Exhibit 10.1
CREDIT AGREEMENT
by and among
HAMPSHIRE GROUP, LIMITED
as Parent,
HAMPSHIRE DESIGNERS, INC., ITEM-EYES, INC. and SCOTT JAMES, LLC
as Borrowers,
THE LENDERS THAT ARE SIGNATORIES HERETO
as the Lenders,
and
WELLS FARGO CAPITAL FINANCE, LLC
as the Agent
Dated as of October 28, 2010

 

 

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

 

TABLE OF CONTENTS

                      CREDIT AGREEMENT     1          
 
              1.     DEFINITIONS AND CONSTRUCTION     1          
1.1
  Definitions     1          
1.2
  Accounting Terms     1          
1.3
  Code     1          
1.4
  Construction     1          
1.5
  Schedules and Exhibits     2          
 
              2.     LOANS AND TERMS OF PAYMENT     2          
2.1
  Revolver Advances     2          
2.2
  [Reserved]     3          
2.3
  Borrowing Procedures and Settlements     3          
2.4
  Payments; Reductions of Commitments; Prepayments     8          
2.5
  Overadvances     11          
2.6
  Interest Rates and Letter of Credit Fee     11          
2.7
  Crediting Payments     12          
2.8
  Designated Account     12          
2.9
  Maintenance of Loan Account; Statements of Obligations     12          
2.10
  Fees     13          
2.11
  Letters of Credit     13          
2.12
  LIBOR Option     16          
2.13
  Capital Requirements     18          
2.14
  Joint and Several Liability of Borrowers     19          
 
              3.     CONDITIONS; TERM OF AGREEMENT     22          
3.1
  Conditions Precedent to the Initial Extension of Credit     22          
3.2
  Conditions Precedent to all Extensions of Credit     22          
3.3
  Maturity     22          
3.4
  Effect of Maturity     22          
3.5
  Early Termination by Borrower     22          
3.6
  Conditions Subsequent     22          
 
              4.     REPRESENTATIONS AND WARRANTIES     23          
4.1
  Due Organization and Qualification; Subsidiaries     23          
4.2
  Due Authorization; No Conflict     24          
4.3
  Governmental Consents     24          
4.4
  Binding Obligations; Perfected Liens     24          
4.5
  Title to Assets; No Encumbrances     24          
4.6
  Jurisdiction of Organization; Location of Chief Executive Office;
Organizational Identification Number; Commercial Tort Claims     25          
4.7
  Litigation     25          
4.8
  Compliance with Laws     25          
4.9
  No Material Adverse Change     25          
4.10
  Fraudulent Transfer     26          
4.11
  Employee Benefits     26          
4.12
  Environmental Condition     26          
4.13
  Intellectual Property     26          
4.14
  Leases     26          
4.15
  Deposit Accounts and Securities Accounts     26          
4.16
  Complete Disclosure     26          
4.17
  Material Contracts     27          
 
           

 

-i-

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

 

TABLE OF CONTENTS
(continued)

                             
4.18
  Patriot Act     27          
4.19
  Indebtedness     27          
4.20
  Payment of Taxes     27          
4.21
  Margin Stock     28          
4.22
  Governmental Regulation     28          
4.23
  OFAC     28          
4.24
  Employee and Labor Matters     28          
4.25
  [Reserved]     28          
4.26
  [Reserved]     28          
4.27
  Excluded Copyrights     28          
4.28
  Eligible Accounts     29          
4.29
  Eligible Inventory     29          
4.30
  Locations of Inventory     29          
4.31
  Inventory Records     29          
 
              5.     AFFIRMATIVE COVENANTS     29          
5.1
  Financial Statements, Reports, Certificates     29          
5.2
  Collateral Reporting     29          
5.3
  Existence     30          
5.4
  Maintenance of Properties     30          
5.5
  Taxes     30          
5.6
  Insurance     30          
5.7
  Inspection     31          
5.8
  Compliance with Laws     31          
5.9
  Environmental     31          
5.10
  Disclosure Updates     31          
5.11
  Formation of Subsidiaries     31          
5.12
  Further Assurances     32          
5.13
  Lender Meetings     32          
5.14
  [Reserved]     32          
5.15
  Location of Inventory     33          
5.16
  Assignable Material Contracts     33          
5.17
  Treasury Management Services and Bank Accounts     33          
 
              6.     NEGATIVE COVENANTS     33          
6.1
  Indebtedness     33          
6.2
  Liens     33          
6.3
  Restrictions on Fundamental Changes     33          
6.4
  Disposal of Assets     34          
6.5
  Change Name     34          
6.6
  Nature of Business     34          
6.7
  Prepayments and Amendments     34          
6.8
  Change of Control     34          
6.9
  Restricted Junior Payments     35          
6.10
  Accounting Methods     35          
6.11
  Investments; Controlled Investments     35          
6.12
  Transactions with Affiliates     35          
6.13
  Use of Proceeds     36          
6.14
  Limitation on Issuance of Stock     36          
6.15
  [Reserved]     36          
6.16
  Consignments     36          
6.17
  Inventory with Bailees     36          
 
           

 

-ii-

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

 

TABLE OF CONTENTS
(continued)

                             
 
              7.     FINANCIAL COVENANTS     37          
 
              8.     EVENTS OF DEFAULT     37          
 
              9.     RIGHTS AND REMEDIES     39          
9.1
  Rights and Remedies     39          
9.2
  Remedies Cumulative     39          
 
              10.     WAIVERS; INDEMNIFICATION     39          
10.1
  Demand; Protest; etc.     40          
10.2
  The Lender Group’s Liability for Collateral     40          
10.3
  Indemnification     40          
 
              11.     NOTICES     41          
 
              12.     CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER     42        
 
 
              13.     ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS     42        
 
13.1
  Assignments and Participations     42          
13.2
  Successors     45          
 
              14.     AMENDMENTS; WAIVERS     45          
14.1
  Amendments and Waivers     45          
14.2
  Replacement of Certain Lenders     46          
14.3
  No Waivers; Cumulative Remedies     47          
 
              15.     AGENT; THE LENDER GROUP     47          
15.1
  Appointment and Authorization of Agent     47          
15.2
  Delegation of Duties     48          
15.3
  Liability of Agent     48          
15.4
  Reliance by Agent     48          
15.5
  Notice of Default or Event of Default     49          
15.6
  Credit Decision     49          
15.7
  Costs and Expenses; Indemnification     50          
15.8
  Agent in Individual Capacity     50          
15.9
  Successor Agent     50          
15.10
  Lender in Individual Capacity     51          
15.11
  Collateral Matters     51          
15.12
  Restrictions on Actions by Lenders; Sharing of Payments     52          
15.13
  Agency for Perfection     53          
15.14
  Payments by Agent to the Lenders     53          
15.15
  Concerning the Collateral and Related Loan Documents   53        
15.16
  Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other
Reports and Information     53          
15.17
  Several Obligations; No Liability     54          
 
              16.     WITHHOLDING TAXES     55          
 
           

 

-iii-

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

 

TABLE OF CONTENTS
(continued)

                             
 
              17.     GENERAL PROVISIONS     57          
17.1
  Effectiveness     57          
17.2
  Section Headings     57          
17.3
  Interpretation     57          
17.4
  Severability of Provisions     57          
17.5
  Bank Product Providers     57          
17.6
  Debtor-Creditor Relationship     58          
17.7
  Counterparts; Electronic Execution     58          
17.8
  Revival and Reinstatement of Obligations     58          
17.9
  Confidentiality     59          
17.10
  Lender Group Expenses     60          
17.11
  Survival     60          
17.12
  Patriot Act     60          
17.13
  Integration     60          
 
           

EXHIBITS AND SCHEDULES

     
Exhibit A-1
  Form of Assignment and Acceptance
Exhibit B-1
  Form of Borrowing Base Certificate
Exhibit C-1
  Form of Compliance Certificate
Exhibit I-1
  Form of Imported Goods Agreement
Exhibit L-1
  Form of LIBOR Notice
 
   
Schedule A-1
  Agent’s Account
Schedule A-2
  Authorized Persons
Schedule C-1
  Commitments
Schedule D-1
  Designated Account
Schedule E-1
  Eligible Inventory Locations
Schedule P-1
  Permitted Investments
Schedule P-2
  Permitted Liens
Schedule P-3
  Permitted Art Dispositions
Schedule R-1
  Real Property Collateral
Schedule 1.1
  Definitions
Schedule 3.1
  Conditions Precedent
Schedule 3.6
  Conditions Subsequent
Schedule 4.1(b)
  Capitalization
Schedule 4.1(c)
  Capitalization of Subsidiaries
Schedule 4.6(a)
  States of Organization
Schedule 4.6(b)
  Chief Executive Offices
Schedule 4.6(c)
  Organizational Identification Numbers
Schedule 4.6(d)
  Commercial Tort Claims
Schedule 4.7(b)
  Litigation
Schedule 4.12
  Environmental Matters
Schedule 4.13
  Intellectual Property
Schedule 4.14
  Leases
Schedule 4.15
  Deposit Accounts and Securities Accounts
Schedule 4.17
  Material Contracts
Schedule 4.19
  Permitted Indebtedness
Schedule 4.30
  Locations of Inventory
Schedule 5.1
  Financial Statements, Reports, Certificates
Schedule 5.2
  Collateral Reporting
Schedule 6.6
  Nature of Business
 
   

 

-iv-

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

 

CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this “Agreement”), is entered into as of October 28,
2010, by and among the lenders identified on the signature pages hereof (each of
such lenders, together with their respective successors and permitted assigns,
are referred to hereinafter as a “Lender”, as that term is hereinafter further
defined), WELLS FARGO CAPITAL FINANCE, LLC, a Delaware limited liability
company, as agent for the Lenders (in such capacity, together with its
successors and assigns in such capacity, “Agent”), HAMPSHIRE GROUP, LIMITED, a
Delaware corporation (“Parent”), and HAMPSHIRE DESIGNERS, INC., a Delaware
corporation (“Hampshire Designers”), ITEM-EYES, INC., a Delaware corporation
(“Item-Eyes”), and SCOTT JAMES, LLC, a Delaware limited liability company
(“Scott James”; Hampshire Designers, Item-Eyes and Scott James are herein
collectively called the “Borrowers” and each individually, a “Borrower”).
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. Capitalized terms used in this Agreement shall have the
meanings specified therefor on Schedule 1.1.
1.2 Accounting Terms. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP; provided, however, that if Borrowers
notify Agent that Borrowers request an amendment to any provision hereof to
eliminate the effect of any Accounting Change occurring after the Closing Date
or in the application thereof on the operation of such provision (or if Agent
notifies Borrowers that the Required Lenders request an amendment to any
provision hereof for such purpose), regardless of whether any such notice is
given before or after such Accounting Change or in the application thereof, then
Agent and Borrowers agree that they will negotiate in good faith amendments to
the provisions of this Agreement that are directly affected by such Accounting
Change with the intent of having the respective positions of the Lenders and
Borrowers after such Accounting Change conform as nearly as possible to their
respective positions as of the date of this Agreement and, until any such
amendments have been agreed upon, the provisions in this Agreement shall be
calculated as if no such Accounting Change had occurred. When used herein, the
term “financial statements” shall include the notes and schedules thereto.
Whenever the term “Parent” or “Borrower” is used in respect of a financial
covenant or a related definition, it shall be understood to mean such Person and
its Subsidiaries on a consolidated basis, unless the context clearly requires
otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the Code shall be
construed and defined as set forth in the Code unless otherwise defined herein;
provided, however, that to the extent that the Code is used to define any term
herein and such term is defined differently in different Articles of the Code,
the definition of such term contained in Article 9 of the Code shall govern.
1.4 Construction. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the terms “includes”
and “including” are not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
or any other Loan Document refer to this Agreement or such other Loan Document,
as the case may be, as a whole and not to any particular provision of this
Agreement or such other Loan Document, as the case may be. Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless
otherwise specified. Any reference in this Agreement or in any other Loan
Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements,

 

 

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

 

substitutions, joinders, and supplements, thereto and thereof, as applicable
(subject to any restrictions on such alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, joinders, and
supplements set forth herein). 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. 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 full in cash or immediately available funds (or,
(a) in the case of contingent reimbursement obligations with respect to Letters
of Credit, providing Letter of Credit Collateralization, and (b) in the case of
obligations with respect to Bank Products (other than Hedge Obligations),
providing Bank Product Collateralization) 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
Hedge Agreements provided by Hedge Providers) other than (i) unasserted
contingent indemnification Obligations, (ii) any Bank Product Obligations (other
than Hedge Obligations) that, at such time, are allowed by the applicable Bank
Product Provider to remain outstanding without being required to be repaid or
cash collateralized, and (iii) any Hedge Obligations that, at such time, are
allowed by the applicable Hedge Provider to remain outstanding without being
required to be repaid. Any reference herein to any Person shall be construed to
include such Person’s successors and assigns. Any requirement of a writing
contained herein or in any other Loan Document shall be satisfied by the
transmission of a Record.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached to this
Agreement shall be deemed incorporated herein by reference.
2. LOANS AND TERMS OF PAYMENT.
2.1 Revolver Advances.
(a) Subject to the terms and conditions of this Agreement, and during the term
of this Agreement, each Lender with a Commitment agrees (severally, not jointly
or jointly and severally) to make revolving loans (“Advances”) to Borrowers in
an amount at any one time outstanding not to exceed the lesser of:
(i) such Lender’s Commitment, or
(ii) such Lender’s Pro Rata Share of an amount equal to the lesser of:
(A) the Maximum Revolver Amount less the sum of (1) the Letter of Credit Usage
at such time, plus (2) the principal amount of Swing Loans outstanding at such
time, and
(B) the Borrowing Base at such time less the sum of (1) the Letter of Credit
Usage at such time, plus (2) the principal amount of Swing Loans outstanding at
such time.
(b) Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to
the terms and conditions of this Agreement, reborrowed at any time during the
term of this Agreement. The outstanding principal amount of the Advances,
together with interest accrued thereon, shall be due and payable on the Maturity
Date or, if earlier, on the date on which they are declared due and payable
pursuant to the terms of this Agreement.

 

2

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

 

(c) Anything to the contrary in this Section 2.1 notwithstanding, Agent shall
have the right (but not the obligation) to establish, increase, reduce,
eliminate, or otherwise adjust reserves from time to time against the Borrowing
Base or the Maximum Revolver Amount in such amounts, and with respect to such
matters, as Agent in its Permitted Discretion shall deem necessary or
appropriate, including (i) reserves in an amount equal to the Bank Product
Reserve Amount, (ii) reserves with respect to (A) sums that Parent or its
Subsidiaries are required to pay under any Section of this Agreement or any
other Loan Document (such as taxes, assessments, insurance premiums, or, in the
case of leased assets, rents or other amounts payable under such leases) and has
failed to pay when due, and (B) amounts owing by Parent or its Subsidiaries to
any Person to the extent secured by a Lien on, or trust over, any of the
Collateral (other than a Permitted Lien which is a permitted purchase money Lien
or the interest of a lessor under a Capital Lease), which Lien or trust, in the
Permitted Discretion of Agent likely would have a priority superior to Agent’s
Liens (such as Liens or trusts in favor of landlords, warehousemen, carriers,
mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad
valorem, excise, sales, or other taxes where given priority under applicable
law) in and to such item of the Collateral, and (iii) Inventory Reserves. The
amount of any reserve established by Agent shall have a reasonable relationship
to the event, condition or other matter which is the basis for such reserve (or
increase thereof) as determined by Agent in good faith.
2.2 [Reserved].
2.3 Borrowing Procedures and Settlements.
(a) Procedure for Borrowing. Each Borrowing shall be made by a written request
by an Authorized Person delivered to Agent. Unless Swing Lender is not obligated
to make a Swing Loan pursuant to Section 2.3(b) below, such notice must be
received by Agent no later than 1:00 p.m. (Atlanta, Georgia time) on the
Business Day that is the requested Funding Date specifying (i) the amount of
such Borrowing, and (ii) the requested Funding Date, which shall be a Business
Day; provided, however, that if Swing Lender is not obligated to make a Swing
Loan as to a requested Borrowing, such notice must be received by Agent no later
than 11:00 a.m. (Atlanta, Georgia time) on the Business Day that is the
requested Funding Date. At Agent’s election, in lieu of delivering the
above-described written request, any Authorized Person may give Agent telephonic
notice of such request by the required time. In such circumstances, Borrowers
agree that any such telephonic notice will be confirmed in writing within 24
hours of the giving of such telephonic notice, but the failure to provide such
written confirmation shall not affect the validity of the request.
(b) Making of Swing Loans. In the case of a request for an Advance and so long
as either (i) the aggregate amount of Swing Loans made since the last Settlement
Date, minus the amount of Collections or payments applied to Swing Loans since
the last Settlement Date, plus the amount of the requested Advance does not
exceed $5,000,000, or (ii) Swing Lender, in its sole discretion, shall agree to
make a Swing Loan notwithstanding the foregoing limitation, Swing Lender shall
make an Advance in the amount of such requested Borrowing (any such Advance made
solely by Swing Lender pursuant to this Section 2.3(b) being referred to as a
“Swing Loan” and such Advances being referred to as “Swing Loans”) available to
Borrowers on the Funding Date applicable thereto by transferring immediately
available funds to the Designated Account. Anything contained herein to the
contrary notwithstanding, the Swing Lender may, but shall not be obligated to,
make Swing Loans at any time that one or more of the Lenders is a Defaulting
Lender. Each Swing Loan shall be deemed to be an Advance hereunder and shall be
subject to all the terms and conditions (including Section 3) applicable to
other Advances, except that all payments on any Swing Loan shall be payable to
Swing Lender solely for its own account. Subject to the provisions of
Section 2.3(d)(ii), Swing Lender shall not make and shall not be obligated to
make any Swing Loan if Swing Lender has actual knowledge that (i) one or more of
the applicable conditions precedent set forth in Section 3 will not be satisfied
on the requested Funding Date for the applicable Borrowing, or (ii) the
requested Borrowing would exceed the Availability on such Funding Date. Swing
Lender shall not otherwise be required to determine whether the applicable
conditions precedent set forth in Section 3 have been satisfied on the Funding
Date applicable thereto prior to making any Swing Loan. The Swing Loans shall be
secured by Agent’s Liens, constitute Advances and Obligations hereunder, and
bear interest at the rate applicable from time to time to Advances that are Base
Rate Loans.

 

3

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

 

(c) Making of Loans.
(i) In the event that Swing Lender is not obligated to make a Swing Loan, then
promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a),
Agent shall notify the Lenders by telecopy, telephone, or other similar form of
transmission, of the requested Borrowing. Each Lender shall make the amount of
such Lender’s Pro Rata Share of the requested Borrowing available to Agent in
immediately available funds, to Agent’s Account, not later than 1:00 p.m.
(Atlanta, Georgia time) on the Funding Date applicable thereto. After Agent’s
receipt of the proceeds of such Advances, Agent shall make the proceeds thereof
available to Borrowers on the applicable Funding Date by transferring
immediately available funds equal to such proceeds received by Agent to the
Designated Account; provided, however, that, subject to the provisions of
Section 2.3(d)(ii), Agent shall not request any Lender to make, and no Lender
shall have the obligation to make, any Advance if (1) one or more of the
applicable conditions precedent set forth in Section 3 will not be satisfied on
the requested Funding Date for the applicable Borrowing unless such condition
has been waived, or (2) the requested Borrowing would exceed the Availability on
such Funding Date.
(ii) Unless Agent receives notice from a Lender prior to 12:00 noon (Atlanta,
Georgia time) on the date of a Borrowing, that such Lender will not make
available as and when required hereunder to Agent for the account of Borrowers
the amount of that Lender’s Pro Rata Share of the Borrowing, Agent may assume
that each Lender has made or will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may (but shall not be
so required), in reliance upon such assumption, make available to Borrowers on
such date a corresponding amount. If any Lender shall not have made its full
amount available to Agent in immediately available funds and if Agent in such
circumstances has made available to Borrowers such amount, that Lender shall on
the Business Day following such Funding Date make such amount available to
Agent, together with interest at the Defaulting Lender Rate for each day during
such period. A notice submitted by Agent to any Lender with respect to amounts
owing under this Section 2.3(c)(ii) shall be conclusive, absent manifest error.
If such amount is so made available, such payment to Agent shall constitute such
Lender’s Advance on the date of Borrowing for all purposes of this Agreement. If
such amount is not made available to Agent on the Business Day following the
Funding Date, Agent will notify Borrowers of such failure to fund and, upon
demand by Agent, Borrowers shall pay such amount to Agent for Agent’s account,
together with interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the interest rate applicable at the time
to the Advances composing such Borrowing.
(d) Protective Advances and Optional Overadvances.
(i) Any contrary provision of this Agreement or any other Loan Document
notwithstanding, Agent hereby is authorized by each Borrower and the Lenders,
from time to time in Agent’s sole discretion, (A) after the occurrence and
during the continuance of a Default or an Event of Default, or (B) at any time
that any of the other applicable conditions precedent set forth in Section 3 are
not satisfied, to make Advances to, or for the benefit of, Borrowers on behalf
of the Lenders (in an aggregate amount for all such Advances taken together not
exceeding $5,000,000 outstanding at any one time) that Agent, in its Permitted
Discretion deems necessary or desirable (1) to preserve or protect the
Collateral, or any portion thereof, or (2) to enhance the likelihood of
repayment of the Obligations (other than the Bank Product Obligations) (any of
the Advances described in this Section 2.3(d)(i) shall be referred to as
“Protective Advances”).

 

4

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

 

(ii) Any contrary provision of this Agreement or any other Loan Document
notwithstanding, the Lenders hereby authorize Agent or Swing Lender, as
applicable, and either Agent or Swing Lender, as applicable, may, but is not
obligated to, knowingly and intentionally, continue to make Advances (including
Swing Loans) to Borrowers notwithstanding that an Overadvance exists or thereby
would be created, so long as (A) after giving effect to such Advances, the
outstanding Revolver Usage does not exceed the Borrowing Base by more than
$5,000,000, and (B) after giving effect to such Advances, the outstanding
Revolver Usage (except for and excluding amounts charged to the Loan Account for
interest, fees, or Lender Group Expenses) does not exceed the Maximum Revolver
Amount. In the event Agent obtains actual knowledge that the Revolver Usage
exceeds the amounts permitted by the immediately foregoing provisions,
regardless of the amount of, or reason for, such excess, Agent shall notify the
Lenders as soon as practicable (and prior to making any (or any additional)
intentional Overadvances (except for and excluding amounts charged to the Loan
Account for interest, fees, or Lender Group Expenses) unless Agent determines
that prior notice would result in imminent harm to the Collateral or its value,
in which case Agent may make such Overadvances and provide notice as promptly as
practicable thereafter), and the Lenders with Commitments thereupon shall,
together with Agent, jointly determine the terms of arrangements that shall be
implemented with Borrowers intended to reduce, within a reasonable time, the
outstanding principal amount of the Advances to Borrowers to an amount permitted
by the preceding sentence. In such circumstances, if any Lender with a
Commitment objects to the proposed terms of reduction or repayment of any
Overadvance, the terms of reduction or repayment thereof shall be implemented
according to the determination of the Required Lenders. The foregoing provisions
are meant for the benefit of the Lenders and Agent and are not meant for the
benefit of Borrowers, which shall continue to be bound by the provisions of
Section 2.5. Each Lender with a Commitment shall be obligated to settle with
Agent as provided in Section 2.3(e) (or Section 2.3(g), as applicable) for the
amount of such Lender’s Pro Rata Share of any unintentional Overadvances by
Agent reported to such Lender, any intentional Overadvances made as permitted
under this Section 2.3(d)(ii), and any Overadvances resulting from the charging
to the Loan Account of interest, fees, or Lender Group Expenses.
(iii) Each Protective Advance and each Overadvance shall be deemed to be an
Advance hereunder, except that no Protective Advance or Overadvance shall be
eligible to be a LIBOR Rate Loan and, prior to Settlement therefor, all payments
on the Protective Advances shall be payable to Agent solely for its own account.
The Protective Advances and Overadvances shall be repayable on demand, secured
by Agent’s Liens, constitute Obligations hereunder, and bear interest at the
rate applicable from time to time to Advances that are Base Rate Loans. The
ability of Agent to make Protective Advances is separate and distinct from its
ability to make Overadvances and its ability to make Overadvances is separate
and distinct from its ability to make Protective Advances. For the avoidance of
doubt, the limitations on Agent’s ability to make Protective Advances do not
apply to Overadvances and the limitations on Agent’s ability to make
Overadvances do not apply to Protective Advances. The provisions of this
Section 2.3(d) are for the exclusive benefit of Agent, Swing Lender, and the
Lenders and are not intended to benefit Borrowers in any way.
(e) Settlement. It is agreed that each Lender’s funded portion of the Advances
is intended by the Lenders to equal, at all times, such Lender’s Pro Rata Share
of the outstanding Advances. Such agreement notwithstanding, Agent, Swing
Lender, and the other Lenders agree (which agreement shall not be for the
benefit of Borrowers) that in order to facilitate the administration of this
Agreement and the other Loan Documents, settlement among the Lenders as to the
Advances, the Swing Loans, and the Protective Advances shall take place on a
periodic basis in accordance with the following provisions:

 

5

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

 

(i) Agent shall request settlement (“Settlement”) with the Lenders on a weekly
basis, or on a more frequent basis if so determined by Agent (1) on behalf of
Swing Lender, with respect to the outstanding Swing Loans, (2) for itself, with
respect to the outstanding Protective Advances, and (3) with respect to
Borrowers’ or their Subsidiaries’ Collections or payments received, as to each
by notifying the Lenders by telecopy, telephone, or other similar form of
transmission, of such requested Settlement, no later than 5:00 p.m. (Atlanta,
Georgia time) on the Business Day immediately prior to the date of such
requested Settlement (the date of such requested Settlement being the
“Settlement Date”). Such notice of a Settlement Date shall include a summary
statement of the amount of outstanding Advances, Swing Loans, and Protective
Advances for the period since the prior Settlement Date. Subject to the terms
and conditions contained herein (including Section 2.3(g)): (y) if the amount of
the Advances (including Swing Loans and Protective Advances) made by a Lender
that is not a Defaulting Lender exceeds such Lender’s Pro Rata Share of the
Advances (including Swing Loans and Protective Advances) as of a Settlement
Date, then Agent shall, by no later than 3:00 p.m. (Atlanta, Georgia time) on
the Settlement Date, transfer in immediately available funds to a Deposit
Account of such Lender (as such Lender may designate), an amount such that each
such Lender shall, upon receipt of such amount, have as of the Settlement Date,
its Pro Rata Share of the Advances (including Swing Loans and Protective
Advances), and (z) if the amount of the Advances (including Swing Loans and
Protective Advances) made by a Lender is less than such Lender’s Pro Rata Share
of the Advances (including Swing Loans and Protective Advances) as of a
Settlement Date, such Lender shall no later than 3:00 p.m. (Atlanta, Georgia
time) on the Settlement Date transfer in immediately available funds to Agent’s
Account, an amount such that each such Lender shall, upon transfer of such
amount, have as of the Settlement Date, its Pro Rata Share of the Advances
(including Swing Loans and Protective Advances). Such amounts made available to
Agent under clause (z) of the immediately preceding sentence shall be applied
against the amounts of the applicable Swing Loans or Protective Advances and,
together with the portion of such Swing Loans or Protective Advances
representing Swing Lender’s Pro Rata Share thereof, shall constitute Advances of
such Lenders. If any such amount is not made available to Agent by any Lender on
the Settlement Date applicable thereto to the extent required by the terms
hereof, Agent shall be entitled to recover for its account such amount on demand
from such Lender together with interest thereon at the Defaulting Lender Rate.
(ii) In determining whether a Lender’s balance of the Advances, Swing Loans, and
Protective Advances is less than, equal to, or greater than such Lender’s Pro
Rata Share of the Advances, Swing Loans, and Protective Advances as of a
Settlement Date, Agent shall, as part of the relevant Settlement, apply to such
balance the portion of payments actually received in good funds by Agent with
respect to principal, interest, fees payable by Borrowers and allocable to the
Lenders hereunder, and proceeds of Collateral.
(iii) Between Settlement Dates, Agent, to the extent Protective Advances or
Swing Loans are outstanding, may pay over to Agent or Swing Lender, as
applicable, any Collections or payments received by Agent, that in accordance
with the terms of this Agreement would be applied to the reduction of the
Advances, for application to the Protective Advances or Swing Loans. Between
Settlement Dates, Agent, to the extent no Protective Advances or Swing Loans are
outstanding, may pay over to Swing Lender any Collections or payments received
by Agent, that in accordance with the terms of this Agreement would be applied
to the reduction of the Advances, for application to Swing Lender’s Pro Rata
Share of the Advances. If, as of any Settlement Date, Collections or payments of
Parent or its Subsidiaries received since the then immediately preceding
Settlement Date have been applied to Swing Lender’s Pro Rata Share of the
Advances other than to Swing Loans, as provided for in the previous sentence,
Swing Lender shall pay to Agent for the accounts of the Lenders, and Agent shall
pay to the Lenders (other than a Defaulting Lender if Agent has implemented the
provisions of Section 2.3(g)), to be applied to the outstanding Advances of such
Lenders, an amount such that each such Lender shall, upon receipt of such
amount, have, as of such Settlement Date, its Pro Rata Share of the Advances.
During the period between Settlement Dates, Swing Lender with respect to Swing
Loans, Agent with respect to Protective Advances, and each Lender (subject to
the effect of agreements between Agent and individual Lenders) with respect to
the Advances other than Swing Loans and Protective Advances, shall be entitled
to interest at the applicable rate or rates payable under this Agreement on the
daily amount of funds employed by Swing Lender, Agent, or the Lenders, as
applicable.

