any such sub-agent may perform any and all of its duties and exercise
its rights and powers by or through their respective Related Parties. The
exculpatory provisions of this Article shall apply to any such sub-agent and to
the Related Parties of the Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as the Agent.

 

9.06        Resignation of Agent. The Agent may at any time give written notice
of its resignation to the Lenders and the Lead Borrower. Upon receipt of any
such notice of resignation, the Required Lenders shall have the right, in
consultation with the Lead Borrower, to appoint a successor, which shall be a
bank with an office in the United States, or an Affiliate of any such bank with
an office in the United States. If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Agent gives notice of its
resignation, then the retiring Agent may on behalf of the Lenders and the L/C
Issuers, appoint a successor Agent meeting the qualifications set forth above;
provided that if the Agent shall notify the Lead Borrower and the Lenders that
no qualifying Person has accepted such appointment, then such resignation shall
nonetheless become effective in accordance with such notice and (1) the retiring
Agent shall be discharged from its duties and obligations hereunder and under
the other Loan Documents (except that in the case of any Collateral held by the
Agent on behalf of the Lenders or the L/C Issuers under any of the Loan
Documents, the retiring Agent shall continue to hold such collateral security
until such time as a successor Agent is appointed) and (2) all payments,
communications and determinations provided to be made by, to or through the
Agent shall instead be made by or to each Lender and each L/C Issuer directly,
until such time as the Required Lenders appoint a successor Agent as provided
for above in this Section. Upon the acceptance of a successor’s appointment as
Agent hereunder, such successor shall succeed to and become vested with all of
the rights, powers, privileges and duties of the retiring (or retired) Agent,
and the retiring Agent shall be discharged from all of its duties and
obligations hereunder or under the other Loan Documents (if not already
discharged therefrom as provided above in this Section). The fees payable by the
Borrowers to a successor Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Lead Borrower and such
successor. After the retiring Agent’s resignation hereunder and under the other
Loan Documents, the provisions of this Article and Section 10.04 shall continue
in effect for the benefit of such retiring Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while the retiring Agent was acting as Agent hereunder.

 

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Any resignation by Salus as Agent pursuant to this Section shall also constitute
its resignation as an L/C Issuer. Upon the acceptance of a successor’s
appointment as Agent hereunder, (a) such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of such retiring
L/C Issuer, (b) such retiring L/C Issuer shall be discharged from all of its
duties and obligations hereunder or under the other Loan Documents, and (c) the
successor L/C Issuer shall issue letters of credit in substitution for the
Letters of Credit, if any, issued by such retiring L/C Issuer and outstanding at
the time of such succession or make other arrangements satisfactory to such
retiring L/C Issuer to effectively assume the obligations of such retiring L/C
Issuer with respect to such Letters of Credit.

 

9.07        Non-Reliance on Agent and Other Lenders. Each Lender and each L/C
Issuer acknowledges that it has, independently and without reliance upon the
Agent or any other Lender or any of their Related Parties and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender and each L/C
Issuer also acknowledges that it will, independently and without reliance upon
the Agent or any other Lender or any of their Related Parties and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document or any related agreement or any
document furnished hereunder or thereunder. Except as provided in Section 9.12,
the Agent shall not have any duty or responsibility to provide any Credit Party
with any other credit or other information concerning the affairs, financial
condition or business of any Loan Party that may come into the possession of the
Agent.

 

9.08        Reserved.

 

9.09        Agent May File Proofs of Claim. In case of the pendency of any
proceeding under any Debtor Relief Law or any other judicial proceeding relative
to any Loan Party, the Agent (irrespective of whether the principal of any Loan
or L/C Obligation shall then be due and payable as herein expressed or by
declaration or otherwise and irrespective of whether the Agent shall have made
any demand on the Loan Parties) shall be entitled and empowered, by intervention
in such proceeding or otherwise:

 

(a)          to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Loans, L/C Obligations and all other
Obligations that are owing and unpaid and to file such other documents as may be
necessary or advisable in order to have the claims of the Lenders, the L/C
Issuers, the Agent and the other Credit Parties (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Lenders,
the L/C Issuers, the Agent, such Credit Parties and their respective agents and
counsel and all other amounts due the Lenders, the L/C Issuers the Agent and
such Credit Parties under Sections 2.03(j) and (k), as applicable, 2.09 and
10.04) allowed in such judicial proceeding; and

 

(b)          to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender and each L/C Issuer to make such payments to the Agent and, if the
Agent shall consent to the making of such payments

 

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directly to the Lenders and the L/C Issuers, to pay to the Agent any amount due
for the reasonable compensation, expenses, disbursements and advances of the
Agent and its agents and counsel, and any other amounts due the Agent under
Sections 2.09 and 10.04.

 

Nothing contained herein shall be deemed to authorize the Agent to authorize or
consent to or accept or adopt on behalf of any Lender or any L/C Issuer any plan
of reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Lender or any L/C Issuer or to authorize the
Agent to vote in respect of the claim of any Lender or any L/C Issuer in any
such proceeding.

 

9.10        Collateral and Guaranty Matters. The Credit Parties irrevocably
authorize the Agent, at its option and in its discretion,

 

(a)          to release any Lien on any property granted to or held by the Agent
under any Loan Document (i) upon termination of the Aggregate Commitments and
payment in full of all Obligations (other than contingent indemnification
obligations for which no claim has been asserted), and the expiration,
termination or Cash Collateralization of all Letters of Credit, (ii) that is
sold or to be sold as part of or in connection with any sale permitted hereunder
or under any other Loan Document, or (iii) if approved, authorized or ratified
in writing by the Applicable Lenders in accordance with Section 10.01;

 

(b)          to subordinate any Lien on any property granted to or held by the
Agent under any Loan Document to the holder of any Lien on such property that is
permitted by clause (h) of the definition of Permitted Encumbrances; and

 

(c)          to release any Guarantor from its obligations under the Facility
Guaranty if such Person ceases to be a Subsidiary as a result of a transaction
permitted hereunder.

 

Upon request by the Agent at any time, the Applicable Lenders will confirm in
writing the Agent’s authority to release or subordinate its interest in
particular types or items of property, or to release any Guarantor from its
obligations under the Facility Guaranty pursuant to this Section 9.10. In each
case as specified in this Section 9.10, the Agent will, at the Loan Parties’
expense, execute and deliver to the applicable Loan Party such documents as such
Loan Party may reasonably request to evidence the release of such item of
Collateral from the assignment and security interest granted under the Security
Documents or to subordinate its interest in such item, or to release such
Guarantor from its obligations under the Facility Guaranty, in each case in
accordance with the terms of the Loan Documents and this Section 9.10.

 

9.11        Notice of Transfer. The Agent may deem and treat a Lender party to
this Agreement as the owner of such Lender’s portion of the Obligations for all
purposes, unless and until, and except to the extent, an Assignment and
Assumption shall have become effective as set forth in Section 10.06.

 

9.12        Reports and Financial Statements. By signing this Agreement, each
Lender:

 

(a)          agrees to furnish the Agent, upon request, with a summary of all
Other Liabilities due or to become due to such Lender. In connection with any
distributions to be made hereunder, the Agent shall be entitled to assume that
no amounts are due to any Lender on

 

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account of Other Liabilities unless the Agent has received written notice
thereof from such Lender;

 

(b)          is deemed to have requested that the Agent furnish such Lender,
promptly after they become available, copies of all Borrowing Base Certificates
and financial statements required to be delivered by the Lead Borrower hereunder
and all commercial finance examinations and appraisals of the Collateral
received by the Agent (collectively, the “Reports”);

 

(c)          expressly agrees and acknowledges that the Agent makes no
representation or warranty as to the accuracy of the Reports, and shall not be
liable for any information contained in any Report;

 

(d)          expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that the Agent or any other party
performing any audit or examination will inspect only specific information
regarding the Loan Parties and will rely significantly upon the Loan Parties’
books and records, as well as on representations of the Loan Parties' personnel;

 

(e)          agrees to keep all Reports confidential in accordance with the
provisions of Section 10.07 hereof; and

 

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

 

9.13        Agency for Perfection. Each Lender hereby appoints each other Lender
as agent for the purpose of perfecting Liens for the benefit of the Agent and
the Lenders in assets which, in accordance with Article 9 of the UCC or any
other applicable Law of the United States, can be perfected only by possession.
Should any Lender (other than the Agent) obtain possession of any such
Collateral, such Lender shall notify the Agent thereof, and, promptly upon the
Agent’s request therefor shall deliver such Collateral to the Agent or otherwise
deal with such Collateral in accordance with the Agent's instructions.

 

9.14        Indemnification of Agent. Without limiting the obligations of the
Loan Parties hereunder, the Lenders hereby agree to indemnify the Agent, each
L/C Issuer and any Related Party, as the case may be, ratably according to their
Applicable Percentages, 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 the Agent, such L/C Issuer and their Related Parties in
any way relating to

 

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or arising out of this Agreement or any other Loan Document or any action taken
or omitted to be taken by the Agent, such L/C Issuer and their Related Parties
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 the Agent’s,
such L/C Issuer’s and their Related Parties’ gross negligence or willful
misconduct as determined by a final and nonappealable judgment of a court of
competent jurisdiction.

 

9.15        Relation among Lenders. The Lenders are not partners or
co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Agent) authorized to act
for, any other Lender.

 

9.16        Defaulting Lenders.

 

(a)          If for any reason any Lender shall become a Defaulting Lender and
such failure is not cured within one (1) Business Day after receipt from the
Agent of written notice thereof, then, in addition to the rights and remedies
that may be available to the other Credit Parties, the Loan Parties’ or any
other party at law or in equity (and not at limitation thereof): (i) any such
Defaulting Lender’s right to participate in the administration of, or
decision-making rights related to, the Obligations, this Agreement or the other
Loan Documents shall be suspended during the pendency of such failure or
refusal, (ii) any such Defaulting Lender shall be deemed to have assigned any
and all payments due to it from the Loan Parties, whether on account of
outstanding Loans, interest, fees or otherwise, to the remaining non-Defaulting
Lenders for application to, and reduction of, their proportionate shares of all
outstanding Obligations, and (iii) at the option of the Agent, any amount
payable to such Defaulting Lender hereunder (whether on account of principal,
interest, fees or otherwise) shall, in lieu of being distributed to such
Defaulting Lender, be retained by the Agent as cash collateral for future
funding obligations of the Defaulting Lender in respect of any Loan. Such
Defaulting Lender’s decision-making and participation rights and rights to
payments as set forth in clauses (i), (ii), and (iii) hereinabove shall be
restored only upon the payment by the Defaulting Lender of its Applicable
Percentage of any Obligations or expenses as to which it is delinquent, together
with interest thereon at the rate set forth in Section 2.12(b) hereof from the
date when originally due until the date upon which any such amounts are actually
paid, or otherwise cure such default or other cause of such Lender becoming a
Defaulting Lender.

 

(b)          The non-Defaulting Lenders shall also have the right, but not the
obligation, in their respective sole and absolute discretion, to cause the
termination and assignment, without any further action by the Defaulting Lender
for no cash consideration (pro rata, based on the respective Commitments of
those Lenders electing to exercise such right), of the Defaulting Lender’s
Commitment to fund future Loans. Upon any such purchase of the Applicable
Percentage of any Defaulting Lender, the Defaulting Lender’s share in future
Credit Extensions and its rights under the Loan Documents with respect thereto
shall terminate on the date of purchase, and the Defaulting Lender shall
promptly execute all documents reasonably requested to surrender and transfer
such interest, including, if so requested, an Assignment and Assumption.

 

(c)          Each Defaulting Lender shall indemnify the Agent and each
non-Defaulting Lender from and against any and all loss, damage or expenses,
including but not

 

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limited to reasonable attorneys’ fees and funds advanced by the Agent or by any
non-Defaulting Lender, on account of a Defaulting Lender’s failure to timely
fund its Applicable Percentage of a Loan or to otherwise perform its obligations
under the Loan Documents.

 

Article X
MISCELLANEOUS

 

10.01      Amendments, Etc. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no Consent to any departure by any
Loan Party therefrom, shall be effective unless in writing signed by the Agent,
with the Consent of the Required Lenders, and the Lead Borrower or the
applicable Loan Party, as the case may be, and acknowledged by the Agent, and
each such waiver or Consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that no such
amendment, waiver or consent shall:

 

(a)          increase the Commitment of any Lender (or reinstate any Commitment
terminated pursuant to Section 8.02) without the written Consent of such Lender;

 

(b)          as to any Lender, postpone any date fixed by this Agreement or any
other Loan Document for (i) any scheduled payment (including the Maturity Date)
or mandatory prepayment of principal, interest, fees or other amounts due
hereunder or under any of the other Loan Documents without the written Consent
of such Lender entitled to such payment, or (ii) any scheduled or mandatory
reduction or termination of the Aggregate Commitments hereunder or under any
other Loan Document without the written Consent of such Lender;

 

(c)          as to any Lender, reduce the principal of, or the rate of interest
specified herein on, any Committed Loan held by such Lender, or (subject to
clause (iii) of the second proviso to this Section 10.01) any fees or other
amounts payable hereunder or under any other Loan Document to or for the account
of such Lender, without the written Consent of each Lender entitled to such
amount; provided, however, that only the Consent of the Required Lenders shall
be necessary to amend the definition of “Default Rate”;

 

(d)          as to any Lender, change Section 2.13 or Section 8.03 in a manner
that would alter the pro rata sharing of payments required thereby without the
written Consent of such Lender;

 

(e)          change any provision of this Section or the definition of
“Applicable Lenders” or “Required Lenders” or any other provision hereof
specifying the number or percentage of Lenders required to amend, waive or
otherwise modify any rights hereunder or make any determination or grant any
consent hereunder, without the written Consent of each Lender;

 

(f)          except as expressly permitted hereunder or under any other Loan
Document, release, or limit the liability of, any Loan Party without the written
Consent of each Lender;

 

(g)          except for Permitted Dispositions, release all or substantially all
of the Collateral from the Liens of the Security Documents without the written
Consent of each Lender;

 

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(h)          increase the Aggregate Commitments without the written Consent of
each Lender; and

 

(i)          except as expressly permitted herein or in any other Loan Document,
subordinate the Obligations hereunder or the Liens granted hereunder or under
the other Loan Documents, to any other Indebtedness or Lien, as the case may be
without the written Consent of each Lender;

 

and, provided, further, that (i) no amendment, waiver or Consent shall, unless
in writing and signed by the applicable L/C Issuer in addition to the Lenders
required above, affect the rights or duties of such L/C Issuer under this
Agreement or any Issuer Document relating to any Letter of Credit issued or to
be issued by it; (ii) no amendment, waiver or Consent shall, unless in writing
and signed by the Agent in addition to the Lenders required above, affect the
rights or duties of the Agent under this Agreement or any other Loan Document;
and (iii) the Fee Letter may be amended, or rights or privileges thereunder
waived, in a writing executed only by the parties thereto. Notwithstanding
anything to the contrary herein, no Deteriorating Lender or Defaulting Lender
shall have any right to approve or disapprove any amendment, waiver or Consent
hereunder, except that the Commitment of such Lender may not be increased or
extended without the consent of such Lender.

 

Notwithstanding anything to the contrary in this Agreement or any other Loan
Document, no provider or holder of any Bank Products or Cash Management Services
shall have any voting or approval rights hereunder (or be deemed a Lender)
solely by virtue of its status as the provider or holder of such agreements or
products or the Obligations owing thereunder, nor shall the consent of any such
provider or holder be required (other than in their capacities as Lenders, to
the extent applicable) for any matter hereunder or under any of the other Loan
Documents, including as to any matter relating to the Collateral or the release
of Collateral or any Loan Party.

 

10.02      Notices; Effectiveness; Electronic Communications.

 

(a)          Notices Generally. Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in subsection (b) below), all notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopier as
follows, and all notices and other communications expressly permitted hereunder
to be given by telephone shall be made to the applicable telephone number, as
follows:

 

(i)          if to the Loan Parties or the Agent, to the address, telecopier
number, electronic mail address or telephone number specified for such Person on
Schedule 10.02; and

 

(ii)         if to any Lender or any L/C Issuer, to the address, telecopier
number, electronic mail address or telephone number specified in its
Administrative Questionnaire (which Administrative Questionnaire each Lender
shall provide to the Agent and the Lead Borrower).

 

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Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next Business Day for the
recipient). Notices delivered through electronic communications to the extent
provided in subsection (b) below, shall be effective as provided in such
subsection (b).

 

(b)          Electronic Communications. Notices and other communications to the
Loan Parties, the Lenders and the L/C Issuers hereunder may be delivered or
furnished by electronic communication (including e-mail and Internet or intranet
websites) pursuant to procedures approved by the Agent, provided that the
foregoing shall not apply to notices to any Lender or any L/C Issuer pursuant to
Article II if such Lender or such L/C Issuer, as applicable, has notified the
Agent that it is incapable of receiving notices under such Article by electronic
communication. The Agent may, in its discretion, agree to accept notices and
other communications to it hereunder by electronic communications pursuant to
procedures approved by it, provided that approval of such procedures may be
limited to particular notices or communications.

 

Unless the Agent otherwise prescribes, (i) notices and other communications sent
to an e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication is not
sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next Business Day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

 

(c)          The Internet. In no event shall the Agent or any of its Related
Parties (collectively, the “Agent Parties”) have any liability to any Loan
Party, any Lender, any L/C Issuer or any other Person for losses, claims,
damages, liabilities or expenses of any kind (whether in tort, contract or
otherwise) arising out of the Loan Parties’ or the Agent’s transmission of
Borrower Materials through the Internet, except to the extent that such losses,
claims, damages, liabilities or expenses are determined by a court of competent
jurisdiction by a final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of such Agent Party; provided, however,
that in no event shall any Agent Party have any liability to any Loan Party, any
Lender, any L/C Issuer or any other Person for indirect, special, incidental,
consequential or punitive damages (as opposed to direct or actual damages).

 

(d)          Change of Address, Etc. Each of the Loan Parties and the Agent may
change its address, telecopier or telephone number for notices and other
communications hereunder by notice to the other parties hereto. Each Lender and
each L/C Issuer may change its address, telecopier or telephone number for
notices and other communications hereunder by notice to the Lead Borrower and
the Agent. In addition, each Lender agrees to notify the Agent from time to time
to ensure that the Agent has on record (i) an effective address, contact name,

 

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telephone number, telecopier number and electronic mail address to which notices
and other communications may be sent and (ii) accurate wire instructions for
such Lender.