 

6

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

 

(iv) Anything in this Section 2.3(e) to the contrary notwithstanding, in the
event that a Lender is a Defaulting Lender, Agent shall be entitled to refrain
from remitting settlement amounts to the Defaulting Lender and, instead, shall
be entitled to elect to implement the provisions set forth in Section 2.3(g).
(f) Notation. Agent, as a non-fiduciary agent for Borrowers, shall maintain a
register showing the principal amount of the Advances, owing to each Lender,
including the Swing Loans owing to Swing Lender, and Protective Advances owing
to Agent, and the interests therein of each Lender, from time to time and such
register shall, absent manifest error, conclusively be presumed to be correct
and accurate.
(g) Defaulting Lenders. Agent shall not be obligated to transfer to a Defaulting
Lender any payments made by Borrowers to Agent for the Defaulting Lender’s
benefit or any Collections or proceeds of Collateral that would otherwise be
remitted hereunder to the Defaulting Lender, and, in the absence of such
transfer to the Defaulting Lender, Agent shall transfer any such payments (A)
first, to Swing Lender to the extent of any Swing Loans that were made by Swing
Lender and that were required to be, but were not, repaid by the Defaulting
Lender, (B) second, to the Issuing Lender, to the extent of the portion of a
Letter of Credit Disbursement that was required to be, but was not, repaid by
the Defaulting Lender, (C) third, to each non-Defaulting Lender ratably in
accordance with their Commitments (but, in each case, only to the extent that
such Defaulting Lender’s portion of an Advance (or other funding obligation) was
funded by such other non-Defaulting Lender), (D) to a suspense account
maintained by Agent, the proceeds of which shall be retained by Agent and may be
made available to be re-advanced to or for the benefit of Borrowers as if such
Defaulting Lender had made its portion of Advances (or other funding
obligations) hereunder, and (E) from and after the date on which all other
Obligations have been paid in full, to such Defaulting Lender in accordance with
tier (L) of Section 2.4(b)(ii). Subject to the foregoing, Agent may hold and, in
its Permitted Discretion, re-lend to Borrowers for the account of such
Defaulting Lender the amount of all such payments received and retained by Agent
for the account of such Defaulting Lender. Solely for the purposes of voting or
consenting to matters with respect to the Loan Documents (including the
calculation of Pro Rata Share in connection therewith) and for the purpose of
calculating the fee payable under Section 2.10(b), such Defaulting Lender shall
be deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to
be zero. The provisions of this Section 2.3(g) shall remain effective with
respect to such Defaulting Lender until the earlier of (y) the date on which the
non-Defaulting Lenders, Agent, and Borrowers shall have waived, in writing, the
application of this Section 2.3(g) to such Defaulting Lender, or (z) the date on
which such Defaulting Lender makes payment of all amounts that it was obligated
to fund hereunder, pays to Agent all amounts owing by Defaulting Lender in
respect of the amounts that it was obligated to fund hereunder, and, if
requested by Agent, provides adequate assurance of its ability to perform its
future obligations hereunder. The operation of this Section 2.3(g) shall not be
construed to increase or otherwise affect the Commitment of any Lender, to
relieve or excuse the performance by such Defaulting Lender or any other Lender
of its duties and obligations hereunder, or to relieve or excuse the performance
by Borrowers of their duties and obligations hereunder to Agent or to the
Lenders other than such Defaulting Lender. Any failure by a Defaulting Lender to
fund amounts that it was obligated to fund hereunder shall constitute a material
breach by such Defaulting Lender of this Agreement and shall entitle Borrowers,
at their option, upon written notice to Agent, to arrange for a substitute
Lender to assume the Commitment of such Defaulting Lender, such substitute
Lender to be reasonably acceptable to Agent. In connection with the arrangement
of such a substitute Lender, the Defaulting Lender shall have no right to refuse
to be replaced hereunder, and agrees to execute and deliver a completed form of
Assignment and Acceptance in favor of the substitute Lender (and agrees that it
shall be deemed to have executed and delivered such

 

7

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

 

document if it fails to do so) subject only to being repaid its share of the
outstanding Obligations (other than Bank Product Obligations, but including
(1) all interest, fees, and other amounts that may be due and payable in respect
thereof, and (2) an assumption of its Pro Rata Share of the Letters of Credit);
provided, however, that any such assumption of the Commitment of such Defaulting
Lender shall not be deemed to constitute a waiver of any of the Lender Groups’
or Borrowers’ rights or remedies against any such Defaulting Lender arising out
of or in relation to such failure to fund. In the event of a direct conflict
between the priority provisions of this Section 2.3(g) and any other provision
contained in this Agreement or any other Loan Document, it is the intention of
the parties hereto that such provisions be read together and construed, to the
fullest extent possible, to be in concert with each other. In the event of any
actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms
and provisions of this Section 2.3(g) shall control and govern.
(h) Independent Obligations. All Advances (other than Swing Loans and Protective
Advances) shall be made by the Lenders contemporaneously and in accordance with
their Pro Rata Shares. It is understood that (i) no Lender shall be responsible
for any failure by any other Lender to perform its obligation to make any
Advance (or other extension of credit) hereunder, nor shall any Commitment of
any Lender be increased or decreased as a result of any failure by any other
Lender to perform its obligations hereunder, and (ii) no failure by any Lender
to perform its obligations hereunder shall excuse any other Lender from its
obligations hereunder.
2.4 Payments; Reductions of Commitments; Prepayments.
(a) Payments by Borrowers.
(i) Except as otherwise expressly provided herein, all payments by Borrowers
shall be made to Agent’s Account for the account of the Lender Group and shall
be made in immediately available funds, no later than 2:00 p.m. (Atlanta,
Georgia time) on the date specified herein. Any payment received by Agent later
than 2:00 p.m. (Atlanta, Georgia time) shall be deemed to have been received on
the following Business Day and any applicable interest or fee shall continue to
accrue until such following Business Day.
(ii) Unless Agent receives notice from Borrowers prior to the date on which any
payment is due to the Lenders that Borrowers will not make such payment in full
as and when required, Agent may assume that Borrowers have made (or will make)
such payment in full to Agent on such date in immediately available funds and
Agent may (but shall not be so required), in reliance upon such assumption,
distribute to each Lender on such due date an amount equal to the amount then
due such Lender. If and to the extent Borrowers do not make such payment in full
to Agent on the date when due, each Lender severally shall repay to Agent on
demand such amount distributed to such Lender, together with interest thereon at
the Defaulting Lender Rate for each day from the date such amount is distributed
to such Lender until the date repaid.
(b) Apportionment and Application.
(i) So long as no Application Event has occurred and is continuing and except as
otherwise provided herein with respect to Defaulting Lenders, all principal and
interest payments received by Agent shall be apportioned ratably among the
Lenders (according to the unpaid principal balance of the Obligations to which
such payments relate held by each Lender) and all payments of fees and expenses
received by Agent (other than fees or expenses that are for Agent’s separate
account or for the separate account of the Issuing Lender) shall be apportioned
ratably among the Lenders having a Pro Rata Share of the type of Commitment or
Obligation to which a particular fee or expense relates. All payments to be made
hereunder by Borrowers shall be remitted to Agent and all (subject to
Section 2.4(b)(iv), Section 2.4(e), and Section 2.4(f)) such payments, and all
proceeds of Collateral received by Agent, shall be applied, so long as no
Application Event has occurred and is continuing, to reduce the balance of the
Advances outstanding and, thereafter, to Borrowers (to be wired to the
Designated Account) or such other Person entitled thereto under applicable law.

 

8

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

 

(ii) At any time that an Application Event has occurred and is continuing and
except as otherwise provided herein with respect to Defaulting Lenders, all
payments remitted to Agent and all proceeds of Collateral received by Agent
shall be applied as follows:
(A) first, to pay any Lender Group Expenses (including cost or expense
reimbursements) or indemnities then due to Agent under the Loan Documents, until
paid in full,
(B) second, to pay any fees or premiums then due to Agent under the Loan
Documents until paid in full,
(C) third, to pay interest due in respect of all Protective Advances until paid
in full,
(D) fourth, to pay the principal of all Protective Advances until paid in full,
(E) fifth, ratably, to pay any Lender Group Expenses (including cost or expense
reimbursements) or indemnities then due to any of the Lenders under the Loan
Documents, until paid in full,
(F) sixth, ratably, to pay any fees or premiums then due to any of the Lenders
under the Loan Documents until paid in full,
(G) seventh, to pay interest accrued in respect of the Swing Loans until paid in
full,
(H) eighth, to pay the principal of all Swing Loans until paid in full,
(I) ninth, ratably, to pay interest accrued in respect of the Advances (other
than Protective Advances) until paid in full,
(J) tenth, ratably (i) to pay the principal of all Advances until paid in full,
(ii) to Agent, to be held by Agent, for the benefit of Issuing Lender (and for
the ratable benefit of each of the Lenders that have an obligation to pay to
Agent, for the account of the Issuing Lender, a share of each Letter of Credit
Disbursement), as cash collateral in an amount up to 105% of the Letter of
Credit Usage (to the extent permitted by applicable law, such cash collateral
shall be applied to the reimbursement of any Letter of Credit Disbursement as
and when such disbursement occurs and, if a Letter of Credit expires undrawn,
the cash collateral held by Agent in respect of such Letter of Credit shall, to
the extent permitted by applicable law, be reapplied pursuant to this
Section 2.4(b)(ii), beginning with tier (A) hereof), and (iii) ratably, to the
Bank Product Providers based upon amounts then certified by the applicable Bank
Product Provider to Agent (in form and substance satisfactory to Agent) to be
due and payable to such Bank Product Providers on account of Bank Product
Obligations,
(K) eleventh, to pay any other Obligations other than Obligations owed to
Defaulting Lenders,

 

9

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

 

(L) twelfth, ratably, to pay any Obligations owed to Defaulting Lenders; and
(M) thirteenth, to Borrowers (to be wired to the Designated Account) or such
other Person entitled thereto under applicable law.
(iii) Agent promptly shall distribute to each Lender, pursuant to the applicable
wire instructions received from each Lender in writing, such funds as it may be
entitled to receive, subject to a Settlement delay as provided in
Section 2.3(e).
(iv) In each instance, so long as no Application Event has occurred and is
continuing, Section 2.4(b)(i) shall not apply to any payment made by Borrowers
to Agent and specified by Borrowers to be for the payment of specific
Obligations then due and payable (or prepayable) under any provision of this
Agreement or any other Loan Document.
(v) For purposes of Section 2.4(b)(ii), “paid in full” of a type of Obligation
means payment in cash or immediately available funds of all amounts owing on
account of such type of Obligation, including interest accrued after the
commencement of any Insolvency Proceeding, default interest, interest on
interest, and expense reimbursements, irrespective of whether any of the
foregoing would be or is allowed or disallowed in whole or in part in any
Insolvency Proceeding.
(vi) In the event of a direct conflict between the priority provisions of this
Section 2.4 and any other provision contained in this Agreement or any other
Loan Document, it is the intention of the parties hereto that such provisions be
read together and construed, to the fullest extent possible, to be in concert
with each other. In the event of any actual, irreconcilable conflict that cannot
be resolved as aforesaid, if the conflict relates to the provisions of
Section 2.3(g) and thisSection 2.4, then the provisions of Section 2.3(g) shall
control and govern, and if otherwise, then the terms and provisions of this
Section 2.4 shall control and govern.
(c) Reduction of Commitments. The Commitments shall terminate on the Maturity
Date. Borrowers may reduce the Commitments to an amount not less than the
greater of (i) $25,000,000 or (ii) the sum of (A) the Revolver Usage as of such
date, plus (B) the principal amount of all Advances not yet made as to which a
request has been given by Borrowers under Section 2.3(a), plus (C) the amount of
all Letters of Credit not yet issued as to which a request has been given by
Borrowers pursuant to Section 2.11(a). Each such reduction shall be in an amount
which is not less than $5,000,000, shall be made by providing not less than 10
Business Days prior written notice to Agent, and shall be irrevocable. Once
reduced, the Commitments may not be increased. Each such reduction of the
Commitments shall reduce the Commitments of each Lender proportionately in
accordance with its Pro Rata Share thereof.
(d) Optional Prepayments. Borrowers may prepay the principal of any Advance at
any time in whole or in part, without premium or penalty.
(e) Mandatory Prepayments — Borrowing Base Excess. If, at any time, (A) the
Revolver Usage on such date exceeds (B) the Borrowing Base (such excess being
referred to as the “Borrowing Base Excess”), then, within 1 Business Day
thereafter, Borrowers shall prepay the Obligations in accordance with
Section 2.4(f), and/or provide Restricted Cash, in an aggregate amount equal to
the Borrowing Base Excess. All such Restricted Cash shall be taken into account
in calculating the Borrowing Base.
(f) Application of Payments. Each prepayment pursuant to Section 2.4(e) shall,
(i) so long as no Application Event shall have occurred and be continuing, be
applied to the outstanding principal amount of the Advances until paid in full,
and (ii) if an Application Event shall have occurred and be continuing, be
applied in the manner set forth in Section 2.4(b)(ii).

 

10

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

 

2.5 Overadvances. If, at any time or for any reason, the amount of Obligations
owed by Borrowers to the Lender Group pursuant to Section 2.1 or Section 2.11 is
greater than any of the limitations set forth in Section 2.1 or Section 2.11, as
applicable (an “Overadvance”), Borrowers shall immediately pay to Agent, in
cash, the amount of such excess, which amount shall be used by Agent to reduce
the Obligations in accordance with the priorities set forth in Section 2.4(b).
Borrowers promise to pay the Obligations (including principal, interest, fees,
costs, and expenses) in full on the Maturity Date or, if earlier, on the date on
which the Obligations (other than the Bank Product Obligations) become due and
payable pursuant to the terms of this Agreement.
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations.
(a) Interest Rates. Except as provided in Section 2.6(c), all Obligations
(except for undrawn Letters of Credit) that have been charged to the Loan
Account pursuant to the terms hereof shall bear interest on the Daily Balance
thereof as follows:
(i) if the relevant Obligation is a LIBOR Rate Loan, at a per annum rate equal
to the LIBOR Rate plus the LIBOR Rate Margin, and
(ii) otherwise, at a per annum rate equal to the Base Rate plus the Base Rate
Margin.
(b) Letter of Credit Fee. Borrowers shall pay Agent (for the ratable benefit of
the Lenders with a Commitment, subject to any agreements between Agent and
individual Lenders), a Letter of Credit fee (in addition to the charges,
commissions, fees, and costs set forth in Section 2.11(e)) which shall accrue at
a rate equal to (i) 2.15% per annum times the Daily Balance of the undrawn
amount of all outstanding trade Letters of Credit, and (ii) 2.50% per annum
times the Daily Balance of the undrawn amount of all other outstanding Letters
of Credit.
(c) Default Rate. Upon the occurrence and during the continuation of an Event of
Default and at the election of the Required Lenders,
(i) all Obligations (except for undrawn Letters of Credit) that have been
charged to the Loan Account pursuant to the terms hereof shall bear interest on
the Daily Balance thereof at a per annum rate equal to 2 percentage points above
the per annum rate otherwise applicable thereunder, and
(ii) each Letter of Credit fee provided for in Section 2.6(b) shall be increased
to 2 percentage points above the per annum rate otherwise applicable hereunder.
(d) Payment. Except to the extent provided to the contrary in Section 2.10,
2.12(a) or 17.10, all interest, all Letter of Credit fees, all other fees
payable hereunder or under any of the other Loan Documents, and all costs,
expenses, and Lender Group Expenses payable hereunder or under any of the other
Loan Documents shall be due and payable, in arrears, on the first day of each
month at any time that Obligations or Commitments are outstanding. Borrowers
hereby authorize Agent, from time to time without prior notice to Borrowers, to
charge all interest, Letter of Credit fees, and all other fees payable hereunder
or under any of the other Loan Documents (in each case, as and when due and
payable), all costs, expenses, and Lender Group Expenses payable hereunder or
under any of the other Loan Documents (in each case, as and when incurred), all
charges, commissions, fees, and costs provided for in

 

11

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

 

Section 2.11(e) (as and when accrued or incurred), all fees and costs provided
for in Section 2.10 (as and when accrued or incurred), and all other payments as
and when due and payable under any Loan Document or any Bank Product Agreement
(including any amounts due and payable to the Bank Product Providers in respect
of Bank Products) to the Loan Account, which amounts thereafter shall constitute
Advances hereunder and shall accrue interest at the rate then applicable to
Advances that are Base Rate Loans. Any interest, fees, costs, expenses, Lender
Group Expenses, or other amounts payable hereunder or under any other Loan
Document or under any Bank Product Agreement that are charged to the Loan
Account shall thereafter constitute Advances hereunder and shall initially
accrue interest at the rate then applicable to Advances that are Base Rate Loans
(unless and until converted into LIBOR Rate Loans in accordance with the terms
of this Agreement).
(e) Computation. All interest and fees chargeable under the Loan Documents shall
be computed on the basis of a 360 day year, in each case, for the actual number
of days elapsed in the period during which the interest or fees accrue. In the
event the Base Rate is changed from time to time hereafter, the rates of
interest hereunder based upon the Base Rate automatically and immediately shall
be increased or decreased by an amount equal to such change in the Base Rate.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the
interest rate or rates payable under this Agreement, plus any other amounts paid
in connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. Borrowers and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto, as
of the date of this Agreement, Borrowers are and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrowers
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such excess.
2.7 Crediting Payments. The receipt of any payment item by Agent shall not be
considered a payment on account unless such payment item is a wire transfer of
immediately available federal funds made to Agent’s Account or unless and until
such payment item is honored when presented for payment. Should any payment item
not be honored when presented for payment, then Borrowers shall be deemed not to
have made such payment and interest shall be calculated accordingly. Anything to
the contrary contained herein notwithstanding, any payment item shall be deemed
received by Agent only if it is received into Agent’s Account on a Business Day
on or before 2:00 p.m. (Atlanta, Georgia time). If any payment item is received
into Agent’s Account on a non-Business Day or after 2:00 p.m. (Atlanta, Georgia
time) on a Business Day, it shall be deemed to have been received by Agent as of
the opening of business on the immediately following Business Day.
2.8 Designated Account. Agent is authorized to make the Advances, and Issuing
Lender is authorized to issue the Letters of Credit, under this Agreement based
upon telephonic or other instructions received from anyone purporting to be an
Authorized Person or, without instructions, if pursuant to Section 2.6(d).
Borrowers agree to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrowers and made by Agent or the Lenders hereunder.
Unless otherwise agreed by Agent and Borrowers, any Advance or Swing Loan
requested by Borrowers and made by Agent or the Lenders hereunder shall be made
to the Designated Account.

 

12

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

 

2.9 Maintenance of Loan Account; Statements of Obligations. Agent shall maintain
an account on its books in the name of Borrowers (the “Loan Account”) on which
Borrowers will be charged with all Advances (including Protective Advances and
Swing Loans) made by Agent, Swing Lender, or the Lenders to Borrowers or for
Borrowers’ account, the Letters of Credit issued or arranged by Issuing Lender
for Borrowers’ account, and with all other payment Obligations hereunder or
under the other Loan Documents, including, accrued interest, fees and expenses,
and Lender Group Expenses. In accordance with Section 2.7, the Loan Account will
be credited with all payments received by Agent from Borrowers or for Borrowers’
account. Agent shall render monthly statements regarding the Loan Account to
Borrowers, including principal, interest, fees, and including an itemization of
all charges and expenses constituting Lender Group 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 Lender
Group unless, within 30 days after receipt thereof by Borrowers, Borrowers shall
deliver to Agent written objection thereto describing the error or errors
contained in any such statements.
2.10 Fees. Borrowers shall pay to Agent,
(a) for the account of Agent, as and when due and payable under the terms of the
Fee Letter, the fees set forth in the Fee Letter, and
(b) for the ratable account of the Lenders with Commitments, on the first day of
each month from and after the Closing Date up to the first day of the month
prior to the Payoff Date and on the Payoff Date, an unused line fee in an amount
equal to 0.50% per annum times the result of (i) the aggregate amount of the
Commitments, less (ii) the average Daily Balance of the Revolver Usage during
the immediately preceding month (or portion thereof).
2.11 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, upon the request of
Parent or a Borrower made in accordance herewith, the Issuing Lender agrees to
issue, or to cause an Underlying Issuer (including, as Issuing Lender’s agent)
to issue, a requested Letter of Credit. If Issuing Lender, at its option, elects
to cause an Underlying Issuer to issue a requested Letter of Credit, then
Issuing Lender agrees that it will enter into arrangements relative to the
reimbursement of such Underlying Issuer (which may include, among, other means,
by becoming an applicant with respect to such Letter of Credit or entering into
undertakings which provide for reimbursements of such Underlying Issuer with
respect to such Letter of Credit; each such obligation or undertaking,
irrespective of whether in writing, a “Reimbursement Undertaking”) with respect
to Letters of Credit issued by such Underlying Issuer. By Parent’s or a
Borrower’s submission of a request to Issuing Lender for the issuance of a
Letter of Credit, Borrowers shall be deemed to have requested that Issuing
Lender issue or that an Underlying Issuer issue the requested Letter of Credit
and to have requested Issuing Lender to issue a Reimbursement Undertaking with
respect to such requested Letter of Credit if it is to be issued by an
Underlying Issuer (it being expressly acknowledged and agreed by Borrowers that
Borrowers are and shall be deemed to be an applicant (within the meaning of
Section 5-102(a)(2) of the Code) with respect to each Underlying Letter of
Credit). Each request for the issuance of a Letter of Credit, or the amendment,
renewal, or extension of any outstanding Letter of Credit, shall be made in
writing by an Authorized Person and delivered to the Issuing Lender via hand
delivery, telefacsimile, or other electronic method of transmission reasonably
in advance of the requested date of issuance, amendment, renewal, or extension.
Each such request shall be in form and substance reasonably satisfactory to the
Issuing Lender and shall specify (i) the amount of such Letter of Credit,
(ii) the date of issuance, amendment, renewal, or extension of such Letter of
Credit, (iii) the expiration date of such Letter of Credit, (iv) the name and
address of the beneficiary of the Letter of Credit, and (v) such other
information (including, in the case of an amendment, renewal, or extension,
identification of the Letter of Credit to be so amended, renewed, or extended)
as shall be necessary to prepare, amend, renew, or extend such Letter of Credit.
Anything contained herein to the contrary notwithstanding, the Issuing Lender
may, but shall not be obligated to, issue or cause the issuance of a Letter of
Credit or to issue a Reimbursement Undertaking in respect of an Underlying
Letter of Credit, in

 

13

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

 

either case, that supports the obligations of Parent or its Subsidiaries (1) in
respect of (A) a lease of real property if the amount of the Letter of Credit or
Underlying Letter of Credit is greater than the rent payable under such lease
(without acceleration) for one year, or (B) an employment contract, or (2) at
any time that one or more of the Lenders is a Defaulting Lender. The Issuing
Lender shall have no obligation to issue a Letter of Credit or a Reimbursement
Undertaking in respect of an Underlying Letter of Credit, in either case, if any
of the following would result after giving effect to the requested issuance:
(i) the Letter of Credit Usage would exceed the Borrowing Base less the
outstanding amount of Advances (inclusive of Swing Loans), or
(ii) the Letter of Credit Usage would exceed $30,000,000, or
(iii) the Letter of Credit Usage would exceed the Maximum Revolver Amount less
the outstanding amount of Advances (including Swing Loans).
Each Letter of Credit shall be in form and substance reasonably acceptable to
the Issuing Lender, including the requirement that the amounts payable
thereunder must be payable in Dollars. If Issuing Lender makes a payment under a
Letter of Credit or an Underlying Issuer makes a payment under an Underlying
Letter of Credit, Borrowers shall pay to Agent an amount equal to the applicable
Letter of Credit Disbursement on the date such Letter of Credit Disbursement is
made and, in the absence of such payment, the amount of the Letter of Credit
Disbursement immediately and automatically shall be deemed to be an Advance
hereunder and, initially, shall bear interest at the rate then applicable to
Advances that are Base Rate Loans. If a Letter of Credit Disbursement is deemed
to be an Advance hereunder, Borrowers’ obligation to pay the amount of such
Letter of Credit Disbursement to Issuing Lender shall be discharged and replaced
by the resulting Advance. Promptly following receipt by Agent of any payment
from Borrowers pursuant to this paragraph, Agent shall distribute such payment
to the Issuing Lender or, to the extent that Lenders have made payments pursuant
to Section 2.11(b) to reimburse the Issuing Lender, then to such Lenders and the
Issuing Lender as their interests may appear.
(b) Promptly following receipt of a notice of a Letter of Credit Disbursement
pursuant to Section 2.11(a), each Lender with a Commitment agrees to fund its
Pro Rata Share of any Advance deemed made pursuant to Section 2.11(a) on the
same terms and conditions as if Borrowers had requested the amount thereof as an
Advance and Agent shall promptly pay to Issuing Lender the amounts so received
by it from the Lenders. By the issuance of a Letter of Credit or a Reimbursement
Undertaking (or an amendment to a Letter of Credit or a Reimbursement
Undertaking increasing the amount thereof) and without any further action on the
part of the Issuing Lender or the Lenders with Commitments, the Issuing Lender
shall be deemed to have granted to each Lender with a Commitment, and each
Lender with a Commitment shall be deemed to have purchased, a participation in
each Letter of Credit issued by Issuing Lender and each Reimbursement
Undertaking, in an amount equal to its Pro Rata Share of such Letter of Credit
or Reimbursement Undertaking, and each such Lender agrees to pay to Agent, for
the account of the Issuing Lender, such Lender’s Pro Rata Share of any Letter of
Credit Disbursement made by Issuing Lender or an Underlying Issuer under the
applicable Letter of Credit. In consideration and in furtherance of the
foregoing, each Lender with a Commitment hereby absolutely and unconditionally
agrees to pay to Agent, for the account of the Issuing Lender, such Lender’s Pro
Rata Share of each Letter of Credit Disbursement made by Issuing Lender or an
Underlying Issuer and not reimbursed by Borrowers on the date due as provided in
Section 2.11(a), or of any reimbursement payment required to be refunded to
Borrowers for any reason. Each Lender with a Commitment acknowledges and agrees
that its obligation to deliver to Agent, for the account of the Issuing Lender,
an amount equal to its respective Pro Rata Share of each Letter of Credit
Disbursement pursuant to this Section 2.11(b) shall be absolute and
unconditional and such remittance shall be made notwithstanding the occurrence
or continuation of an Event of Default or Default or the failure to satisfy any
condition set forth in Section 3. If any such Lender fails to make available to
Agent the amount of such Lender’s Pro Rata Share of a Letter of Credit
Disbursement as provided in this Section, such Lender shall be deemed to be a
Defaulting Lender and Agent (for the account of the Issuing Lender) shall be
entitled to recover such amount on demand from such Lender together with
interest thereon at the Defaulting Lender Rate until paid in full.

 

14

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

 

(c) Each Borrower and Parent hereby agree to indemnify, save, defend, and hold
the Lender Group and each Underlying Issuer harmless from any damage, loss,
cost, expense, or liability (other than Taxes, which shall be governed by
Section 16), and reasonable attorneys fees incurred by Issuing Lender, any other
member of the Lender Group, or any Underlying Issuer arising out of or in
connection with any Reimbursement Undertaking or any Letter of Credit; provided,
however, that Borrowers and Parent shall not be obligated hereunder to indemnify
for any loss, cost, expense, or liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful
misconduct of the Issuing Lender, any other member of the Lender Group, or any
Underlying Issuer. Each Borrower and Parent agree to be bound by the Underlying
Issuer’s regulations and interpretations of any Letter of Credit or by Issuing
Lender’s interpretations of any Reimbursement Undertaking even though this
interpretation may be different from Borrowers’ or Parent’s own, and Borrowers
and Parent understand and agree that none of the Issuing Lender, the Lender
Group, or any Underlying Issuer shall be liable for any error, negligence, or
mistake, whether of omission or commission, in following Borrowers’ or Parent’s
instructions or those contained in the Letter of Credit or any modifications,
amendments, or supplements thereto. Each Borrower and Parent understand that the
Reimbursement Undertakings may require Issuing Lender to indemnify the
Underlying Issuer for certain costs or liabilities arising out of claims by
Borrowers or Parent against such Underlying Issuer. Each Borrower and Parent
hereby agree to indemnify, save, defend, and hold Issuing Lender and the other
members of the Lender Group harmless with respect to any loss, cost, expense
(including reasonable attorneys fees), or liability (other than Taxes, which
shall be governed by Section 16) incurred by them as a result of the Issuing
Lender’s indemnification of an Underlying Issuer; provided, however, that
Borrowers and Parent shall not be obligated hereunder to indemnify for any such
loss, cost, expense, or liability to the extent that it is caused by the gross
negligence or willful misconduct of the Issuing Lender or any other member of
the Lender Group. Each Borrower and Parent hereby acknowledge and agree that
none of the Issuing Lender, any other member of the Lender Group, or any
Underlying Issuer shall be responsible for delays, errors, or omissions
resulting from the malfunction of equipment in connection with any Letter of
Credit.
(d) Borrowers and Parent hereby authorize and direct any Underlying Issuer to
deliver to the Issuing Lender all instruments, documents, and other writings and
property received by such Underlying Issuer pursuant to such Underlying Letter
of Credit and to accept and rely upon the Issuing Lender’s instructions with
respect to all matters arising in connection with such Underlying Letter of
Credit and the related application.
(e) Any and all issuance charges, usage charges, commissions, fees, and costs
incurred by the Issuing Lender relating to Underlying Letters of Credit shall be
Lender Group Expenses for purposes of this Agreement and shall be reimbursable
immediately by Borrowers to Agent for the account of the Issuing Lender; it
being acknowledged and agreed by Borrowers that, as of the Closing Date, the
usage charge imposed by the Underlying Issuer is 0.125% per annum times the
undrawn amount of each Underlying Letter of Credit, that such usage charge may
be changed from time to time, and that the Underlying Issuer also imposes a
schedule of charges for amendments, extensions, drawings, and renewals.

 

15

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

 

(f) If by reason of (i) any change after the Closing Date in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
thereof by any Governmental Authority, or (ii) compliance by the Issuing Lender,
any other member of the Lender Group, or Underlying Issuer with any direction,
request, or requirement (irrespective of whether having the force of law) of any
Governmental Authority or monetary authority including, Regulation D of the
Federal Reserve Board as from time to time in effect (and any successor
thereto):
(i) any reserve, deposit, or similar requirement is or shall be imposed or
modified in respect of any Letter of Credit issued or caused to be issued
hereunder or hereby, or
(ii) there shall be imposed on the Issuing Lender, any other member of the
Lender Group, or Underlying Issuer any other condition regarding any Letter of
Credit or Reimbursement Undertaking,
and the result of the foregoing is to increase, directly or indirectly, the cost
to the Issuing Lender, any other member of the Lender Group, or an Underlying
Issuer of issuing, making, guaranteeing, or maintaining any Reimbursement
Undertaking or Letter of Credit or to reduce the amount receivable in respect
thereof, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Borrowers, and Borrowers shall pay within 30 days after demand therefor,
such amounts as Agent may specify to be necessary to compensate the Issuing
Lender, any other member of the Lender Group, or an Underlying Issuer for such
additional cost or reduced receipt, together with interest on such amount from
the date of such demand until payment in full thereof at the rate then
applicable to Base Rate Loans hereunder; provided, however, that Borrowers shall
not be required to provide any compensation pursuant to this Section 2.11(f) for
any such amounts incurred more than 180 days prior to the date on which the
demand for payment of such amounts is first made to Borrowers; provided further,
however, that if an event or circumstance giving rise to such amounts is
retroactive, then the 180-day period referred to above shall be extended to
include the period of retroactive effect thereof. The determination by Agent of
any amount due pursuant to this Section 2.11(f), as set forth in a certificate
setting forth the calculation thereof in reasonable detail, shall, in the
absence of manifest or demonstrable error, be final and conclusive and binding
on all of the parties hereto.
(g) Borrowers acknowledge and agree that certain of the Qualified Import Letters
of Credit may provide for the presentation of time drafts to the Underlying
Issuer. If an Underlying Issuer accepts such a time draft that is presented
under an Underlying Letter of Credit, it is acknowledged and agreed that (i) the
Letter of Credit will require the Issuing Lender to reimburse the Underlying
Issuer for amounts paid on account of such time draft on or after the maturity
date thereof, (ii) the pricing provisions hereof (including Sections 2.6(b) and
2.11(e)) shall continue to apply, until payment of such time draft on or after
the maturity date thereof, as if the Underlying Letter of Credit were still
outstanding, and (iii) on the date on which Issuing Lender makes payment to the
Underlying Issuer of the amounts paid on account of such time draft, Borrowers
immediately shall reimburse such amount to Issuing Lender and such amount shall
constitute a Letter of Credit Disbursement hereunder.
2.12 LIBOR Option.
(a) Interest and Interest Payment Dates. In lieu of having interest charged at
the rate based upon the Base Rate, Borrowers shall have the option, subject to
Section 2.12(b) below (the “LIBOR Option”) to have interest on all or a portion
of the Advances be charged (whether at the time when made (unless otherwise
provided herein), upon conversion from a Base Rate Loan to a LIBOR Rate Loan, or
upon continuation of a LIBOR Rate Loan as a LIBOR Rate Loan) at a rate of
interest based upon the LIBOR Rate. Interest on LIBOR Rate Loans shall be
payable on the earliest of (i) the last day of the Interest Period applicable
thereto; (ii) the date on which all or any portion of the Obligations are
accelerated pursuant to the terms hereof, or (iii) the date on which this
Agreement is terminated pursuant

 

16

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

 

to the terms hereof. On the last day of each applicable Interest Period, unless
Borrowers properly have exercised the LIBOR Option with respect thereto, the
interest rate applicable to such LIBOR Rate Loan automatically shall convert to
the rate of interest then applicable to Base Rate Loans of the same type
hereunder. At any time that an Event of Default has occurred and is continuing,
at the written election of the Required Lenders, Borrowers no longer shall have
the option to request that Advances bear interest at a rate based upon the LIBOR
Rate.
(b) LIBOR Election.
(i) Borrowers may, at any time and from time to time, so long as Borrowers have
not received a notice from Agent, after the occurrence and during the
continuance of an Event of Default, of the election of the Required Lenders to
terminate the right of Borrowers to exercise the LIBOR Option during the
continuance of such Event of Default, elect to exercise the LIBOR Option by
notifying Agent prior to 2:00 p.m. (Atlanta, Georgia time) at least 3 Business
Days prior to the commencement of the proposed Interest Period (the “LIBOR
Deadline”). Notice of Borrowers’ election of the LIBOR Option for a permitted
portion of the Advances and an Interest Period pursuant to this Section shall be
made by delivery to Agent of a LIBOR Notice received by Agent before the LIBOR
Deadline, or by telephonic notice received by Agent before the LIBOR Deadline
(to be confirmed by delivery to Agent of a LIBOR Notice received by Agent prior
to 5:00 p.m. (Atlanta, Georgia time) on the same day). Promptly upon its receipt
of each such LIBOR Notice, Agent shall provide a copy thereof to each of the
affected Lenders.
(ii) Each LIBOR Notice shall be irrevocable and binding on Borrowers. In
connection with each LIBOR Rate Loan, Borrowers shall indemnify, defend, and
hold Agent and the Lenders harmless against any loss, cost, or expense actually
incurred by Agent or any Lender as a result of (A) the payment of any principal
of any LIBOR Rate Loan other than on the last day of an Interest Period
applicable thereto (including as a result of an Event of Default), (B) the
conversion of any LIBOR Rate Loan other than on the last day of the Interest
Period applicable thereto, or (C) the failure to borrow, convert, continue or
prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered
pursuant hereto (such losses, costs, or expenses, “Funding Losses”). A
certificate of Agent or a Lender delivered to Borrowers setting forth in
reasonable detail any amount or amounts that Agent or such Lender is entitled to
receive pursuant to this Section 2.12 shall be conclusive absent manifest error.
Borrowers shall pay such amount to Agent or the Lender, as applicable, within 30
days of the date of its receipt of such certificate. If a payment of a LIBOR
Rate Loan on a day other than the last day of the applicable Interest Period
would result in a Funding Loss, Agent shall, if Borrowers have provided at least
2 Business Days written notice of such request under this Section 2.12(b)(ii),
and provided that no Event of Default shall have occurred and be continuing,
hold the amount of such payment as cash collateral in support of the Obligations
until the last day of such Interest Period and apply such amounts to the payment
of the applicable LIBOR Rate Loan on such last day.
(iii) Borrowers shall have not more than 10 LIBOR Rate Loans in effect at any
given time. Borrowers only may exercise the LIBOR Option for proposed LIBOR Rate
Loans of at least $1,000,000.
(c) Conversion. Borrowers may convert LIBOR Rate Loans to Base Rate Loans at any
time; provided, however, that in the event that LIBOR Rate Loans are converted
or prepaid on any date that is not the last day of the Interest Period
applicable thereto, including as a result of any automatic prepayment through
the required application by Agent of proceeds of Borrowers’ and their
Subsidiaries’ Collections in accordance with Section 2.4(b) or for any other
reason, including early termination of the term of this Agreement or
acceleration of all or any portion of the Obligations pursuant to the terms
hereof, Borrowers shall indemnify, defend, and hold Agent and the Lenders and
their Participants harmless against any and all Funding Losses in accordance
with Section 2.12(b)(ii).

 

17

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

 

(d) Special Provisions Applicable to LIBOR Rate.
(i) The LIBOR Rate may be adjusted by Agent with respect to any Lender on a
prospective basis to take into account any additional or increased costs to such
Lender of maintaining or obtaining any eurodollar deposits or increased costs,
in each case, due to changes in applicable law (other than changes in laws
relative to Taxes, which shall be governed by Section 16) occurring subsequent
to the commencement of the then applicable Interest Period, including changes in
tax laws (except changes of general applicability in corporate income tax laws)
and changes in the reserve requirements imposed by the Board of Governors of the
Federal Reserve System (or any successor), which additional or increased costs
would increase the cost of funding or maintaining loans bearing interest at the
LIBOR Rate. In any such event, the affected Lender shall give Borrowers and
Agent notice of such a determination and adjustment and Agent promptly shall
transmit the notice to each other Lender and, upon its receipt of the notice
from the affected Lender, Borrowers may, by notice to such affected Lender
(y) require such Lender to furnish to Borrowers a statement setting forth the
basis for adjusting such LIBOR Rate and the method for determining the amount of
such adjustment, or (z) repay the LIBOR Rate Loans with respect to which such
adjustment is made (together with any amounts due under Section 2.12(b)(ii)).
(ii) In the event that any change in market conditions or any law, regulation,
treaty, or directive, or any change therein or in the interpretation or
application thereof, shall at any time after the date hereof, in the reasonable
opinion of any Lender, make it unlawful or impractical for such Lender to fund
or maintain LIBOR Rate Loans or to continue such funding or maintaining, or to
determine or charge interest rates at the LIBOR Rate, such Lender shall give
notice of such changed circumstances to Agent and Borrowers and Agent promptly
shall transmit the notice to each other Lender and (y) in the case of any LIBOR
Rate Loans of such Lender that are outstanding, the date specified in such
Lender’s notice shall be deemed to be the last day of the Interest Period of
such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such Lender
thereafter shall accrue interest at the rate then applicable to Base Rate Loans,
and (z) Borrowers shall not be entitled to elect the LIBOR Option until such
Lender determines that it would no longer be unlawful or impractical to do so.
(e) No Requirement of Matched Funding. Anything to the contrary contained herein
notwithstanding, neither Agent, nor any Lender, nor any of their Participants,
is required actually to acquire eurodollar deposits to fund or otherwise match
fund any Obligation as to which interest accrues at the LIBOR Rate.
2.13 Capital Requirements.
(a) If, after the date hereof, any Lender determines that (i) the adoption of or
change in any law, rule, regulation or guideline regarding capital or reserve
requirements for banks or bank holding companies, or any change in the
interpretation, implementation, or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), has the effect of reducing the return on such Lender’s or
such holding company’s capital as a consequence of such Lender’s Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender’s or such holding company’s then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity’s capital) by any amount deemed by such Lender to be material, then such
Lender may notify Borrowers and Agent

 

18

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

 

thereof. Following receipt of such notice, Borrowers agree to pay such Lender on
demand the amount of such reduction of return of capital as and when such
reduction is determined, payable within 30 days after presentation by such
Lender of a statement in the amount and setting forth in reasonable detail such
Lender’s calculation thereof and the assumptions upon which such calculation was
based (which statement shall be deemed true and correct absent manifest error).
In determining such amount, such Lender may use any reasonable averaging and
attribution methods. Failure or delay on the part of any Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s right to demand such compensation; provided that Borrowers shall not be
required to compensate a Lender pursuant to this Section for any reductions in
return incurred more than 180 days prior to the date that such Lender notifies
Borrowers of such law, rule, regulation or guideline giving rise to such
reductions and of such Lender’s intention to claim compensation therefor;
provided further that if such claim arises by reason of the adoption of or
change in any law, rule, regulation or guideline that is retroactive, then the
180-day period referred to above shall be extended to include the period of
retroactive effect thereof.
(b) If any Lender requests additional or increased costs referred to in Section
2.12(d)(i) or amounts under Section 2.13(a) or sends a notice under Section
2.12(d)(ii) relative to changed circumstances (any such Lender, an “Affected
Lender”), then such Affected Lender shall use reasonable efforts to promptly
designate a different one of its lending offices or to assign its rights and
obligations hereunder to another of its offices or branches, if (i) in the
reasonable judgment of such Affected Lender, such designation or assignment
would eliminate or reduce amounts payable pursuant to Section 2.12(d)(i) or
Section 2.13(a), as applicable, or would eliminate the illegality or
impracticality of funding or maintaining LIBOR Rate Loans and (ii) in the
reasonable judgment of such Affected Lender, such designation or assignment
would not subject it to any material unreimbursed cost or expense and would not
otherwise be materially disadvantageous to it. Each Borrower agrees to pay all
reasonable out-of-pocket costs and expenses incurred by such Affected Lender in
connection with any such designation or assignment. If, after such reasonable
efforts, such Affected Lender does not so designate a different one of its
lending offices or assign its rights to another of its offices or branches so as
to eliminate Borrowers’ obligation to pay any future amounts to such Affected
Lender pursuant to Section 2.12(d)(i) or Section 2.13(a), as applicable, or to
enable Borrowers to obtain LIBOR Rate Loans, then Borrowers (without prejudice
to any amounts then due to such Affected Lender under Section 2.12(d)(i) or
Section 2.13(a), as applicable) may, unless prior to the effective date of any
such assignment the Affected Lender withdraws its request for such additional
amounts under Section 2.12(d)(i) or Section 2.13(a), as applicable, or indicates
that it is no longer unlawful or impractical to fund or maintain LIBOR Rate
Loans, may seek a substitute Lender reasonably acceptable to Agent to purchase
the Obligations owed to such Affected Lender and such Affected Lender’s
Commitments hereunder (a “Replacement Lender”), and if such Replacement Lender
agrees to such purchase, such Affected Lender shall assign to the Replacement
Lender its Obligations and Commitments, pursuant to an Assignment and Acceptance
Agreement, and upon such purchase by the Replacement Lender, such Replacement
Lender shall be deemed to be a “Lender” for purposes of this Agreement and such
Affected Lender shall cease to be a “Lender” for purposes of this Agreement.
2.14 Joint and Several Liability of Borrowers.
(a) Each Borrower is accepting joint and several liability hereunder and under
the other Loan Documents in consideration of the financial accommodations to be
provided by the Lender Group under this Agreement, for the mutual benefit,
directly and indirectly, of each Borrower and in consideration of the
undertakings of the other Borrowers to accept joint and several liability for
the Obligations.

 

19

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

 

(b) Each Borrower, jointly and severally, hereby irrevocably and unconditionally
accepts, not merely as a surety but also as a co-debtor, joint and several
liability with the other Borrowers, with respect to the payment and performance
of all of the Obligations (including, without limitation, any Obligations
arising under this Section 2.14) it being the intention of the parties hereto
that all the Obligations shall be the joint and several obligations of each
Borrower without preferences or distinction among them.
(c) If and to the extent that any Borrower shall fail to make any payment with
respect to any of the Obligations as and when due or to perform any of the
Obligations in accordance with the terms thereof, then in each such event the
other Borrowers will make such payment with respect to, or perform, such
Obligation.
(d) The Obligations of each Borrower under the provisions of this Section 2.14
constitute the absolute and unconditional, full recourse Obligations of each
Borrower enforceable against each Borrower to the full extent of its properties
and assets, irrespective of the validity, regularity or enforceability of this
Agreement or any other circumstances whatsoever.
(e) Except as otherwise expressly provided in this Agreement, each Borrower
hereby waives notice of acceptance of its joint and several liability, notice of
any Advances or Letters of Credit issued under or pursuant to this Agreement,
notice of the occurrence of any Default, Event of Default, or of any demand for
any payment under this Agreement, notice of any action at any time taken or
omitted by Agent or Lenders under or in respect of any of the Obligations, any
requirement of diligence or to mitigate damages and, generally, to the extent
permitted by applicable law, all demands, notices and other formalities of every
kind in connection with this Agreement (except as otherwise provided in this
Agreement). Each Borrower hereby assents to, and waives notice of, any extension
or postponement of the time for the payment of any of the Obligations, the
acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
Agent or Lenders at any time or times in respect of any default by any Borrower
in the performance or satisfaction of any term, covenant, condition or provision
of this Agreement, any and all other indulgences whatsoever by Agent or Lenders
in respect of any of the Obligations, and the taking, addition, substitution or
release, in whole or in part, at any time or times, of any security for any of
the Obligations or the addition, substitution or release, in whole or in part,
of any Borrower. Without limiting the generality of the foregoing, each Borrower
assents to any other action or delay in acting or failure to act on the part of
any Agent or Lender with respect to the failure by any Borrower to comply with
any of its respective Obligations, including, without limitation, any failure
strictly or diligently to assert any right or to pursue any remedy or to comply
fully with applicable laws or regulations thereunder, which might, but for the
provisions of this Section 2.14, afford grounds for terminating, discharging or
relieving any Borrower, in whole or in part, from any of its Obligations under
this Section 2.14 it being the intention of each Borrower that, so long as any
of the Obligations hereunder remain unsatisfied, the Obligations of each
Borrower under this Section 2.14 shall not be discharged except by performance
and then only to the extent of such performance. The Obligations of each
Borrower under this Section 2.14 shall not be diminished or rendered
unenforceable by any winding up, reorganization, arrangement, liquidation,
reconstruction or similar proceeding with respect to any Borrower or any Agent
or Lender.
(f) Each Borrower represents and warrants to Agent and Lenders that such
Borrower is currently informed of the financial condition of each other Borrower
and of all other circumstances which a diligent inquiry would reveal and which
bear upon the risk of nonpayment of the Obligations. Each Borrower further
represents and warrants to Agent and Lenders that such Borrower has read and
understands the terms and conditions of the Loan Documents. Each Borrower hereby
covenants that such Borrower will continue to keep informed of each other
Borrower’s financial condition, the financial condition of guarantors, if any,
and of all other circumstances which bear upon the risk of nonpayment or
nonperformance of the Obligations.

 

20

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

 

(g) The provisions of this Section 2.14 are made for the benefit of Agent,
Lenders and their respective successors and assigns and may be enforced by it or
them from time to time against any or all Borrowers as often as occasion
therefor may arise and without requirement on the part of any such Agent,
Lender, successor or assign first to marshal any of its or their claims or to
exercise any of its or their rights against any Borrower or to exhaust any
remedies available to it or them against any Borrower or to resort to any other
source or means of obtaining payment of any of the Obligations hereunder or to
elect any other remedy. The provisions of this Section 2.14 shall remain in
effect until all of the Obligations shall have been paid in full or otherwise
fully satisfied. If at any time, any payment, or any part thereof, made in
respect of any of the Obligations, is rescinded or must otherwise be restored or
returned by any Agent or Lender upon the insolvency, bankruptcy or
reorganization of any Borrower, or otherwise, the provisions of this
Section 2.14 will forthwith be reinstated in effect, as though such payment had
not been made.
(h) Each Borrower hereby agrees that it will not enforce any of its rights of
contribution or subrogation against any other Borrower with respect to any
liability incurred by it hereunder or under any of the other Loan Documents, any
payments made by it to Agent or Lenders with respect to any of the Obligations
or any collateral security therefor until such time as all of the Obligations
have been paid in full in cash. Any claim which any Borrower may have against
any other Borrower with respect to any payments to any Agent or Lender hereunder
or under any other Loan Documents are hereby expressly made subordinate and
junior in right of payment, without limitation as to any increases in the
Obligations arising hereunder or thereunder, to the prior payment in full in
cash of the Obligations and, in the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding under the
laws of any jurisdiction relating to any Borrower, its debts or its assets,
whether voluntary or involuntary, all such Obligations shall be paid in full in
cash before any payment or distribution of any character, whether in cash,
securities or other property, shall be made to any other Borrower therefor.
(i) Each Borrower hereby agrees that, after the occurrence and during the
continuance of any Event of Default, the payment of any amounts due with respect
to the indebtedness owing by any Borrower to any other Borrower is hereby
subordinated to the prior payment in full in cash of the Obligations. Each
Borrower hereby agrees that after the occurrence and during the continuance of
any Event of Default, such Borrower will not demand, sue for or otherwise
attempt to collect any indebtedness of any other Borrower owing to such Borrower
until the Obligations shall have been paid in full in cash. If, notwithstanding
the foregoing sentence, such Borrower shall collect, enforce or receive any
amounts in respect of such indebtedness, such amounts shall be collected,
enforced and received by, such Borrower as trustee for Agent, and such Borrower
shall deliver any such amounts to Agent for application to the Obligations in
accordance with Section 2.4(b).
(j) Each Borrower agrees that the Obligations may at any time and from time to
time exceed the Maximum Liability of such Borrower, without impairing its
liability under this Agreement or affecting the rights and remedies of Agent or
any other member of the Lender Group or Bank Product Provider hereunder, but
that such Borrower’s obligations hereunder shall be in, but not in excess of,
the Maximum Liability. The “Maximum Liability,” with respect to any Borrower,
shall be the maximum amount that could be paid by such Borrower (taking into
account, among other things, (i) all rights of contribution, reimbursement and
subrogation available to such Borrower with respect to the other Loan Parties,
and (ii) the adequacy and reasonableness of all consideration and value received
by such Borrower in connection herewith) without rendering such Borrower’s
Obligations void under Section 548 of the Bankruptcy Code or any comparable
provisions of applicable state law.

 

21

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

 

3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Extension of Credit. The obligation of
each Lender to make its initial extension of credit provided for hereunder is
subject to the fulfillment, to the satisfaction of Agent and each Lender, of
each of the conditions precedent set forth on Schedule 3.1 (the making of such
initial extension of credit by a Lender being conclusively deemed to be its
satisfaction or waiver of the conditions precedent ).
3.2 Conditions Precedent to all Extensions of Credit. The obligation of the
Lender Group (or any member thereof) to make any Advances hereunder (or to
extend any other credit hereunder) at any time shall be subject to the following
conditions precedent:
(a) the representations and warranties of Parent or its Subsidiaries contained
in this Agreement or in the other Loan Documents shall be true and correct in
all material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof) on and as of the date of such
extension of credit, as though made on and as of such date (except to the extent
that such representations and warranties relate solely to an earlier date); and
(b) no Default or Event of Default shall have occurred and be continuing on the
date of such extension of credit, nor shall either result from the making
thereof.
3.3 Maturity. This Agreement shall continue in full force and effect for a term
ending on October 28, 2014 (the “Maturity Date”). The foregoing notwithstanding,
the Lender Group, upon the election of the Required Lenders, shall have the
right to terminate its obligations under this Agreement immediately and without
notice upon the occurrence and during the continuation of an Event of Default.
3.4 Effect of Maturity. On the Maturity Date, all commitments of the Lender
Group to provide additional credit hereunder shall automatically be terminated
and all of the Obligations immediately shall become due and payable without
notice or demand and Borrowers shall be required to repay all of the Obligations
in full. No termination of the obligations of the Lender Group (other than
payment in full of the Obligations and termination of the Commitments) shall
relieve or discharge any Loan Party of its duties, obligations, or covenants
hereunder or under any other Loan Document and Agent’s Liens in the Collateral
shall continue to secure the Obligations and shall remain in effect until all
Obligations have been paid in full and the Commitments have been terminated.
When all of the Obligations have been paid in full and the Lender Group’s
obligations to provide additional credit under the Loan Documents have been
terminated irrevocably, Agent will, at Borrowers’ sole expense, execute and
deliver any termination statements, lien releases, discharges of security
interests, and other similar discharge or release documents (and, if applicable,
in recordable form) as are reasonably necessary to release, as of record,
Agent’s Liens and all notices of security interests and liens previously filed
by Agent.
3.5 Early Termination by Borrower. Borrowers have the option, at any time upon
10 Business Days prior written notice to Agent, to terminate this Agreement and
terminate the Commitments hereunder by repaying to Agent all of the Obligations
in full. Borrowers shall not be liable for any early termination penalty or
premium in connection with any termination under this Section, but shall be
liable for any applicable Funding Losses in connection therewith in accordance
with Section 2.12.
3.6 Conditions Subsequent. The obligation of the Lender Group (or any member
thereof) to continue to make Advances (or otherwise extend credit hereunder) is
subject to the fulfillment, on or before the date applicable thereto, of the
conditions subsequent set forth on Schedule 3.6 (the failure by Borrowers to so
perform or cause to be performed such conditions subsequent as and when required
by the terms thereof, shall constitute an Event of Default).