 

(e)          Reliance by Agent, L/C Issuers and Lenders. The Agent, the L/C
Issuers and the Lenders shall be entitled to rely and act upon any notices
(including telephonic Committed Loan Notices) purportedly given by or on behalf
of the Loan Parties even if (i) such notices were not made in a manner specified
herein, were incomplete or were not preceded or followed by any other form of
notice specified herein, or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof. The Loan Parties shall
indemnify the Agent, each L/C Issuer, each Lender and the Related Parties of
each of them from all losses, costs, expenses and liabilities resulting from the
reliance by such Person on each notice purportedly given by or on behalf of the
Loan Parties. All telephonic notices to and other telephonic communications with
the Agent may be recorded by the Agent, and each of the parties hereto hereby
consents to such recording.

 

10.03      No Waiver; Cumulative Remedies. No failure by any Credit Party to
exercise, and no delay by any such Person in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder or
under any other Loan Document preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges provided herein and in the other Loan Documents
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law. Without limiting the generality of the foregoing, the making of
a Loan or issuance of a Letter of Credit shall not be construed as a waiver of
any Default or Event of Default, regardless of whether any Credit Party may have
had notice or knowledge of such Default or Event of Default at the time.

 

10.04      Expenses; Indemnity; Damage Waiver.

 

(a)          Costs and Expenses. The Borrowers shall pay all Credit Party
Expenses.

 

(b)          Indemnification by the Loan Parties. The Loan Parties shall
indemnify the Agent (and any sub-agent thereof), each other Credit Party, and
each Related Party of any of the foregoing Persons (each such Person being
called an “Indemnitee”) against, and hold each Indemnitee harmless (on an after
tax basis) from, any and all losses, claims, causes of action, damages,
liabilities, settlement payments, costs, and related expenses (including the
fees, charges and disbursements of any counsel for any Indemnitee), incurred by
any Indemnitee or asserted against any Indemnitee by any third party or by any
Borrower or any other Loan Party arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement, any other Loan
Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto of their respective obligations hereunder or
thereunder or the consummation of the transactions contemplated hereby or
thereby, or, in the case of the Agent (and any sub-agents thereof) and their
Related Parties only, the administration of this Agreement and the other Loan
Documents, (ii) any Loan or Letter of Credit or the use or proposed use of the
proceeds therefrom (including any refusal by any L/C Issuer to honor a demand
for payment under a Letter of Credit if the documents presented in connection
with such demand do not strictly comply with the terms of such Letter of Credit,
any bank advising or confirming a Letter

 

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of Credit or any other nominated person with respect to a Letter of Credit
seeking to be reimbursed or indemnified or compensated, and any third party
seeking to enforce the rights of a Borrower, beneficiary, nominated person,
transferee, assignee of Letter of Credit proceeds, or holder of an instrument or
document related to any Letter of Credit), (iii) any actual or alleged presence
or release of Hazardous Materials on or from any property owned or operated by
any Loan Party or any of its Subsidiaries, or any Environmental Liability
related in any way to any Loan Party or any of its Subsidiaries, (iv) any claims
of, or amounts paid by any Credit Party to, a Blocked Account Bank or other
Person which has entered into a control agreement with any Credit Party
hereunder, or (v) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory, whether brought by a third party or by any Borrower or any
other Loan Party or any of the Loan Parties’ directors, shareholders or
creditors, and regardless of whether any Indemnitee is a party thereto, in all
cases, whether or not caused by or arising, in whole or in part, out of the
comparative, contributory or sole negligence of the Indemnitee; provided, that
such indemnity shall not, as to any Indemnitee, be available to the extent that
such losses, claims, damages, liabilities or related expenses (x) are determined
by a court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee or
(y) result from a claim brought by a Borrower or any other Loan Party against an
Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or
under any other Loan Document, if the Borrowers or such Loan Party has obtained
a final and nonappealable judgment in its favor on such claim as determined by a
court of competent jurisdiction.

 

(c)          Reimbursement by Lenders. Without limiting their obligations under
Section 9.14 hereof, to the extent that the Loan Parties for any reason fail to
indefeasibly pay any amount required under subsection (a) or (b) of this Section
to be paid by it, each Lender severally agrees to pay to the Agent (or any such
sub-agent), the applicable L/C Issuer or such Related Party, as the case may be,
such Lender’s Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount, provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against the Agent (or any such sub-agent) or such L/C Issuer in its
capacity as such, or against any Related Party of any of the foregoing acting
for the Agent (or any such sub-agent) or such L/C Issuer in connection with such
capacity. The obligations of the Lenders under this subsection (c) are subject
to the provisions of Section 2.12(d).

 

(d)          Waiver of Consequential Damages, Etc. To the fullest extent
permitted by applicable Law, the Loan Parties shall not assert, and hereby
waive, any claim against any Indemnitee, on any theory of liability, for
special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby, the transactions contemplated hereby or thereby, any Loan or Letter of
Credit or the use of the proceeds thereof. No Indemnitee shall be liable for any
damages arising from the use by unintended recipients of any information or
other materials distributed to such unintended recipients by such Indemnitee
through telecommunications, electronic or other information transmission systems
in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby other than for direct or actual
damages resulting

 

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from the gross negligence or willful misconduct of such Indemnitee as determined
by a final and nonappealable judgment of a court of competent jurisdiction.

 

(e)          Payments. All amounts due under this Section shall be payable on
demand therefor.

 

(f)          Survival. The agreements in this Section shall survive the
resignation of any Agent and any L/C Issuer, the assignment of any Commitment or
Loan by any Lender, the replacement of any Lender, the termination of the
Aggregate Commitments and the repayment, satisfaction or discharge of all the
other Obligations.

 

10.05      Payments Set Aside. To the extent that any payment by or on behalf of
the Loan Parties is made to any Credit Party, or any Credit Party exercises its
right of setoff, and such payment or the proceeds of such setoff or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by such
Credit Party in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any proceeding under any Debtor Relief Law or
otherwise, then (a) to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such setoff had
not occurred, and (b) each Lender and each L/C Issuer severally agrees to pay to
the Agent upon demand its Applicable Percentage (without duplication) of any
amount so recovered from or repaid by the Agent, plus interest thereon from the
date of such demand to the date such payment is made at a rate per annum equal
to the Federal Funds Rate from time to time in effect. The obligations of the
Lenders and the L/C Issuers under clause (b) of the preceding sentence shall
survive the payment in full of the Obligations and the termination of this
Agreement.

 

10.06      Successors and Assigns.

 

(a)          Successors and Assigns Generally. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that no Loan Party
may assign or otherwise transfer any of its rights or obligations hereunder or
under any other Loan Document without the prior written Consent of the Agent and
each Lender. Nothing in this Agreement, expressed or implied, shall be construed
to confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby, Participants to the extent provided in
subsection (d) of this Section and, to the extent expressly contemplated hereby,
the Related Parties of each of the Credit Parties) any legal or equitable right,
remedy or claim under or by reason of this Agreement.

 

(b)          Assignments by Lenders. Any Lender may at any time assign to one or
more Persons all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment(s) and the Loans at the time owing
to it); provided, that any such assignment shall be subject to the following
conditions:

 

(i)          Minimum Amounts.

 

(A)         In the case of an assignment of the entire remaining amount of the
assigning Lender’s Commitment and the Loans at the time owing to it or in the

 

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case of an assignment to a Lender or an Affiliate of a Lender or an Approved
Fund with respect to a Lender, no minimum amount need be assigned; and

 

(B)         In any case not described in subsection (b)(i)(A) of this Section,
the aggregate amount of the Commitment (which for this purpose includes Loans
outstanding thereunder) or, if the Commitment is not then in effect, the
principal outstanding balance of the Loans of the assigning Lender subject to
each such assignment, determined as of the date the Assignment and Assumption
with respect to such assignment is delivered to the Agent or, if “Trade Date” is
specified in the Assignment and Assumption, as of the Trade Date, shall not be
less than $1,000,000 unless the Agent otherwise consents (each such consent not
to be unreasonably withheld or delayed); provided, however, that concurrent
assignments to members of an Assignee Group and concurrent assignments from
members of an Assignee Group to a single Person will be treated as a single
assignment for purposes of determining whether such minimum amount has been met.

 

(ii)         Proportionate Amounts. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement with respect to the Loans or the Commitments
assigned.

 

(iii)        Required Consents and Notices.

 

(A)         The consent of the Agent (such consent not to be unreasonably
withheld or delayed) shall be required for assignments in respect of any
Commitment if such assignment is to a Person that is not a Lender, an Affiliate
of such Lender or an Approved Fund with respect to such Lender.

 

(B)         Subject to clause (A) above, no consent shall be required (including
the consent of the Borrowers) for any assignment in respect to any Commitment or
Loan; provided, that in the event that no Default or Event of Default has
occurred and is continuing and any Lender wishes to assign all or a portion of
its Commitment or Loans to any Person that does not regularly make revolving
credit loans in the ordinary course of such Person’s business, such Lender shall
give the Lead Borrower at least three (3) Business Day’s prior written notice of
such assignment and the Lead Borrower shall be deemed to have accepted such
Person as a Lender hereunder (such acceptance not be unreasonably withheld or
conditioned) unless the Lead Borrower notifies the Agent and such Lender thereof
in writing prior to the effectiveness of such assignment, which effectiveness
shall not be deemed to occur sooner than three (3) Business Days after such
Lender gives the Lead Borrower notice of such assignment. If the Lead Borrower
notifies the Agent and such Lender in writing prior to the effectiveness of such
assignment that it does not accept such Person as a Lender hereunder, such
assignment shall not be effective.

 

(iv)        Assignment and Assumption. The parties to each assignment shall
execute and deliver to the Agent an Assignment and Assumption, together with a
processing and recordation fee of $3,500, provided, however, that the Agent may,
in its sole discretion, elect to waive such processing and recordation fee in
the case of any

 

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assignment. The assignee, if it shall not be a Lender, shall deliver to the
Agent an Administrative Questionnaire.

 

Subject to acceptance and recording thereof by the Agent pursuant to subsection
(c) of this Section, from and after the effective date specified in each
Assignment and Assumption, the assignee thereunder shall be a party to this
Agreement and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Assumption, be released from its obligations
under this Agreement (and, in the case of an Assignment and Assumption covering
all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto) but shall continue to be entitled to
the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and
circumstances occurring prior to the effective date of such assignment. Upon
request, the Borrowers (at their expense) shall execute and deliver a Note to
the assignee Lender. Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this subsection shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with
Section 10.06(d).

 

(c)          Register. The Agent, acting solely for this purpose as an agent of
the Borrowers, shall maintain at the Agent’s Office a copy of each Assignment
and Assumption delivered to it and a register for the recordation of the names
and addresses of the Lenders, and the Commitments of, and principal amounts of
the Loans owing to, each Lender pursuant to the terms hereof from time to time
(the “Register”). The entries in the Register shall be conclusive, absent
manifest error, and the Loan Parties, the Agent and the Lenders may treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary. The Register shall be available for inspection by the Lead
Borrower and any Lender at any reasonable time and from time to time upon
reasonable prior notice.

 

(d)          Participations. Any Lender may at any time, without the consent of,
or notice to, the Loan Parties or the Agent, sell participations to any Person
(other than a natural person or the Loan Parties or any of the Loan Parties’
Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such
Lender’s rights and/or obligations under this Agreement (including all or a
portion of its Commitment and/or the Loans owing to it); provided, that (i) such
Lender’s obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Loan Parties, the Agent, the
Lenders and the L/C Issuers shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement. Any Participant shall agree in writing to comply with all
confidentiality obligations set forth in Section 10.07 as if such Participant
was a Lender hereunder. Any agreement or instrument pursuant to which a Lender
sells such a participation shall provide that such Lender shall retain the sole
right to enforce this Agreement and to approve any amendment, modification or
waiver of any provision of this Agreement; provided, that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification described in
the first proviso to Section 10.01 that affects such Participant. Subject to
subsection (e) of this Section, the Loan Parties agree that each Participant
shall be entitled to the benefits of Sections 3.01 and 3.04 to the same extent
as if

 

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it were a Lender and had acquired its interest by assignment pursuant to
Section (b). To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 10.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.13 as though it were a
Lender. Each Lender, acting for this purpose as an agent of the Loan Parties,
shall maintain at its offices a record of each agreement or instrument effecting
any participation and a register for the recordation of the names and addresses
of its Participants and their rights with respect to principal amounts and other
Obligations from time to time (each a “Participation Register”).  The entries in
each Participation Register shall be conclusive absent manifest error and the
Loan Parties, the Administrative Agent, the L/C Issuers and the Lenders may
treat each Person whose name is recorded in a Participant Register as a
Participant for all purposes of this Agreement (including, for the avoidance of
doubt, for purposes of entitlement to benefits under Section 3.01, Section 3.04,
and Section 10.08).  The Participation Register shall be available for
inspection by the Lead Borrower and any Lender, at any reasonable time and from
time to time upon reasonable prior notice.

 

(e)          Limitations upon Participant Rights. A Participant shall not be
entitled to receive any greater payment under Section 3.01 or 3.04 than the
applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to
such Participant is made with the Lead Borrower’s prior written consent. A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 3.01 unless the Lead Borrower is notified of
the participation sold to such Participant and such Participant agrees, for the
benefit of the Loan Parties, to comply with Section 3.01(e) as though it were a
Lender.

 

(f)          Certain Pledges. Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided, that no such pledge or assignment shall release such Lender from
any of its obligations hereunder or substitute any such pledgee or assignee for
such Lender as a party hereto.

 

(g)          Electronic Execution of Assignments. The words “execution,”
“signed,” “signature,” and words of like import in any Assignment and Assumption
shall be deemed to include electronic signatures or the keeping of records in
electronic form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records Act,
or any other similar state laws based on the Uniform Electronic Transactions
Act.

 

(h)          Resignation as L/C Issuer after Assignment. Notwithstanding
anything to the contrary contained herein, if at any time Salus assigns all of
its Commitment and Committed Loans pursuant to subsection (b) above, Salus may,
upon thirty (30) days’ notice to the Lead Borrower and the Lenders, resign as a
L/C Issuer. In the event of any such resignation as a L/C Issuer, the Lead
Borrower shall be entitled to appoint from among the Lenders a successor L/C
Issuer hereunder; provided, however, that no failure by the Lead Borrower to
appoint any such successor shall affect the resignation of Salus as a L/C
Issuer. If Salus resigns as a L/C Issuer, it

 

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shall retain all the rights, powers, privileges and duties of a L/C Issuer
hereunder with respect to all Letters of Credit issued by it and outstanding as
of the effective date of its resignation as a L/C Issuer and all L/C Obligations
with respect thereto. Upon the appointment of a successor L/C Issuer, (a) such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of such retiring L/C Issuer, and (b) the successor L/C
Issuer shall issue letters of credit in substitution for the Letters of Credit,
if any, issued by such retiring L/C Issuer and outstanding at the time of such
succession or make other arrangements satisfactory to Salus to effectively
assume the obligations of Salus with respect to such Letters of Credit.

 

(i)          Transactions by Salus Entity. Notwithstanding anything in this
Agreement or any other Loan Document to the contrary, (A) neither Salus nor any
Affiliate thereof (each, a “Salus Entity”) shall be required to comply with this
Section 10.06 in connection with any transaction involving any other Salus
Entity or any of its or their lenders or funding or financing sources, and no
Salus Entity shall have any obligation to disclose any such transaction to any
Person, and (B) there shall be no limitation or restriction on (i) the ability
of any Salus Entity to assign or otherwise transfer its rights and/or
obligations under this Agreement or any other Loan Document, any Commitment, any
Loan, or any other Obligation to any other Salus Entity or any lender or
financing or funding source of a Salus Entity or (ii) any such lender’s or
funding or financing source’s ability to assign or otherwise transfer its rights
and/or obligations under this Agreement or any other Loan Document, any
Commitment, any Loan, or any other Obligation; provided, however, that Salus
shall continue to be liable as a “Lender” under this Agreement and the other
Loan Documents unless such other Person complies with the provisions of this
Agreement to become a “Lender”.

 

10.07      Treatment of Certain Information; Confidentiality. Each of the Credit
Parties agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its Affiliates and to
its and its Affiliates’ respective partners, directors, officers, employees,
agents, funding sources, attorneys, advisors and representatives (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority purporting to have jurisdiction over it (including any self-regulatory
authority, such as the National Association of Insurance Commissioners), (c) to
the extent required by applicable Laws or regulations or by any subpoena or
similar legal process, (d) to any other party hereto, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to a written
agreement containing provisions substantially the same as those of this Section,
to (i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii)
any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to any Loan Party and its obligations, (g) with
the written consent of the Lead Borrower (such consent not to be unreasonably
withheld) or (h) to the extent such Information (x) becomes publicly available
other than as a result of a breach of this Section or (y) becomes available to
any Credit Party or any of their respective Affiliates on a non-confidential
basis from a source other than the Loan Parties that was not under an obligation
of confidentiality.

 

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For purposes of this Section, “Information” means all information received from
the Loan Parties or any Subsidiary thereof relating to the Loan Parties or any
Subsidiary thereof or their respective businesses, other than any such
information that is available to any Credit Party on a non-confidential basis
prior to disclosure by the Loan Parties or any Subsidiary thereof, provided
that, in the case of information received from any Loan Party or any Subsidiary
after the Closing Date, such information is clearly identified at the time of
delivery as confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.

 

Each of the Credit Parties acknowledges that (a) the Information may include
material non-public information concerning the Loan Parties or a Subsidiary, as
the case may be, (b) it has developed compliance procedures regarding the use of
material non-public information and (c) it will handle such material non-public
information in accordance with applicable Law, including Federal and state
securities Laws.

 

10.08      Right of Setoff. If an Event of Default shall have occurred and be
continuing or if any Lender shall have been served with a trustee process or
similar attachment relating to property of a Loan Party, each Lender, each L/C
Issuer and each of their respective Affiliates is hereby authorized at any time
and from time to time, after obtaining the prior written consent of the Agent or
the Required Lenders, to the fullest extent permitted by applicable law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by such Lender, such L/C
Issuer or any such Affiliate to or for the credit or the account of the
Borrowers or any other Loan Party against any and all of the Obligations now or
hereafter existing under this Agreement or any other Loan Document to such
Lender or such L/C Issuer, regardless of the adequacy of the Collateral, and
irrespective of whether or not such Lender or such L/C Issuer shall have made
any demand under this Agreement or any other Loan Document and although such
obligations of the Borrowers or such Loan Party may be contingent or unmatured
or are owed to a branch or office of such Lender or such L/C Issuer different
from the branch or office holding such deposit or obligated on such
indebtedness. The rights of each Lender, each L/C Issuer and their respective
Affiliates under this Section are in addition to other rights and remedies
(including other rights of setoff) that such Lender, such L/C Issuer or their
respective Affiliates may have. Each Lender and each L/C Issuer agrees to notify
the Lead Borrower and the Agent promptly after any such setoff and application,
provided that the failure to give such notice shall not affect the validity of
such setoff and application.

 

10.09      Interest Rate Limitation. Notwithstanding anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under the
Loan Documents shall not exceed the maximum rate of non-usurious interest
permitted by applicable Law (the “Maximum Rate”). If the Agent or any Lender
shall receive interest in an amount that exceeds the Maximum Rate, the excess
interest shall be applied to the principal of the Loans or, if it exceeds such
unpaid principal, refunded to the Borrowers. In determining whether the interest
contracted for, charged, or received by the Agent or a Lender exceeds the
Maximum Rate, such Person may, to the extent permitted by applicable Law, (a)
characterize any payment that is not principal as an expense, fee, or premium
rather than interest, (b) exclude voluntary prepayments and the

 

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effects thereof, and (c) amortize, prorate, allocate, and spread in equal or
unequal parts the total amount of interest throughout the contemplated term of
the Obligations hereunder.

 

10.10      Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and the other
Loan Documents constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Agent and when the Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto. Delivery of an executed counterpart of a signature
page of this Agreement by telecopy, pdf., or other electronic transmission shall
be as effective as delivery of a manually executed counterpart of this
Agreement.

 

10.11      Survival. All representations and warranties made hereunder and in
any other Loan Document or other document delivered pursuant hereto or thereto
or in connection herewith or therewith shall survive the execution and delivery
hereof and thereof. Such representations and warranties have been or will be
relied upon by the Credit Parties, regardless of any investigation made by any
Credit Party or on their behalf and notwithstanding that any Credit Party may
have had notice or knowledge of any Default or Event of Default at the time of
any Credit Extension, and shall continue in full force and effect as long as any
Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any
Letter of Credit shall remain outstanding. Further, the provisions of
Sections 3.01, 3.04, and 10.04 and Article IX shall survive and remain in full
force and effect regardless of the repayment of the Obligations, the expiration
or termination of the Letters of Credit and the Commitments or the termination
of this Agreement or any provision hereof. In connection with the termination of
this Agreement and the release and termination of the security interests in the
Collateral, the Agent may require such indemnities and collateral security as
they shall reasonably deem necessary or appropriate to protect the Credit
Parties against (x) loss on account of credits previously applied to the
Obligations that may subsequently be reversed or revoked, (y) any obligations
that may thereafter arise with respect to the Other Liabilities and (z) any
Obligations that may thereafter arise under Section 10.04.

 

10.12      Severability. If any provision of this Agreement or the other Loan
Documents is held to be illegal, invalid or unenforceable, (a) the legality,
validity and enforceability of the remaining provisions of this Agreement and
the other Loan Documents shall not be affected or impaired thereby and (b) the
parties shall endeavor in good faith negotiations to replace the illegal,
invalid or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

10.13      Replacement of Lenders. If any Lender requests compensation under
Section 3.04, or if the Borrowers are required to pay any additional amount to
any Lender or any Governmental Authority for the account of any Lender pursuant
to Section 3.01, or if any Lender is a Defaulting Lender, then the Borrowers
may, at their sole expense and effort, upon notice to

 

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such Lender and the Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in, and
consents required by, Section 10.06), all of its interests, rights and
obligations under this Agreement and the related Loan Documents to an assignee
that shall assume such obligations (which assignee may be another Lender, if a
Lender accepts such assignment), provided that:

 

(a)          the Borrowers shall have paid to the Agent the assignment fee
specified in Section 10.06(b);

 

(b)          such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder and under the other Loan Documents
from the assignee (to the extent of such outstanding principal and accrued
interest and fees) or the Borrowers (in the case of all other amounts);

 

(c)          in the case of any such assignment resulting from a claim for
compensation under Section 3.04 or payments required to be made pursuant to
Section 3.01, such assignment will result in a reduction in such compensation or
payments thereafter; and

 

(d)          such assignment does not conflict with applicable Laws.

 

A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrowers to require such assignment and delegation
cease to apply.

 

10.14      Governing Law; Jurisdiction; Etc.

 

(a)          GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT INCLUDING SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW.

 

(b)          SUBMISSION TO JURISDICTION. EACH LOAN PARTY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE LOAN PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT
OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.
EACH OF THE LOAN PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY

 

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OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN
DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY OTHERWISE HAVE TO
BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY
JURISDICTION.

 

(c)          WAIVER OF VENUE. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY
COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE LOAN PARTIES
HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.

 

(d)          SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

(e)          ACTIONS COMMENCED BY LOAN PARTIES. EACH LOAN PARTY AGREES THAT ANY
ACTION COMMENCED BY ANY LOAN PARTY ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE
BROUGHT SOLELY IN A COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY OR
ANY FEDERAL COURT SITTING THEREIN AS THE AGENT MAY ELECT IN ITS SOLE DISCRETION
AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH RESPECT TO ANY
SUCH ACTION.

 

10.15      Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY AND WHETHER INITIATED BY OR AGAINST ANY SUCH PERSON OR IN WHICH ANY SUCH
PERSON IS JOINED AS A PARTY LITIGANT). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

 

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10.16      No Advisory or Fiduciary Responsibility. In connection with all
aspects of each transaction contemplated hereby, the Loan Parties each
acknowledge and agree that: (i) the credit facility provided for hereunder and
any related arranging or other services in connection therewith (including in
connection with any amendment, waiver or other modification hereof or of any
other Loan Document) are an arm’s-length commercial transaction between the Loan
Parties, on the one hand, and the Credit Parties, on the other hand, and each of
the Loan Parties is capable of evaluating and understanding and understands and
accepts the terms, risks and conditions of the transactions contemplated hereby
and by the other Loan Documents (including any amendment, waiver or other
modification hereof or thereof); (ii) in connection with the process leading to
such transaction, each Credit Party is and has been acting solely as a principal
and is not the financial advisor, agent or fiduciary, for the Loan Parties or
any of their respective Affiliates, stockholders, creditors or employees or any
other Person; (iii) none of the Credit Parties has assumed or will assume an
advisory, agency or fiduciary responsibility in favor of the Loan Parties with
respect to any of the transactions contemplated hereby or the process leading
thereto, including with respect to any amendment, waiver or other modification
hereof or of any other Loan Document (irrespective of whether any of the Credit
Parties has advised or is currently advising any Loan Party or any of its
Affiliates on other matters) and none of the Credit Parties has any obligation
to any Loan Party or any of its Affiliates with respect to the transactions
contemplated hereby except those obligations expressly set forth herein and in
the other Loan Documents; (iv) the Credit Parties and their respective
Affiliates may be engaged in a broad range of transactions that involve
interests that differ from those of the Loan Parties and their respective
Affiliates, and none of the Credit Parties has any obligation to disclose any of
such interests by virtue of any advisory, agency or fiduciary relationship; and
(v) the Credit Parties have not provided and will not provide any legal,
accounting, regulatory or tax advice with respect to any of the transactions
contemplated hereby (including any amendment, waiver or other modification
hereof or of any other Loan Document) and each of the Loan Parties has consulted
its own legal, accounting, regulatory and tax advisors to the extent it has
deemed appropriate. Each of the Loan Parties hereby waives and releases, to the
fullest extent permitted by law, any claims that it may have against each of the
Credit Parties with respect to any breach or alleged breach of agency or
fiduciary duty.

 

10.17      USA PATRIOT Act Notice. Each Lender that is subject to the Act (as
hereinafter defined) and the Agent (for itself and not on behalf of any Lender)
hereby notifies the Loan 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 “Act”), it is required to obtain, verify and record information that
identifies each Loan Party, which information includes the name and address of
each Loan Party and other information that will allow such Lender or the Agent,
as applicable, to identify each Loan Party in accordance with the Act. Each Loan
Party is in compliance, in all material respects, with the Act. No part of the
proceeds of the Loans will be used by the Loan Parties, directly or indirectly,
for any payments to any governmental official or employee, political party,
official of a political party, candidate for political office, or anyone else
acting in an official capacity, in order to obtain, retain or direct business or
obtain any improper advantage, in violation of the United States Foreign Corrupt
Practices Act of 1977, as amended.

 

10.18      Foreign Asset Control Regulations. Neither of the advance of the
Loans nor the use of the proceeds of any thereof will violate the Trading With
the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading With the Enemy
Act”) or any of the foreign assets control

 

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regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any
enabling legislation or executive order relating thereto (which for the
avoidance of doubt shall include, but shall not be limited to (a) Executive
Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg.
49079 (2001)) (the “Executive Order”) and (b) the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (Public Law 107-56)). Furthermore, none of the Borrowers
or their Affiliates (a) is or will become a “blocked person” as described in the
Executive Order, the Trading With the Enemy Act or the Foreign Assets Control
Regulations or (b) engages or will engage in any dealings or transactions, or be
otherwise associated, with any such “blocked person” or in any manner violative
of any such order.

 

10.19      Time of the Essence. Time is of the essence of the Loan Documents.

 

10.20      Press Releases.

 

(a)          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 the Agent or its Affiliates or referring to this
Agreement or the other Loan Documents without at least two (2) Business Days’
prior notice to the Agent and without the prior written consent of the Agent
unless (and only to the extent that) such Credit Party or Affiliate is required
to do so under applicable Law and then, in any event, such Credit Party or
Affiliate will consult with the Agent before issuing such press release or other
public disclosure.

 

(b)          Each Loan Party consents to the publication by the Agent or any
Lender of advertising material, including any “tombstone” or comparable
advertising, on its website or in other marketing materials of Agent, relating
to the financing transactions contemplated by this Agreement using any Loan
Party’s name, product photographs, logo, trademark or other insignia. The Agent
or such Lender shall provide a draft reasonably in advance of any advertising
material to the Lead Borrower for review and comment prior to the publication
thereof. The Agent reserves the right to provide to industry trade organizations
and loan syndication and pricing reporting services information necessary and
customary for inclusion in league table measurements.

 

10.21      Additional Waivers.

 

(a)          The Obligations are the joint and several obligation of each Loan
Party. To the fullest extent permitted by Applicable Law, the obligations of
each Loan Party shall not be affected by (i) the failure of any Credit Party to
assert any claim or demand or to enforce or exercise any right or remedy against
any other Loan Party under the provisions of this Agreement, any other Loan
Document or otherwise, (ii) any rescission, waiver, amendment or modification
of, or any release from any of the terms or provisions of, this Agreement or any
other Loan Document, or (iii) the failure to perfect any security interest in,
or the release of, any of the Collateral or other security held by or on behalf
of the Agent or any other Credit Party.

 

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(b)          The obligations of each Loan Party shall not be subject to any
reduction, limitation, impairment or termination for any reason (other than the
indefeasible payment in full in cash of the Obligations after the termination of
the Commitments), including any claim of waiver, release, surrender, alteration
or compromise of any of the Obligations, and shall not be subject to any defense
or setoff, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality or unenforceability of any of the Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
each Loan Party hereunder shall not be discharged or impaired or otherwise
affected by the failure of the Agent or any other Credit Party to assert any
claim or demand or to enforce any remedy under this Agreement, any other Loan
Document or any other agreement, by any waiver or modification of any provision
of any thereof, any default, failure or delay, willful or otherwise, in the
performance of any of the Obligations, or by any other act or omission that may
or might in any manner or to any extent vary the risk of any Loan Party or that
would otherwise operate as a discharge of any Loan Party as a matter of law or
equity (other than the indefeasible payment in full in cash of all the
Obligations after the termination of the Commitments).

 

(c)          To the fullest extent permitted by applicable Law, each Loan Party
waives any defense based on or arising out of any defense of any other Loan
Party or the unenforceability of the Obligations or any part thereof from any
cause, or the cessation from any cause of the liability of any other Loan Party,
other than the indefeasible payment in full in cash of all the Obligations and
the termination of the Commitments. The Agent and the other Credit Parties may,
at their election, foreclose on any security held by one or more of them by one
or more judicial or non-judicial sales, accept an assignment of any such
security in lieu of foreclosure, compromise or adjust any part of the
Obligations, make any other accommodation with any other Loan Party, or exercise
any other right or remedy available to them against any other Loan Party,
without affecting or impairing in any way the liability of any Loan Party
hereunder except to the extent that all the Obligations have been indefeasibly
paid in full in cash and the Commitments have been terminated. Each Loan Party
waives any defense arising out of any such election even though such election
operates, pursuant to applicable Law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Loan Party against
any other Loan Party, as the case may be, or any security.

 

(d)          Each Borrower is obligated to repay the Obligations as joint and
several obligors under this Agreement. Upon payment by any Loan Party of any
Obligations, all rights of such Loan Party against any other Loan Party arising
as a result thereof by way of right of subrogation, contribution, reimbursement,
indemnity or otherwise shall in all respects be subordinate and junior in right
of payment to the prior indefeasible payment in full in cash of all the
Obligations and the termination of the Commitments. In addition, any
indebtedness of any Loan Party now or hereafter held by any other Loan Party is
hereby subordinated in right of payment to the prior indefeasible payment in
full of the Obligations and no Loan Party will demand, sue for or otherwise
attempt to collect any such indebtedness. If any amount shall erroneously be
paid to any Loan Party on account of (i) such subrogation, contribution,
reimbursement, indemnity or similar right or (ii) any such indebtedness of any
Loan Party, such amount shall be held in trust for the benefit of the Credit
Parties and shall forthwith be paid to the Agent to be credited against the
payment of the Obligations, whether matured or unmatured, in accordance with the
terms of this Agreement and the other Loan Documents. Subject to the foregoing,
to the extent that any Borrower shall, under this Agreement as a joint and
several

 

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obligor, repay any of the Obligations constituting Loans made to another
Borrower hereunder or other Obligations incurred directly and primarily by any
other Borrower (an “Accommodation Payment”), then the Borrower making such
Accommodation Payment shall be entitled to contribution and indemnification
from, and be reimbursed by, each of the other Borrowers in an amount, for each
of such other Borrowers, equal to a fraction of such Accommodation Payment, the
numerator of which fraction is such other Borrower’s Allocable Amount and the
denominator of which is the sum of the Allocable Amounts of all of the
Borrowers. As of any date of determination, the “Allocable Amount” of each
Borrower shall be equal to the maximum amount of liability for Accommodation
Payments which could be asserted against such Borrower hereunder without (a)
rendering such Borrower “insolvent” within the meaning of Section 101 (31) of
the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”)
or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (b) leaving such
Borrower with unreasonably small capital or assets, within the meaning of
Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the
UFCA, or (c) leaving such Borrower unable to pay its debts as they become due
within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the
UFTA, or Section 5 of the UFCA.

 

10.22      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 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.

 

10.23      Attachments. The exhibits, schedules and annexes attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for the purposes stated herein, except that in the event of any
conflict between any of the provisions of such exhibits and the provisions of
this Agreement, the provisions of this Agreement shall prevail.

 

[ Signature pages follow ]

 

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

 

  BLUEFLY, INC., as a Borrower       By:  /s/ Joseph Park   Name:  Joseph Park  
Title:  Chief Executive Officer       EVT Acquisition Co., LLC, as a Borrower  
    By:  /s/ Joseph Park   Name:  Joseph Park   Title:  Chief Executive Officer

 

[Signature Page to Credit Agreement]

 

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  SALUS CAPITAL PARTNERS, LLC,   as Administrative Agent and as Collateral Agent
      By:  /s/ Marc S. Price   Name:  Marc S. Price   Title:  Senior Vice
President

 

[Signature Page to Credit Agreement]

 

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  SALUS CAPITAL PARTNERS, LLC,   as a Lender       By:  /s/ Marc S. Price  
Name:  Marc S. Price   Title:  Senior Vice President

 

[Signature Page to Credit Agreement]

 

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Schedule 2.01 – Commitments and Applicable Percentages

 

Lender  Commitment   Applicable Percentage            Salus Capital Partners,
LLC  $10,000,000    100%

 

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Execution Version

 

 

 

SECURITY AGREEMENT

 

by

 

BLUEFLY, INC.,

as Lead Borrower

 

and

 

THE OTHER BORROWERS AND GUARANTORS PARTY HERETO

FROM TIME TO TIME

 

and

 

SALUS CAPITAL PARTNERS, LLC,

as Collateral Agent

 

Dated as of November 13, 2012

  

 

  

 

 

 

TABLE OF CONTENTS

 

    Page       PREAMBLE   1       RECITALS   1       AGREEMENT   1       Article
I DEFINITIONS AND INTERPRETATION 2       SECTION 1.1 Definitions. 2 SECTION 1.2
Interpretation. 6 SECTION 1.3 Perfection Certificate. 6       Article II GRANT
OF SECURITY AND SECURED OBLIGATIONS 6       SECTION 2.1 Pledge; Grant of
Security Interest. 6 SECTION 2.2 Secured Obligations. 7 SECTION 2.3 Security
Interest. 7       Article III PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES; USE
OF COLLATERAL 8       SECTION 3.1 Delivery of Certificated Securities
Collateral. 8 SECTION 3.2 Perfection of Uncertificated Securities Collateral. 8
SECTION 3.3 Financing Statements and Other Filings; Maintenance of Perfected
Security Interest. 8 SECTION 3.4 Other Actions. 9 SECTION 3.5 Supplements;
Further Assurances. 11 SECTION 3.6 Joinder of Additional Grantors. 12      
Article IV REPRESENTATIONS, WARRANTIES AND COVENANTS 12       SECTION 4.1 Title.
12 SECTION 4.2 Limitation on Liens; Defense of Claims; Transferability of
Collateral. 12 SECTION 4.3 Chief Executive Office; Change of Name; Jurisdiction
of Organization. 13 SECTION 4.4 Location of Inventory and Equipment. 13 SECTION
4.5 Condition and Maintenance of Equipment 13 SECTION 4.6 Due Authorization and
Issuance. 13 SECTION 4.7 No Conflicts, Consents, etc. 14 SECTION 4.8 Collateral.
14 SECTION 4.9 Insurance. 14 SECTION 4.10 Payment of Taxes; Compliance with
Laws; Contested Liens; Claims. 14 SECTION 4.11 Access to Collateral, Books and
Records; Other Information. 15       Article V CERTAIN PROVISIONS CONCERNING
SECURITIES COLLATERAL 15       SECTION 5.1 Pledge of Additional Securities
Collateral. 15