 

22

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

 

4. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement, each of Parent
and each Borrower makes the following representations and warranties to the
Lender Group which shall be true, correct, and complete, in all material
respects (except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof), as of the Closing Date, and shall be true,
correct, and complete, in all material respects (except that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof), as of the
date of the making of each Advance (or other extension of credit) made
thereafter, as though made on and as of the date of such Advance (or other
extension of credit) (except to the extent that such representations and
warranties relate solely to an earlier date) and such representations and
warranties shall survive the execution and delivery of this Agreement:
4.1 Due Organization and Qualification; Subsidiaries.
(a) Each (i) Primary Obligor is duly organized and existing and in good standing
under the laws of the jurisdiction of its organization, (ii) Loan Party is
qualified to do business in any state where the failure to be so qualified could
reasonably be expected to result in a Material Adverse Change, and (iii) Primary
Obligor has all requisite power and authority to own and operate its properties,
to carry on its business as now conducted and as proposed to be conducted, to
enter into the Loan Documents to which it is a party, and to carry out the
transactions contemplated thereby.
(b) Set forth on Schedule 4.1(b) is a complete and accurate description of the
authorized capital Stock of Borrowers, by class, and, as of the Closing Date, a
description of the number of shares of each such class that are issued and
outstanding. Other than as described on Schedule 4.1(b), there are no
subscriptions, options, warrants, or calls relating to any shares of any
Borrower’s capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. No Borrower is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.
(c) Set forth on Schedule 4.1(c) (as such Schedule may be updated from time to
time to reflect changes resulting from transactions permitted under this
Agreement), is a complete and accurate list of the Loan Parties’ direct and
indirect Subsidiaries, showing: (i) the number of shares of each class of common
and preferred Stock authorized for each of such Subsidiaries, (ii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by the respective Loan Party, and (iii) whether each such
Subsidiary is an Inactive Subsidiary as of the Closing Date. All of the
outstanding capital Stock of each such Subsidiary has been validly issued and is
fully paid and non-assessable.
(d) Except as set forth on Schedule 4.1(c) (as such Schedule may be updated from
time to time to reflect changes resulting from transactions permitted under this
Agreement), there are no subscriptions, options, warrants, or calls relating to
any shares of Parent’s or any of its Subsidiaries’ capital Stock, including any
right of conversion or exchange under any outstanding security or other
instrument. No Loan Party is subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any shares of such Person’s
Subsidiaries’ capital Stock or any security convertible into or exchangeable for
any such capital Stock.

 

23

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

 

4.2 Due Authorization; No Conflict.
(a) As to each Primary Obligor, the execution, delivery, and performance by such
Primary Obligor of the Loan Documents to which it is a party have been duly
authorized by all necessary action on the part of such Primary Obligor.
(b) As to each Primary Obligor, the execution, delivery, and performance by such
Primary Obligor of the Loan Documents to which it is a party do not and will not
violate any material provision of federal, state, or local law or regulation
applicable to any Primary Obligor, the Governing Documents of any Primary
Obligor, or any order, judgment, or decree of any court or other Governmental
Authority binding on any Primary Obligor. As to each Loan Party, the execution,
delivery, and performance by such Loan Party of the Loan Documents to which it
is a party do not and will not (i) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
Material Contract of any Loan Party except to the extent that any such conflict,
breach or default could not individually or in the aggregate reasonably be
expected to have a Material Adverse Change, (ii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any assets of
any Loan Party, other than Permitted Liens, or (iii) require any approval of any
Loan Party’s interestholders or any approval or consent of any Person under any
Material Contract of any Loan Party, other than consents or approvals that have
been obtained and that are still in force and effect and except, in the case of
Material Contracts, for consents or approvals, the failure to obtain could not
individually or in the aggregate reasonably be expected to cause a Material
Adverse Change.
4.3 Governmental Consents. The execution, delivery, and performance by each
Primary Obligor of the Loan Documents to which such Primary Obligor is a party
and the consummation of the transactions contemplated by the Loan Documents do
not and will not require any registration with, consent, or approval of, or
notice to, or other action with or by, any Governmental Authority, other than
registrations, consents, approvals, notices, or other actions that have been
obtained and that are still in force and effect and except for filings and
recordings with respect to the Collateral to be made, or otherwise delivered to
Agent for filing or recordation, as of the Closing Date.
4.4 Binding Obligations; Perfected Liens.
(a) Each Loan Document has been duly executed and delivered by each Primary
Obligor that is a party thereto and is the legally valid and binding obligation
of such Primary Obligor, enforceable against such Primary Obligor in accordance
with its respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors’ rights generally.
(b) Agent’s Liens are validly created, perfected (other than in respect of
(i) motor vehicles that are subject to a certificate of title and as to which
Agent has not caused its Lien to be noted on the applicable certificate of
title, (ii) any Deposit Accounts not subject to a Control Agreement as permitted
by Section 6.11, (iii) any letter-of credit rights not subject to the control of
Agent, and (iv) the Excluded Copyrights, and subject only to the filing of
financing statements, the recordation of the Copyright Security Agreement, and
the recordation of the Mortgages (if any), in each case, in the appropriate
filing offices), and first priority Liens, subject only to Permitted Liens.
     4.5 Title to Assets; No Encumbrances. Each of the Loan Parties and its
Subsidiaries has (a) good, sufficient and legal title to (in the case of fee
interests in Real Property), (b) valid leasehold interests in (in the case of
leasehold interests in real or personal property), and (c) good and marketable
title to (in the case of all other personal property), all of their respective
assets reflected in their most recent financial statements delivered pursuant to
Section 5.1, in each case except for assets disposed of since the date of such
financial statements to the extent permitted hereby. All of such assets are free
and clear of Liens except for Permitted Liens.

 

24

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

 

4.6 Jurisdiction of Organization; Location of Chief Executive Office;
Organizational Identification Number; Commercial Tort Claims.
(a) The name of (within the meaning of Section 9-503 of the Code) and
jurisdiction of organization of each Loan Party is set forth on Schedule 4.6(a)
(as such Schedule may be updated from time to time to reflect changes resulting
from transactions permitted under this Agreement).
(b) The chief executive office of each Loan Party is located at the address
indicated on Schedule 4.6(b) (as such Schedule may be updated from time to time
to reflect changes resulting from transactions permitted under this Agreement).
(c) Each Loan Party’s tax identification numbers and organizational
identification numbers, if any, are identified on Schedule 4.6(c) (as such
Schedule may be updated from time to time to reflect changes resulting from
transactions permitted under this Agreement).
(d) As of the Closing Date, no Loan Party holds any commercial tort claims that
exceed $100,000 in amount, except as set forth on Schedule 4.6(d).
4.7 Litigation.
(a) There are no actions, suits, or proceedings pending or, to the knowledge of
Borrowers, after due inquiry, threatened in writing against a Loan Party or any
of its Subsidiaries that either individually or in the aggregate could
reasonably be expected to result in a Material Adverse Change.
(b) Schedule 4.7(b) sets forth a complete and accurate description, with respect
to each of the actions, suits, or proceedings that, as of the Closing Date, is
pending or, to the knowledge of Borrowers, after due inquiry, threatened against
a Loan Party or any of its Subsidiaries, of (i) the parties to such actions,
suits, or proceedings, (ii) the nature of the dispute that is the subject of
such actions, suits, or proceedings, (iii) the status, as of the Closing Date,
with respect to such actions, suits, or proceedings, and (iv) whether any
liability of the Loan Parties’ and their Subsidiaries in connection with such
actions, suits, or proceedings is covered by insurance.
4.8 Compliance with Laws. No Loan Party nor any of its Subsidiaries (a) is in
violation of any applicable laws, rules, regulations, executive orders, or codes
(including Environmental Laws) that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Change, or (b) is subject
to or in default with respect to any final judgments, writs, injunctions,
decrees, rules or regulations of any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Change.
4.9 No Material Adverse Change. All historical financial statements relating to
the Loan Parties and their Subsidiaries that have been delivered by the Loan
Parties to Agent have been prepared in accordance with GAAP (except, in the case
of unaudited financial statements, for the lack of footnotes and being subject
to year-end audit adjustments) and present fairly in all material respects, the
Loan Parties’ and their Subsidiaries’ consolidated financial condition as of the
date thereof and results of operations for the period then ended. Since
December 31, 2009, no event, circumstance, or change has occurred with respect
to the Loan Parties and their Subsidiaries that has or could reasonably be
expected to result in a Material Adverse Change.

 

25

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

 

4.10 Fraudulent Transfer.
(a) Each Primary Obligor is Solvent.
(b) No transfer of property is being made by any Loan Party and no obligation is
being 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 such Loan Party.
4.11 Employee Benefits. No Loan Party, none of their Subsidiaries, nor any of
their ERISA Affiliates maintains or contributes to any Benefit Plan.
4.12 Environmental Condition. Except as set forth on Schedule 4.12, (a) to each
Borrower’s knowledge, no Loan Party’s properties or assets has ever been used by
a Loan Party, or by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials,
where such disposal, production, storage, handling, treatment, release or
transport was in violation, in any material respect, of any applicable
Environmental Law, (b) to each Borrower’s knowledge, after due inquiry, no Loan
Party’s properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a Hazardous Materials
disposal site, (c) no Loan Party has received notice that a Lien arising under
any Environmental Law has attached to any revenues or to any Real Property owned
or operated by a Loan Party, and (d) no Loan Party nor any of their respective
facilities or operations is subject to any outstanding written order, consent
decree, or settlement agreement with any Person relating to any Environmental
Law or Environmental Liability that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Change.
4.13 Intellectual Property. Each Loan Party and its Subsidiaries own, or hold
licenses in, all trademarks, trade names, copyrights, patents, and licenses that
are necessary to the conduct of its business as currently conducted, except for
those the failure to own or have such legal right to use would not reasonably be
expected to have a Material Adverse Change, and attached hereto as Schedule 4.13
(as updated from time to time) is a true, correct, and complete listing of all
material trademarks, trade names, copyrights, patents, and licenses as to which
Parent or one of its Subsidiaries is the owner or is an exclusive licensee;
provided, however, that Borrowers may amend Schedule 4.13 to add additional
intellectual property so long as such amendment occurs by written notice to
Agent at the time that Parent provides its Compliance Certificate pursuant to
Section 5.1.
4.14 Leases. Each Loan Party enjoys peaceful and undisturbed possession under
all leases material to the business of the Loan Parties, taken as a whole, and,
subject to Permitted Protests, all of such material leases are valid and
subsisting and, except as set forth on Schedule 4.14, no material default by the
applicable Loan Party exists under any of them.
4.15 Deposit Accounts and Securities Accounts. Set forth on Schedule 4.15 (as
updated pursuant to the provisions of the Security Agreement from time to time)
is a listing of all of the Loan Parties’ Deposit Accounts and Securities
Accounts, including, with respect to each bank or securities intermediary
(a) the name and address of such Person, and (b) the account numbers of the
Deposit Accounts or Securities Accounts maintained with such Person.

 

26

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

 

4.16 Complete Disclosure. All factual information taken as a whole (other than
forward-looking information and projections and information of a general
economic nature and general information about Borrowers’ industry) furnished by
or on behalf of a Loan Party or its Subsidiaries in writing to Agent or any
Lender (including all information contained in the Schedules hereto or in the
other Loan Documents) for purposes of or in connection with this Agreement or
the other Loan Documents, and all other such factual information taken as a
whole (other than forward-looking information and projections and information of
a general economic nature and general information about Borrowers’ industry)
hereafter furnished by or on behalf of a Loan Party or its Subsidiaries in
writing to Agent or any Lender will be, true and accurate, in all material
respects, on the date as of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make such information
(taken as a whole) not misleading in any material respect at such time in light
of the circumstances under which such information was provided. The Projections
delivered to Agent on September 14, 2010 represent, and as of the date on which
any other Projections are delivered to Agent, such additional Projections will
represent, Borrowers’ good faith estimate, on the date such Projections are
delivered, of the Loan Parties’ and their Subsidiaries’ future performance for
the periods covered thereby based upon assumptions believed by Borrowers to be
reasonable at the time of the delivery thereof to Agent (it being understood
that such Projections are subject to uncertainties and contingencies, many of
which are beyond the control of the Loan Parties and their Subsidiaries, that no
assurances can be given that such Projections will be realized, and that actual
results may differ in a material manner from such Projections).
4.17 Material Contracts. Set forth on Schedule 4.17 is a reasonably detailed
description of the Material Contracts of each Loan Party and its Subsidiaries as
of the Closing Date. Except for matters which, either individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Change, each Material Contract (other than those that have expired at the end of
their normal terms) (a) is in full force and effect and is binding upon and
enforceable against the applicable Loan Party or its Subsidiary and, to each
Borrower’s knowledge, after due inquiry, each other Person that is a party
thereto in accordance with its terms, (b) has not been otherwise amended or
modified (other than amendments or modifications permitted by Section 6.7(b)),
and (c) is not in default due to the action or inaction of the applicable Loan
Party or its Subsidiary.
4.18 Patriot Act. To the extent applicable, each Loan Party is in compliance, in
all material respects, with the (a) Trading with the Enemy Act, as amended, and
each of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (b) Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot Act”). No part of the
proceeds of the loans made hereunder will be used by any Loan Party or any of
their Affiliates, 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.
4.19 Indebtedness. Set forth on Schedule 4.19 is a true and complete list of all
Indebtedness of each Loan Party and each of its Subsidiaries outstanding
immediately prior to the Closing Date that is to remain outstanding immediately
after giving effect to the closing hereunder on the Closing Date and such
Schedule accurately sets forth, in all material respects, the aggregate
principal amount of such Indebtedness as of the Closing Date.
4.20 Payment of Taxes. All tax returns and reports of each Loan Party and its
Subsidiaries required to be filed by any of them have been timely filed, and all
taxes shown on such tax returns to be due and payable and all assessments, fees
and other governmental charges upon a Loan Party and its Subsidiaries and upon
their respective assets, income, businesses and franchises that are due and
payable have been paid when due and payable, except to the extent that
(a) adequate provision therefor was made in accordance with GAAP as of the
Closing Date, or (b) they are the subject of a Permitted Protest. Each Loan
Party and each of its Subsidiaries have made adequate provision in accordance
with GAAP for all taxes not yet due and payable.

 

27

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

 

4.21 Margin Stock. No Loan Party nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock. No part of
the proceeds of the loans made to Borrowers will be used to purchase or carry
any such Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock or for any purpose that violates
the provisions of Regulation T, U or X of the Board of Governors of the United
States Federal Reserve.
4.22 Governmental Regulation. No Loan Party nor any of its Subsidiaries is
subject to regulation under the Federal Power Act or under any other federal or
state statute or regulation which may limit its ability to incur Indebtedness or
which may otherwise render all or any portion of the Obligations unenforceable.
No Loan Party nor any of its Subsidiaries is a “registered investment company”
or a company “controlled” by a “registered investment company” or a “principal
underwriter” of a “registered investment company” as such terms are defined in
the Investment Company Act of 1940.
4.23 OFAC. No Loan Party nor any of its Subsidiaries is in violation of any of
the country or list based economic and trade sanctions administered and enforced
by OFAC. No Loan Party nor any of its Subsidiaries (a) is a Sanctioned Person or
a Sanctioned Entity, (b) has its assets located in Sanctioned Entities, or
(c) derives revenues from investments in, or transactions with, Sanctioned
Persons or Sanctioned Entities. No proceeds of any loan made hereunder will be
used to fund any operations in, finance any investments or activities in, or
make any payments to, a Sanctioned Person or a Sanctioned Entity.
4.24 Employee and Labor Matters. There is (i) no unfair labor practice complaint
pending or, to the knowledge of any Borrower, threatened against Parent or its
Subsidiaries before any Governmental Authority and no grievance or arbitration
proceeding pending or threatened against Parent or its Subsidiaries which arises
out of or under any collective bargaining agreement and that could reasonably be
expected to result in a Material Adverse Change, (ii) no strike, labor dispute,
slowdown, stoppage or similar action or grievance pending or threatened in
writing against Parent or its Subsidiaries that could reasonably be expected to
result in a Material Adverse Change, or (iii) to the knowledge of any Borrower,
after due inquiry, no union representation question existing with respect to the
employees of Parent or its Subsidiaries and no union organizing activity taking
place with respect to any of the employees of Parent or its Subsidiaries. None
of Parent or its Subsidiaries has incurred any liability or obligation under the
Worker Adjustment and Retraining Notification Act or similar state law, which
remains unpaid or unsatisfied. The hours worked and payments made to employees
of Parent or its Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable legal requirements, except to the extent
such violations could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Change. All material payments due from
Parent or its Subsidiaries on account of wages and employee health and welfare
insurance and other benefits have been paid or accrued as a liability on the
books of Parent, except where the failure to do so could not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Change.
4.25 [Reserved]
4.26 [Reserved]
4.27 Excluded Copyrights. The Excluded Copyrights, taken as a whole, are not
material to the business and assets of the Loan Parties, nor are any of the
Excluded Copyrights, individually or taken as a whole, used in connection with
the sale of any material portion of the Inventory included in the Borrowing
Base.

 

28

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

 

4.28 Eligible Accounts. As to each Account that is identified by any Borrower as
an Eligible Account in a Borrowing Base Certificate submitted to Agent, such
Account is (a) a bona fide existing payment obligation of the applicable Account
Debtor created by the sale and delivery of Inventory or the rendition of
services to such Account Debtor in the ordinary course of the applicable
Borrower’s business, (b) owed to such Borrower, and (c) not excluded as
ineligible by virtue of one or more of the excluding criteria (other than
Agent-discretionary criteria) set forth in the definition of Eligible Accounts.
4.29 Eligible Inventory. As to each item of Inventory that is identified by any
Borrower as Eligible Inventory (whether constituting Eligible In-Transit
Inventory or Eligible Landed Inventory) in a Borrowing Base Certificate
submitted to Agent, such Inventory is (a) of good and merchantable quality, free
from known defects, and (b) not excluded as ineligible by virtue of one or more
of the excluding criteria (other than Agent-discretionary criteria) set forth in
the definitions of Eligible Inventory, Eligible In-Transit Inventory or Eligible
Landed Inventory, as applicable.
4.30 Locations of Inventory. The Inventory included in the Borrowing Base is
(a) not stored with a bailee, warehouseman, or similar party unless a Collateral
Access Agreement has been executed by such party and delivered to Agent, and
(b) located only at, or in-transit between or to, the locations identified on
Schedule 4.30 (as such Schedule may be updated pursuant to Section 5.15).
4.31 Inventory Records. Each Loan Party keeps correct and accurate records, in
all material respects, itemizing and describing the type, quality, and quantity
of its Inventory and the book value thereof.
5. AFFIRMATIVE COVENANTS.
Each of Parent and each Borrower covenants and agrees that, until termination of
all of the Commitments and payment in full of the Obligations, Parent and each
Borrower shall comply, and shall cause each of their Subsidiaries to comply
(except to the extent the applicability of any of the following covenants is
expressly limited so as not to apply to any such Subsidiary), with each of the
following:
5.1 Financial Statements, Reports, Certificates. Deliver to Agent, with copies
to each Lender, each of the financial statements, reports, and other items set
forth on Schedule 5.1 no later than the times specified therein. In addition,
each of Parent and each Borrower agrees that no Subsidiary of a Loan Party will
have a fiscal year different from that of Parent. In addition, Parent agrees to
maintain a system of accounting that enables Parent to produce financial
statements in accordance with GAAP. Each Loan Party shall also (a) keep a
reporting system that shows all additions, sales, claims, returns, and
allowances with respect to its and its Subsidiaries’ sales, and (b) maintain its
billing systems/practices substantially as in effect as of the Closing Date and
shall only make modifications thereto that are not material, and other material
modifications thereto with notice to Agent.
5.2 Collateral Reporting. Provide Agent (and if so requested by Agent, with
copies for each Lender) with each of the reports set forth on Schedule 5.2 at
the times specified therein. In addition, Borrowers agree to use commercially
reasonable efforts in cooperation with Agent to facilitate and implement a
system of electronic collateral reporting in order to provide electronic
reporting of each of the items set forth on such Schedule.

 

29

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

 

5.3 Existence. Except as otherwise permitted under Section 6.3 or Section 6.4,
at all times maintain and preserve in full force and effect each Primary
Obligor’s existence (including being in good standing in its jurisdiction of
organization) and all rights and franchises, licenses and permits material to
its business; provided, however, that no Primary Obligor shall be required to
preserve any such right or franchise, license or permit if (a) such Person’s
board of directors (or similar governing body) shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
such Person, and (b) the loss thereof is not disadvantageous in any material
respect to the Lenders.
5.4 Maintenance of Properties. Maintain and preserve all of its assets that are
necessary or useful in the proper conduct of its business in good working order
and condition, ordinary wear, tear, and casualty excepted and Permitted
Dispositions excepted (and except where the failure to do so could not
reasonably be expected to result in a Material Adverse Change), and comply with
the material provisions of all material leases to which it is a party as lessee,
so as to prevent the loss or forfeiture thereof, unless such provisions are the
subject of a Permitted Protest.
5.5 Taxes. Cause all federal, and all material state and local, assessments and
taxes imposed, levied, or assessed against any Loan Party or its Subsidiaries,
or any of their respective assets or in respect of any of their income,
businesses, or franchises to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest and so long
as, in the case of an assessment or tax that has or may become a Lien against
any of the Collateral, such contest proceedings conclusively operate to stay the
sale of any portion of the Collateral to satisfy such assessment or tax. Parent
will and will cause each of its Subsidiaries to make timely payment or deposit
of all material tax payments and withholding taxes required of it and them by
applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Agent with proof reasonably satisfactory to Agent indicating that Parent
and its Subsidiaries have made such payments or deposits.
5.6 Insurance. At Borrowers’ expense, maintain insurance respecting each of the
Loan Parties’ assets wherever located, covering loss or damage by fire, theft,
explosion, and all other hazards and risks as ordinarily are insured against by
other Persons engaged in the same or similar businesses. Borrowers also shall
maintain (with respect to each of the Loan Parties) business interruption,
general liability, product liability insurance, director’s and officer’s
liability insurance, fiduciary liability insurance, and employment practices
liability insurance, as well as insurance against larceny, embezzlement, and
criminal misappropriation. All such policies of insurance shall be with
responsible and reputable insurance companies reasonably acceptable to Agent and
in such amounts as is carried generally in accordance with sound business
practice by companies in similar businesses similarly situated and located and
in any event in amount, adequacy and scope reasonably satisfactory to Agent. All
property insurance policies covering the Collateral are to be made payable to
Agent for the benefit of Agent and the Lenders, as their interests may appear,
in case of loss, pursuant to a standard loss payable endorsement with a standard
non contributory “lender” or “secured party” clause and are to contain such
other provisions as Agent may reasonably require to fully protect the Lenders’
interest in the Collateral and to any payments to be made under such policies.
All certificates of property and general liability insurance are to be delivered
to Agent, with the loss payable (but only in respect of Collateral) and
additional insured endorsements in favor of Agent and shall provide for the
insurance companies to endeavor to give not less than 30 days prior written
notice to Agent of the exercise of any right of cancellation. If Borrowers fail
to maintain such insurance, Agent may arrange for such insurance, but at
Borrowers’ expense and without any responsibility on Agent’s part for obtaining
the insurance, the solvency of the insurance companies, the adequacy of the
coverage, or the collection of claims. Borrowers shall give Agent prompt notice
of any loss exceeding $1,000,000 covered by its casualty or business
interruption insurance. Upon the occurrence and during the continuance of an
Event of Default, Agent shall have the sole right to file claims under any
property and general liability insurance policies in respect of the Collateral,
to receive, receipt and give acquittance for any payments that may be payable
thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect
the collection, compromise or settlement of any claims under any such insurance
policies.