 

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    Page       SECTION 5.2 Voting Rights; Distributions; etc. 15 SECTION 5.3
[Reserved] 17 SECTION 5.4 Defaults, Etc 17 SECTION 5.5 Certain Agreements of
Grantors As Issuers and Holders of Equity Interests. 17       Article VI CERTAIN
PROVISIONS CONCERNING INTELLECTUAL PROPERTY COLLATERAL 17       SECTION 6.1
Grant of License. 17 SECTION 6.2 Registrations 17 SECTION 6.3 No Violations or
Proceedings 18 SECTION 6.4 Protection of Collateral Agent’s Security. 18 SECTION
6.5 After-Acquired Property. 18 SECTION 6.6 Modifications. 19 SECTION 6.7
Litigation. 19 SECTION 6.8 Third Party Consents. 19       Article VII CERTAIN
PROVISIONS CONCERNING ACCOUNTS 20       SECTION 7.1 Special Representations and
Warranties. 20 SECTION 7.2 Maintenance of Records. 20 SECTION 7.3 Legend. 20
SECTION 7.4 Modification of Terms, Etc. 20 SECTION 7.5 Collection. 20      
Article VIII REMEDIES 21       SECTION 8.1 Remedies. 21 SECTION 8.2 Notice of
Sale. 22 SECTION 8.3 Waiver of Notice and Claims. 23 SECTION 8.4 Certain Sales
of Collateral. 23 SECTION 8.5 No Waiver; Cumulative Remedies. 24 SECTION 8.6
Certain Additional Actions Regarding Intellectual Property. 24 SECTION 8.7
Application of Proceeds. 24       Article IX MISCELLANEOUS 25       SECTION 9.1
Concerning Collateral Agent. 25 SECTION 9.2 Collateral Agent May Perform;
Collateral Agent Appointed Attorney-in-Fact. 25 SECTION 9.3 Expenses. 26 SECTION
9.4 Continuing Security Interest; Assignment. 26 SECTION 9.5 Termination;
Release. 26 SECTION 9.6 Modification in Writing. 27 SECTION 9.7 Notices. 27
SECTION 9.8 GOVERNING LAW. 27 SECTION 9.9 CONSENT TO JURISDICTION; SERVICE OF
PROCESS; WAIVER OF JURY TRIAL. 28 SECTION 9.10 Severability of Provisions. 29

 

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    Page       SECTION 9.11 Execution in Counterparts; Effectiveness. 29 SECTION
9.12 No Release. 29 SECTION 9.13 Obligations Absolute. 29       SIGNATURES    

 

EXHIBIT 1 Form of Securities Pledge Amendment SCHEDULE I Intercompany Notes
SCHEDULE II Filings, Registrations and Recordings SCHEDULE III Pledged Interests

 

-iii-

 

 

SECURITY AGREEMENT

 

SECURITY AGREEMENT dated as of November 13, 2012 (as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
provisions hereof, this “Security Agreement”) made by (i) BLUEFLY, INC., a
Delaware corporation having an office at 42 West 39th Street, New York, New York
10018, as lead borrower for itself and the other Borrowers (the “Lead
Borrower”), (ii) THE OTHER BORROWERS LISTED ON THE SIGNATURE PAGES HERETO
(together with the Lead Borrower, the “Original Borrowers”) OR FROM TIME TO TIME
PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT (the “Additional Borrowers,”
and together with the Original Borrowers, the “Borrowers”), and (iii) THE
GUARANTORS FROM TIME TO TIME PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT
(the “Guarantors”), as pledgors, assignors and debtors (the Borrowers, together
with the Guarantors, in such capacities and together with any successors in such
capacities, the “Grantors,” and each, a “Grantor”), in favor of SALUS CAPITAL
PARTNERS, LLC, having an office at 197 First Avenue, Suite 250, Needham Heights,
Massachusetts 02494, in its capacity as collateral agent for the Credit Parties
(as defined in the Credit Agreement defined below) pursuant to the Credit
Agreement, as pledgee, assignee and secured party (in such capacities and
together with any successors in such capacities, the “Collateral Agent”).

 

RECITALS:

 

A.           The Borrowers, the Collateral Agent, Salus Capital Partners, LLC,
as administrative agent, and the Lenders party thereto, among others, have, in
connection with the execution and delivery of this Security Agreement, entered
into that certain Credit Agreement dated as of the date hereof (as amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”).

 

B.           The Borrowers and the Guarantors will receive substantial benefits
from the execution, delivery and performance of the Credit Agreement and each
is, therefore, willing to enter into this Security Agreement.

 

C.           This Security Agreement is given by each Grantor in favor of the
Collateral Agent for the benefit of the Credit Parties to secure the payment and
performance of all of the Secured Obligations (as hereinafter defined).

 

D.           It is a condition to the obligations of the Lenders to make the
Loans under the Credit Agreement and a condition to the L/C Issuers issuing
Letters of Credit under the Credit Agreement that each Grantor execute and
deliver the applicable Loan Documents, including this Security Agreement.

 

AGREEMENT:

 

NOW THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Grantor and the Collateral Agent hereby agree as follows:

 

 

 

 

Article I

DEFINITIONS AND INTERPRETATION

 

SECTION 1.1           Definitions.

 

(a)          Unless otherwise defined herein or in the Credit Agreement,
capitalized terms used herein that are defined in the UCC shall have the
meanings assigned to them in the UCC.

 

(b)          Capitalized terms used but not otherwise defined herein that are
defined in the Credit Agreement shall have the meanings given to them in the
Credit Agreement.

 

(c)          The following terms shall have the following meanings:

 

“Additional Borrowers” shall have the meaning assigned to such term in the
Preamble hereof.

 

“Borrowers” shall have the meaning assigned to such term in the Preamble hereof.

 

“Claims” shall mean any and all property taxes and other taxes, assessments and
special assessments, levies, fees and all governmental charges imposed upon or
assessed against, and all claims (including, without limitation, landlords’,
carriers’, mechanics’, workmen’s, repairmen’s, laborers’, materialmen’s,
suppliers’ and warehousemen’s Liens and other claims arising by operation of
law) against, all or any portion of the Collateral.

 

“Collateral” shall have the meaning assigned to such term in SECTION 2.1 hereof.

 

“Collateral Agent” shall have the meaning assigned to such term in the Preamble
hereof.

 

“Contracts” shall mean, collectively, with respect to each Grantor, all sale,
service, performance, equipment or property lease contracts, agreements and
grants and all other contracts, agreements or grants (in each case, whether
written or oral, or third party or intercompany), between such Grantor and any
other party, and all assignments, amendments, restatements, supplements,
extensions, renewals, replacements or modifications thereof.

 

“Control” shall mean (i) in the case of each DDA, “control,” as such term is
defined in Section 9-104 of the UCC, and (ii) in the case of any security
entitlement, “control,” as such term is defined in Section 8-106 of the UCC.

 

“Control Agreements” shall mean, collectively, the Blocked Account Agreements
and the Securities Account Control Agreements.

 

“Copyrights” shall mean, collectively, with respect to each Grantor, all
copyrights (whether statutory or common Law, whether established or registered
in the United States or any other country or any political subdivision thereof
whether registered or unregistered and whether published or unpublished) and all
copyright registrations and applications made by such Grantor, in each case,
whether now owned or hereafter created or acquired by or assigned to such
Grantor, including, without limitation, the registrations and applications
listed in Section III of the Perfection Certificate, together with any and all
(i) rights and privileges arising under applicable Law with respect to such
Grantor’s use of such copyrights, (ii) reissues, renewals, continuations and
extensions thereof, (iii) income, fees, royalties,

 

2

 

 

damages, claims and payments now or hereafter due and/or payable with respect
thereto, including, without limitation, damages and payments for past, present
or future infringements thereof, (iv) rights corresponding thereto throughout
the world and (v) rights to sue for past, present or future infringements
thereof.

 

“Credit Agreement” shall have the meaning assigned to such term in Recital A
hereof.

 

“Distributions” shall mean, collectively, with respect to each Grantor, all
Restricted Payments from time to time received, receivable or otherwise
distributed to such Grantor in respect of or in exchange for any or all of the
Pledged Securities or Intercompany Notes.

 

“Excluded Property” shall mean the following:

 

(a)          any license, permit or contractual obligation of any Grantor
(i) that validly prohibits the creation by such Grantor of a security interest
therein or thereon or (ii) to the extent that applicable Law prohibits the
creation of a security interest therein or thereon in each case after giving
effect to Article 9 of the UCC; and

 

(b)          any Intellectual Property Collateral consisting of intent-to-use
trademark applications, for which the creation by a Grantor of a security
interest therein is prohibited without the consent of third party or by
applicable Law;

 

(c)          any property now owned or hereafter acquired by any Grantor that is
subject to a purchase money Lien or a capital lease permitted under the Credit
Agreement if the contractual obligation pursuant to which such Lien is granted
(or the documentation providing for such purchase money Lien or capital lease)
validly prohibits the creation by such Grantor of a Lien thereon or requires the
consent of any person other than such Grantor which consent has not been
obtained as a condition to the creation of any other Lien on such property; and

 

(d)          motor vehicles and other goods subject to a certificate of title;

 

provided, however, that in each case described in clauses (a) and (b) of this
definition, such property shall constitute “Excluded Property” only to the
extent and for so long as such license, permit, or applicable Law validly
prohibits the creation of a Lien on such property in favor of the Collateral
Agent and, upon the termination of such prohibition (howsoever occurring), such
property shall cease to constitute “Excluded Property”; provided further, that
“Excluded Property” shall not include (i) any assets that are of the type that
may be eligible for inclusion in the Borrowing Base, or (ii) the right to
receive any proceeds arising therefrom or any other rights referred to in
Sections 9-406(f), 9-407(a) or 9-408(a) of the UCC or any Proceeds,
substitutions or replacements of any Excluded Property (unless such Proceeds,
substitutions or replacements would otherwise constitute Excluded Property).

 

“Goodwill” shall mean, collectively, with respect to each Grantor, the goodwill
connected with such Grantor’s business including, without limitation, (i) all
goodwill connected with the use of and symbolized by any of the Intellectual
Property Collateral in which such Grantor has any interest, (ii) all know-how,
trade secrets, customer and supplier lists, proprietary information, inventions,
methods, procedures, formulae, descriptions, compositions, technical data,
drawings, specifications, name plates, catalogs, confidential information and
the right to limit the use or disclosure thereof by any Person, pricing and cost
information, business and marketing plans and proposals, consulting agreements,
engineering contracts and such other assets which relate to such goodwill and
(iii) all product lines of such Grantor’s business.

 

3

 

 

“Grantor” shall have the meaning assigned to such term in the Preamble hereof.

 

“Guarantors” shall have the meaning assigned to such term in the Preamble
hereof.

 

“Intellectual Property Collateral” shall mean, collectively, the Patents,
Trademarks, Copyrights, Licenses and Goodwill.

 

“Intercompany Notes” shall mean, with respect to each Grantor, all intercompany
notes described on Schedule I hereto and each intercompany note hereafter
acquired by such Grantor and all certificates, instruments or agreements
evidencing such intercompany notes, and all assignments, amendments,
restatements, supplements, extensions, renewals, replacements or modifications
thereof to the extent permitted pursuant to the terms hereof.

 

“Lead Borrower” shall have the meaning assigned to such term in the Preamble
hereof.

 

“Letters of Credit” unless the context otherwise requires, shall have the
meaning given to such term in the UCC.

 

“Licenses” shall mean, collectively, with respect to each Grantor, all license
and distribution agreements with any other Person with respect to any Patent,
Trademark or Copyright or any other patent, trademark or copyright, whether such
Grantor is a licensor or licensee, distributor or distributee under any such
license or distribution agreement, together with any and all (i) renewals,
extensions, supplements and continuations thereof, (ii) income, fees, royalties,
damages, claims and payments now and hereafter due and/or payable thereunder and
with respect thereto including, without limitation, damages and payments for
past, present or future infringements or violations thereof, (iii) rights to sue
for past, present and future infringements or violations thereof and (iv) other
rights to use, exploit or practice any or all of the Patents, Trademarks or
Copyrights or any other patent, trademark or copyright.

 

“Patents” shall mean, collectively, with respect to each Grantor, all patents
issued or assigned to and all patent applications made by such Grantor (whether
established or registered or recorded in the United States or any other country
or any political subdivision thereof), including, without limitation, those
patents and patent applications listed in Section III of the Perfection
Certificate, together with any and all (i) rights and privileges arising under
applicable Law with respect to such Grantor’s use of any patents,
(ii) inventions and improvements described and claimed therein, (iii) reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof, (iv) income, fees, royalties, damages, claims and payments now or
hereafter due and/or payable thereunder and with respect thereto including,
without limitation, damages and payments for past, present or future
infringements thereof, (v) rights corresponding thereto throughout the world and
(vi) rights to sue for past, present or future infringements thereof.

 

“Perfection Certificate” shall mean that certain perfection certificate dated as
of the date hereof, executed and delivered by each Grantor in favor of the
Collateral Agent for the benefit of the Credit Parties, and each other
Perfection Certificate (which shall be in form and substance reasonably
acceptable to the Collateral Agent) executed and delivered by the applicable
Borrower or Guarantor in favor of the Collateral Agent for the benefit of the
Credit Parties contemporaneously with the execution and delivery of a joinder
agreement executed in accordance with SECTION 3.6 hereof, in each case, as the
same may be amended, amended and restated, restated, supplemented or otherwise
modified from time to time in accordance with the Credit Agreement.

 

“Pledged Interests” shall mean, collectively, with respect to each Grantor, all
Equity

 

4

 

 

Interests owned by such Grantor in any issuer now existing or hereafter acquired
or formed, including, without limitation, all Equity Interests of such issuer
described in Schedule III hereof, together with all rights, privileges,
authority and powers of such Grantor relating to such Equity Interests issued by
any such issuer under the Organization Documents of any such issuer, and the
certificates, instruments and agreements representing such Equity Interests and
any and all interest of such Grantor in the entries on the books of any
financial intermediary pertaining to such Equity Interests, from time to time
acquired by such Grantor in any manner, and all other Investment Property owned
by such Grantor; provided, however, that to the extent applicable, Pledged
Interests shall not include any interest possessing more than 65% of the voting
power or control of all classes of interests entitled to vote of any CFC to the
extent such pledge would result in an adverse tax consequence to such Grantor.

 

“Pledged Securities” shall mean, collectively, the Pledged Interests and the
Successor Interests.

 

“Secured Obligations” shall mean the Obligations (as defined in the Credit
Agreement); provided, however, that Other Liabilities shall be Secured
Obligations solely to the extent that there is sufficient Collateral following
satisfaction of the Obligations described in clause (a) of the definition of
Obligations.

 

“Securities Account Control Agreement” shall mean an agreement in form and
substance reasonably satisfactory to the Collateral Agent with respect to any
Securities Account of a Grantor.

 

“Securities Act” means the Securities Exchange Act of 1934 and the applicable
regulations promulgated by the Securities and Exchange Commission pursuant to
such Act.

 

“Securities Collateral” shall mean, collectively, the Pledged Securities, the
Intercompany Notes and the Distributions.

 

“Security Agreement” shall have the meaning assigned to such in the Preamble
hereof.

 

“Successor Interests” shall mean, collectively, with respect to each Grantor,
all shares of each class of the capital stock of the successor corporation or
interests or certificates of the successor limited liability company,
partnership or other entity owned by such Grantor (unless such successor is such
Grantor itself) formed by or resulting from any consolidation or merger in which
any Person listed in Section I of the Perfection Certificate is not the
surviving entity; provided, however, that Successor Interests shall not include
shares or interests possessing more than 65% of the voting power or control of
all classes of capital stock or interests entitled to vote of any CFC to the
extent such pledge would result in an adverse tax consequence to such Grantor.

 

“Trademarks” shall mean, collectively, with respect to each Grantor, all
trademarks (including service marks), slogans, logos, certification marks, trade
dress, uniform resource locations (URLs), domain names, corporate names and
trade names, whether registered or unregistered, owned by or assigned to such
Grantor and all registrations and applications for the foregoing (whether
statutory or common Law and whether established or registered in the United
States or any other country or any political subdivision thereof), including,
without limitation, the registrations and applications listed in Section III of
the Perfection Certificate, together with any and all (i) rights and privileges
arising under applicable Law with respect to such Grantor’s use of any
trademarks, (ii) reissues, continuations, extensions and renewals thereof,
(iii) income, fees, royalties, damages and payments now and hereafter due and/or
payable thereunder and with respect thereto, including, without limitation,
damages, claims and payments for past, present or future infringements thereof,
(iv) rights corresponding thereto throughout the world and (v) rights to sue for
past, present and future infringements thereof.

 

5

 

 

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in
effect from time to time in the State of New York; provided, however, that if a
term is defined in Article 9 of the Uniform Commercial Code differently than in
another Article thereof, the term shall have the meaning set forth in Article 9;
provided further that, if by reason of mandatory provisions of law, perfection,
or the effect of perfection or non-perfection, of a security interest in any
Collateral or the availability of any remedy hereunder is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, “Uniform Commercial Code” means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection or availability of
such remedy, as the case may be.

 

SECTION 1.2           Interpretation. The rules of interpretation specified in
Article I of the Credit Agreement shall be applicable to this Security
Agreement.

 

SECTION 1.3           Perfection Certificate. The Collateral Agent and each
Grantor agree that the Perfection Certificate, and all schedules, amendments and
supplements thereto, are and shall at all times remain a part of this Security
Agreement.

 

Article II

GRANT OF SECURITY AND SECURED OBLIGATIONS

 

SECTION 2.1           Pledge; Grant of Security Interest. As collateral security
for the payment and performance in full of all the Secured Obligations, each
Grantor hereby pledges and grants to the Collateral Agent for its benefit and
for the benefit of the other Credit Parties, a lien on and security interest in
and to all of the right, title and interest of such Grantor in, to and under all
personal property and interests in such personal property, wherever located, and
whether now existing or hereafter arising or acquired from time to time
(collectively, the “Collateral”), including, without limitation:

 

(a)          all Accounts;

 

(b)          all Goods, including Equipment, Inventory and Fixtures;

 

(c)          all Documents, Instruments and Chattel Paper;

 

(d)          all Letters of Credit and Letter-of-Credit Rights;

 

(e)          all Securities Collateral;

 

(f)          all Investment Property;

 

(g)         all Intellectual Property Collateral;

 

(h)         all Commercial Tort Claims, including, without limitation, those
described in Section IV of the Perfection Certificate;

 

(i)          all General Intangibles;

 

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(j)          all Deposit Accounts;

 

(k)         all Supporting Obligations;

 

(l)          all books and records relating to the Collateral; and

 

(m)         to the extent not covered by clauses (a) through (l) of this
sentence, all other personal property of such Grantor, whether tangible or
intangible and all Proceeds and products of each of the foregoing and all
accessions to, substitutions and replacements for, and rents, profits and
products of, each of the foregoing, any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to such Grantor from time to time with
respect to any of the foregoing.

 

Notwithstanding anything to the contrary contained in clauses (a) through (m)
above, the security interest created by this Security Agreement shall not extend
to, and the term “Collateral” shall not include, any Excluded Property and the
Grantors shall from time to time at the request of the Collateral Agent give
written notice to the Collateral Agent identifying in reasonable detail the
Excluded Property and shall provide to the Collateral Agent such other
information regarding the Excluded Property as the Collateral Agent may
reasonably request.

 

SECTION 2.2           Secured Obligations. This Security Agreement secures, and
the Collateral is collateral security for, the payment and performance in full
when due of the Secured Obligations.

 

SECTION 2.3           Security Interest.

 

(a)          Each Grantor hereby irrevocably authorizes the Collateral Agent at
any time and from time to time to file in any relevant jurisdiction any
financing statements (including fixture filings) and amendments thereto that
contain the information required by Article 9 of the Uniform Commercial Code of
each applicable jurisdiction for the filing of any financing statement or
amendment relating to the Collateral, including, without limitation, (i) whether
such Grantor is an organization, the type of organization and any organizational
identification number issued to such Grantor, (ii) a description of the
Collateral as “all assets of the Debtor, wherever located, whether now owned or
hereafter acquired” and (iii) in the case of a financing statement filed as a
fixture filing, a sufficient description of the real property to which such
Collateral relates. Each Grantor agrees to provide all information described in
the immediately preceding sentence to the Collateral Agent promptly upon
request.

 

(b)          Each Grantor hereby ratifies its prior authorization for the
Collateral Agent to file in any relevant jurisdiction any financing statements
or amendments thereto relating to the Collateral if filed prior to the date
hereof.

 

(c)          Each Grantor hereby further authorizes the Collateral Agent to file
filings with the United States Patent and Trademark Office and United States
Copyright Office (or any successor office or any similar office in any other
country) or other necessary documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the security interest granted by such
Grantor hereunder in any Intellectual Property Collateral, without the signature
of such Grantor where permitted by law, and naming such Grantor, as debtor, and
the Collateral Agent, as secured party.

 

7

 

 

Article III

PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;
USE OF COLLATERAL

 

SECTION 3.1           Delivery of Certificated Securities Collateral. Each
Grantor represents and warrants that all certificates, agreements or instruments
representing or evidencing the Securities Collateral in existence on the date
hereof have been delivered to the Collateral Agent in suitable form for transfer
by delivery or accompanied by duly executed instruments of transfer or
assignment in blank and that (assuming continuing possession by the Collateral
Agent of such Securities Collateral) the Collateral Agent has a perfected first
priority security interest therein (subject to Permitted Encumbrances having
priority by operation of law). Each Grantor hereby agrees that all certificates,
agreements or instruments representing or evidencing Securities Collateral
acquired by such Grantor after the date hereof, shall promptly (and in any event
within three (3) Business Days) upon receipt thereof by such Grantor be
delivered to and held by or on behalf of the Collateral Agent pursuant hereto.
All certificated Securities Collateral shall be in suitable form for transfer by
delivery or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance reasonably satisfactory to the
Collateral Agent. The Collateral Agent shall have the right, at any time upon
the occurrence and during the continuance of any Event of Default, to endorse,
assign or otherwise transfer to or to register in the name of the Collateral
Agent or any of its nominees or endorse for negotiation any or all of the
Securities Collateral, without any indication that such Securities Collateral is
subject to the security interest hereunder. In addition, the Collateral Agent
shall have the right with written notice to exchange certificates representing
or evidencing Securities Collateral for certificates of smaller or larger
denominations, accompanied by instruments of transfer or assignment and letters
of direction duly executed in blank.

 

SECTION 3.2           Perfection of Uncertificated Securities Collateral. Each
Grantor represents and warrants that the Collateral Agent has a perfected first
priority security interest in all uncertificated Pledged Securities pledged by
it hereunder that are in existence on the date hereof (subject to Permitted
Encumbrances having priority by operation of law) and that the applicable
Organization Documents do not require the consent of the other shareholders,
members, partners or other Person to permit the Collateral Agent or its designee
to be substituted for the applicable Grantor as a shareholder, member, partner
or other equity owner, as applicable, thereto. Each Grantor hereby agrees that
if any of the Pledged Securities are at any time not evidenced by certificates
of ownership, then each applicable Grantor shall, to the extent permitted by
applicable Law and upon the request of the Collateral Agent, cause such pledge
to be recorded on the equityholder register or the books of the issuer, execute
customary pledge forms or other documents necessary or reasonably requested to
complete the pledge and give the Collateral Agent the right to transfer such
Pledged Securities under the terms hereof and, provide to the Collateral Agent
an opinion of counsel, in form and substance reasonably satisfactory to the
Collateral Agent, confirming such pledge and perfection thereof.

 

SECTION 3.3           Financing Statements and Other Filings; Maintenance of
Perfected Security Interest. Each Grantor represents and warrants that the only
filings, registrations and recordings necessary and appropriate to create,
preserve, protect, publish notice of and perfect the security interest granted
by each Grantor to the Collateral Agent (for the benefit of the Credit Parties)
pursuant to this Security Agreement in respect of the Collateral are listed on
Schedule II hereto. Each Grantor represents and warrants that all such filings,
registrations and recordings have been delivered to the Collateral Agent in
completed and, to the extent necessary or appropriate, duly executed form for
filing in each governmental, municipal or other office specified in Schedule II.
Each Grantor agrees that at the sole cost and expense of the Grantors, (i) such
Grantor will maintain the security interest

 

8

 

 

created by this Security Agreement in the Collateral as a perfected first
priority security interest and shall defend such security interest against the
claims and demands of all Persons (other than with respect to Permitted
Encumbrances), (ii) such Grantor shall furnish to the Collateral Agent from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Collateral Agent may reasonably request, all in reasonable detail and (iii) at
any time and from time to time, upon the written request of the Collateral
Agent, such Grantor shall promptly and duly execute and deliver, and file and
have recorded, such further instruments and documents and take such further
action as the Collateral Agent may reasonably request, including the filing of
any financing statements, continuation statements and other documents (including
this Security Agreement) under the UCC (or other applicable Laws) in effect in
any jurisdiction with respect to the security interest created hereby and the
execution and delivery of Control Agreements, all in form reasonably
satisfactory to the Collateral Agent and in such offices (including, without
limitation, the United States Patent and Trademark Office and the United States
Copyright Office) wherever required by applicable Law in each case to perfect,
continue and maintain a valid, enforceable, first priority security interest in
the Collateral as provided herein and to preserve the other rights and interests
granted to the Collateral Agent hereunder, as against the Grantors and third
parties (other than with respect to Permitted Encumbrances), with respect to the
Collateral.

 

SECTION 3.4           Other Actions. In order to further evidence the
attachment, perfection and priority of, and the ability of the Collateral Agent
to enforce, the Collateral Agent’s security interest in the Collateral, each
Grantor represents, warrants (as to itself) and agrees, in each case at such
Grantor’s own expense, with respect to the following Collateral that:

 

(a)          Instruments and Tangible Chattel Paper. As of the date hereof
(i) no amount payable to such Grantor under or in connection with any of the
Collateral is evidenced by any Instrument or Tangible Chattel Paper other than
such Instruments and Tangible Chattel Paper listed in Section II.D of the
Perfection Certificate and (ii) each Instrument and each item of Tangible
Chattel Paper listed in Section II.D of the Perfection Certificate to the extent
requested by the Collateral Agent, has been properly endorsed, assigned and
delivered to the Collateral Agent, accompanied by instruments of transfer or
assignment and letters of direction duly executed in blank. If any amount
payable under or in connection with any of the Collateral shall be evidenced by
any Instrument or Tangible Chattel Paper, the Grantor acquiring such Instrument
or Tangible Chattel Paper shall forthwith endorse, assign and deliver the same
to the Collateral Agent, accompanied by such instruments of transfer or
assignment duly executed in blank as the Collateral Agent may reasonably request
from time to time.

 

(b)          Investment Property.

 

(i)          As of the date hereof (1) it has no Securities Accounts other than
those listed in Section II.B of the Perfection Certificate, (2) it does not
hold, own or have any interest in any certificated securities or uncertificated
securities other than those constituting Pledged Securities with respect to
which the Collateral Agent has a perfected first priority security interest in
such Pledged Securities, and (3) it has entered into a duly authorized, executed
and delivered Securities Account Control Agreement with respect to each
Securities Account listed in Section II.B of the Perfection Certificate with
respect to which the Collateral Agent has a perfected first priority security
interest in such Securities Accounts by Control.

 

(ii)         If any Grantor shall at any time hold or acquire any certificated
securities constituting Investment Property, other than any securities of any
CFC not required to be pledged hereunder, such Grantor shall promptly (a) notify
the Collateral Agent thereof

 

9

 

 

and endorse, assign and deliver the same to the Collateral Agent, accompanied by
such instruments of transfer or assignment duly executed in blank, all in form
and substance reasonably satisfactory to the Collateral Agent or (b) deliver
such securities into a Securities Account with respect to which a Securities
Account Control Agreement is in effect in favor of the Collateral Agent. If any
securities now or hereafter acquired by any Grantor constituting Investment
Property, other than any securities of any CFC not required to be pledged
hereunder, are uncertificated, such Grantor shall promptly notify the Collateral
Agent thereof and pursuant to an agreement in form and substance reasonably
satisfactory to the Collateral Agent, either (a) grant Control to the Collateral
Agent and cause the issuer to agree to comply with instructions from the
Collateral Agent as to such securities, without further consent of any Grantor
or such nominee, (b) cause a security entitlement with respect to such
uncertificated security to be held in a Securities Account with respect to which
the Collateral Agent has Control or (c) arrange for the Collateral Agent to
become the registered owner of the securities. Grantor shall not hereafter
establish and maintain any Securities Account with any Securities Intermediary
unless (1) the applicable Grantor shall have given the Collateral Agent ten (10)
Business Days’ prior written notice of its intention to establish such new
Securities Account with such Securities Intermediary, (2) such Securities
Intermediary shall be reasonably acceptable to the Collateral Agent and (3) such
Securities Intermediary and such Grantor shall have duly executed and delivered
a Control Agreement with respect to such Securities Account. Each Grantor shall
accept any cash and Investment Property which are proceeds of the Pledged
Interests in trust for the benefit of the Collateral Agent and promptly upon
receipt thereof, deposit any cash received by it into an account in which the
Collateral Agent has Control, or with respect to any Investment Properties or
additional securities, take such actions as required above with respect to such
securities. The Collateral Agent agrees with each Grantor that the Collateral
Agent shall not give any entitlement orders or instructions or directions to any
issuer of uncertificated securities or Securities Intermediary, and shall not
withhold its consent to the exercise of any withdrawal or dealing rights by such
Grantor, unless an Event of Default has occurred and is continuing. No Grantor
shall grant control over any Pledged Securities to any Person other than the
Collateral Agent.

 

(iii)        As between the Collateral Agent and the Grantors, the Grantors
shall bear the investment risk with respect to the Investment Property and
Pledged Securities, and the risk of loss of, damage to, or the destruction of
the Investment Property and Pledged Securities, whether in the possession of, or
maintained as a security entitlement or deposit by, or subject to the control
of, the Collateral Agent, a Securities Intermediary, any Grantor or any other
Person; provided, however, that nothing contained in this SECTION 3.4(b) shall
release or relieve any Securities Intermediary of its duties and obligations to
the Grantors or any other Person under any Control Agreement or under applicable
Law. Each Grantor shall promptly pay all Claims and fees of whatever kind or
nature with respect to the Pledged Securities pledged by it under this Security
Agreement. In the event any Grantor shall fail to make such payment contemplated
in the immediately preceding sentence, the Collateral Agent may do so for the
account of such Grantor and the Grantors shall promptly reimburse and indemnify
the Collateral Agent for all costs and expenses incurred by the Collateral Agent
under this SECTION 3.4(b) and under SECTION 9.3 hereof.

 

(c)          Electronic Chattel Paper and Transferable Records. As of the date
hereof no amount payable under or in connection with any of the Collateral is
evidenced by any Electronic Chattel Paper or any “transferable record” (as that
term is defined in Section 201 of the Federal

 

10

 

 

Electronic Signatures in Global and National Commerce Act, or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction). If any amount payable under or in connection with any of the
Collateral shall be evidenced by any Electronic Chattel Paper or any
transferable record, the Grantor acquiring such Electronic Chattel Paper or
transferable record shall promptly notify the Collateral Agent thereof and shall
take such action as the Collateral Agent may reasonably request to vest in the
Collateral Agent control under UCC Section 9-105 of such Electronic Chattel
Paper or control under Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of
such transferable record. The Collateral Agent agrees with such Grantor that the
Collateral Agent will arrange, pursuant to procedures reasonably satisfactory to
the Collateral Agent and so long as such procedures will not result in the
Collateral Agent’s loss of control, for the Grantor to make alterations to the
Electronic Chattel Paper or transferable record permitted under UCC
Section 9-105 or, as the case may be, Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or Section 16 of the Uniform
Electronic Transactions Act for a party in control to allow without loss of
control, unless an Event of Default has occurred and is continuing or would
occur after taking into account any action by such Grantor with respect to such
Electronic Chattel Paper or transferable record.

 

(d)          Letter-of-Credit Rights. If such Grantor is at any time a
beneficiary under a Letter of Credit now or hereafter issued in favor of such
Grantor (which, for the avoidance of doubt, shall not include any Letter of
Credit issued pursuant to the Credit Agreement), other than Letters of Credit
representing amounts in the aggregate for all Grantors of less than $50,000,
such Grantor shall promptly notify the Collateral Agent thereof and such Grantor
shall, at the request of the Collateral Agent, pursuant to an agreement in form
and substance reasonably satisfactory to the Collateral Agent, either
(i) arrange for the issuer and any confirmer of such Letter of Credit to consent
to an assignment to the Collateral Agent of, and to pay to the Collateral Agent,
the proceeds of any drawing under the Letter of Credit or (ii) arrange for the
Collateral Agent to become the beneficiary of such Letter of Credit, with the
Collateral Agent agreeing, in each case, that the proceeds of any drawing under
the Letter of Credit are to be applied as provided in the Credit Agreement.

 

(e)          Commercial Tort Claims. As of the date hereof it holds no
Commercial Tort Claims other than those listed in Section IV of the Perfection
Certificate. If any Grantor shall at any time hold or acquire a Commercial Tort
Claim, such Grantor shall promptly notify the Collateral Agent in writing signed
by such Grantor of the brief details thereof and grant to the Collateral Agent
in such writing a security interest therein and in the Proceeds thereof, all
upon the terms of this Security Agreement, with such writing to be in form and
substance reasonably satisfactory to the Collateral Agent.

 

SECTION 3.5           Supplements; Further Assurances. Each Grantor shall take
such further actions, and execute and deliver to the Collateral Agent such
additional assignments, agreements, supplements, powers and instruments, as the
Collateral Agent may in its reasonable judgment deem necessary or appropriate,
wherever required by Law, in order to perfect, preserve and protect the security
interest in the Collateral as provided herein and the rights and interests
granted to the Collateral Agent hereunder, or to permit the Collateral Agent to
exercise and enforce its rights, powers and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, but subject to
applicable Law, each Grantor shall make, execute, endorse, acknowledge, file or
refile and/or deliver to the Collateral Agent from time to time upon reasonable
request such lists, descriptions and designations of the Collateral, copies of
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory

 

11

 

 

assignments, supplements, additional security agreements, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments. If an Event of Default has occurred and is
continuing, the Collateral Agent may institute and maintain, in its own name or
in the name of any Grantor, such suits and proceedings as the Collateral Agent
may be advised by counsel shall be necessary or expedient to prevent any
impairment of the security interest in or the perfection thereof in the
Collateral. All of the foregoing shall be at the sole cost and expense of the
Grantors. The Grantors and the Collateral Agent acknowledge that this Security
Agreement is intended to grant to the Collateral Agent for the benefit of the
Credit Parties a security interest in and Lien upon the Collateral and shall not
constitute or create a present assignment of any of the Collateral.

 

SECTION 3.6           Joinder of Additional Grantors. The Grantors shall cause
each direct or indirect Subsidiary of any Loan Party which, from time to time,
after the date hereof shall be required to pledge any assets to the Collateral
Agent for the benefit of the Credit Parties pursuant to the provisions of the
Credit Agreement, to execute and deliver to the Collateral Agent a Perfection
Certificate and a Joinder, in each case, within five (5) Business Days of the
date on which it was acquired or created and, upon such execution and delivery,
such Subsidiary shall constitute a “Grantor” for all purposes hereunder with the
same force and effect as if originally named as a Grantor herein, including, but
limited to, granting the Collateral Agent a security interest in all Securities
Collateral of such Subsidiary. The rights and obligations of each Grantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Grantor as a party to this Security Agreement.

 

Article IV

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

In addition to, and without limitation of, each of the representations,
warranties and covenants set forth in the Credit Agreement and the other Loan
Documents, each Grantor represents, warrants and covenants as follows:

 

SECTION 4.1           Title. No financing statement or other public notice with
respect to all or any part of the Collateral is on file or of record in any
public office, except such as have been filed in favor of the Collateral Agent
pursuant to this Security Agreement or as are permitted by the Credit Agreement.
No Person other than the Collateral Agent has control or possession of all or
any part of the Collateral, except as permitted by the Credit Agreement.