 

30

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

 

5.7 Inspection. Permit Agent and each of its duly authorized representatives or
agents to visit any of its properties and inspect any of its assets or books and
records, to conduct appraisals and valuations, to examine and make copies of its
books and records, and to discuss its affairs, finances, and accounts with, and
to be advised as to the same by, its officers and employees at such reasonable
times and intervals as Agent may designate and, so long as no Default or Event
of Default exists, with reasonable prior notice to Borrowers.
5.8 Compliance with Laws. Comply with the requirements of all applicable laws,
rules, regulations, and orders of any Governmental Authority (including all
Environmental Laws), other than laws, rules, regulations, and orders the
non-compliance with which, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Change.
5.9 Environmental.
(a) Keep any property either owned or operated by any Loan Party free of any
Environmental Liens or post bonds or other financial assurances sufficient to
satisfy the obligations or liability evidenced by such Environmental Liens,
(b) Promptly notify Agent of any release of which Parent or any Borrower has
knowledge of a Hazardous Material in any reportable quantity from or onto
property owned or operated by any Loan Party and take any Remedial Actions
required to abate said release or otherwise to come into compliance, in all
material respects, with applicable Environmental Law, and
(c) Promptly, but in any event within 10 Business Days of its receipt thereof,
provide Agent with written notice of any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of any Loan Party, (ii) commencement of any Environmental Action or written
notice that an Environmental Action will be filed against any Loan Party, and
(iii) written notice of a violation, citation, or other administrative order
from a Governmental Authority.
5.10 Disclosure Updates. Promptly and in no event later than 10 Business Days
after a Responsible Officer obtaining knowledge thereof, notify Agent if any
written information, exhibit, or report furnished to Agent or the Lenders
contained, at the time it was furnished, any untrue statement of a material fact
or omitted to state any material fact necessary to make the statements contained
therein not misleading in light of the circumstances in which made. The
foregoing to the contrary notwithstanding, any notification pursuant to the
foregoing provision will not cure or remedy the effect of the prior untrue
statement of a material fact or omission of any material fact nor shall any such
notification have the effect of amending or modifying this Agreement or any of
the Schedules hereto.
5.11 Formation of Subsidiaries. At the time that any Loan Party forms any direct
or indirect Subsidiary or acquires any direct or indirect Subsidiary after the
Closing Date, such Loan Party shall (a) within 30 days of such formation or
acquisition (or such later date as permitted by Agent in its sole discretion)
cause any such new Subsidiary to provide to Agent a joinder agreement with
respect to the Guaranty (or, if Agent agrees to allow such Subsidiary to become
a Borrower hereunder, with respect to this Agreement) and with respect to the
Security Agreement, together with such other security documents (including
mortgages with respect to any Real Property owned in fee of such new Subsidiary
with a fair market value of at least $1,000,000), as well as appropriate market
value of

 

31

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

 

at least $1,000,000), as well as appropriate financing statements (and with
respect to all property subject to a mortgage, fixture filings), all in form and
substance reasonably satisfactory to Agent (including being sufficient to grant
Agent a first priority Lien (subject to Permitted Liens) in and to the assets of
such newly formed or acquired Subsidiary); provided, that, such joinder
agreements and other security documents shall not be required to be provided to
Agent with respect to any such Subsidiary that is a Foreign Subsidiary,
(b) within 30 days of such formation or acquisition (or such later date as
permitted by Agent in its sole discretion) provide to Agent a pledge agreement
(or an addendum to the Security Agreement) and appropriate certificates and
powers or financing statements, pledging all of the direct or beneficial
ownership interest in such new Subsidiary reasonably satisfactory to Agent;
provided, that, only 65% of the total outstanding voting Stock of any such
Subsidiary that is a Foreign Subsidiary (and none of the Stock of any Subsidiary
of such Foreign Subsidiary) shall be required to be pledged (which pledge, if
reasonably requested by Agent, shall be governed by the laws of the jurisdiction
of such Subsidiary), and (c) within 30 days of such formation or acquisition (or
such later date as permitted by Agent in its sole discretion) provide to Agent
all other documentation, including one or more opinions of counsel reasonably
satisfactory to Agent, which in its opinion is appropriate with respect to the
execution and delivery of the applicable documentation referred to above
(including policies of title insurance or other documentation with respect to
all Real Property owned in fee and subject to a Mortgage). Any document,
agreement, or instrument executed or issued pursuant to this Section 5.11 shall
be a Loan Document.
5.12 Further Assurances. At any time upon the reasonable request of Agent,
execute or deliver to Agent any and all financing statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, mortgages, deeds of trust, opinions of counsel, and all other documents
(the “Additional Documents”) that Agent may reasonably request in form and
substance reasonably satisfactory to Agent, to create, perfect, and continue
perfected or to better perfect Agent’s Liens in all of the assets of Parent and
its Subsidiaries (whether now owned or hereafter arising or acquired, tangible
or intangible, real or personal), to create and perfect Liens in favor of Agent
in any Real Property acquired by Parent or its Subsidiaries after the Closing
Date with a fair market value in excess of $1,000,000, and in order to fully
consummate all of the transactions contemplated hereby and under the other Loan
Documents; provided, that, the foregoing shall not apply to any such Subsidiary
that is a Foreign Subsidiary. To the maximum extent permitted by applicable law,
if Parent or any other Loan Party refuses or fails to execute or deliver any
reasonably requested Additional Documents within a reasonable period of time
following the request to do so, Parent and each Borrower hereby authorizes Agent
to execute any such Additional Documents in the applicable Loan Party’s name,
and authorizes Agent to file such executed Additional Documents in any
appropriate filing office. In furtherance and not in limitation of the
foregoing, each Loan Party shall take such actions as Agent may reasonably
request from time to time to ensure that the Obligations are guarantied by the
Guarantors and are secured by substantially all of the assets of the Loan
Parties and all of the outstanding capital Stock of Borrowers and their
Subsidiaries (subject to exceptions and limitations contained in the Loan
Documents with respect to Foreign Subsidiaries).
5.13 Lender Meetings. Within 120 days after the close of each Fiscal Year, at
the request of Agent or of the Required Lenders and upon reasonable prior
notice, hold a meeting (at a mutually agreeable location and time or, at the
option of Agent, by conference call) with all Lenders who choose to attend such
meeting at which meeting shall be reviewed the financial results of the previous
Fiscal Year and the financial condition of Parent and its Subsidiaries and the
projections presented for the current Fiscal Year.
5.14 [Reserved]

 

32

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

 

5.15 Location of Inventory. Keep all Inventory (other than (i) In-Transit
Inventory, and (ii) Inventory with an aggregate net book value of not more than
$50,000) included in the Borrowing Base only at the locations identified on
Schedule 4.30 and each Loan Party’s chief executive offices only at the
locations identified on Schedule 4.6(b); provided, however, that Borrowers may
amend Schedule 4.30 or Schedule 4.6(b) so long as such amendment occurs by
written notice to Agent not less than 5 days prior to the date on which such
Inventory is moved to such new location, or such chief executive office is
relocated, and so long as (a) such new location is within the continental United
States and (b) Borrowers use commercially reasonable efforts to provide Agent a
Collateral Access Agreement with respect thereto promptly after the date of such
written notification. For the avoidance of doubt, the 5 day notice provision
referred to in this Section 5.15 shall not apply to any Inventory transferred
from a warehouse to a Scott James retail location so long as when such Inventory
is transferred it is not included in the Borrowing Base.
5.16 Assignable Material Contracts. Use commercially reasonable efforts to
ensure that any Material Contract entered into after the Closing Date by any
Loan Party that generates or, by its terms, will generate revenue, permits the
assignment of such agreement to such Loan Party’s lenders or an agent for any
lenders (and any transferees of such lenders or such agent, as applicable).
5.17 Treasury Management Services and Bank Accounts. Utilize Wells Fargo (and/or
its Affiliates) as their primary bank for depository and treasury management
services, including all concentration, collection and disbursement services;
provided, that: (a) the Loan Parties may maintain payroll, pension and other
employee benefit accounts at other financial institutions; (b) Foreign
Subsidiaries may maintain such services with other banks outside the United
States; (c) during the Transition Period, the Loan Parties may continue to use
their Deposit Accounts (including collection accounts) in existence as of the
Closing Date, subject to the Loan Parties’ compliance with the terms set forth
in item 1 of Schedule 3.6; and (d) the Loan Parties may maintain the HSBC Cash
Collateral Account.
6. NEGATIVE COVENANTS.
Each of Parent and each Borrower covenants and agrees that, until termination of
all of the Commitments and payment in full of the Obligations, neither Parent
nor any Borrower will, nor will Parent nor any Borrower permit any of their
Subsidiaries to (except to the extent the applicability of any of the following
covenants is expressly limited so as not to apply to any such Subsidiary), do
any of the following:
6.1 Indebtedness. Create, incur, assume, suffer to exist, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except for Permitted Indebtedness.
6.2 Liens. Create, incur, assume, or suffer to exist, directly or indirectly,
any Lien on or with respect to any of its assets, of any kind, whether now owned
or hereafter acquired, or any income or profits therefrom, except for Permitted
Liens.
6.3 Restrictions on Fundamental Changes.
(a) Enter into any merger, consolidation, reorganization, or recapitalization,
or reclassify its Stock, except for (i) any merger between Loan Parties,
provided, that, a Borrower must be the surviving entity of any such merger to
which it is a party, (ii) any merger between a Loan Party and Subsidiaries of
such Loan Party that are not Loan Parties so long as such Loan Party is the
surviving entity of any such merger, and (iii) any merger between Subsidiaries
of Parent that are not Loan Parties,

 

33

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

 

(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), except for (i) the liquidation or dissolution of non-operating
Subsidiaries of Parent with nominal assets and nominal liabilities, (ii) the
liquidation or dissolution of a Loan Party (other than Parent or any Borrower)
or any of their wholly-owned Subsidiaries so long as all of the assets
(including any interest in any Stock) of such liquidating or dissolving Loan
Party or Subsidiary are transferred to a Loan Party that is not liquidating or
dissolving, or (iii) the liquidation or dissolution of a Subsidiary of Parent
that is not a Loan Party so long as all of the assets of such liquidating or
dissolving Subsidiary are transferred to a Subsidiary of Parent that is not
liquidating or dissolving, or
(c) Suspend or go out of a substantial portion of its or their business, except
as permitted pursuant to clauses (a) or (b) above or in connection with the
transactions permitted pursuant to Section 6.4.
6.4 Disposal of Assets. Other than Permitted Dispositions or transactions
expressly permitted by Sections 6.3 or 6.11, convey, sell, lease, license,
assign, transfer, or otherwise dispose of (or enter into an agreement to convey,
sell, lease, license, assign, transfer, or otherwise dispose of) any of Parent’s
or its Subsidiaries assets.
6.5 Change Name. Change any Loan Party’s name, organizational identification
number, state of organization or organizational identity; provided, however,
that any Loan Party may change its name if such Loan Party provides written
notice of such change to Agent prior to or on the date of such change.
6.6 Nature of Business. Make any change in the nature of its or their business
as described in Schedule 6.6 or acquire any properties or assets that are not
reasonably related to the conduct of such business activities; provided,
however, that the foregoing shall not prevent Parent and its Subsidiaries from
engaging in any business that is reasonably related, ancillary or complimentary
to its or their business.
6.7 Prepayments and Amendments.
(a) Make any payment on account of Indebtedness that has been contractually
subordinated in right of payment to the Obligations if such payment is not
permitted at such time under the subordination terms and conditions applicable
thereto, or
(b) Directly or indirectly, amend, modify, or change any of the terms or
provisions of
(i) any Material Contract except to the extent that such amendment,
modification, or change could not, individually or in the aggregate, reasonably
be expected to be materially adverse to the interests of the Lenders,
(ii) the Governing Documents of any Loan Party or any of its Subsidiaries if the
effect thereof, either individually or in the aggregate, could reasonably be
expected to be materially adverse to the interests of the Lenders, or
(iii) any Factoring Agreement, except to the extent that such amendment,
modification, or change could not, individually or in the aggregate, reasonably
be expected to be materially adverse to the interests of the Lenders.
6.8 Change of Control. Cause, permit, or suffer, directly or indirectly, any
Change of Control.

 

34

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

 

6.9 Restricted Junior Payments. Make any Restricted Junior Payment; provided,
however, that, so long as it is permitted by law, and so long as no Default or
Event of Default shall have occurred and be continuing or would result
therefrom, the Loan Parties may:
(a) make distributions to former employees, officers, or directors of Loan
Parties (or any spouses, ex-spouses, or estates of any of the foregoing) on
account of redemptions of Stock of Parent held by such Persons, provided,
however, that the aggregate amount of such redemptions made by the Loan Parties
during the term of this Agreement plus the amount of Indebtedness outstanding
under clause (j) of the definition of Permitted Indebtedness, does not exceed
$1,000,000 in the aggregate, and
(b) make distributions to former employees, officers, or directors of the Loan
Parties (or any spouses, ex-spouses, or estates of any of the foregoing), solely
in the form of forgiveness of Indebtedness of such Persons owing to Parent on
account of repurchases of the Stock of Parent held by such Persons; provided,
that, such Indebtedness was incurred by such Persons solely to acquire Stock of
Parent.
6.10 Accounting Methods. Modify or change its fiscal year or its method of
accounting (other than, in the case of modifications and changes to its method
of accounting, as may be required to conform to GAAP or as would otherwise not
reasonably be expected to be materially adverse to the interests of the
Lenders).
6.11 Investments; Controlled Investments .
(a) Except for Permitted Investments, directly or indirectly, make or acquire
any Investment or incur any liabilities (including contingent obligations) for
or in connection with any Investment.
(b) Other than (i) an aggregate amount of not more than $250,000 at any one
time, in the case of Parent and its Subsidiaries (other than those Subsidiaries
that are Foreign Subsidiaries), (ii) amounts deposited into Deposit Accounts
specially and exclusively used for payroll, payroll taxes and other employee
wage and benefit payments to or for Parent’s or its Subsidiaries’ employees,
(iii) an aggregate amount of not more than $300,000 (calculated at current
exchange rates) at any one time, in the case of Subsidiaries of Parent that are
Foreign Subsidiaries, (iv) amounts deposited into the HSBC Cash Collateral
Account, and (v) amounts deposited into escrow accounts solely to the extent
required to be deposited and segregated therein (A) pursuant to any
Environmental Law or Environmental Action in order to satisfy obligations of the
Loan Parties with respect thereto, (B) to secure Parent’s and its Subsidiaries’
obligations in connection with the making or entering into of Real Property
leases in the ordinary course of business, and (C) as a good faith or similar
deposit in connection with any Acquisition that, at the time of making such
deposit, is reasonably expected to constitute a Permitted Acquisition upon the
closing of such Acquisition, make, acquire, or permit to exist Permitted
Investments consisting of cash, Cash Equivalents, or amounts credited to Deposit
Accounts or Securities Accounts unless Parent or its Subsidiary, as applicable,
and the applicable bank or securities intermediary have entered into Control
Agreements with Agent governing such Permitted Investments in order to perfect
(and further establish) Agent’s Liens in such Permitted Investments. Except as
provided in this Section 6.11(b), Parent shall not and shall not permit its
Subsidiaries to establish or maintain any Deposit Account or Securities Account
unless Agent shall have received a Control Agreement in respect of such Deposit
Account or Securities Account.
6.12 Transactions with Affiliates. Directly or indirectly enter into or permit
to exist any transaction between or among any Loan Party and any Affiliate of
such Loan Party (other than any Affiliate that is also a Loan Party), except
for:

 

35

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

 

(a) transactions (other than the payment of management, consulting, monitoring,
or advisory fees) between any Loan Party, on the one hand, and any Affiliate of
such Loan Party, on the other hand, so long as such transactions (i) are fully
disclosed to Agent prior to the consummation thereof, if they are not in the
ordinary course of business and involve one or more payments by a Loan Party in
excess of $1,000,000 for any single transaction or series of related
transactions, and (ii) are no less favorable, taken as a whole, to the Loan
Parties than would be obtained in an arm’s length transaction with a
non-Affiliate,
(b) so long as it has been approved by Parent’s or other applicable Loan Party’s
board of directors (or comparable governing body) in accordance with applicable
law, any indemnity provided for the benefit of directors (or comparable
managers) of Parent or other applicable Loan Party,
(c) so long as it has been approved by Parent’s or other applicable Loan Party’s
board of directors (or comparable governing body) in accordance with applicable
law, the payment of reasonable compensation, severance, or employee benefit
arrangements to employees, officers, and outside directors of Parent and other
Loan Parties in the ordinary course of business and consistent with industry
practice, and
(d) transactions permitted by Section 6.3 or Section 6.9, or any Permitted
Intercompany Advance or a Permitted Investment as described in clause (j) or (l)
of the definition thereof.
6.13 Use of Proceeds. Use the proceeds of any loan made hereunder for any
purpose other than (a) on the Closing Date, (i) to repay, in full, the
outstanding principal, accrued interest, and accrued fees and expenses owing
under or in connection with the Existing Credit Facility, and (ii) to pay
transactional fees, costs, and expenses incurred in connection with this
Agreement, the other Loan Documents, and the transactions contemplated hereby
and thereby, and (b) thereafter, consistent with the terms and conditions
hereof, for their lawful and permitted purposes (including that no part of the
proceeds of the loans made to Borrowers will be used to purchase or carry any
such Margin Stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock or for any purpose that violates the provisions
of Regulation T, U or X of the Board of Governors of the United States Federal
Reserve).
6.14 Limitation on Issuance of Stock. Except for the issuance or sale of common
stock, warrants or options to purchase common stock or Permitted Preferred Stock
by Parent, Permitted Investments as described in clause (l) of the definition
thereof and as otherwise permitted by the Loan Documents, issue or sell or enter
into any agreement or arrangement for the issuance and sale of any of its Stock.
6.15 [Reserved]
6.16 Consignments. Except in the ordinary course of business, consign any of its
or their Inventory or sell any of its or their Inventory on bill and hold, sale
or return, sale on approval, or other conditional terms of sale.
6.17 Inventory with Bailees. Store the Inventory included in the Borrowing Base
at any time now or hereafter with a bailee, warehouseman, or similar party,
except to the extent that a Collateral Access Agreement is in effect with
respect to such party.

 

36

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

 

7. FINANCIAL COVENANTS.
Each of Parent and Borrowers covenant and agree that, until termination of all
of the Commitments and payment in full of the Obligations, Parent and its
Subsidiaries, on a consolidated basis, shall have a Fixed Charge Coverage Ratio
of at least 1.0 to 1.0, measured as of the last day of each fiscal month for the
twelve fiscal month period then ending; provided, however, that such financial
covenant shall only apply if at any time Adjusted Excess Liquidity falls below
the Trigger Level. Upon Adjusted Excess Liquidity falling below the Trigger
Level, unless Borrowers prepay the Obligations in accordance with Section 2.4(e)
and/or provide Qualified Cash or Restricted Cash (together with reasonably
satisfactory evidence of the provision of such Qualified Cash or Restricted
Cash) in an amount sufficient to restore the Adjusted Excess Liquidity to or
above the Trigger Level within 2 Business Days (the “FCCR Cure Period”), the
Loan Parties shall be required to (a) establish that they are in compliance with
this Section 7as of the most recently ended fiscal month for which financial
statements are then required to have been delivered to Agent in accordance with
Section 5.1, and (b) thereafter maintain compliance with this Section 7 as of
each fiscal month end unless and until Adjusted Excess Liquidity thereafter
equals or exceeds the Trigger Level for 90 consecutive days. If, during any FCCR
Cure Period, the Loan Parties are not able to establish that they have a Fixed
Charge Coverage Ratio of at least 1.0 to 1.0 as of the most recently ended
fiscal month for which financial statements are then required to have been
delivered to Agent in accordance with Section 5.1, a Default shall exist for all
purposes hereunder (including for purposes of Section 3.2(b)), subject to the
Loan Parties’ right to cure such Default during the FCCR Cure Period as
described above.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of default
(each, an “Event of Default”) under this Agreement:
8.1 If any Borrower fails to pay when due and payable, or when declared due and
payable, (a) all or any portion of the Obligations consisting of interest, fees,
or charges due the Lender Group, reimbursement of Lender Group Expenses, or
other amounts (other than any portion thereof constituting principal)
constituting Obligations (including any portion thereof that accrues after the
commencement of an Insolvency Proceeding, regardless of whether allowed or
allowable in whole or in part as a claim in any such Insolvency Proceeding), and
such failure continues for a period of 5 Business Days, or (b) all or any
portion of the principal of the Obligations;
8.2 If any Loan Party:
(a) fails to perform or observe any covenant or other agreement contained in any
of (i) Sections 3.6, 5.1, 5.2, 5.7 (solely if any Loan Party refuses to allow
Agent or its representatives or agents to visit such Loan Party’s properties,
inspect its assets or books or records, examine and make copies of its books and
records, or discuss such Loan Party’s affairs, finances, and accounts with
officers and employees of such Loan Party), 5.10, 5.11, 5.15, or 5.17 of this
Agreement, (ii) Sections 6.1 through 6.17 of this Agreement, (iii) Section 7 of
this Agreement, or (iv) Section 6 of the Security Agreement;
(b) fails to perform or observe any covenant or other agreement contained in
Section 5.3 (solely if any Primary Obligor is not in good standing in its
jurisdiction of organization) of this Agreement and such failure continues for a
period of 3 Business Days after the earlier of (i) the date on which such
failure shall first become known to any Responsible Officer or (ii) the date on
which written notice thereof is given to Borrowers by Agent;

 

37

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

 

(c) fails to perform or observe any covenant or other agreement contained in any
of Sections 5.3 (other than if any Primary Obligor is not in good standing in
its jurisdiction of organization), 5.4, 5.5, 5.6, 5.8, and 5.12 of this
Agreement and such failure continues for a period of 10 days after the earlier
of (i) the date on which such failure shall first become known to any
Responsible Officer or (ii) the date on which written notice thereof is given to
Borrowers by Agent; or
(d) fails to perform or observe any covenant or other agreement contained in
this Agreement, or in any of the other Loan Documents, in each case, other than
any such covenant or agreement that is the subject of another provision of this
Section 8 (in which event such other provision of this Section 8 shall govern),
and such failure continues for a period of 30 days after the earlier of (i) the
date on which such failure shall first become known to any Responsible Officer
or (ii) the date on which written notice thereof is given to Borrowers by Agent;
8.3 If one or more judgments, orders, or awards for the payment of money
involving an aggregate amount of $1,000,000, or more (except to the extent fully
covered (other than to the extent of customary deductibles) by insurance
pursuant to which the insurer has not denied coverage) is entered or filed
against any Primary Obligor, or with respect to any of their respective assets,
and either (a) there is a period of 30 consecutive days at any time after the
entry of any such judgment, order, or award during which (i) the same is not
discharged, satisfied, vacated, or bonded pending appeal, or (ii) a stay of
enforcement thereof is not in effect, or (b) enforcement proceedings are
commenced upon such judgment, order, or award;
8.4 If an Insolvency Proceeding is commenced by any Primary Obligor;
8.5 If an Insolvency Proceeding is commenced against any Primary Obligor and any
of the following events occur: (a) such Primary Obligor consents to the
institution of such Insolvency Proceeding against it, (b) the petition
commencing the Insolvency Proceeding is not timely controverted, (c) the
petition commencing the Insolvency Proceeding is not dismissed within 60
calendar days of the date of the filing thereof, (d) an interim trustee is
appointed to take possession of all or any substantial portion of the properties
or assets of, or to operate all or any substantial portion of the business of,
such Primary Obligor, or (e) an order for relief shall have been issued or
entered therein;
8.6 If a Loan Party is enjoined, restrained, or in any way prevented by court
order from continuing to conduct all or any material part of the business
affairs of Parent and its Subsidiaries, taken as a whole;
8.7 If there is (a) a default in one or more agreements to which a Loan Party or
any of its Subsidiaries is a party with one or more third Persons relative to a
Loan Party’s or any of its Subsidiaries’ Indebtedness involving an aggregate
amount of $1,000,000 or more, and such default (i) occurs at the final maturity
of the obligations thereunder, or (ii) results in a right by such third Person,
irrespective of whether exercised, to accelerate the maturity of such Loan
Party’s or its Subsidiary’s obligations thereunder, or (b) a default in or an
involuntary early termination of one or more Hedge Agreements to which a Loan
Party or any of its Subsidiaries is a party involving an aggregate amount of
$1,000,000 or more;
8.8 If any warranty, representation, certificate, statement, or Record made
herein or in any other Loan Document or delivered in writing to Agent or any
Lender in connection with this Agreement or any other Loan Document proves to be
untrue in any material respect (except that such materiality qualifier shall not
be applicable to any representations and warranties that already are qualified
or modified by materiality in the text thereof) as of the date of issuance or
making or deemed making thereof;

 

38

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

 

8.9 If the obligation of any Guarantor under the Guaranty is limited or
terminated by such Guarantor, or the obligation of any Guarantor (other than an
Inactive Subsidiary) under the Guaranty is limited or terminated by operation of
law, in any such case other than in accordance with the terms thereof or of this
Agreement;
8.10 If any of the Agent’s Liens that are purported to be created by the
Security Agreement or any other Loan Document shall, for any reason, fail or
cease to be valid and perfected Liens on the Collateral covered thereby, except
(a) as a result of a disposition of the applicable Collateral in a transaction
permitted under any Loan Document, (b) with respect to Collateral the aggregate
fair market value (or net book value) of which, for all such Collateral, does
not exceed at any time, $250,000, or (c) as the result of an action or failure
to act on the part of Agent; or
8.11 The validity or enforceability of any Loan Document shall at any time for
any reason (other than solely as the result of an action or failure to act on
the part of Agent) be declared to be null and void, or a proceeding shall be
commenced by a Loan Party, or by any Governmental Authority having jurisdiction
over a Loan Party, seeking to establish the invalidity or unenforceability
thereof, or a Loan Party shall deny that such Loan Party has any liability or
obligation purported to be created under any Loan Document.
9. RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence and during the continuation of an
Event of Default, Agent may, and, at the instruction of the Required Lenders,
shall (in each case under clauses (a) or (b) by written notice to Borrowers), in
addition to any other rights or remedies provided for hereunder or under any
other Loan Document or by applicable law, do any one or more of the following:
(a) declare the Obligations (other than the Bank Product Obligations), whether
evidenced by this Agreement or by any of the other Loan Documents immediately
due and payable, whereupon the same shall become and be immediately due and
payable and Borrowers shall be obligated to repay all of such Obligations in
full, without presentment, demand, protest, or further notice or other
requirements of any kind, all of which are hereby expressly waived by Borrowers;
(b) declare the Commitments terminated, whereupon the Commitments shall
immediately be terminated together with (i) any obligation of any Lender
hereunder to make Advances, (ii) the obligation of the Swing Lender to make
Swing Loans, and (iii) the obligation of the Issuing Lender to issue Letters of
Credit; and
(c) exercise all other rights and remedies available to Agent or the Lenders
under the Loan Documents or applicable law.
The foregoing to the contrary notwithstanding, upon the occurrence of any Event
of Default described in Section 8.4 or Section 8.5, in addition to the remedies
set forth above, without any notice to Borrowers or any other Person or any act
by the Lender Group, the Commitments shall automatically terminate and the
Obligations (other than the Bank Product Obligations), inclusive of all accrued
and unpaid interest thereon and all fees and all other amounts owing under this
Agreement or under any of the other Loan Documents, shall automatically and
immediately become due and payable and Borrowers shall be obligated to repay all
of such Obligations in full, without presentment, demand, protest, or notice of
any kind, all of which are expressly waived by Parent and Borrowers.

 

39

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

 

9.2 Remedies Cumulative. The rights and remedies of the Lender Group under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
10. WAIVERS; INDEMNIFICATION.
10.1 Demand; Protest; etc. Except to the extent of any notice expressly required
to be provided in accordance with the terms of any Loan Document, each Borrower
waives demand, protest, notice of protest, notice of default or dishonor, notice
of payment and nonpayment, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of documents, instruments, chattel paper, and
guarantees at any time held by the Lender Group on which Borrowers may in any
way be liable.
10.2 The Lender Group’s Liability for Collateral. Each Borrower hereby agrees
that: (a) so long as Agent complies with its obligations, if any, under the
Code, the Lender Group shall not in any way or manner be liable or responsible
for: (i) the safekeeping of the Collateral, (ii) any loss or damage thereto
occurring or arising in any manner or fashion from any cause, (iii) any
diminution in the value thereof, or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of
loss, damage, or destruction of the Collateral shall be borne by Borrowers.
10.3 Indemnification. Each Borrower shall pay, indemnify, defend, and hold the
Agent-Related Persons, the Lender-Related Persons, and each Participant (each,
an “Indemnified Person”) harmless (to the fullest extent permitted by law) from
and against any and all claims, demands, suits, actions, investigations,
proceedings, liabilities, fines, costs, penalties, and damages, and all
reasonable fees and disbursements of attorneys, experts, or consultants and all
other costs and expenses actually incurred in connection therewith or in
connection with the enforcement of this indemnification (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them (a) in connection with or as a
result of or related to the execution and delivery (provided that Borrowers
shall not be liable for costs and expenses (including attorneys fees) of any
Lender (other than WFCF) incurred in advising, structuring, drafting, reviewing,
administering or syndicating the Loan Documents), enforcement, performance, or
administration (including any restructuring or workout with respect hereto) of
this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby or the monitoring of Parent’s and its
Subsidiaries’ compliance with the terms of the Loan Documents (provided,
however, that the indemnification in this clause (a) shall not extend to
(i) disputes solely between or among the Lenders, (ii) disputes solely between
or among the Lenders and their respective Affiliates; it being understood and
agreed that the indemnification in this clause (a) shall extend to Agent (but
not the Lenders) relative to disputes between or among Agent on the one hand,
and one or more Lenders, or one or more of their Affiliates, on the other hand,
or (iii) any Taxes or any costs attributable to Taxes, which shall be governed
by Section 16), (b) with respect to any investigation, litigation, or proceeding
related to this Agreement, any other Loan Document, or the use of the proceeds
of the credit provided hereunder (irrespective of whether any Indemnified Person
is a party thereto), or any act, omission, event, or circumstance in any manner
related thereto, and (c) in connection with or arising out of any presence or
release of Hazardous Materials at, on, under, to or from any assets or
properties owned, leased or operated by Borrowers or any of their Subsidiaries
or any Environmental Actions, Environmental Liabilities or Remedial Actions
related in any way to any such assets or properties of Borrowers or any of their
Subsidiaries (each and all of the foregoing, the “Indemnified Liabilities”). The
foregoing to the contrary notwithstanding, Borrowers shall have no obligation to
any Indemnified Person under this Section with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person or its officers, directors, employees, attorneys, or agents. This
provision shall survive the termination of this Agreement and the repayment of
the Obligations.

 

40

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

 

If any Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which any Borrower was required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrowers
with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO
EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE
OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
11. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands relating to
this Agreement or any other Loan Document shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
registered or certified mail (postage prepaid, return receipt requested),
overnight courier, electronic mail (at such email addresses as a party may
designate in accordance herewith), or telefacsimile. In the case of notices or
demands to Parent, Borrowers or Agent, as the case may be, they shall be sent to
the respective address set forth below:

     
If to Parent or any Borrower:
  Hampshire Group, Limited
 
  1924 Pearman Dairy Road
 
  Anderson, SC 29625
 
  Attn: Jonathan Norwood, CFO
 
  Fax No. 864-662-0715
 
   
with copies to:
  Willkie Farr & Gallagher LLP
 
  787 Seventh Avenue
 
  New York, NY 10019
 
  Attn: Leslie Mazza, Esq.
 