 

SECTION 4.2           Limitation on Liens; Defense of Claims; Transferability of
Collateral. Each Grantor is the sole direct and beneficial owner of, or holds a
valid leasehold in, all Collateral pledged by it hereunder free from any Lien or
other right, title or interest of any Person other than the Liens and security
interest created by this Security Agreement and Permitted Encumbrances (except
for such defects in title as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect). Each Grantor shall,
at its own cost and expense, defend title to the Collateral pledged by it
hereunder and the security interest therein and Lien thereon granted to the
Collateral Agent and the priority thereof against all claims and demands of all
Persons (other than Permitted Encumbrances), at its own cost and expense, at any
time claiming any interest therein adverse to the Collateral Agent or any other
Credit Party other than Permitted Encumbrances. There is no agreement to which
such Grantor is a party, and no Grantor shall enter into any agreement or take
any other action, that would restrict the transferability of any of the
Collateral or otherwise impair or conflict with such Grantors’ obligations or
the rights of the Collateral Agent hereunder.

 

12

 

 

SECTION 4.3           Chief Executive Office; Change of Name; Jurisdiction of
Organization.

 

(a)          The exact legal name, type of organization, jurisdiction of
organization, federal taxpayer identification number, organizational
identification number and chief executive office of such Grantor is indicated
next to its name in Sections I.A and I.B of the Perfection Certificate. Such
Grantor shall furnish to the Collateral Agent prompt written notice of any
change in (i) its legal name, (ii) the location of its chief executive office,
its principal place of business, any office in which it maintains books or
records relating to Collateral owned by it or any office or facility at which
Collateral owned by it is located (including the establishment of any such new
office or facility), (iii) its identity or type of organization or corporate
structure, (iv) its federal taxpayer identification number or organizational
identification number or (v) its jurisdiction of organization (in each case,
including, without limitation, by merging with or into any other entity,
reorganizing, dissolving, liquidating, reincorporating or incorporating in any
other jurisdiction). Such Grantor agrees (A) not to effect or permit any such
change unless all filings have been made under the UCC or otherwise that are
required in order for the Collateral Agent to continue at all times following
such change to have a valid, legal and perfected first priority security
interest in all the Collateral (subject to, with respect to priority, Permitted
Encumbrances having priority by operation of law) and (B) to take all action
reasonably satisfactory to the Collateral Agent to maintain the perfection and
priority of the security interest of the Collateral Agent for the benefit of the
Credit Parties in the Collateral intended to be granted hereunder. Each Grantor
agrees to promptly provide the Collateral Agent with certified Organization
Documents reflecting any of the changes described in the preceding sentence.

 

(b)          The Collateral Agent may rely on opinions of counsel as to whether
any or all UCC financing statements of the Grantors need to be amended as a
result of any of the changes described in SECTION 4.3(a). If any Grantor fails
to provide information to the Collateral Agent about such changes on a timely
basis, the Collateral Agent shall not be liable or responsible to any party for
any failure to maintain a perfected security interest in such Grantor’s property
constituting Collateral, for which the Collateral Agent needed to have
information relating to such changes. The Collateral Agent shall have no duty to
inquire about such changes if any Grantor does not inform the Collateral Agent
of such changes, the parties acknowledging and agreeing that it would not be
feasible or practical for the Collateral Agent to search for information on such
changes if such information is not provided by any Grantor.

 

SECTION 4.4           Location of Inventory and Equipment. As of the Closing
Date, all Equipment and Inventory (other than mobile goods and goods in transit)
of such Grantor is located at the chief executive office or such other location
listed in Schedule 5.08(b)(1) and Schedule 5.08(b)(2) of the Credit Agreement.

 

SECTION 4.5           Condition and Maintenance of Equipment. Each Grantor shall
cause the Equipment to be maintained and preserved in good repair, working order
and condition, ordinary wear and tear excepted, and shall make all necessary
repairs thereto and renewals and replacements thereof except where the failure
to do so could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 4.6           Due Authorization and Issuance. All of the Pledged
Interests have been, and to the extent any Pledged Interests are hereafter
issued, such shares or other equity interests will be, upon such issuance, duly
authorized, validly issued and, to the extent applicable, fully paid and
non-assessable. There is no amount or other obligation owing by any Grantor to
any issuer of the Pledged Interests in exchange for or in connection with the
issuance of the Pledged Interests or any

 

13

 

 

Grantor’s status as a partner or a member of any issuer of the Pledged
Interests. No Grantor will elect to treat any Pledged Interests of such Grantor
as a security under Section 8-103 of the UCC.

 

SECTION 4.7           No Conflicts, Consents, etc. No consent of any party
(including, without limitation, equity holders or creditors of such Grantor) and
no consent, authorization, approval, license or other action by, and no notice
to or filing with, any Governmental Authority or regulatory body or other Person
is required (A) for the grant of the security interest by such Grantor of the
Collateral pledged by it pursuant to this Security Agreement or for the
execution, delivery or performance hereof by such Grantor, (B) for the exercise
by the Collateral Agent of the voting or other rights provided for in this
Security Agreement or (C) for the exercise by the Collateral Agent of the
remedies in respect of the Collateral pursuant to this Security Agreement
except, in each case, for such consents which have been obtained prior to the
date hereof. Following the occurrence and during the continuation of an Event of
Default, if the Collateral Agent desires to exercise any remedies, voting or
consensual rights or attorney-in-fact powers set forth in this Security
Agreement and determines it necessary to obtain any approvals or consents of any
Governmental Authority or any other Person therefor, then, upon the reasonable
request of the Collateral Agent, such Grantor agrees to use commercially
reasonable efforts to assist and aid the Collateral Agent to obtain as soon as
commercially practicable any necessary approvals or consents for the exercise of
any such remedies, rights and powers.

 

SECTION 4.8           Collateral. All information set forth herein, including
the schedules annexed hereto, and all information contained in any documents,
schedules and lists heretofore delivered to any Credit Party in connection with
this Security Agreement, in each case, relating to the Collateral, is accurate
and complete in all material respects. The Collateral described on the schedules
annexed hereto constitutes all of the property of such type of Collateral owned
or held by the Grantors.

 

SECTION 4.9           Insurance. Such Grantor shall (i) maintain or shall cause
to be maintained such insurance as is required pursuant to Section 6.07 of the
Credit Agreement; (ii) maintain such other insurance as may be required by
applicable Law; and (iii) furnish to the Collateral Agent, upon written request,
information as to the insurance carried. Each Grantor hereby irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers, employees or
agents designated by the Collateral Agent) as such Grantor’s true and lawful
agent (and attorney-in-fact), exercisable only after the occurrence and during
the continuance of an Event of Default, for the purpose of making, settling and
adjusting claims in respect of the Collateral under policies of insurance,
endorsing the name of such Grantor on any check, draft, instrument or other item
of payment for the proceeds of such policies of insurance and for making all
determinations and decisions with respect thereto. In the event that any Grantor
at any time or times shall fail to obtain or maintain any of the policies of
insurance required hereby or to pay any premium in whole or in part relating
thereto, the Collateral Agent may, without waiving or releasing any obligation
or liability of the Grantors hereunder or any Default or Event of Default, in
its sole discretion, obtain and maintain such policies of insurance and pay such
premium and take any other actions with respect thereto as the Collateral Agent
deems advisable. All sums disbursed by the Collateral Agent in connection with
this SECTION 4.9, including reasonable attorneys’ fees, court costs, expenses
and other charges relating thereto, shall be payable, upon demand, by the
Grantors to the Collateral Agent and shall be additional Secured Obligations
secured hereby.

 

SECTION 4.10         Payment of Taxes; Compliance with Laws; Contested Liens;
Claims. Each Grantor represents and warrants that all Claims imposed upon or
assessed against the Collateral have been paid and discharged except to the
extent such Claims constitute a Lien not yet due and payable or a Permitted
Encumbrance or such Claims constitute a Lien such Grantor is contesting

 

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pursuant to this SECTION 4.10. Each Grantor shall comply with all applicable Law
relating to the Collateral the failure to comply with which, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.
Each Grantor may at its own expense contest the validity, amount or
applicability of any Claims so long as the contest thereof shall be conducted in
accordance with, and permitted pursuant to the provisions of, the Credit
Agreement. Notwithstanding the foregoing provisions of this SECTION 4.10, no
contest of any such obligation may be pursued by such Grantor if such contest
would expose the Collateral Agent or any other Credit Party to (i) any possible
criminal liability or (ii) any additional civil liability for failure to comply
with such obligations unless such Grantor shall have furnished a bond or other
security therefor satisfactory to the Collateral Agent, or such other Credit
Party, as the case may be.

 

SECTION 4.11         Access to Collateral, Books and Records; Other Information.
Without limitation or duplication of the provisions of Section 6.10 of the
Credit Agreement, upon reasonable prior request to each Grantor, the Collateral
Agent, its agents, accountants and attorneys shall have full and free access to
visit and inspect, as applicable, during normal business hours, all of the
Collateral including, without limitation, all of the books, correspondence and
records of such Grantor relating thereto. The Collateral Agent and its
representatives may examine the same, take extracts therefrom and make
photocopies thereof, and such Grantor agrees to render to the Collateral Agent,
at such Grantor’s cost and expense, such clerical and other assistance as may be
reasonably requested by the Collateral Agent with regard thereto. Such Grantor
shall, at any and all times, within a reasonable time after written request by
the Collateral Agent, furnish or cause to be furnished to the Collateral Agent,
in such manner and in such detail as may be reasonably requested by the
Collateral Agent, additional information with respect to the Collateral.

 

Article V

CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL

 

SECTION 5.1           Pledge of Additional Securities Collateral. Each Grantor
shall, upon obtaining any Pledged Securities or Intercompany Notes of any Person
required to be pledged hereunder, accept the same in trust for the benefit of
the Collateral Agent and forthwith deliver to the Collateral Agent a pledge
amendment, duly executed by such Grantor, in substantially the form of Exhibit 1
annexed hereto (each, a “Pledge Amendment”), and the certificates and other
documents required under SECTION 3.1 and SECTION 3.2 hereof in respect of the
additional Pledged Securities or Intercompany Notes which are to be pledged
pursuant to this Security Agreement, and confirming the attachment of the Lien
hereby created on and in respect of such additional Pledged Securities or
Intercompany Notes. Each Grantor hereby authorizes the Collateral Agent to
attach each Pledge Amendment to this Security Agreement and agrees that all
Pledged Securities or Intercompany Notes listed on any Pledge Amendment
delivered to the Collateral Agent shall for all purposes hereunder be considered
Collateral.

 

SECTION 5.2           Voting Rights; Distributions; etc.

 

(a)          So long as no Event of Default shall have occurred and be
continuing, each Grantor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Securities Collateral or any part
thereof for any purpose not inconsistent with the terms or purposes hereof, the
Credit Agreement or any other Loan Document evidencing the Secured Obligations.
The Collateral Agent shall be deemed without further action or formality to have

 

15

 

 

 

granted to each Grantor all necessary consents relating to voting rights and
shall, if necessary, upon written request of any Grantor and at the sole cost
and expense of the Grantors, from time to time execute and deliver (or cause to
be executed and delivered) to such Grantor all such instruments as such Grantor
may reasonably request in order to permit such Grantor to exercise the voting
and other rights which it is entitled to exercise pursuant to this SECTION
5.2(a).

 

(b)          Upon the occurrence and during the continuance of any Event of
Default, all rights of each Grantor to exercise the voting and other consensual
rights it would otherwise be entitled to exercise pursuant to SECTION 5.2(a)
hereof without any action (other than, in the case of any Securities Collateral,
the giving of any notice) shall immediately cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall thereupon have the
sole right to exercise such voting and other consensual rights; provided, that
the Collateral Agent shall have the right, in its sole discretion, from time to
time following the occurrence and continuance of an Event of Default to permit
such Grantor to exercise such rights under SECTION 5.2(a). After such Event of
Default is no longer continuing, each Grantor shall have the right to exercise
the voting, managerial and other consensual rights and powers that it would
otherwise be entitled to pursuant to SECTION 5.2(a) hereof.

 

(c)          Subject to Section 6.13 of the Credit Agreement, so long as no
Event of Default shall have occurred and be continuing, each Grantor shall be
entitled to receive and retain any and all Distributions, but only if and to the
extent made in accordance with, and to the extent permitted by, the provisions
of the Credit Agreement; provided, however, that any and all such Distributions
consisting of rights or interests in the form of securities shall be forthwith
delivered to the Collateral Agent to hold as Collateral and shall, if received
by any Grantor, be received in trust for the benefit of the Collateral Agent, be
segregated from the other property or funds of such Grantor and be forthwith
delivered to the Collateral Agent as Collateral in the same form as so received
(with any necessary endorsement). The Collateral Agent shall, if necessary, upon
written request of any Grantor and at the sole cost and expense of the Grantors,
from time to time execute and deliver (or cause to be executed and delivered) to
such Grantor all such instruments as such Grantor may reasonably request in
order to permit such Grantor to receive the Distributions which it is authorized
to receive and retain pursuant to this SECTION 5.2(c).

 

(d)          Upon the occurrence and during the continuance of any Event of
Default, all rights of each Grantor to receive Distributions which it would
otherwise be authorized to receive and retain pursuant to SECTION 5.2(c) hereof
shall cease and all such rights shall thereupon become vested in the Collateral
Agent, which shall thereupon have the sole right to receive and hold as
Collateral such Distributions. After such Event of Default is no longer
continuing, each Grantor shall have the right to receive the Distributions which
it would be authorized to receive and retain pursuant to SECTION 5.2(c).

 

(e)          Each Grantor shall, at its sole cost and expense, from time to time
execute and deliver to the Collateral Agent appropriate instruments as the
Collateral Agent may reasonably request in order to permit the Collateral Agent
to exercise the voting and other rights which it may be entitled to exercise
pursuant to SECTION 5.2(b) hereof and to receive all Distributions which it may
be entitled to receive under SECTION 5.2(c) hereof.

 

(f)          All Distributions which are received by any Grantor contrary to the
provisions of SECTION 5.2(c) hereof shall be received in trust for the benefit
of the Collateral Agent, shall be segregated from other funds of such Grantor
and shall immediately be paid over to the Collateral Agent as Collateral in the
same form as so received (with any necessary endorsement).

 

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SECTION 5.3           [Reserved].

 

SECTION 5.4           Defaults, Etc. Such Grantor is not in default in the
payment of any portion of any mandatory capital contribution, if any, required
to be made under any agreement to which such Grantor is a party relating to the
Pledged Securities pledged by it, and such Grantor is not in violation of any
other provisions of any such agreement to which such Grantor is a party, or
otherwise in default or violation thereunder. No Securities Collateral pledged
by such Grantor is subject to any defense, offset or counterclaim, nor have any
of the foregoing been asserted or alleged against such Grantor by any Person
with respect thereto, and as of the date hereof, there are no certificates,
instruments, documents or other writings (other than the Organization Documents
and certificates, if any, delivered to the Collateral Agent) which evidence any
Pledged Securities of such Grantor.

 

SECTION 5.5           Certain Agreements of Grantors As Issuers and Holders of
Equity Interests.

 

(a)          In the case of each Grantor which is an issuer of Securities
Collateral, such Grantor agrees to be bound by the terms of this Security
Agreement relating to the Securities Collateral issued by it and will comply
with such terms insofar as such terms are applicable to it.

 

(b)          In the case of each Grantor which is a partner in a partnership,
limited liability company or other entity, such Grantor hereby consents to the
extent required by the applicable Organization Documents to the pledge by each
other Grantor, pursuant to the terms hereof, of the Pledged Interests in such
partnership, limited liability company or other entity and, upon the occurrence
and during the continuance of an Event of Default, to the transfer of such
Pledged Interests to the Collateral Agent or its nominee and to the substitution
of the Collateral Agent or its nominee as a substituted partner or member in
such partnership, limited liability company or other entity with all the rights,
powers and duties of a general partner or a limited partner or member, as the
case may be.

 

Article VI

CERTAIN PROVISIONS CONCERNING INTELLECTUAL
PROPERTY COLLATERAL

 

SECTION 6.1           Grant of License. Without limiting the rights of
Collateral Agent as the holder of a Lien on the Intellectual Property
Collateral, for the purpose of enabling the Collateral Agent, upon the
occurrence and during the continuance of an Event of Default, to exercise rights
and remedies under Article VIII hereof at such time as the Collateral Agent
shall be lawfully entitled to exercise such rights and remedies, and for no
other purpose, each Grantor hereby grants to the Collateral Agent, to the extent
assignable, and effective only during an Event of Default, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to such Grantor) to use, assign, license or sublicense any of the
Intellectual Property Collateral then owned by such Grantor, wherever the same
may be located, including in such license access to all media in which any of
the licensed items may be recorded or stored and to all computer programs used
for the compilation or printout hereof.

 

SECTION 6.2           Registrations. Except pursuant to licenses and other user

 

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agreements entered into by any Grantor in the ordinary course of business, on
and as of the date hereof (i) each Grantor owns and possesses the right to use,
and has done nothing to authorize or enable any other Person to use, any
material Copyright, Patent or Trademark listed in Section III of the Perfection
Certificate, and (ii) all registrations listed in Section III of the Perfection
Certificate are valid and in full force and effect.

 

SECTION 6.3           No Violations or Proceedings. To each Grantor’s knowledge,
there is no violation by others of any right of such Grantor with respect to any
Copyright, Patent or Trademark listed in Section III of the Perfection
Certificate, respectively, pledged by it under the name of such Grantor, except
to the extent that such violation could not reasonably be expected to have a
Material Adverse Effect.

 

SECTION 6.4           Protection of Collateral Agent’s Security. On a continuing
basis, each Grantor shall, at its sole cost and expense, (i) promptly following
its becoming aware thereof, notify the Collateral Agent of (A) any materially
adverse determination in any proceeding in the United States Patent and
Trademark Office or the United States Copyright Office with respect to any
Patent, Trademark or Copyright necessary for the conduct of business of such
Grantor or (B) the institution of any proceeding or any adverse determination in
any federal, state or local court or administrative body regarding such
Grantor’s claim of ownership in or right to use any of the Intellectual Property
Collateral material to the use and operation of the Collateral, its right to
register such Intellectual Property Collateral or its right to keep and maintain
such registration in full force and effect, (ii) maintain and protect the
Intellectual Property Collateral necessary for the conduct of business of such
Grantor, (iii) not permit to lapse or become abandoned any Intellectual Property
Collateral necessary for the conduct of business of such Grantor, and not settle
or compromise any pending or future litigation or administrative proceeding with
respect to such Intellectual Property Collateral, in each case except as shall
be consistent with commercially reasonable business judgment and, if any Event
of Default has occurred and is continuing, with the prior approval of the
Collateral Agent (such approval not to be unreasonably withheld, conditioned or
delayed), (iv) upon such Grantor’s obtaining knowledge thereof, promptly notify
the Collateral Agent in writing of any event which may be reasonably expected to
materially and adversely affect the value or utility of the Intellectual
Property Collateral or any portion thereof material to the use and operation of
the Collateral, the ability of such Grantor or the Collateral Agent to dispose
of the Intellectual Property Collateral or any material portion thereof or the
rights and remedies of the Collateral Agent in relation thereto including,
without limitation, a levy or threat of levy or any legal process against the
Intellectual Property Collateral or any portion thereof, (v) not license the
Intellectual Property Collateral other than licenses entered into by such
Grantor in, or incidental to, the ordinary course of business, or amend or
permit the amendment of any of the material licenses in a manner that materially
and adversely affects the right to receive payments thereunder, or in any manner
that would materially impair the value of the Intellectual Property Collateral
or the Lien on and security interest in the Intellectual Property Collateral
intended to be granted to the Collateral Agent for the benefit of the Credit
Parties, without the consent of the Collateral Agent (which shall not be
unreasonably conditioned, delayed or withheld), (vi) until the Collateral Agent
exercises its rights to make collection, diligently keep adequate records
respecting the material Intellectual Property Collateral and (vii) furnish to
the Collateral Agent from time to time upon the Collateral Agent’s reasonable
request therefor detailed statements and amended schedules further identifying
and describing the Intellectual Property Collateral and such other materials
evidencing or reports pertaining to the Intellectual Property Collateral as the
Collateral Agent may from time to time reasonably request. Notwithstanding the
foregoing, nothing herein shall prevent any Grantor from selling, disposing of
or otherwise using any Intellectual Property Collateral as permitted under the
Credit Agreement.

 

SECTION 6.5           After-Acquired Property. If any Grantor shall, at any time
after

 

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the date hereof and before this Security Agreement shall have been terminated in
accordance with SECTION 9.5(a), (i) obtain any rights to any additional
Intellectual Property Collateral or (ii) become entitled to the benefit of any
additional Intellectual Property Collateral or any renewal or extension thereof,
including any reissue, division, continuation, or continuation-in-part of any
Intellectual Property Collateral, or any improvement on any Intellectual
Property Collateral, the provisions hereof shall automatically apply thereto and
any such item enumerated in clause (i) or (ii) of this SECTION 6.5 with respect
to such Grantor shall automatically constitute Intellectual Property Collateral
if such would have constituted Intellectual Property Collateral at the time of
execution hereof and be subject to the Lien and security interest created by
this Security Agreement without further action by any party. With respect to any
federally registered Intellectual Property Collateral, each Grantor shall
promptly (a) provide to the Collateral Agent written notice of any of the
foregoing and (b) upon the reasonable request of the Collateral Agent, confirm
the attachment of the Lien and security interest created by this Security
Agreement to any rights described in clauses (i) and (ii) of the immediately
preceding sentence of this SECTION 6.5 by execution of an instrument in form
reasonably acceptable to the Collateral Agent.

 

SECTION 6.6           Modifications. Each Grantor authorizes the Collateral
Agent to modify this Security Agreement by amending Section III of the
Perfection Certificate to include any Intellectual Property Collateral acquired
or arising after the date hereof of such Grantor including, without limitation,
any of the items listed in SECTION 6.5 hereof.

 

SECTION 6.7           Litigation. Unless there shall occur and be continuing any
Event of Default, each Grantor shall have the right to commence and prosecute in
its own name, as the party in interest, for its own benefit and at the sole cost
and expense of the Grantors, such applications for protection of the
Intellectual Property Collateral and suits, proceedings or other actions to
prevent the infringement, counterfeiting, unfair competition, dilution,
diminution in value or other damage as are necessary to protect the Intellectual
Property Collateral. Upon the occurrence and during the continuance of any Event
of Default, the Collateral Agent shall have the right but shall in no way be
obligated to file applications for protection of the Intellectual Property
Collateral and/or bring suit in the name of any Grantor, the Collateral Agent or
the other Credit Parties to enforce the Intellectual Property Collateral and any
license thereunder. In the event of such suit, each Grantor shall, at the
reasonable request of the Collateral Agent, do any and all lawful acts and
execute any and all documents requested by the Collateral Agent in aid of such
enforcement and the Grantors shall promptly reimburse and indemnify the
Collateral Agent, as the case may be, for all costs and expenses incurred by the
Collateral Agent in the exercise of its rights under this SECTION 6.7 in
accordance with SECTION 9.3 hereof. In the event that the Collateral Agent shall
elect not to bring suit to enforce the Intellectual Property Collateral, each
Grantor agrees, at the request of the Collateral Agent, to take all commercially
reasonable actions necessary, whether by suit, proceeding or other action, to
prevent the infringement, counterfeiting, unfair competition, dilution,
diminution in value of or other damage to any of the Intellectual Property
Collateral by others and for that purpose agrees to diligently maintain any
suit, proceeding or other action against any Person so infringing necessary to
prevent such infringement.

 

SECTION 6.8           Third Party Consents. Each Grantor shall use commercially
reasonable efforts to obtain the consent of third parties to the extent such
consent is necessary or desirable to create a valid, perfected security interest
in favor of the Collateral Agent in any Intellectual Property Collateral, upon
the reasonable request of the Collateral Agent.

 

Article VII

 

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CERTAIN PROVISIONS CONCERNING ACCOUNTS

 

SECTION 7.1           Special Representations and Warranties. As of the time
when each of its Accounts is included in the Borrowing Base as an Eligible
Credit Card Receivable each Grantor shall be deemed to have represented and
warranted that such Account and all records, papers and documents relating
thereto (i) are genuine and correct and in all material respects what they
purport to be, (ii) represent the legal, valid and binding obligation of the
account debtor, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar Laws relating to or limiting
creditors’ rights generally or by equitable principles relating to
enforceability, evidencing indebtedness unpaid and owed by such account debtor,
arising out of the performance of labor or services or the sale, lease, license,
assignment or other disposition and delivery of the goods or other property
listed therein or out of an advance or a loan, and (iii) are in all material
respects in compliance and conform with all applicable material federal, state
and local Laws and applicable Laws of any relevant foreign jurisdiction.

 

SECTION 7.2           Maintenance of Records. Each Grantor shall keep and
maintain at its own cost and expense materially complete records of each
Account, in a manner consistent with prudent business practice, including,
without limitation, records of all payments received, all credits granted
thereon, all merchandise returned and all other documentation relating thereto.
Each Grantor shall, at such Grantor’s sole cost and expense, upon the Collateral
Agent’s demand made at any time after the occurrence and during the continuance
of any Event of Default, deliver all tangible evidence of Accounts, including,
without limitation, all documents evidencing Accounts and any books and records
relating thereto to the Collateral Agent or to its representatives (copies of
which evidence and books and records may be retained by such Grantor). Upon the
occurrence and during the continuance of any Event of Default, the Collateral
Agent may transfer a full and complete copy of any Grantor’s books, records,
credit information, reports, memoranda and all other writings relating to the
Accounts to and for the use by any Person that has acquired or is contemplating
acquisition of an interest in the Accounts or the Collateral Agent’s security
interest therein in accordance with applicable Law without the consent of any
Grantor.

 

SECTION 7.3           Legend. Each Grantor shall legend, at the request of the
Collateral Agent made at any time after the occurrence and during the
continuance of any Event of Default and in form and manner reasonably
satisfactory to the Collateral Agent, the Accounts and the other books, records
and documents of such Grantor evidencing or pertaining to the Accounts with an
appropriate reference to the fact that the Accounts have been collaterally
assigned to the Collateral Agent for the benefit of the Credit Parties and that
the Collateral Agent has a security interest therein.

 

SECTION 7.4           Modification of Terms, Etc. No Grantor shall rescind or
cancel any indebtedness evidenced by any Account or modify any term thereof or
make any adjustment with respect thereto except in the ordinary course of
business consistent with prudent business practice, or extend or renew any such
indebtedness except in the ordinary course of business consistent with prudent
business practice or compromise or settle any dispute, claim, suit or legal
proceeding relating thereto or sell any Account or interest therein except in
the ordinary course of business consistent with prudent business practice or in
accordance with the Credit Agreement without the prior written consent of the
Collateral Agent.

 

SECTION 7.5           Collection. Each Grantor shall cause to be collected from
the account debtor of each of the Accounts, as and when due in the ordinary
course of business consistent with prudent business practice (including, without
limitation, Accounts that are delinquent, such

 

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Accounts to be collected in accordance with generally accepted commercial
collection procedures), any and all amounts owing under or on account of such
Account, and apply forthwith upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Account. The costs and expenses
(including, without limitation, attorneys’ fees) of collection, in any case,
whether incurred by any Grantor, the Collateral Agent or any other Credit Party,
shall be paid by the Grantors.

 

Article VIII

REMEDIES

 

SECTION 8.1           Remedies. Upon the occurrence and during the continuance
of any Event of Default the Collateral Agent may, and at the direction of the
Required Lenders, shall, from time to time in respect of the Collateral, in
addition to the other rights and remedies provided for herein, under applicable
Law or otherwise available to it:

 

(a)          Personally, or by agents or attorneys, immediately take possession
of the Collateral or any part thereof, from any Grantor or any other Person who
then has possession of any part thereof with or without notice or process of
law, and for that purpose may enter upon any Grantor’s premises where any of the
Collateral is located, remove such Collateral, remain present at such premises
to receive copies of all communications and remittances relating to the
Collateral and use in connection with such removal and possession any and all
services, supplies, aids and other facilities of any Grantor;

 

(b)          Demand, sue for, collect or receive any money or property at any
time payable or receivable in respect of the Collateral including, without
limitation, instructing the obligor or obligors on any agreement, instrument or
other obligation constituting part of the Collateral to make any payment
required by the terms of such agreement, instrument or other obligation directly
to the Collateral Agent, and in connection with any of the foregoing,
compromise, settle, extend the time for payment and make other modifications
with respect thereto; provided, however, that in the event that any such
payments are made directly to any Grantor, prior to receipt by any such obligor
of such instruction, such Grantor shall segregate all amounts received pursuant
thereto in trust for the benefit of the Collateral Agent and shall promptly pay
such amounts to the Collateral Agent;

 

(c)          Sell, assign, grant a license to use or otherwise liquidate, or
direct any Grantor to sell, assign, grant a license to use or otherwise
liquidate, any and all investments made in whole or in part with the Collateral
or any part thereof, and take possession of the proceeds of any such sale,
assignment, license or liquidation;

 

(d)          Take possession of the Collateral or any part thereof, by directing
any Grantor in writing to deliver the same to the Collateral Agent at any place
or places so designated by the Collateral Agent, in which event such Grantor
shall at its own expense: (A) forthwith cause the same to be moved to the place
or places designated by the Collateral Agent and therewith delivered to the
Collateral Agent, (B) store and keep any Collateral so delivered to the
Collateral Agent at such place or places pending further action by the
Collateral Agent and (C) while the Collateral shall be so stored and kept,
provide such security and maintenance services as shall be necessary to protect
the same and to preserve and maintain them in good condition. Each Grantor’s
obligation to deliver the Collateral as contemplated in this SECTION 8.1 is of
the

 

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essence hereof. Upon application to a court of equity having jurisdiction, the
Collateral Agent shall be entitled to a decree requiring specific performance by
any Grantor of such obligation;

 

(e)          Withdraw all moneys, instruments, securities and other property in
any bank, financial securities, deposit or other account of any Grantor
constituting Collateral for application to the Secured Obligations as provided
in SECTION 8.7 hereof;

 

(f)          Retain and apply the Distributions to the Secured Obligations as
provided in Article V hereof;

 

(g)          Exercise any and all rights as beneficial and legal owner of the
Collateral, including, without limitation, perfecting assignment of and
exercising any and all voting, consensual and other rights and powers with
respect to any Collateral; and

 

(h)          Exercise all the rights and remedies of a secured party under the
UCC, and the Collateral Agent may also in its sole discretion, without notice
except as specified in SECTION 8.2 hereof, sell, assign or grant a license to
use the Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker’s board or at any of the Collateral
Agent’s offices or elsewhere, for cash, on credit or for future delivery, and at
such price or prices and upon such other terms as the Collateral Agent may deem
commercially reasonable. The Collateral Agent or any other Credit Party or any
of their respective Affiliates may be the purchaser, licensee, assignee or
recipient of any or all of the Collateral at any such sale and shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold, assigned or
licensed at such sale, to use and apply any of the Secured Obligations owed to
such Person as a credit on account of the purchase price of any Collateral
payable by such Person at such sale. Each purchaser, assignee, licensee or
recipient at any such sale shall acquire the property sold, assigned or licensed
absolutely free from any claim or right on the part of any Grantor, and each
Grantor hereby waives, to the fullest extent permitted by Law, all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
The Collateral Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Collateral Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. To the fullest extent permitted by
Law, each Grantor hereby waives any claims against the Collateral Agent arising
by reason of the fact that the price at which any Collateral may have been sold,
assigned or licensed at such a private sale was less than the price which might
have been obtained at a public sale, even if the Collateral Agent accepts the
first offer received and does not offer such Collateral to more than one
offeree.

 

SECTION 8.2           Notice of Sale. Each Grantor acknowledges and agrees that,
to the extent notice of sale or other disposition of Collateral shall be
required by applicable Law and unless the Collateral is perishable or threatens
to decline speedily in value, or is of a type customarily sold on a recognized
market (in which event the Collateral Agent shall provide such Grantor such
advance notice as may be practicable under the circumstances), ten (10) days’
prior notice to such Grantor of the time and place of any public sale or of the
time after which any private sale or other intended disposition is to take place
shall be commercially reasonable notification of such matters. No notification
need be given to any Grantor if it has signed, after the occurrence of an Event
of Default, a statement renouncing or modifying (as permitted under Law) any
right to notification of sale or other intended disposition.

 

22

 

 

SECTION 8.3           Waiver of Notice and Claims. Subject to SECTION 8.2, each
Grantor hereby waives, to the fullest extent permitted by applicable Law, notice
or judicial hearing in connection with the Collateral Agent’s taking possession
or the Collateral Agent’s disposition of any of the Collateral, including,
without limitation, any and all prior notice and hearing for any prejudgment
remedy or remedies and any such right which such Grantor would otherwise have
under law, and each Grantor hereby further waives, to the fullest extent
permitted by applicable Law: (i) all damages occasioned by such taking of
possession, (ii) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Collateral Agent’s
rights hereunder and (iii) all rights of redemption, appraisal, valuation, stay,
extension or moratorium now or hereafter in force under any applicable Law. The
Collateral Agent shall not be liable for any incorrect or improper payment made
pursuant to this Article VIII in the absence of gross negligence or willful
misconduct. Any sale of, or the grant of options to purchase, or any other
realization upon, any Collateral shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of the applicable
Grantor therein and thereto, and shall be a perpetual bar both at law and in
equity against such Grantor and against any and all Persons claiming or
attempting to claim the Collateral so sold, optioned or realized upon, or any
part thereof, from, through or under such Grantor.

 

SECTION 8.4           Certain Sales of Collateral.

 

(a)          Each Grantor recognizes that, by reason of certain prohibitions
contained in law, rules, regulations or orders of any Governmental Authority,
the Collateral Agent may be compelled, with respect to any sale of all or any
part of the Collateral, to limit purchasers to those who meet the requirements
of such Governmental Authority. Each Grantor acknowledges that any such sales
may be at prices and on terms less favorable to the Collateral Agent than those
obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agrees that any such restricted sale shall be deemed to have
been made in a commercially reasonable manner and that, except as may be
required by applicable Law, the Collateral Agent shall have no obligation to
engage in public sales.

 

(b)          Each Grantor recognizes that, by reason of certain prohibitions
contained in the Securities Act, and applicable state securities Laws, the
Collateral Agent may be compelled, with respect to any sale of all or any part
of the Securities Collateral and Investment Property, to limit purchasers to
Persons who will agree, among other things, to acquire such Securities
Collateral or Investment Property for their own account, for investment and not
with a view to the distribution or resale thereof. Each Grantor acknowledges
that any such private sales may be at prices and on terms less favorable to the
Collateral Agent than those obtainable through a public sale without such
restrictions (including, without limitation, a public offering made pursuant to
a registration statement under the Securities Act), and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner and that the Collateral Agent shall
have no obligation to engage in public sales and no obligation to delay the sale
of any Securities Collateral or Investment Property for the period of time
necessary to permit the issuer thereof to register it for a form of public sale
requiring registration under the Securities Act or under applicable state
securities Laws, even if such issuer would agree to do so.

 

(c)          If the Collateral Agent determines to exercise its right to sell
any or all of the Securities Collateral or Investment Property, upon written
request, the applicable Grantor shall from time to time furnish to the
Collateral Agent all such information as the Collateral Agent may reasonably
request in order to determine the number of securities included in the
Securities Collateral or Investment Property which may be sold by the Collateral
Agent as exempt transactions under the Securities Act and the rules of the
Securities and Exchange Commission thereunder, as the same are from time to time
in effect.

 

23

 

 

(d)          Each Grantor further agrees that a breach of any of the covenants
contained in this SECTION 8.4 will cause irreparable injury to the Collateral
Agent and the other Credit Parties, that the Collateral Agent and the other
Credit Parties have no adequate remedy at law in respect of such breach and, as
a consequence, that each and every covenant contained in this SECTION 8.4 shall
be specifically enforceable against such Grantor, and such Grantor hereby waives
and agrees not to assert any defenses against an action for specific performance
of such covenants except for a defense that no Event of Default has occurred and
is continuing.

 

SECTION 8.5           No Waiver; Cumulative Remedies.

 

(a)          No failure on the part of the Collateral Agent to exercise, no
course of dealing with respect to, and no delay on the part of the Collateral
Agent in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy; nor shall the Collateral Agent be
required to look first to, enforce or exhaust any other security, collateral or
guaranties. The remedies herein provided are cumulative and are not exclusive of
any remedies provided by law.