  Fax No.: 212-728-9245
 
   
If to Agent:
  Wells Fargo Capital Finance, LLC
 
  1100 Abernathy Road, Suite 1600
 
  Atlanta, GA 30328
 
  Attn: Portfolio Manager — Hampshire Group
 
  Fax No.: 770-804-0785
 
   
with copies to:
  Greenberg Traurig, LLP
 
  3290 Northside Parkway, Suite 400
 
  Atlanta, GA 30327
 
  Attn: David Kurzweil, Esq.
 
  Fax No.: 678-553-2681

Any party hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other
party. All notices or demands sent in accordance with this Section 11, shall be
deemed received on the earlier of the date of actual receipt or 3 Business Days
after the deposit thereof in the mail; provided, that (a) notices sent by
overnight courier service shall be deemed to have been given when received, (b)
notices by facsimile 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) and (c) notices by electronic mail shall be deemed received upon the
sender’s receipt of an acknowledgment from the intended recipient (such as by
the “return receipt requested” function, as available, return email or other
written acknowledgment).

 

41

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

 

12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH
OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO
ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL
BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN
THE STATE OF NEW YORK AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL
COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK; PROVIDED, HOWEVER,
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY
BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT
ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. EACH OF PARENT AND BORROWERS AND EACH MEMBER OF THE LENDER GROUP WAIVE,
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 12(b).
(c) TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF PARENT AND
BORROWERS AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH OF PARENT AND] BORROWERS AND EACH MEMBER OF
THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
13. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
13.1 Assignments and Participations.
(a) With the prior written consent of Borrowers (which consent of Borrowers
shall not be unreasonably withheld, delayed or conditioned, and shall not be
required (1) if an Event of Default has occurred and is continuing, or (2) in
connection with an assignment to a Person that, immediately prior to such
assignment, is a Lender or an Affiliate (other than individuals) of a Lender)
and Agent (which consent of Agent shall not be unreasonably withheld, delayed or
conditioned, and shall not be required in connection with an assignment to a
Person that, immediately prior to such assignment, is a Lender or an Affiliate
(other than individuals) of a

 

42

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

 

Lender), any Lender may assign and delegate to one or more assignees so long as
such prospective assignee is an Eligible Transferee (each, an “Assignee”;
provided, however, that no Loan Party or Affiliate of a Loan Party shall be
permitted to become an Assignee) all or any portion of the Obligations, the
Commitments and the other rights and obligations of such Lender hereunder and
under the other Loan Documents, in a minimum amount of $10,000,000 (except such
minimum amount shall not apply to (x) an assignment or delegation by any Lender
to any other Lender or an Affiliate of any Lender or (y) a group of new Lenders,
each of which is an Affiliate of each other, to the extent that the aggregate
amount to be assigned to all such new Lenders is at least $10,000,000);
provided, however, that Borrowers and Agent may continue to deal solely and
directly with such Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses, and related information with respect to the Assignee,
have been given to Borrowers and Agent by such Lender and the Assignee,
(ii) such Lender and its Assignee have delivered to Borrowers and Agent an
Assignment and Acceptance and Agent has notified the assigning Lender of its
receipt thereof in accordance with Section 13.1(b), and (iii) unless waived by
Agent, the assigning Lender or Assignee has paid to Agent for Agent’s separate
account a processing fee in the amount of $3,500.
(b) From and after the date that Agent notifies the assigning Lender (with a
copy to Borrowers) that it has received an executed Assignment and Acceptance
and, if applicable, payment of the required processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall be a “Lender” and shall have the rights and obligations of a
Lender under the Loan Documents, and (ii) the assigning Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights (except with respect to Section 10.3) and be released from any future
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender’s rights
and obligations under this Agreement and the other Loan Documents, such Lender
shall cease to be a party hereto and thereto); provided, however, that nothing
contained herein shall release any assigning Lender from agreements and
obligations that survive the termination of this Agreement, including such
assigning Lender’s agreements and obligations under Sections 12, 15 and 17.9(a).
(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the Assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other Loan Document furnished pursuant hereto,
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrowers or the
performance or observance by Borrowers of any of their obligations under this
Agreement or any other Loan Document furnished pursuant hereto, (iii) such
Assignee confirms that it has received a copy of this Agreement, together with
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance,
(iv) such Assignee will, independently and without reliance upon Agent, such
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement, (v) such
Assignee appoints and authorizes Agent to take such actions and to exercise such
powers under this Agreement and the other Loan Documents as are delegated to
Agent, by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto, and (vi) such Assignee agrees that it will
perform all of the obligations which by the terms of this Agreement are required
to be performed by it as a Lender.

 

43

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

 

(d) Immediately upon Agent’s receipt of the required processing fee, if
applicable, and delivery of notice to the assigning Lender pursuant to
Section 13.1(b), this Agreement shall be deemed to be amended to the extent, but
only to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Commitments arising therefrom. The Commitment
allocated to each Assignee shall reduce such Commitments of the assigning Lender
pro tanto.
(e) Any Lender may at any time sell to one or more Persons that are Eligible
Transferees (each such Person, a “Participant”) participating interests in all
or any portion of its Obligations, its Commitment, and the other rights and
interests of that Lender (the “Originating Lender”) hereunder and under the
other Loan Documents; provided, however, that (i) the Originating Lender shall
remain a “Lender” for all purposes of this Agreement and the other Loan
Documents and the Participant receiving the participating interest in the
Obligations, the Commitments, and the other rights and interests of the
Originating Lender hereunder shall not constitute a “Lender” hereunder or under
the other Loan Documents and the Originating Lender’s obligations under this
Agreement shall remain unchanged, (ii) the Originating Lender shall remain
solely responsible for the performance of such obligations, (iii) Borrowers,
Agent, and the Lenders shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender’s rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the right to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment to, or consent or waiver with respect to this Agreement or of any
other Loan Document would (A) extend the final maturity date of the Obligations
hereunder in which such Participant is participating, (B) reduce the interest
rate applicable to the Obligations hereunder in which such Participant is
participating, (C) release all or substantially all of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating, (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through such Lender (other than a
waiver of default interest), or (E) decreases the amount or postpones the due
dates of scheduled principal repayments or prepayments or premiums payable to
such Participant through such Lender, and (v) all amounts payable by Borrowers
hereunder shall be determined as if such Lender had not sold such participation,
except that, if amounts outstanding under this Agreement are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement. The rights of any
Participant only shall be derivative through the Originating Lender with whom
such Participant participates and no Participant shall have any rights under
this Agreement or the other Loan Documents or any direct rights as to the other
Lenders, Agent, Borrowers, the Collections of Borrowers or their Subsidiaries,
the Collateral, or otherwise in respect of the Obligations. No Participant shall
have the right to participate directly in the making of decisions by the Lenders
among themselves.
(f) In connection with any such assignment or participation or proposed
assignment or participation or any grant of a security interest in, or pledge
of, its rights under and interest in this Agreement, a Lender may, subject to
the provisions of Section 17.9, disclose all documents and information which it
now or hereafter may have relating to Parent and its Subsidiaries and their
respective businesses.
(g) Any other provision in this Agreement notwithstanding, any Lender may at any
time create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement in favor of any Federal Reserve Bank in
accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury
Regulation 31 CFR §203.24, and such Federal Reserve Bank may enforce such pledge
or security interest in any manner permitted under applicable law.

 

44

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

 

13.2 Successors. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that Borrowers may not assign this Agreement or any rights or duties hereunder
without the Lenders’ prior written consent and any prohibited assignment shall
be absolutely void ab initio. No consent to assignment by the Lenders shall
release Borrowers from their Obligations. A Lender may assign this Agreement and
the other Loan Documents and its rights and duties hereunder and thereunder
pursuant to Section 13.1 and, except as expressly required pursuant to
Section 13.1, no consent or approval by Borrowers is required in connection with
any such assignment.
14. AMENDMENTS; WAIVERS.
14.1 Amendments and Waivers.
(a) No amendment, waiver or other modification of any provision of this
Agreement or any other Loan Document (other than Bank Product Agreements or the
Fee Letter), and no consent with respect to any departure by Parent or Borrowers
therefrom, shall be effective unless the same shall be in writing and signed by
the Required Lenders (or by Agent at the written request of the Required
Lenders) and the Loan Parties that are party thereto and then any such waiver or
consent shall be effective, but only in the specific instance and for the
specific purpose for which given; provided, however, that no such waiver,
amendment, or consent shall, unless in writing and signed by all of the Lenders
directly affected thereby and all of the Loan Parties that are party thereto, do
any of the following:
(i) increase the amount of or extend the expiration date of any Commitment of
any Lender or amend, modify, or eliminate the last sentence of Section 2.4(c),
(ii) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees, or other amounts due
hereunder or under any other Loan Document,
(iii) reduce the principal of, or the rate of interest on, any loan or other
extension of credit hereunder, or reduce any fees or other amounts payable
hereunder or under any other Loan Document (except in connection with the waiver
of applicability of Section 2.6(c), which waiver shall be effective with the
written consent of the Required Lenders),
(iv) amend, modify, or eliminate this Section or any provision of this Agreement
providing for consent or other action by all Lenders,
(v) other than as permitted by Section 15.11, release Agent’s Lien in and to any
of the Collateral,
(vi) amend, modify, or eliminate the definition of “Required Lenders” or “Pro
Rata Share”,
(vii) contractually subordinate any of Agent’s Liens,
(viii) other than in connection with a merger, liquidation, dissolution or sale
of such Person expressly permitted by the terms hereof or the other Loan
Documents, release Borrowers or any Guarantor from any obligation for the
payment of money or consent to the assignment or transfer by Borrowers or any
Guarantor of any of its rights or duties under this Agreement or the other Loan
Documents,

 

45

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

 

(ix) amend, modify, or eliminate any of the provisions of Section 2.4(b)(i) or
(ii),
(x) amend, modify, or eliminate any of the provisions of Section 13.1(a) to
permit a Loan Party or an Affiliate of a Loan Party to be permitted to become an
Assignee, or
(xi) amend, modify, or eliminate the definition of Borrowing Base or any of the
defined terms (including the definitions of Eligible Accounts, Eligible
Inventory, Eligible In-Transit Inventory and Eligible Landed Inventory) that are
used in such definition to the extent that any such change results in more
credit being made available to Borrowers based upon the Borrowing Base], but not
otherwise, or the definition of Maximum Revolver Amount, or change
Section 2.1(c).
(b) No amendment, waiver, modification, elimination, or consent shall amend,
modify, or waive (i) the definition of, or any of the terms or provisions of,
the Fee Letter, without the written consent of Agent, Parent and Borrowers (and
shall not require the written consent of any of the Lenders), and (ii) any
provision of Section 15 pertaining to Agent, or any other rights or duties of
Agent under this Agreement or the other Loan Documents, without the written
consent of Agent, Borrowers, and the Required Lenders,
(c) No amendment, waiver, modification, elimination, or consent shall amend,
modify, or waive any provision of this Agreement or the other Loan Documents
pertaining to Issuing Lender, or any other rights or duties of Issuing Lender
under this Agreement or the other Loan Documents, without the written consent of
Issuing Lender, Agent, Parent, Borrowers, and the Required Lenders,
(d) No amendment, waiver, modification, elimination, or consent shall amend,
modify, or waive any provision of this Agreement or the other Loan Documents
pertaining to Swing Lender, or any other rights or duties of Swing Lender under
this Agreement or the other Loan Documents, without the written consent of Swing
Lender, Agent, Parent, Borrowers, and the Required Lenders,
(e) Anything in this Section 14.1 to the contrary notwithstanding, (i) any
amendment, modification, elimination, waiver, consent, termination, or release
of, or with respect to, any provision of this Agreement or any other Loan
Document that relates only to the relationship of the Lender Group among
themselves, and that does not affect the rights or obligations of any Loan
Party, shall not require consent by or the agreement of any Loan Party, and
(ii) any amendment, waiver, modification, elimination, or consent of or with
respect to any provision of this Agreement or any other Loan Document may be
entered into without the consent of, or over the objection of, any Defaulting
Lender.
14.2 Replacement of Certain Lenders.
(a) If (i) any action to be taken by the Lender Group or Agent hereunder
requires the consent, authorization, or agreement of all Lenders or all Lenders
affected thereby and if such action has received the consent, authorization, or
agreement of the Required Lenders but not of all Lenders or all Lenders affected
thereby, or (ii) any Lender makes a claim for compensation under Section 16,
then Borrowers or Agent, upon at least 5 Business Days prior irrevocable notice,
may permanently replace any Lender that failed to give its consent,
authorization, or agreement (a “Holdout Lender”) or any Lender that made a claim
for compensation (a “Tax Lender”) with one or more Replacement Lenders, and the
Holdout Lender or Tax Lender, as applicable, shall have no right to refuse to be
replaced hereunder. Such notice to replace the Holdout Lender or Tax Lender, as
applicable, shall specify an effective date for such replacement, which date
shall not be later than 15 Business Days after the date such notice is given.

 

46

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

 

(b) Prior to the effective date of such replacement, the Holdout Lender or Tax
Lender, as applicable, and each Replacement Lender shall execute and deliver an
Assignment and Acceptance, subject only to the Holdout Lender or Tax Lender, as
applicable, being repaid in full its share of the outstanding Obligations
(without any premium or penalty of any kind whatsoever, but including (i) all
interest, fees and other amounts that may be due in payable in respect thereof,
and (ii) an assumption of its Pro Rata Share of the Letters of Credit). If the
Holdout Lender or Tax Lender, as applicable, shall refuse or fail to execute and
deliver any such Assignment and Acceptance prior to the effective date of such
replacement, Agent may, but shall not be required to, execute and deliver such
Assignment and Acceptance in the name or and on behalf of the Holdout Lender or
Tax Lender, as applicable, and irrespective of whether Agent executes and
delivers such Assignment and Acceptance, the Holdout Lender or Tax Lender, as
applicable, shall be deemed to have executed and delivered such Assignment and
Acceptance. The replacement of any Holdout Lender or Tax Lender, as applicable,
shall be made in accordance with the terms of Section 13.1. Until such time as
one or more Replacement Lenders shall have acquired all of the Obligations, the
Commitments, and the other rights and obligations of the Holdout Lender or Tax
Lender, as applicable, hereunder and under the other Loan Documents, the Holdout
Lender or Tax Lender, as applicable, shall remain obligated to make the Holdout
Lender’s or Tax Lender’s, as applicable, Pro Rata Share of Advances and to
purchase a participation in each Letter of Credit, in an amount equal to its Pro
Rata Share of such Letters of Credit.
14.3 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to
exercise any right, remedy, or option under this Agreement or any other Loan
Document, or delay by Agent or any Lender in exercising the same, will operate
as a waiver thereof. No waiver by Agent or any Lender will be effective unless
it is in writing, and then only to the extent specifically stated. No waiver by
Agent or any Lender on any occasion shall affect or diminish Agent’s and each
Lender’s rights thereafter to require strict performance by Parent and Borrowers
of any provision of this Agreement. Agent’s and each Lender’s rights under this
Agreement and the other Loan Documents will be cumulative and not exclusive of
any other right or remedy that Agent or any Lender may have.
15. AGENT; THE LENDER GROUP.
15.1 Appointment and Authorization of Agent. Each Lender hereby designates and
appoints WFCF as its agent under this Agreement and the other Loan Documents and
each Lender hereby irrevocably authorizes (and by entering into a Bank Product
Agreement, each Bank Product Provider shall be deemed to designate, appoint, and
authorize) Agent to execute and deliver each of the other Loan Documents on its
behalf and to take such other action on its behalf under the provisions of this
Agreement and each other Loan Document and to exercise such powers and perform
such duties as are expressly delegated to Agent by the terms of this Agreement
or any other Loan Document, together with such powers as are reasonably
incidental thereto. Agent agrees to act as agent for and on behalf of the
Lenders (and the Bank Product Providers) on the conditions contained in this
Section 15. Any provision to the contrary contained elsewhere in this Agreement
or in any other Loan Document notwithstanding, Agent shall not have any duties
or responsibilities, except those expressly set forth herein or in the other
Loan Documents, nor shall Agent have or be deemed to have any fiduciary
relationship with any Lender (or Bank Product Provider), and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against Agent. Without limiting the generality of the foregoing, the use of the
term “agent” in this Agreement or the other Loan Documents with reference to
Agent is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable law. Instead, such
term is used merely as a matter of market custom, and is intended to create or
reflect only a representative relationship between independent contracting
parties. Each Lender hereby further authorizes (and by entering into a Bank
Product Agreement, each Bank Product Provider shall be deemed to authorize)
Agent to act as the secured party under each of the Loan Documents that create a
Lien on any item of Collateral. Except as expressly otherwise provided in this
Agreement,

 

47

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

 

Agent shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking any actions that Agent expressly is entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have the
right to exercise the following powers as long as this Agreement remains in
effect: (a) maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Obligations, the Collateral,
the Collections of Parent and its Subsidiaries, and related matters, (b) execute
or file any and all financing or similar statements or notices, amendments,
renewals, supplements, documents, instruments, proofs of claim, notices and
other written agreements with respect to the Loan Documents, (c) make Advances,
for itself or on behalf of Lenders, as provided in the Loan Documents,
(d) exclusively receive, apply, and distribute the Collections of Parent and its
Subsidiaries as provided in the Loan Documents, (e) open and maintain such bank
accounts and cash management arrangements as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes
with respect to the Collateral and the Collections of Parent and its
Subsidiaries, (f) perform, exercise, and enforce any and all other rights and
remedies of the Lender Group with respect to Parent or its Subsidiaries, the
Obligations, the Collateral, the Collections of Parent and its Subsidiaries, or
otherwise related to any of same as provided in the Loan Documents, and
(g) incur and pay such Lender Group Expenses as Agent may deem necessary or
appropriate for the performance and fulfillment of its functions and powers
pursuant to the Loan Documents.
15.2 Delegation of Duties. Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorneys in fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney in fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
15.3 Liability of Agent. None of the Agent-Related Persons shall (a) be liable
for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (b) be responsible in any manner to any of the Lenders (or Bank Product
Providers) for any recital, statement, representation or warranty made by Parent
or any of its Subsidiaries or Affiliates, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
Parent or its Subsidiaries or any other party to any Loan Document to perform
its obligations hereunder or thereunder. No Agent-Related Person shall be under
any obligation to any Lenders (or Bank Product Providers) to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement or any other Loan Document, or to inspect
the books and records or properties of Parent or its Subsidiaries.
15.4 Reliance by Agent. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, telefacsimile or other electronic
method of transmission, telex or telephone message, statement or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent, or made by the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel to Borrowers or counsel to any
Lender), independent accountants and other experts selected by Agent. Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless Agent shall first receive such
advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If

 

48

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

 

Agent so requests, it shall first be indemnified to its reasonable satisfaction
by the Lenders (and, if it so elects, the Bank Product Providers) against any
and all liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Required Lenders and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders (and Bank Product Providers).
15.5 Notice of Default or Event of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Agent for the account of the Lenders and, except
with respect to Events of Default of which Agent has actual knowledge, unless
Agent shall have received written notice from a Lender or Borrowers referring to
this Agreement, describing such Default or Event of Default, and stating that
such notice is a “notice of default.” Agent promptly will notify the Lenders of
its receipt of any such notice or of any Event of Default of which Agent has
actual knowledge. If any Lender obtains actual knowledge of any Event of
Default, such Lender promptly shall notify the other Lenders and Agent of such
Event of Default. Each Lender shall be solely responsible for giving any notices
to its Participants, if any. Subject to Section 15.4, Agent shall take such
action with respect to such Default or Event of Default as may be requested by
the Required Lenders in accordance with Section 9; provided, however, that
unless and until Agent has received any such request, Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable.
15.6 Credit Decision. Each Lender (and Bank Product Provider) acknowledges that
none of the Agent-Related Persons has made any representation or warranty to it,
and that no act by Agent hereinafter taken, including any review of the affairs
of Parent and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender (or Bank
Product Provider). Each Lender represents (and by entering into a Bank Product
Agreement, each Bank Product Provider shall be deemed to represent) to Agent
that it has, independently and without reliance upon any Agent-Related Person
and based on such due diligence, documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrowers or any other Person party to a Loan Document, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to Borrowers. Each Lender also represents (and by entering into a Bank
Product Agreement, each Bank Product Provider shall be deemed to represent) that
it will, independently and without reliance upon any Agent-Related Person and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers or any other Person party to a Loan Document.
Except for notices, reports, and other documents expressly herein required to be
furnished to the Lenders by Agent, Agent shall not have any duty or
responsibility to provide any Lender (or Bank Product Provider) with any credit
or other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrowers or any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons. Each Lender acknowledges (and by entering into a Bank
Product Agreement, each Bank Product Provider shall be deemed to acknowledge)
that Agent does not have any duty or responsibility, either initially or on a
continuing basis (except to the extent, if any, that is expressly specified
herein) to provide such Lender (or Bank Product Provider) with any credit or
other information with respect to Borrowers, their Affiliates or any of their
respective business, legal, financial or other affairs, and irrespective of
whether such information came into Agent’s or its Affiliates’ or
representatives’ possession before or after the date on which such Lender became
a party to this Agreement (or such Bank Product Provider entered into a Bank
Product Agreement).

 

49

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

 

15.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender Group
Expenses to the extent Agent reasonably deems necessary or appropriate for the
performance and fulfillment of its functions, powers, and obligations pursuant
to the Loan Documents, including court costs, reasonable attorneys’ fees and
expenses, fees and expenses of financial accountants, advisors, consultants, and
appraisers, costs of collection by outside collection agencies, auctioneer fees
and expenses, and costs of security guards or insurance premiums paid to
maintain the Collateral, whether or not Borrowers are obligated to reimburse
Agent or Lenders for such expenses pursuant to this Agreement or otherwise.
Agent is authorized and directed to deduct and retain sufficient amounts from
the Collections of Parent and its Subsidiaries received by Agent to reimburse
Agent for such out-of-pocket costs and expenses prior to the distribution of any
amounts to Lenders (or Bank Product Providers). In the event Agent is not
reimbursed for such costs and expenses by Parent or its Subsidiaries, each
Lender hereby agrees that it is and shall be obligated to pay to Agent such
Lender’s ratable thereof. Whether or not the transactions contemplated hereby
are consummated, each of the Lenders, on a ratable basis, shall indemnify and
defend the Agent-Related Persons (to the extent not reimbursed by or on behalf
of Borrowers and without limiting the obligation of Borrowers to do so) from and
against any and all Indemnified Liabilities; provided, however, that no Lender
shall be liable for the payment to any Agent-Related Person of any portion of
such Indemnified Liabilities resulting solely from such Person’s gross
negligence or willful misconduct nor shall any Lender be liable for the
obligations of any Defaulting Lender in failing to make an Advance or other
extension of credit hereunder. Without limitation of the foregoing, each Lender
shall reimburse Agent upon demand for such Lender’s ratable share of any costs
or out of pocket expenses (including attorneys, accountants, advisors, and
consultants fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
or any other Loan Document to the extent that Agent is not reimbursed for such
expenses by or on behalf of Borrowers. The undertaking in this Section shall
survive the payment of all Obligations hereunder and the resignation or
replacement of Agent.
15.8 Agent in Individual Capacity. WFCF and its Affiliates may make loans to,
issue letters of credit for the account of, accept deposits from, provide Bank
Products to, acquire equity interests in, and generally engage in any kind of
banking, trust, financial advisory, underwriting, or other business with Parent
and its Subsidiaries and Affiliates and any other Person party to any Loan
Document as though WFCF were not Agent hereunder, and, in each case, without
notice to or consent of the other members of the Lender Group. The other members
of the Lender Group acknowledge (and by entering into a Bank Product Agreement,
each Bank Product Provider shall be deemed to acknowledge) that, pursuant to
such activities, WFCF or its Affiliates may receive information regarding Parent
or its Affiliates or any other Person party to any Loan Documents that is
subject to confidentiality obligations in favor of Parent or such other Person
and that prohibit the disclosure of such information to the Lenders (or Bank
Product Providers), and the Lenders acknowledge (and by entering into a Bank
Product Agreement, each Bank Product Provider shall be deemed to acknowledge)
that, in such circumstances (and in the absence of a waiver of such
confidentiality obligations, which waiver Agent will use its reasonable best
efforts to obtain), Agent shall not be under any obligation to provide such
information to them. The terms “Lender” and “Lenders” include WFCF in its
individual capacity.