 

(b)          In the event that the Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this Security Agreement
by foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to the Collateral Agent, then and in every such case, the Grantors, the
Collateral Agent and each other Credit Party shall be restored to their
respective former positions and rights hereunder with respect to the Collateral,
and all rights, remedies and powers of the Collateral Agent and the other Credit
Parties shall continue as if no such proceeding had been instituted.

 

SECTION 8.6           Certain Additional Actions Regarding Intellectual
Property. If any Event of Default shall have occurred and be continuing, upon
the written demand of Collateral Agent, each Grantor shall execute and deliver
to Collateral Agent an assignment or assignments of the registered Patents,
Trademarks and/or Copyrights and such other documents as are necessary or
appropriate to carry out the intent and purposes hereof to the extent such
assignment does not result in any loss of rights therein under applicable Law.
Within five (5) Business Days of written notice thereafter from Collateral
Agent, each Grantor shall make available to Collateral Agent, to the extent
within such Grantor’s power and authority, such personnel then in such Grantor’s
employ as Collateral Agent may reasonably designate to permit such Grantor to
continue, directly or indirectly, to produce, advertise and sell the products
and services sold by such Grantor under the registered Patents, Trademarks
and/or Copyrights, and such Persons shall be available to perform their prior
functions on Collateral Agent’s behalf.

 

SECTION 8.7           Application of Proceeds. The proceeds received by the
Collateral Agent in respect of any sale of, collection from or other realization
upon all or any part of the Collateral pursuant to the exercise by the
Collateral Agent of its remedies shall be applied, together with any other sums
then held by the Collateral Agent pursuant to this Security Agreement, in
accordance with and as set forth in Section 8.03 of the Credit Agreement.

 

24

 

 

Article IX

MISCELLANEOUS

 

SECTION 9.1           Concerning Collateral Agent.

 

(a)          The Collateral Agent has been appointed as collateral agent
pursuant to the Credit Agreement. The actions of the Collateral Agent hereunder
are subject to the provisions of the Credit Agreement. The Collateral Agent
shall have the right hereunder to make demands, to give notices, to exercise or
refrain from exercising any rights, and to take or refrain from taking action
(including, without limitation, the release or substitution of the Collateral),
in accordance with this Security Agreement and the Credit Agreement. The
Collateral Agent may employ agents and attorneys-in-fact in connection herewith
and shall not be liable for the negligence or misconduct of any such agents or
attorneys-in-fact (but shall be liable for the gross negligence or willful
misconduct of such agents and attorneys-in-fact). The Collateral Agent may
resign and a successor Collateral Agent may be appointed in the manner provided
in the Credit Agreement. Upon the acceptance of any appointment as the
Collateral Agent by a successor Collateral Agent, that successor Collateral
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Collateral Agent under this Security
Agreement, and the retiring Collateral Agent shall thereupon be discharged from
its duties and obligations under this Security Agreement. After any retiring
Collateral Agent’s resignation, the provisions hereof shall inure to its benefit
as to any actions taken or omitted to be taken by it under this Security
Agreement while it was the Collateral Agent.

 

(b)          The Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if such
Collateral is accorded treatment substantially equivalent to that which the
Collateral Agent, in its individual capacity, accords its own property
consisting of similar instruments or interests, it being understood that neither
the Collateral Agent nor any of the other Credit Parties shall have
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Securities Collateral, whether or not the Collateral Agent or any other Credit
Party has or is deemed to have knowledge of such matters or (ii) taking any
necessary steps to preserve rights against any Person with respect to any
Collateral.

 

(c)          The Collateral Agent shall be entitled to rely upon any written
notice, statement, certificate, order or other document or any telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person, and, with respect to all matters pertaining to this
Security Agreement and its duties hereunder, upon advice of counsel selected by
it.

 

(d)          If any item of Collateral also constitutes collateral granted to
Collateral Agent under any other deed of trust, mortgage, security agreement,
pledge or instrument of any type, in the event of any conflict between the
provisions hereof and the provisions of such other deed of trust, mortgage,
security agreement, pledge or instrument of any type in respect of such
collateral, Collateral Agent, in its sole discretion, shall select which
provision or provisions shall control.

 

 

SECTION 9.2           Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If any Grantor shall fail to perform any covenants contained
in this Security Agreement or in the Credit Agreement (including, without
limitation, such Grantor’s covenants to

 

25

 

 

(i) pay the premiums in respect of all required insurance policies hereunder,
(ii) pay Claims, (iii) make repairs, (iv) discharge Liens or (v) pay or perform
any other obligations of such Grantor with respect to any Collateral) after
giving effect to any applicable grace periods, or if any warranty on the part of
any Grantor contained herein shall be breached, the Collateral Agent may (but
shall not be obligated to), do the same or cause it to be done or remedy any
such breach, and may expend funds for such purpose; provided, however, that
Collateral Agent shall in no event be bound to inquire into the validity of any
tax, lien, imposition or other obligation which such Grantor fails to pay or
perform as and when required hereby. Any and all amounts so expended by the
Collateral Agent shall be paid by the Grantors in accordance with the provisions
of SECTION 9.3 hereof. Neither the provisions of this SECTION 9.2 nor any action
taken by Collateral Agent pursuant to the provisions of this SECTION 9.2 shall
prevent any such failure to observe any covenant contained in this Security
Agreement nor any breach of warranty from constituting an Event of Default. Each
Grantor hereby appoints the Collateral Agent its attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such
Grantor, or otherwise, from time to time after the occurrence and during the
continuation of an Event of Default in the Collateral Agent’s discretion to take
any action and to execute any instrument consistent with the terms of the Credit
Agreement and the other Security Documents which the Collateral Agent may deem
necessary to accomplish the purposes hereof. The foregoing grant of authority is
a power of attorney coupled with an interest and such appointment shall be
irrevocable for the term hereof. Each Grantor hereby ratifies all that such
attorney shall lawfully do or cause to be done by virtue hereof.

 

SECTION 9.3           Expenses. Each Grantor will upon demand pay to the
Collateral Agent the amount of any and all amounts required to be paid pursuant
to Section 10.04 of the Credit Agreement.

 

SECTION 9.4           Continuing Security Interest; Assignment. This Security
Agreement shall create a continuing security interest in the Collateral and
shall (i) be binding upon the Grantors, their respective successors and assigns,
and (ii) inure, together with the rights and remedies of the Collateral Agent
hereunder, to the benefit of the Collateral Agent and the other Credit Parties
and each of their respective successors, transferees and assigns. No other
Persons (including, without limitation, any other creditor of any Grantor) shall
have any interest herein or any right or benefit with respect hereto. Without
limiting the generality of the foregoing clause (ii), any Credit Party may
assign or otherwise transfer any indebtedness held by it secured by this
Security Agreement to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to such Credit
Party, herein or otherwise, subject, however, to the provisions of the Credit
Agreement.

 

SECTION 9.5           Termination; Release.

 

(a)          This Security Agreement, the Lien in favor of the Collateral Agent
(for the benefit of itself and the other Credit Parties) and all other security
interests granted hereby shall terminate with respect to all Secured Obligations
(other than contingent indemnification obligations for which claims have not
been asserted) and all obligations (other than those expressly stated to survive
termination) of the Collateral Agent and each Grantor set forth in this Security
Agreement shall terminate, and all rights to the Collateral shall revert to the
Grantors when (i) the Commitments shall have expired or been terminated,
(ii) the principal of and interest on each Loan and all fees and other Secured
Obligations shall have been indefeasibly paid in full in cash, (iii) each Letter
of Credit (as defined in the Credit Agreement) shall have (A) expired or
terminated and have been reduced to zero, (B) been Cash Collateralized to the
extent required by the Credit Agreement, or (C) been supported by another letter
of credit in a manner reasonably satisfactory to the applicable L/C Issuer and
the Agent, and (iv) all Unreimbursed Amounts shall

 

26

 

 

have been indefeasibly paid in full in cash; provided, however, that in
connection with the termination of this Security Agreement, the Collateral Agent
may require such indemnities as it shall reasonably deem necessary or
appropriate to protect the Credit Parties against (x) loss on account of credits
previously applied to the Secured Obligations that may subsequently be reversed
or revoked, (y) any obligations that may thereafter arise with respect to the
Other Liabilities, and (z) any Secured Obligations that may thereafter arise
under Section 10.04 of the Credit Agreement.

 

(b)          The Collateral shall be released from the Lien of this Security
Agreement in accordance with the provisions of the Credit Agreement. Upon
termination hereof or any release of Collateral in accordance with the
provisions of the Credit Agreement, the Collateral Agent shall, upon the request
and at the sole cost and expense of the Grantors, assign, transfer and deliver
to the Grantors, against receipt and without recourse to or warranty by the
Collateral Agent, such of the Collateral to be released (in the case of a
release) or all of the Collateral (in the case of termination of this Security
Agreement) as may be in possession of the Collateral Agent and as shall not have
been sold or otherwise applied pursuant to the terms hereof, and, with respect
to any other Collateral, proper documents and instruments (including UCC-3
termination statements or releases) acknowledging the termination hereof or the
release of such Collateral, as the case may be.

 

(c)          At any time that the respective Grantor desires that the Collateral
Agent take any action described in clause (b) of this SECTION 9.5, such Grantor
shall, upon request of the Collateral Agent, deliver to the Collateral Agent an
officer’s certificate certifying that the release of the respective Collateral
is permitted pursuant to clause (a) or (b) of this SECTION 9.5. The Collateral
Agent shall have no liability whatsoever to any other Credit Party as the result
of any release of Collateral by it as permitted (or which the Collateral Agent
in good faith believes to be permitted) by this SECTION 9.5.

 

SECTION 9.6           Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision hereof, nor consent to
any departure by any Grantor therefrom, shall be effective unless the same shall
be made in accordance with the terms of the Credit Agreement and unless in
writing and signed by the Collateral Agent and the Grantors. Any amendment,
modification or supplement of or to any provision hereof, any waiver of any
provision hereof and any consent to any departure by any Grantor from the terms
of any provision hereof shall be effective only in the specific instance and for
the specific purpose for which made or given. Except where notice is
specifically required by this Security Agreement or any other document
evidencing the Secured Obligations, no notice to or demand on any Grantor in any
case shall entitle any Grantor to any other or further notice or demand in
similar or other circumstances.

 

SECTION 9.7           Notices. Unless otherwise provided herein or in the Credit
Agreement, any notice or other communication herein required or permitted to be
given shall be given in the manner and become effective as set forth in the
Credit Agreement, as to any Grantor, addressed to it at the address of the Lead
Borrower set forth in the Credit Agreement and as to the Collateral Agent,
addressed to it at the address set forth in the Credit Agreement, or in each
case at such other address as shall be designated by such party in a written
notice to the other parties hereto complying as to delivery with the terms of
this SECTION 9.7.

 

SECTION 9.8           GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF, BUT INCLUDING SECTION
5-1401 OF THE NEW YORK GENERAL

 

27

 

 

OBLIGATIONS LAW.

 

SECTION 9.9           CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF
JURY TRIAL.

 

(a)          EACH GRANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF
AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF
THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT
OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT,
AND EACH GRANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW
YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH
FEDERAL COURT. EACH GRANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
SECURITY AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY
CREDIT PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO
THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY GRANTOR OR ITS
PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(b)          EACH GRANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT
REFERRED TO IN PARAGRAPH (a) OF THIS SECTION. EACH GRANTOR HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

 

(c)          EACH GRANTOR AGREES THAT ANY ACTION COMMENCED BY ANY GRANTOR
ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR IN CONNECTION WITH THIS
SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT SOLELY IN A COURT
OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY OR ANY FEDERAL COURT SITTING
THEREIN AS THE COLLATERAL AGENT MAY ELECT IN ITS SOLE DISCRETION AND CONSENTS TO
THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH RESPECT TO ANY SUCH ACTION.

 

(d)          EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE
MANNER PROVIDED FOR NOTICES IN SECTION 9.7. NOTHING IN THIS SECURITY AGREEMENT
WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY APPLICABLE LAW.

 

(e)          EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO

 

28

 

 

A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR
ANY OTHER THEORY AND WHETHER INITIATED BY OR AGAINST ANY SUCH PERSON OR IN WHICH
ANY SUCH PERSON IS JOINED AS A PARTY LITIGANT). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS SECURITY
AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 9.10         Severability of Provisions. Any provision hereof which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

SECTION 9.11         Execution in Counterparts; Effectiveness. This Security
Agreement and any amendments or waivers hereto may be executed in any number of
counterparts (and by different parties hereto in different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. Delivery of an executed counterpart of a
signature page of this Security Agreement by telecopy, pdf or other electronic
transmission shall be as effective as delivery of a manually executed
counterpart of this Security Agreement.

 

SECTION 9.12         No Release. Nothing set forth in this Security Agreement
shall relieve any Grantor from the performance of any term, covenant, condition
or agreement on such Grantor’s part to be performed or observed under or in
respect of any of the Collateral or from any liability to any Person under or in
respect of any of the Collateral or shall impose any obligation on the
Collateral Agent or any other Credit Party to perform or observe any such term,
covenant, condition or agreement on such Grantor’s part to be so performed or
observed or shall impose any liability on the Collateral Agent or any other
Credit Party for any act or omission on the part of such Grantor relating
thereto or for any breach of any representation or warranty on the part of such
Grantor contained in this Security Agreement, the Credit Agreement or the other
Loan Documents, or under or in respect of the Collateral or made in connection
herewith or therewith. The obligations of each Grantor contained in this SECTION
9.12 shall survive the termination hereof and the discharge of such Grantor’s
other obligations under this Security Agreement, the Credit Agreement and the
other Loan Documents.

 

SECTION 9.13         Obligations Absolute. All obligations of each Grantor
hereunder shall be absolute and unconditional irrespective of:

 

(a)          any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of any Grantor;

 

(b)          any lack of validity or enforceability of the Credit Agreement or
any other Loan Document, or any other agreement or instrument relating thereto;

 

(c)          any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from the Credit Agreement or any other
Loan Document or any other agreement or

 

29

 

 

instrument relating thereto;

 

(d)          any pledge, exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any departure
from any guarantee, for all or any of the Secured Obligations;

 

(e)          any exercise, non-exercise or waiver of any right, remedy, power or
privilege under or in respect hereof, the Credit Agreement or any other Loan
Document except as specifically set forth in a waiver granted pursuant to the
provisions of SECTION 9.6 hereof; or

 

(f)          any other circumstances which might otherwise constitute a defense
available to, or a discharge of, any Grantor (other than the termination of this
Security Agreement in accordance with SECTION 9.5(a) hereof).

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

30

 

 

IN WITNESS WHEREOF, the Grantors and the Collateral Agent have caused this
Security Agreement to be duly executed and delivered by their duly authorized
officers as of the date first above written.

 

  GRANTOR:       BLUEFLY, INC.       By: / s / Joseph Park   Name: Joseph Park  
Title: Chief Executive Officer       EVT ACQUISITION CO., LLC       By: / s /
Joseph Park   Name: Joseph Park   Title: Chief Executive Officer

 

[Signature Page to Security Agreement]

 

 

 

 

 

SALUS CAPITAL PARTNERS, LLC, as Collateral

Agent

      By: / s / Marc S. Price   Name: Marc S. Price   Title: Senior Vice
President

 

[Signature Page to Security Agreement]

 

 

 

 

EXHIBIT 1

 

[Form of]

SECURITIES PLEDGE AMENDMENT

 

This Securities Pledge Amendment, dated as of [________] [__], 20[__], is
delivered pursuant to SECTION 5.1 of that certain Security Agreement (as
amended, amended and restated, restated, supplemented or otherwise modified from
time to time, the “Security Agreement;” capitalized terms used but not otherwise
defined herein shall have the meanings assigned to such terms in the Security
Agreement), dated as of November 13, 2012, made by (i) BLUEFLY, INC. as lead
borrower for itself and the other Borrowers (the “Lead Borrower”), (ii) THE
BORROWERS party thereto from time to time (together with the Lead Borrower, the
“Borrowers”), and (iii) THE GUARANTORS party thereto from time to time (the
“Guarantors”), as pledgors, assignors and debtors (the Borrowers, together with
the Guarantors, in such capacities and together with any successors in such
capacities, the “Grantors,” and each, a “Grantor”), in favor of SALUS CAPITAL
PARTNERS, LLC, having an office at 197 First Avenue, Suite 250, Needham,
Massachusetts 02494, in its capacity as collateral agent for the Credit Parties,
as pledgee, assignee and secured party (in such capacities and together with any
successors in such capacities, the “Collateral Agent”). The undersigned hereby
agrees that this Securities Pledge Amendment may be attached to the Security
Agreement and that the Pledged Securities and/or Intercompany Notes listed on
this Securities Pledge Amendment shall be deemed to be and shall become part of
the Collateral and shall secure all Secured Obligations.

 

 

 

 

PLEDGED SECURITIES

  

ISSUER   CLASS
OF STOCK
OR
INTERESTS   PAR
VALUE   CERTIFICATE
NO(S).   NUMBER OF
SHARES
OR
INTERESTS  

PERCENTAGE OF
ALL ISSUED CAPITAL
OR OTHER EQUITY

INTERESTS OF ISSUER

                                                                               
                                         

 

 

 

 

INTERCOMPANY NOTES

 

 

ISSUER

 

PRINCIPAL
AMOUNT

 

DATE OF
ISSUANCE

 

INTEREST
RATE

 

MATURITY
DATE

                                                             

 

  [______________________________________________],   as Grantor       By:      
Name:     Title:       AGREED TO AND ACCEPTED:           SALUS CAPITAL PARTNERS,
LLC, as Collateral Agent             By:         Name:       Title:    

  

 

 

 

SCHEDULE I

Intercompany Notes

 

None.

 

 

 

 

SCHEDULE II

Filings, Registrations and Recordings

 

Grantor   Filing Office(s)       Bluefly, Inc.  

Delaware Secretary of State

United States Patent & Trademark Office

      EVT Acquisition Co., LLC   New York Secretary of State

 

 

 

 

SCHEDULE III

Pledged Interests

 

Grantor   Issuer   Type of
Organization   # of Shares
Owned   Total Shares
Outstanding   % of
Interest
Pledged   Certificate
No. 
(if
uncertificated,
please
indicate so)                               Bluefly, Inc.   EVT Acquisition Co.,
LLC   New York limited liability company   100% membership interest   N/A   100%
  uncertificated