 

50

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

 

15.9 Successor Agent. Agent may resign as Agent upon 30 days prior written
notice to the Lenders (unless such notice is waived by the Required Lenders) and
Borrowers (unless such notice is waived by Borrowers) and without any notice to
the Bank Product Providers. If Agent resigns under this Agreement, the Required
Lenders shall be entitled, with (so long as no Event of Default has occurred and
is continuing) the consent of Borrowers (such consent not to be unreasonably
withheld, delayed, or conditioned), appoint a successor Agent for the Lenders
(and the Bank Product Providers). If, at the time that Agent’s resignation is
effective, it is acting as the Issuing Lender or the Swing Lender, such
resignation shall also operate to effectuate its resignation as the Issuing
Lender or the Swing Lender, as applicable, and it shall automatically be
relieved of any further obligation to issue Letters of Credit, to cause the
Underlying Issuer to issue Letters of Credit, or to make Swing Loans. If no
successor Agent is appointed prior to the effective date of the resignation of
Agent, Agent may appoint, after consulting with the Lenders and Borrowers, a
successor Agent. If Agent has materially breached or failed to perform any
material provision of this Agreement or of applicable law, the Required Lenders
may agree in writing to remove and replace Agent with a successor Agent from
among the Lenders with (so long as no Event of Default has occurred and is
continuing) the consent of Borrowers (such consent not to be unreasonably
withheld, delayed, or conditioned). In any such event, upon the acceptance of
its appointment as successor Agent hereunder, such successor Agent shall succeed
to all the rights, powers, and duties of the retiring Agent and the term “Agent”
shall mean such successor Agent and the retiring Agent’s appointment, powers,
and duties as Agent shall be terminated. After any retiring Agent’s resignation
hereunder as Agent, the provisions of this Section 15 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement. If no successor Agent has accepted appointment as Agent by the
date which is 30 days following a retiring Agent’s notice of resignation, the
retiring Agent’s resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of Agent hereunder until such time,
if any, as the Lenders appoint a successor Agent as provided for above.
15.10 Lender in Individual Capacity. Any Lender and its respective Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, provide Bank Products to, acquire equity interests in and generally engage
in any kind of banking, trust, financial advisory, underwriting, or other
business with Parent and its Subsidiaries and Affiliates and any other Person
party to any Loan Documents as though such Lender were not a Lender hereunder
without notice to or consent of the other members of the Lender Group (or the
Bank Product Providers). The other members of the Lender Group acknowledge (and
by entering into a Bank Product Agreement, each Bank Product Provider shall be
deemed to acknowledge) that, pursuant to such activities, such Lender and its
respective Affiliates may receive information regarding Parent or its Affiliates
or any other Person party to any Loan Documents that is subject to
confidentiality obligations in favor of Parent or such other Person and that
prohibit the disclosure of such information to the Lenders, and the Lenders
acknowledge (and by entering into a Bank Product Agreement, each Bank Product
Provider shall be deemed to acknowledge) that, in such circumstances (and in the
absence of a waiver of such confidentiality obligations, which waiver such
Lender will use its reasonable best efforts to obtain), such Lender shall not be
under any obligation to provide such information to them.
15.11 Collateral Matters.
(a) The Lenders hereby irrevocably authorize (and by entering into a Bank
Product Agreement, each Bank Product Provider shall be deemed to authorize)
Agent to release any Lien on any Collateral (i) upon the termination of the
Commitments and payment and satisfaction in full by Borrowers of all of the
Obligations, (ii) constituting property being sold or disposed of if a release
is required or desirable in connection therewith and if Borrowers certify to
Agent that the sale or disposition is permitted under Section 6.4 (and Agent may
rely conclusively on any such certificate, without further inquiry),
(iii) constituting property in which Parent or its Subsidiaries owned no
interest at the time Agent’s Lien was granted nor at any time thereafter, or
(iv) constituting property leased to Parent or its Subsidiaries under a lease
that has expired or is terminated in a transaction permitted under this
Agreement. The Loan Parties and the Lenders hereby irrevocably authorize (and by
entering into a Bank Product Agreement, each Bank Product Provider shall be
deemed to authorize) Agent, based upon the instruction of the Required Lenders,
to credit bid and

 

51

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

 

purchase (either directly or through one or more acquisition vehicles) or to
sell or otherwise dispose of (or to consent to any such sale or other
disposition of) all or any portion of the Collateral at any sale thereof
conducted by Agent under the provisions of the Code, including pursuant to
Sections 9-610 or 9-620 of the Code, at any sale thereof conducted under the
provisions of the Bankruptcy Code, including Section 363 of the Bankruptcy Code,
or at any sale or foreclosure conducted by Agent (whether by judicial action or
otherwise) in accordance with applicable law. Except as provided above, Agent
will not execute and deliver a release of any Lien on any Collateral without the
prior written authorization of (y) if the release is of all or substantially all
of the Collateral, all of the Lenders (without requiring the authorization of
the Bank Product Providers), or (z) otherwise, the Required Lenders (without
requiring the authorization of the Bank Product Providers). Upon request by
Agent or Borrowers at any time, the Lenders will (and if so requested, the Bank
Product Providers will) confirm in writing Agent’s authority to release any such
Liens on particular types or items of Collateral pursuant to this Section 15.11;
provided, however, that (1) Agent shall not be required to execute any document
necessary to evidence such release on terms that, in Agent’s opinion, would
expose Agent to liability or create any obligation or entail any consequence
other than the release of such Lien without recourse, representation, or
warranty, and (2) such release shall not in any manner discharge, affect, or
impair the Obligations or any Liens (other than those expressly being released)
upon (or obligations of Borrowers in respect of) all interests retained by
Borrowers, including, the proceeds of any sale, all of which shall continue to
constitute part of the Collateral. The Lenders further hereby irrevocably
authorize (and by entering into a Bank Product Agreement, each Bank Product
Provider shall be deemed to authorize) Agent, at its option and in its sole
discretion, to subordinate any Lien granted to or held by Agent under any Loan
Document to the holder of any Permitted Lien on such property if such Permitted
Lien secures Permitted Purchase Money Indebtedness.
(b) Agent shall have no obligation whatsoever to any of the Lenders (or the Bank
Product Providers) to assure that the Collateral exists or is owned by Parent or
its Subsidiaries or is cared for, protected, or insured or has been encumbered,
or that Agent’s Liens have been properly or sufficiently or lawfully created,
perfected, protected, or enforced or are entitled to any particular priority, or
that any particular items of Collateral meet the eligibility criteria applicable
in respect thereof, or whether to impose, maintain, reduce, or eliminate any
particular reserve hereunder or whether the amount of any such reserve is
appropriate or not, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to Agent pursuant to any of
the Loan Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission, or event related thereto, subject to the terms
and conditions contained herein, Agent may act in any manner it may deem
appropriate, in its sole discretion given Agent’s own interest in the Collateral
in its capacity as one of the Lenders and that Agent shall have no other duty or
liability whatsoever to any Lender (or Bank Product Provider) as to any of the
foregoing, except as otherwise provided herein.
15.12 Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the express written
consent of Agent, and that it shall, to the extent it is lawfully entitled to do
so, upon the written request of Agent, set off against the Obligations, any
amounts owing by such Lender to Parent or its Subsidiaries or any deposit
accounts of Parent or its Subsidiaries now or hereafter maintained with such
Lender. Each of the Lenders further agrees that it shall not, unless
specifically requested to do so in writing by Agent, take or cause to be taken
any action, including, the commencement of any legal or equitable proceedings to
enforce any Loan Document against any Borrower or any Guarantor or to foreclose
any Lien on, or otherwise enforce any security interest in, any of the
Collateral.

 

52

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

 

(b) If, at any time or times any Lender shall receive (i) by payment,
foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments
with respect to the Obligations, except for any such proceeds or payments
received by such Lender from Agent pursuant to the terms of this Agreement, or
(ii) payments from Agent in excess of such Lender’s Pro Rata Share of all such
distributions by Agent, such Lender promptly shall (A) turn the same over to
Agent, in kind, and with such endorsements as may be required to negotiate the
same to Agent, or in immediately available funds, as applicable, for the account
of all of the Lenders and for application to the Obligations in accordance with
the applicable provisions of this Agreement, or (B) purchase, without recourse
or warranty, an undivided interest and participation in the Obligations owed to
the other Lenders so that such excess payment received shall be applied ratably
as among the Lenders in accordance with their Pro Rata Shares; provided,
however, that to the extent that such excess payment received by the purchasing
party is thereafter recovered from it, those purchases of participations shall
be rescinded in whole or in part, as applicable, and the applicable portion of
the purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.
15.13 Agency for Perfection. Agent hereby appoints each other Lender (and each
Bank Product Provider) as its agent (and each Lender hereby accepts (and by
entering into a Bank Product Agreement, each Bank Product Provider shall be
deemed to accept) such appointment) for the purpose of perfecting Agent’s Liens
in assets which, in accordance with Article 8 or Article 9, as applicable, of
the Code can be perfected by possession or control. Should any Lender obtain
possession or control of any such Collateral, such Lender shall notify Agent
thereof, and, promptly upon Agent’s request therefor shall deliver possession or
control of such Collateral to Agent or in accordance with Agent’s instructions.
15.14 Payments by Agent to the Lenders. All payments to be made by Agent to the
Lenders (or Bank Product Providers) shall be made by bank wire transfer of
immediately available funds pursuant to such wire transfer instructions as each
party may designate for itself by written notice to Agent. Concurrently with
each such payment, Agent shall identify whether such payment (or any portion
thereof) represents principal, premium, fees, or interest of the Obligations.
15.15 Concerning the Collateral and Related Loan Documents. Each member of the
Lender Group authorizes and directs Agent to enter into this Agreement and the
other Loan Documents. Each member of the Lender Group agrees (and by entering
into a Bank Product Agreement, each Bank Product Provider shall be deemed to
agree) that any action taken by Agent in accordance with the terms of this
Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent of its powers set forth therein or herein, together with such
other powers that are reasonably incidental thereto, shall be binding upon all
of the Lenders (and such Bank Product Provider).
15.16 Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
Other Reports and Information.
By becoming a party to this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender, promptly after
it becomes available, a copy of each field audit or examination report
respecting Parent or its Subsidiaries (each, a “Report”) prepared by or at the
request of Agent, and Agent shall so furnish each Lender with such Reports,
(b) expressly agrees and acknowledges that Agent does not (i) make any
representation or warranty as to the accuracy of any Report, and (ii) shall not
be liable for any information contained in any Report,

 

53

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

 

(c) expressly agrees and acknowledges that the Reports are not comprehensive
audits or examinations, that Agent or other party performing any audit or
examination will inspect only specific information regarding Parent and its
Subsidiaries and will rely significantly upon Parent’s and its Subsidiaries’
books and records, as well as on representations of Borrowers’ personnel,
(d) agrees to keep all Reports and other material, non-public information
regarding Parent and its Subsidiaries and their operations, assets, and existing
and contemplated business plans in a confidential manner in accordance with
Section 17.9, and
(e) without limiting the generality of any other indemnification provision
contained in this Agreement, agrees: (i) to hold Agent and any other Lender
preparing a Report harmless from any action the indemnifying Lender may take or
fail to take or any conclusion the indemnifying Lender may reach or draw from
any Report in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to Borrowers, or the indemnifying
Lender’s participation in, or the indemnifying Lender’s purchase of, a loan or
loans of Borrowers, and (ii) to pay and protect, and indemnify, defend and hold
Agent, and any such other Lender preparing a Report harmless from and against,
the claims, actions, proceedings, damages, costs, expenses, and other amounts
(including, attorneys fees and costs) incurred by Agent and any such other
Lender preparing a Report as the direct or indirect result of any third parties
who might obtain all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Parent or its Subsidiaries to Agent that has not been
contemporaneously provided by Parent or such Subsidiary to such Lender, and,
upon receipt of such request, Agent promptly shall provide a copy of same to
such Lender, (y) to the extent that Agent is entitled, under any provision of
the Loan Documents, to request additional reports or information from Parent or
its Subsidiaries, any Lender may, from time to time, reasonably request Agent to
exercise such right as specified in such Lender’s notice to Agent, whereupon
Agent promptly shall request of Borrowers the additional reports or information
reasonably specified by such Lender, and, upon receipt thereof from Parent or
its Subsidiaries, Agent promptly shall provide a copy of same to such Lender,
and (z) any time that Agent renders to Borrowers a statement regarding the Loan
Account, Agent shall send a copy of such statement to each Lender.
15.17 Several Obligations; No Liability. Notwithstanding that certain of the
Loan Documents now or hereafter may have been or will be executed only by or in
favor of Agent in its capacity as such, and not by or in favor of the Lenders,
any and all obligations on the part of Agent (if any) to make any credit
available hereunder shall constitute the several (and not joint) obligations of
the respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such credit not to exceed, in principal
amount, at any one time outstanding, the amount of their respective Commitments.
Nothing contained herein shall confer upon any Lender any interest in, or
subject any Lender to any liability for, or in respect of, the business, assets,
profits, losses, or liabilities of any other Lender. Each Lender shall be solely
responsible for notifying its Participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no Lender shall
have any obligation, duty, or liability to any Participant of any other Lender.
Except as provided in Section 15.7, no member of the Lender Group shall have any
liability for the acts of any other member of the Lender Group. No Lender shall
be responsible to any Borrower or any other Person for any failure by any other
Lender (or Bank Product Provider) to fulfill its obligations to make credit
available hereunder, nor to advance for such Lender (or Bank Product Provider)
or on its behalf, nor to take any other action on behalf of such Lender (or Bank
Product Provider) hereunder or in connection with the financing contemplated
herein.

 

54

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

 

16. WITHHOLDING TAXES.
(a) All payments made by Borrowers hereunder or under any note or other Loan
Document will be made without setoff, counterclaim, or other defense. In
addition, all such payments will be made free and clear of, and without
deduction or withholding for, any present or future Taxes, and in the event any
deduction or withholding of Taxes is required, Borrowers shall comply with the
next sentence of this Section 16(a). If any Taxes are so levied or imposed, each
Borrower agrees to pay the full amount of such Taxes and such additional amounts
as may be necessary so that every payment of all amounts due under this
Agreement, any note, or Loan Document, including any amount paid pursuant to
this Section 16(a) after withholding or deduction for or on account of any
Taxes, will not be less than the amount provided for herein; provided, however,
that Borrowers shall not be required to increase any such amounts if the
increase in such amount payable results from Agent’s or such Lender’s own
willful misconduct or gross negligence (as finally determined by a court of
competent jurisdiction). Borrowers will furnish to Agent as promptly as possible
after the date the payment of any Tax is due pursuant to applicable law,
certified copies of tax receipts evidencing such payment by Borrowers.
(b) Each Borrower agrees to pay any present or future stamp, value added or
documentary taxes or any other excise or property taxes, charges, or similar
levies that arise from any payment made hereunder or from the execution,
delivery, performance, recordation, or filing of, or otherwise with respect to
this Agreement or any other Loan Document.
(c) If a Lender or Participant is entitled to claim an exemption or reduction
from United States withholding tax, such Lender or Participant agrees with and
in favor of Agent, to deliver to Agent (or, in the case of a Participant, to the
Lender granting the participation only) one of the following before receiving
its first payment under this Agreement:
(i) if such Lender or Participant is entitled to claim an exemption from United
States withholding tax pursuant to the portfolio interest exception, (A) a
statement of the Lender or Participant, signed under penalty of perjury, that it
is not a (I) a “bank” as described in Section 881(c)(3)(A) of the IRC, (II) a
10% shareholder of any Borrower (within the meaning of Section 871(h)(3)(B) of
the IRC), or (III) a controlled foreign corporation related to any Borrower
within the meaning of Section 864(d)(4) of the IRC, and (B) a properly completed
and executed IRS Form W-8BEN or Form W-8IMY (with proper attachments);
(ii) if such Lender or Participant is entitled to claim an exemption from, or a
reduction of, withholding tax under a United States tax treaty, a properly
completed and executed copy of IRS Form W-8BEN;
(iii) if such Lender or Participant is entitled to claim that interest paid
under this Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Lender, a
properly completed and executed copy of IRS Form W-8ECI;
(iv) if such Lender or Participant is entitled to claim that interest paid under
this Agreement is exempt from United States withholding tax because such Lender
or Participant serves as an intermediary, a properly completed and executed copy
of IRS Form W-8IMY (with proper attachments); or
(v) a properly completed and executed copy of any other form or forms, including
IRS Form W-9, as may be required under the IRC or other laws of the United
States as a condition to exemption from, or reduction of, United States
withholding or backup withholding tax.

 

55

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

 

Each Lender or Participant shall provide new forms (or successor forms) upon the
expiration or obsolescence of any previously delivered forms and to promptly
notify Agent (or, in the case of a Participant, to the Lender granting the
participation only) of any change in circumstances which would modify or render
invalid any claimed exemption or reduction.
(d) If a Lender or Participant claims an exemption from withholding tax in a
jurisdiction other than the United States, such Lender or such Participant
agrees with and in favor of Agent, to deliver to Agent (or, in the case of a
Participant, to the Lender granting the participation only) any such form or
forms, as may be required under the laws of such jurisdiction as a condition to
exemption from, or reduction of, foreign withholding or backup withholding tax
before receiving its first payment under this Agreement, but only if such Lender
or such Participant is legally able to deliver such forms, provided, however,
that nothing in this Section 16(d) shall require a Lender or Participant to
disclose any information that it deems to be confidential (including without
limitation, its tax returns). Each Lender and each Participant shall provide new
forms (or successor forms) upon the expiration or obsolescence of any previously
delivered forms and to promptly notify Agent (or, in the case of a Participant,
to the Lender granting the participation only) of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(e) If a Lender or Participant claims exemption from, or reduction of,
withholding tax and such Lender or Participant sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrowers to such Lender or Participant, such Lender or Participant agrees to
notify Agent (or, in the case of a sale of a participation interest, to the
Lender granting the participation only) of the percentage amount in which it is
no longer the beneficial owner of Obligations of Borrowers to such Lender or
Participant. To the extent of such percentage amount, Agent will treat such
Lender’s or such Participant’s documentation provided pursuant to Section 16(c)
or 16(d) as no longer valid. With respect to such percentage amount, such
Participant or Assignee may provide new documentation, pursuant to Section 16(c)
or 16(d), if applicable. Each Borrower agrees that each Participant shall be
entitled to the benefits of this Section 16 with respect to its participation in
any portion of the Commitments and the Obligations so long as such Participant
complies with the obligations set forth in this Section 16 with respect thereto.
(f) If a Lender or a Participant is entitled to a reduction in the applicable
withholding tax, Agent (or, in the case of a Participant, to the Lender granting
the participation) may withhold from any interest payment to such Lender or such
Participant an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
Section 16(c) or 16(d) are not delivered to Agent (or, in the case of a
Participant, to the Lender granting the participation), then Agent (or, in the
case of a Participant, to the Lender granting the participation) may withhold
from any interest payment to such Lender or such Participant not providing such
forms or other documentation an amount equivalent to the applicable withholding
tax.
(g) If the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that Agent (or, in the case of a Participant, to
the Lender granting the participation) did not properly withhold tax from
amounts paid to or for the account of any Lender or any Participant due to a
failure on the part of the Lender or any Participant (because the appropriate
form was not delivered, was not properly executed, or because such Lender failed
to notify Agent (or such Participant failed to notify the Lender granting the
participation) of a change in circumstances which rendered the exemption from,
or reduction of, withholding tax ineffective, or for any other reason) such
Lender shall indemnify and hold Agent harmless (or, in the case of a
Participant, such Participant shall indemnify and hold the Lender granting the
participation harmless) for all amounts paid, directly or indirectly, by Agent
(or, in the case of a Participant, to the Lender granting the participation), as
tax or otherwise, including penalties and interest, and including any taxes
imposed by any jurisdiction on the amounts payable to Agent (or, in the case of
a Participant, to the Lender granting the participation only) under this
Section 16, together with all costs and expenses (including attorneys fees and
expenses). The obligation of the Lenders and the Participants under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of Agent.

 

56

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

 

(h) If Agent or a Lender determines, in its sole discretion, that it has
received a refund of any Taxes as to which it has been indemnified by Borrowers
or with respect to which Borrowers have paid additional amounts pursuant to this
Section 16, so long as no Default or Event of Default has occurred and is
continuing, it shall pay over such refund to Borrowers (but only to the extent
of payments made, or additional amounts paid, by Borrowers under this Section 16
with respect to Taxes giving rise to such a refund), net of all out-of-pocket
expenses of Agent or such Lender and without interest (other than any interest
paid by the relevant Governmental Authority with respect to such a refund);
provided, that Borrowers, upon the request of Agent or such Lender, agree to
repay the amount paid over to Borrowers (plus any penalties, interest or other
charges, imposed by the relevant Governmental Authority, other than such
penalties, interest or other charges imposed as a result of the willful
misconduct or gross negligence of Agent hereunder) to Agent or such Lender in
the event Agent or such Lender is required to repay such refund to such
Governmental Authority. Notwithstanding anything in this Agreement to the
contrary, this Section 16 shall not be construed to require Agent or any Lender
to make available its tax returns (or any other information which it deems
confidential) to Borrowers or any other Person.
17. GENERAL PROVISIONS.
17.1 Effectiveness. This Agreement shall be binding and deemed effective when
executed by Parent, Borrowers, Agent, and each Lender whose signature is
provided for on the signature pages hereof.
17.2 Section Headings. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each Section applies equally to this entire Agreement.
17.3 Interpretation. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed against the Lender Group or Parent or Borrowers,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.
17.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
17.5 Bank Product Providers. Each Bank Product Provider shall be deemed a third
party beneficiary hereof and of the provisions of the other Loan Documents for
purposes of any reference in a Loan Document to the parties for whom Agent is
acting. Agent hereby agrees to act as agent for such Bank Product Providers and,
by virtue of entering into a Bank Product Agreement, the applicable Bank Product
Provider shall be automatically deemed to have appointed Agent as its agent and
to have accepted the benefits of the Loan Documents; it being understood and
agreed that the rights and benefits of each Bank Product Provider under the Loan
Documents consist exclusively of such Bank Product Provider’s being a
beneficiary of the Liens and security interests (and, if applicable, guarantees)
granted to Agent and the right to share in payments and collections out of the
Collateral as more fully set forth herein. In addition, each Bank Product
Provider, by virtue of entering into a Bank Product Agreement, shall be
automatically deemed to have agreed that Agent shall have the right, but shall
have no obligation, to establish, maintain, relax, or release reserves in
respect of the Bank Product Obligations and that if reserves are established
there is no obligation on the part of Agent to determine or insure

 

57

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

 

whether the amount of any such reserve is appropriate or not. In connection with
any such distribution of payments or proceeds of Collateral, Agent shall be
entitled to assume no amounts are due or owing to any Bank Product Provider
unless such Bank Product Provider has provided a written certification (setting
forth a reasonably detailed calculation) to Agent as to the amounts that are due
and owing to it and such written certification is received by Agent a reasonable
period of time prior to the making of such distribution. Agent shall have no
obligation to calculate the amount due and payable with respect to any Bank
Products, but may rely upon the written certification of the amount due and
payable from the relevant Bank Product Provider. In the absence of an updated
certification, Agent shall be entitled to assume that the amount due and payable
to the relevant Bank Product Provider is the amount last certified to Agent by
such Bank Product Provider as being due and payable (less any distributions made
to such Bank Product Provider on account thereof). Borrowers may obtain Bank
Products from any Bank Product Provider, although Borrowers are not required to
do so. Borrowers acknowledge and agree that no Bank Product Provider has
committed to provide any Bank Products and that the providing of Bank Products
by any Bank Product Provider is in the sole and absolute discretion of such Bank
Product Provider. Notwithstanding anything to the contrary in this Agreement or
any other Loan Document, no provider or holder of any Bank Product 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 Guarantors.
17.6 Debtor-Creditor Relationship. The relationship between the Lenders and
Agent, on the one hand, and the Loan Parties, on the other hand, is solely that
of creditor and debtor. No member of the Lender Group has (or shall be deemed to
have) any fiduciary relationship or duty to any Loan Party arising out of or in
connection with the Loan Documents or the transactions contemplated thereby, and
there is no agency or joint venture relationship between the members of the
Lender Group, on the one hand, and the Loan Parties, on the other hand, by
virtue of any Loan Document or any transaction contemplated therein.
17.7 Counterparts; Electronic Execution. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile or other electronic method of transmission shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile or
other electronic method of transmission also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.
17.8 Revival and Reinstatement of Obligations. If the incurrence or payment of
the Obligations by Borrowers or Guarantor or the transfer to the Lender Group of
any property should for any reason subsequently be asserted, or declared, to be
void or voidable under any state or federal law relating to creditors’ rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (each, a “Voidable Transfer”), and if the Lender Group is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Lender Group is required or elects to
repay or restore, and as to all reasonable costs, expenses, and attorneys fees
of the Lender Group related thereto, the liability of Borrowers or Guarantor
automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made.

 

58

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

 

17.9 Confidentiality.
(a) Agent and Lenders each individually (and not jointly or jointly and
severally) agree that material, non-public information regarding Parent or its
Subsidiaries, their operations, assets, and existing and contemplated business
plans (“Confidential Information”) shall be treated by Agent and the Lenders in
a confidential manner, and shall not be disclosed by Agent and the Lenders to
Persons who are not parties to this Agreement, except: (i) to attorneys for and
other advisors, accountants, auditors, and consultants to any member of the
Lender Group and to employees, directors and officers of any member of the
Lender Group (the Persons in this clause (i), “Lender Group Representatives”) on
a “need to know” basis in connection with this Agreement and the transactions
contemplated hereby and on a confidential basis, (ii) to Subsidiaries and
Affiliates of any member of the Lender Group (including the Bank Product
Providers), provided that any such Subsidiary or Affiliate shall have agreed to
receive such information hereunder subject to the terms of this Section 17.9,
(iii) as may be required by regulatory authorities so long as such authorities
are informed of the confidential nature of such information, (iv) as may be
required by statute, decision, or judicial or administrative order, rule, or
regulation; provided that (x) prior to any disclosure under this clause (iv),
the disclosing party agrees to provide Borrowers with prior notice thereof, to
the extent that it is practicable to do so and to the extent that the disclosing
party is permitted to provide such prior notice to Borrowers pursuant to the
terms of the applicable statute, decision, or judicial or administrative order,
rule, or regulation and (y) any disclosure under this clause (iv) shall be
limited to the portion of the Confidential Information as may be required by
such statute, decision, or judicial or administrative order, rule, or
regulation, (v) as may be agreed to in advance in writing by Borrowers, (vi) as
requested or required by any Governmental Authority pursuant to any subpoena or
other legal process, provided, that, (x) prior to any disclosure under this
clause (vi) the disclosing party agrees to provide Borrowers with prior written
notice thereof, to the extent that it is practicable to do so and to the extent
that the disclosing party is permitted to provide such prior written notice to
Borrowers pursuant to the terms of the subpoena or other legal process and
(y) any disclosure under this clause (vi) shall be limited to the portion of the
Confidential Information as may be required by such Governmental Authority
pursuant to such subpoena or other legal process, (vii) as to any such
information that is or becomes generally available to the public (other than as
a result of prohibited disclosure by Agent or the Lenders or the Lender Group
Representatives), (viii) in connection with any assignment, participation or
pledge of any Lender’s interest under this Agreement, provided that prior to
receipt of Confidential Information any such assignee, participant, or pledgee
shall have agreed in writing to receive such Confidential Information hereunder
subject to the terms of this Section, (ix) in connection with any litigation or
other adversary proceeding involving parties hereto which such litigation or
adversary proceeding involves claims related to the rights or duties of such
parties under this Agreement or the other Loan Documents; provided, that, prior
to any disclosure to any Person (other than any Loan Party, Agent, any Lender,
any of their respective Affiliates, or their respective counsel) under this
clause (ix) with respect to litigation involving any Person (other than
Borrowers, Agent, any Lender, any of their respective Affiliates, or their
respective counsel), the disclosing party agrees to provide Borrowers with prior
written notice thereof, and (x) in connection with, and to the extent reasonably
necessary for, the exercise of any secured creditor remedy under this Agreement
or under any other Loan Document.
(b) Anything in this Agreement to the contrary notwithstanding, Agent may
(i) provide customary information concerning the terms and conditions of this
Agreement and the other Loan Documents to loan syndication and pricing reporting
services, and (ii) use the name, logos, and other insignia of Borrowers and the
Loan Parties and the Commitments provided hereunder in any “tombstone” or
comparable advertising, on its website or in other marketing materials of Agent.

 

59

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

 

17.10 Lender Group Expenses. Borrowers agree to pay any and all Lender Group
Expenses on the earlier of (a) the first day of the month or (b) the date on
which demand therefor is made by Agent and agrees that its obligations contained
in this Section 17.10 shall survive payment or satisfaction in full of all other
Obligations.
17.11 Survival. All representations and warranties made by the Loan Parties in
the Loan Documents and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of the Loan Documents and the making of any
loans and issuance of any Letters of Credit, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that Agent,
the Issuing Lender, or any Lender may have had notice or knowledge of any
Default or Event of Default or incorrect representation or warranty at the time
any credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated.
17.12 Patriot Act. Each Lender that is subject to the requirements of the
Patriot Act hereby notifies Borrowers that pursuant to the requirements of the
Act, it is required to obtain, verify and record information that identifies
each Borrower, which information includes the name and address of Borrowers and
other information that will allow such Lender to identify Borrowers in
accordance with the Patriot Act.
17.13 Integration. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof. The foregoing to
the contrary notwithstanding, all Bank Product Agreements, if any, are
independent agreements governed by the written provisions of such Bank Product
Agreements, which will remain in full force and effect, unaffected by any
repayment, prepayments, acceleration, reduction, increase, or change in the
terms of any credit extended hereunder, except as otherwise expressly provided
in such Bank Product Agreement.
[Signature pages to follow.]

 

60

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

 

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

            HAMPSHIRE GROUP, LIMITED,
a Delaware corporation, as Parent
      By:   /s/ Jonathan W. Norwood       Name:   Jonathan W. Norwood      
Title:   Treasurer     

            HAMPSHIRE DESIGNERS, INC.,
a Delaware corporation, as a Borrower
      By:   /s/ Jonathan W. Norwood       Name:   Jonathan W. Norwood     
Title:   Treasurer        ITEM-EYES, INC.,
a Delaware corporation, as a Borrower
      By:   /s/ Jonathan W. Norwood       Name:   Jonathan W. Norwood     
Title:   Treasurer        SCOTT JAMES, LLC,
a Delaware limited liability company, as a Borrower
      By:   /s/ Jonathan W. Norwood       Name:   Jonathan W. Norwood     
Title:   Treasurer        WELLS FARGO CAPITAL FINANCE, LLC,
a Delaware limited liability company, as Agent and as a Lender
      By:   /s/ Samantha Alexander       Name:   Samantha Alexander      
Title:   Director     

Credit Agreement Signature Page

 

 

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

 

Schedule 1.1
As used in the Agreement, the following terms shall have the following
definitions:
“Acceptable Bill of Lading” means, with respect to In-Transit Inventory, a
tangible bill of lading that: (a) if such bill of lading is a negotiable bill of
lading, is made to the order of the applicable Borrower, as consignee; (b) if
such bill of lading is a non-negotiable bill of lading, is made either (i) to
the applicable Borrower as consignee, but subject to a notation thereon as to
the lien and security interest in favor of Agent, or (ii) to Agent (either
directly or by means of endorsements) as consignee; (c) was issued by a carrier
(including a non-vessel operating common carrier) respecting the subject
Inventory, (d) is in the possession of Agent, an Eligible Customs Broker or an
Eligible NVOCC, in each case in the United States, and (e) is subject to a valid
and perfected first priority Agent’s Lien, subject only to Permitted Liens.
“Account” means an account (as that term is defined in the Code).
“Account Debtor” means any Person who is obligated on an Account, chattel paper,
or a general intangible.
“Accounting Changes” means changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions).
“Acquired Indebtedness” means Indebtedness of a Person whose assets are acquired
in a Permitted Acquisition; provided, however, that such Indebtedness (a) is
either Purchase Money Indebtedness or a Capital Lease with respect to Equipment
or mortgage financing with respect to Real Property, (b) was in existence prior
to the date of such Permitted Acquisition, and (c) was not incurred in
connection with, or in contemplation of, such Permitted Acquisition.
“Acquisition” means the purchase or other acquisition by a Person or its
Subsidiaries of all or substantially all of the assets of (or any division or
business line of) any other Person.
“Additional Documents” has the meaning specified therefor in Section 5.12 of the
Agreement.
“Adjusted Excess Liquidity” means, as of any date of determination, (a) the
lesser of (i) the Maximum Revolver Amount (plus, solely in the case of any
determination made based on a Borrowing Base Certificate prepared as of a date
during the High Season, $10,000,000) or (ii) the Borrowing Base plus Qualified
Cash as of such date, minus (b) the sum of (i) the aggregate Revolver Usage as
of such date plus (ii) the aggregate amount of all payables, other than payables
which are being disputed in good faith by a Loan Party, which are more than
60 days past their due date.
“Advances” has the meaning specified therefor in Section 2.1(a) of the
Agreement.
“Affected Lender” has the meaning specified therefor in Section 2.13(b) of the
Agreement.

 

 

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

 

“Affiliate” means, as applied to any Person, any other Person who controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, “control” means the possession, directly or indirectly through
one or more intermediaries, of the power to direct the management and policies
of a Person, whether through the ownership of Stock, by contract, or otherwise;
provided, however, that, for purposes of the definition of Eligible Accounts and
Section 6.12 of the Agreement: (a) any Person which owns directly or indirectly
10% or more of the Stock having ordinary voting power for the election of
directors or other members of the governing body of a Person or 10% or more of
the partnership or other ownership interests of a Person (other than as a
limited partner of such Person) shall be deemed an Affiliate of such Person,
(b) each director (or comparable manager) of a Person shall be deemed to be an
Affiliate of such Person, and (c) each partnership in which a Person is a
general partner shall be deemed an Affiliate of such Person.
“Agent” has the meaning specified therefor in the preamble to the Agreement.
“Agent-Related Persons” means Agent, together with its Affiliates, officers,
directors, employees, attorneys, and agents.
“Agent’s Account” means the Deposit Account of Agent identified on Schedule A-1.
“Agent’s Liens” means the Liens granted by Parent or its Subsidiaries to Agent
under the Loan Documents.
“Agreement” means the Credit Agreement to which this Schedule 1.1 is attached.
“Application Event” means the occurrence of (a) a failure by Borrowers to repay
all of the Obligations in full on the Maturity Date, or (b) an Event of Default
and the election by Agent or the Required Lenders to require that payments and
proceeds of Collateral be applied pursuant to Section 2.4(b)(ii) of the
Agreement.
“Assignee” has the meaning specified therefor in Section 13.1(a) of the
Agreement.
“Assignment and Acceptance” means an Assignment and Acceptance Agreement
substantially in the form of Exhibit A-1.
“Assignment of Factoring Proceeds” means any Assignment of Factoring Credit
Balance and Proceeds Agreement among a Borrower, the Factor and Agent, in each
case, in form and substance reasonably satisfactory to Agent, pursuant to which,
among other things, the Factor (a) agrees not to make any loans or advances to
such Borrower or any other Loan Party, or to guaranty on behalf of such Borrower
or any other Loan Party any Indebtedness or other obligations, (b) agrees to
waive the right of setoff against any Accounts (or proceeds thereof) of amounts
owed by such Borrower or any other Loan Party to the Factor (or Factor’s other
clients) arising out of claims or accounts receivable owed by such Borrower or
any other Loan Party to such other clients of Factor or other third parties, and
(c) agrees that, except with respect to Factored Accounts with respect to which
the Factor pays the purchase price therefor in accordance with the terms of the
Factoring Agreement and such Assignment of Factoring Credit Balance and Proceeds
Agreement, the Factor has no ownership of or security interest in any Accounts
of such Borrower.
“Authorized Person” means any one of the individuals identified on Schedule A-2,
as such schedule is updated from time to time by written notice from Borrowers
to Agent.
“Availability” means, as of any date of determination, the amount that Borrowers
are entitled to borrow as Advances under Section 2.1 of the Agreement (after
giving effect to all then outstanding Obligations (other than Bank Product
Obligations)).

 

-2-

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

 

“Bank Product” means any one or more of the following financial products or
accommodations extended to Parent or its Subsidiaries by a Bank Product
Provider: (a) credit cards, (b) credit card processing services, (c) debit
cards, (d) stored value cards, (e) purchase cards (including so-called
“procurement cards” or “P-cards”), (f) Cash Management Services, or (g)
transactions under Hedge Agreements.
“Bank Product Agreements” means those agreements entered into from time to time
by Parent or its Subsidiaries with a Bank Product Provider in connection with
the obtaining of any of the Bank Products.
“Bank Product Collateralization” means providing cash collateral (pursuant to
documentation reasonably satisfactory to Agent) to be held by Agent for the
benefit of the Bank Product Providers (other than the Hedge Providers) in an
amount determined by Agent as sufficient to satisfy the reasonably estimated
credit exposure with respect to the then existing Bank Product Obligations
(other than Hedge Obligations).
“Bank Product Obligations” means (a) all obligations, liabilities, reimbursement
obligations, fees, or expenses owing by Parent or its Subsidiaries to any Bank
Product Provider pursuant to or evidenced by a Bank Product Agreement and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
(b) all Hedge Obligations, and (c) without duplication of amounts owed pursuant
to the foregoing clauses (a) and (b), all amounts that Agent or any Lender is
obligated to pay to a Bank Product Provider as a result of Agent or such Lender
purchasing participations from, or executing guarantees or indemnities or
reimbursement obligations to, a Bank Product Provider with respect to the Bank
Products provided by such Bank Product Provider to Parent or its Subsidiaries.
“Bank Product Provider” means Wells Fargo or any of its Affiliates (including
WFCF).
“Bank Product Reserve Amount” means, as of any date of determination, the Dollar
amount of reserves that Agent has determined it is necessary or appropriate to
establish (based upon the Bank Product Providers’ reasonable determination of
their credit exposure to Parent and its Subsidiaries in respect of Bank Product
Obligations) in respect of Bank Products then provided or outstanding.
“Bankruptcy Code” means title 11 of the United States Code, as in effect from
time to time.
“Base Rate” means the greatest of (a) the Federal Funds Rate plus 0.50%, (b) the
LIBOR Rate (which rate shall be calculated based upon an Interest Period of
1 month and shall be determined on a daily basis), plus 1.50%, and (c) the rate
of interest announced, from time to time, within Wells Fargo at its principal
office in San Francisco as its “prime rate”, with the understanding that the
“prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest of
such rates) and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto and is evidenced by the
recording thereof after its announcement in such internal publications as Wells
Fargo may designate.
“Base Rate Loan” means each portion of the Advances that bears interest at a
rate determined by reference to the Base Rate.
“Base Rate Margin” means 1.75%.

 

-3-

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

 

“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of
ERISA) for which Parent or any of its Subsidiaries or ERISA Affiliates has been
an “employer” (as defined in Section 3(5) of ERISA) within the past six years.
“Board of Directors” means the board of directors (or comparable managers) of
Parent or any committee thereof duly authorized to act on behalf of the board of
directors (or comparable managers).
“Borrower” and “Borrowers” have the meaning specified therefor in the preamble
to the Agreement.
“Borrowing” means a borrowing consisting of Advances made on the same day by the
Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing
Loan, or by Agent in the case of a Protective Advance.
“Borrowing Base” means, as of any date of determination, the result of:
(a) 85% of the amount of Eligible Accounts, less the amount, if any, of the
Dilution Reserve, plus
(b) the lesser of $35,000,000 and the sum of
(i) the lesser of (A) 65% of the value (calculated at the lower of cost or
market in accordance with GAAP on a basis consistent with the terms of
Section 6.10) of Eligible Landed Inventory, and (B) 85% times the most recently
determined Net Liquidation Percentage times the value (calculated at the lower
of cost or market in accordance with GAAP on a basis consistent with the terms
of Section 6.10) of Eligible Landed Inventory, plus
(ii) the least of (A) 65% of the value (calculated at the lower of cost or
market in accordance with GAAP on a basis consistent with the terms of
Section 6.10) of Eligible In-Transit Inventory, (B) 85% times the most recently
determined Net Liquidation Percentage times the value (calculated at the lower
of cost or market in accordance with GAAP on a basis consistent with the terms
of Section 6.10) of Eligible In-Transit Inventory, and (C) $8,500,000, plus
(iii) 65% of the aggregate undrawn amount of outstanding Qualified Import
Letters of Credit, plus
(c) 100% of Restricted Cash, minus
(d) without duplication of any Dilution Reserve established under clause (a)
above, the aggregate amount of reserves, if any, established by Agent under
Section 2.1(c) of the Agreement.
“Borrowing Base Certificate” means a certificate in the form of Exhibit B-1.
“Borrowing Base Excess” has the meaning set forth in Section 2.4(e).
“Business Day” means any day that is not a Saturday, Sunday, or other day on
which banks are authorized or required to close in the state of Georgia or New
York, except that, if a determination of a Business Day shall relate to a LIBOR
Rate Loan, the term “Business Day” also shall exclude any day on which banks are
closed for dealings in Dollar deposits in the London interbank market.

 

-4-

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

 

“Capital Expenditures” means, with respect to any Person for any period, the
aggregate of all expenditures by such Person and its Subsidiaries during such
period that are capital expenditures as determined in accordance with GAAP,
whether such expenditures are paid in cash or financed.
“Capitalized Lease Obligation” means that portion of the obligations under a
Capital Lease that is required to be capitalized in accordance with GAAP.
“Capital Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
“Cash Equivalents” means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof, (b) marketable
direct obligations issued or fully guaranteed by any state of the United States
or any political subdivision of any such state or any public instrumentality
thereof maturing within 1 year from the date of acquisition thereof and, at the
time of acquisition, having one of the two highest ratings obtainable from
either Standard & Poor’s Rating Group (“S&P”) or Moody’s Investors Service, Inc.
(“Moody’s”), (c) commercial paper maturing no more than 270 days from the date
of creation thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody’s, (d) certificates of deposit, time
deposits, overnight bank deposits or bankers’ acceptances maturing within 1 year
from the date of acquisition thereof issued by any bank organized under the laws
of the United States or any state thereof or the District of Columbia or any
United States branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000, (e) Deposit Accounts
maintained with (i) any bank that satisfies the criteria described in clause (d)
above, or (ii) any other bank organized under the laws of the United States or
any state thereof so long as the full amount maintained with any such other bank
is insured by the Federal Deposit Insurance Corporation, (f) repurchase
obligations of any commercial bank satisfying the requirements of clause (d) of
this definition or recognized securities dealer having combined capital and
surplus of not less than $250,000,000, having a term of not more than seven
days, with respect to securities satisfying the criteria in clauses (a) or (d)
above, (g) debt securities with maturities of six months or less from the date
of acquisition backed by standby letters of credit issued by any commercial bank
satisfying the criteria described in clause (d) above, and (h) Investments in
money market funds substantially all of whose assets are invested in the types
of assets described in clauses (a) through (g) above.
“Cash Management Services” means any cash management or related services
including treasury, depository, return items, overdraft, controlled
disbursement, merchant store value cards, e-payables services, electronic funds
transfer, interstate depository network, automatic clearing house transfer
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system) and other cash management
arrangements.
“Change of Control” means that (a) any “person” or “group” (within the meaning
of Sections 13(d) and 14(d) of the Exchange Act), becomes the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
40%, or more, of the Stock of Parent having the right to vote for the election
of members of the Board of Directors, (b) a majority of the members of the Board
of Directors do not constitute Continuing Directors, or (c) Parent fails to own
and control, directly or indirectly, 100% of the Stock of each other Loan Party,
except as a result of a transaction permitted under Section 6.3 or Section 6.4.
“Closing Date” means the date of the making of the initial Advance (or other
extension of credit) under the Agreement.

 

-5-

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

 

“Code” means the New York Uniform Commercial Code, as in effect from time to
time.
“Collateral” means all assets and interests in assets and proceeds thereof now
owned or hereafter acquired by the Loan Parties in or upon which a Lien is
granted by such Person in favor of Agent or the Lenders under any of the Loan
Documents.
“Collateral Access Agreement” means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in any Loan Party’s books and records, Equipment, or Inventory, in each case, in
form and substance reasonably satisfactory to Agent.
“Collateral Reporting Trigger Level” means, (a) in the case of any determination
made based on a Borrowing Base Certificate prepared as of a date during the High
Season, $30,000,000, and (b) in the case of any determination made based on a
Borrowing Base Certificate prepared as of a date during the Low Season,
$15,000,000.
“Collections” means all cash, checks, notes, instruments, and other items of
payment (including insurance proceeds, cash proceeds of asset sales, rental
proceeds, and tax refunds).
“Commitment” means, with respect to each Lender, its Commitment, and, with
respect to all Lenders, their Commitments, in each case as such Dollar amounts
are set forth beside such Lender’s name under the applicable heading on
Schedule C-1 or in the Assignment and Acceptance pursuant to which such Lender
became a Lender under the Agreement, as such amounts may be reduced or increased
from time to time pursuant to assignments made in accordance with the provisions
of Section 13.1 of the Agreement.
“Compliance Certificate” means a certificate substantially in the form of
Exhibit C-1 delivered by the chief financial officer of Parent to Agent.
“Confidential Information” has the meaning specified therefor in Section 17.9(a)
of the Agreement.
“Continuing Director” means (a) any member of the Board of Directors who was a
director (or comparable manager) of Parent on the Closing Date, and (b) any
individual who becomes a member of the Board of Directors after the Closing Date
if such individual was approved, appointed or nominated for election to the
Board of Directors by a majority of the Continuing Directors, but excluding any
such individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Parent and whose initial assumption of office resulted from such contest or the
settlement thereof.
“Control Agreement” means a control agreement, in form and substance reasonably
satisfactory to Agent, executed and delivered by a Loan Party, Agent, and the
applicable securities intermediary (with respect to a Securities Account) or
bank (with respect to a Deposit Account).
“Controlled Account Agreement” has the meaning specified therefor in the
Security Agreement.
“Copyright Security Agreement” has the meaning specified therefor in the
Security Agreement.

 

-6-

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

 

“Daily Balance” means, as of any date of determination and with respect to any
Obligation, the amount of such Obligation owed at the end of such day.
“Default” means an event, condition, or default that, with the giving of notice,
the passage of time, or both, would be an Event of Default.
“Defaulting Lender” means any Lender that (a) has failed to fund any amounts
required to be funded by it under the Agreement on the date that it is required
to do so under the Agreement (including the failure to make available to Agent
amounts required pursuant to a Settlement or to make a required payment in
connection with a Letter of Credit Disbursement), (b) notified the Borrowers,
Agent, or any Lender in writing that it does not intend to comply with all or
any portion of its funding obligations under the Agreement, (c) has made a
public statement to the effect that it does not intend to comply with its
funding obligations under the Agreement or under other agreements generally (as
reasonably determined by Agent) under which it has committed to extend credit,
(d) failed, within 1 Business Day after written request by Agent, to confirm
that it will comply with the terms of the Agreement relating to its obligations
to fund any amounts required to be funded by it under the Agreement,
(e) otherwise failed to pay over to Agent or any other Lender any other amount
required to be paid by it under the Agreement on the date that it is required to
do so under the Agreement, or (f) (i) becomes or is insolvent or has a parent
company that has become or is insolvent or (ii) becomes the subject of a
bankruptcy or insolvency proceeding, or has had a receiver, conservator,
trustee, or custodian or appointed for it, or has taken any action in
furtherance of, or indicating its consent to, approval of or acquiescence in any
such proceeding or appointment or has a parent company that has become the
subject of a bankruptcy or insolvency proceeding, or has had a receiver,
conservator, trustee, or custodian appointed for it, or has taken any action in
furtherance of, or indicating its consent to, approval of or acquiescence in any
such proceeding or appointment.
“Defaulting Lender Rate” means (a) for the first 3 days from and after the date
the relevant payment is due, the Base Rate, and (b) thereafter, the interest
rate then applicable to Advances that are Base Rate Loans (inclusive of the Base
Rate Margin applicable thereto).
“Deposit Account” means any deposit account (as that term is defined in the
Code).
“Designated Account” means the Deposit Account identified on Schedule D-1.
“Designated Account Bank” has the meaning specified therefor in Schedule D-1.
“Dilution” means, as of any date of determination, a percentage, based upon the
experience of the immediately prior 90 consecutive days, that is the result of
dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising
allowances, credits, or other dilutive items with respect to Borrowers’ Accounts
during such period, in each case to the extent not already taken into account in
Borrowers’ GAAP reserves and Eligible Accounts calculation, by (b) Borrowers’
billings with respect to Accounts during such period.
“Dilution Reserve” means, as of any date of determination, an amount sufficient
to reduce the advance rate against Eligible Accounts by 1 percentage point for
each percentage point by which Dilution is in excess of 5.0%.
“Dollars” or “$” means United States dollars.
“EBITDA” means, for any period, (a) Net Income, minus (b) extraordinary gains
and interest income, plus (c) to the extent such items were deducted from Net
Income during such period, interest expense, income taxes, and depreciation and
amortization for such period, in each case as determined on a consolidated basis
for Parent and its Subsidiaries in accordance with GAAP.

 

-7-

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

 

“Eligible Accounts” means those Accounts created by Borrowers in the ordinary
course of their business, that arise out of Borrowers’ sale of goods or
rendition of services, that comply with each of the representations and
warranties respecting Eligible Accounts made in the Loan Documents, and that are
not excluded as ineligible by virtue of one or more of the excluding criteria
set forth below; provided, however, that such criteria may be revised from time
to time by Agent in Agent’s Permitted Discretion to address the results of any
audit performed by Agent from time to time after the Closing Date. In
determining the amount to be included, Eligible Accounts shall be calculated net
of customer deposits and unapplied cash. Eligible Accounts shall not include the
following:
(a) Accounts that (i) the Account Debtor has failed to pay within 120 days of
original invoice date, or (ii) have selling terms of more than 95 days;
provided, that, the foregoing shall not exclude Accounts owing by Kohl’s
Corporation with respect to new store openings so long as such Accounts have
selling terms of 120 days or less and are not past due by more than 30 days,
(b) Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of
all Accounts owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clause (a) above,
(c) Accounts with respect to which the Account Debtor is an Affiliate of any
Borrower or an employee or agent of any Borrower or any Affiliate of any
Borrower,
(d) Accounts arising in a transaction wherein goods are placed on consignment or
are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a
bill and hold, or any other terms by reason of which the payment by the Account
Debtor may be conditional,
(e) Accounts that are not payable in Dollars,
(f) Accounts with respect to which the Account Debtor either (i) does not
maintain its chief executive office in the United States or Canada, or (ii) is
not organized under the laws of the United States or any state thereof, or
Canada or any province thereof, or (iii) is the government of any foreign
country or sovereign state, or of any state, province, municipality, or other
political subdivision thereof, or of any department, agency, public corporation,
or other instrumentality thereof, unless (y) the Account is supported by an
irrevocable letter of credit reasonably satisfactory to Agent (as to form,
substance, and issuer or domestic confirming bank) that has been delivered to
Agent and is directly drawable by Agent, or (z) the Account is covered by credit
insurance in form, substance, and amount, and by an insurer, reasonably
satisfactory to Agent,
(g) Accounts with respect to which the Account Debtor is either (i) the United
States or any department, agency, or instrumentality of the United States
(exclusive, however, of Accounts with respect to which Borrowers have complied,
to the reasonable satisfaction of Agent, with the Assignment of Claims Act, 31
USC §3727), or (ii) any state of the United States,
(h) Accounts with respect to which the Account Debtor is a creditor of
Borrowers, has or has asserted a right of setoff, or has disputed its obligation
to pay all or any portion of the Account, to the extent of such claim, right of
setoff, or dispute,

 

-8-

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

 

(i) Accounts with respect to an Account Debtor whose total obligations owing to
Borrowers exceed (i) 40% of the total amount of all Eligible Accounts, in the
case of an Account Debtor that has (or whose parent company has) a rating of at
least BBB from S&P or Baa3 from Moody’s, or (ii) 20% of the total amount of all
Eligible Accounts, in the case of any other Account Debtor, in each case to the
extent of the obligations owing by such Account Debtor in excess of such
percentage; provided, however, that, in each case, (A) the amount of Eligible
Accounts that are excluded because they exceed the foregoing applicable
percentage shall be determined by Agent based on all of the otherwise Eligible
Accounts prior to giving effect to any eliminations based upon the foregoing
concentration limit, and (B) such percentage, as applied to a particular Account
Debtor, is subject to reduction by Agent in its Permitted Discretion if the
creditworthiness of such Account Debtor deteriorates,
(j) Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent, has gone out of business, or as to which
Borrowers have received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor,
(k) Accounts, the collection of which, Agent, in its Permitted Discretion,
believes to be doubtful by reason of the Account Debtor’s financial condition,
(l) Accounts that are not subject to a valid and perfected first priority
Agent’s Lien, except, that, this clause (l) shall not exclude Eligible Factored
Accounts solely to the extent such Accounts are subject to a prior Lien in favor
of the Factor,
(m) Accounts with respect to which (i) the goods giving rise to such Account
have not been shipped and billed to the Account Debtor, or (ii) the services
giving rise to such Account have not been performed and billed to the Account
Debtor,
(n) Accounts with respect to which the Account Debtor is a Sanctioned Person or
Sanctioned Entity, or
(o) Accounts that represent the right to receive progress payments or other
advance billings that are due prior to the completion of performance by
Borrowers of the subject contract for goods or services.
“Eligible Customs Broker” means, as of any date of determination, a Person
(other than an Affiliate) that is engaged by Borrowers to clear In-Transit
Inventory through United States customs and that is a party to an effective
Imported Goods Agreement.
“Eligible Factored Account” means those Factored Accounts that are Eligible
Accounts and as to which (a) the Factor has the credit risk with respect to such
Factored Accounts pursuant to the applicable Factoring Agreement with the
Factor, (b) such Factored Accounts at all times are subject to an Assignment of
Factoring Proceeds, and (c) at all times Agent is satisfied with the
creditworthiness of the Factor.
“Eligible Foreign Vendor” means a Foreign Vendor (other than an Affiliate) which
(a) has received timely payment or performance of all liabilities and other
obligations at any time owed to it by Borrowers, and (b) has not asserted (and
has no right to assert) any reclamation, repossession, diversion, stoppage in
transit, Lien or title retention rights in respect of such In-Transit Inventory.

 

-9-

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

 

“Eligible In-Transit Inventory” means those items of Inventory that do not
qualify as Eligible Landed Inventory solely because they are not in a location
set forth on Schedule E-1 or are in transit among such locations, but as to
which (a) the Inventory is not currently the subject of a Qualified Import
Letter of Credit, (b) such Inventory currently is in transit (whether by vessel,
air, or land) from a location outside of the continental United States to a
location set forth on Schedule E-1 that is the subject of a Collateral Access
Agreement, (c) the vendor with respect to such Inventory is an Eligible Foreign
Vendor, (d) title and risk of loss to such Inventory has passed to a Borrower,
(e) such Inventory is insured against types of loss, damage, hazards, and risks,
and in amounts, satisfactory to Agent in its Permitted Discretion, and Agent has
been named as sole loss payee with respect to such insurance pursuant to a loss
payable endorsement acceptable to Agent in its Permitted Discretion, (f) such
Inventory is the subject of an Acceptable Bill of Lading, and (g) Borrowers have
provided a certificate to Agent that certifies that, to the best knowledge of
Borrowers, such Inventory meets all of Borrowers’ representations and warranties
contained in the Loan Documents concerning Eligible Inventory, that it knows of
no reason why such Inventory would not be accepted by Borrowers when it arrives
in at the applicable location in the United States set forth on Schedule E-1,
and that the shipment as evidenced by the documents conforms to the related
order documents.
“Eligible Inventory” means Eligible Landed Inventory or Eligible In-Transit
Inventory.
“Eligible Landed Inventory” means Inventory consisting of first quality finished
goods held for sale in the ordinary course of Borrowers’ business that complies
with each of the representations and warranties respecting Eligible Inventory
made in the Loan Documents, and that is not excluded as ineligible by virtue of
the one or more of the excluding criteria set forth below; provided, however,
that such criteria may be revised from time to time by Agent in Agent’s
Permitted Discretion to address the results of any audit or appraisal performed
by Agent from time to time after the Closing Date. In determining the amount to
be so included, Inventory shall be valued at the lower of cost or market in
accordance with GAAP on a basis consistent with the terms of Section 6.10, but
without duplication of any reserves described in clause (c) of the definition of
Inventory Reserve. An item of Inventory shall not be included in Eligible
Inventory if:
(a) a Borrower does not have good, valid, and marketable title thereto,
(b) a Borrower does not have actual and exclusive possession thereof (either
directly or through a bailee or agent of a Borrower),
(c) it is not located at one of the locations in the continental United States
set forth on Schedule E-1 (or in-transit from one such location to another such
location),
(d) it is in-transit to or from a location of a Borrower (other than in-transit
from one location set forth on Schedule E-1 to another location set forth on
Schedule E-1),
(e) it is located on real property leased by a Borrower or in a contract
warehouse, in each case, unless it is subject to a Collateral Access Agreement
executed by the lessor or warehouseman, as the case may be, and unless it is
segregated or otherwise separately identifiable from goods of others, if any,
stored on the premises,
(f) it is the subject of a bill of lading or other document of title,
(g) it is not subject to a valid and perfected first priority Agent’s Lien,
(h) it consists of goods returned or rejected by any Borrower’s customers,
(i) it consists of goods that are obsolete or slow moving (other than Prior
Season Inventory), restrictive or custom items, work-in-process, raw materials,
or goods that constitute spare parts, packaging and shipping materials, supplies
used or consumed in any Borrower’s business, bill and hold goods, defective
goods, “seconds,” or Inventory acquired on consignment,

 

-10-

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

 

(j) it is subject to third party trademark, licensing or other proprietary
rights, unless, with respect to each applicable Required Licensor with respect
thereto (if any), a Licensor Agreement is then in effect (unless Agent has
waived the requirement for a Licensor Agreement with respect to such Required
Licensor), or
(k) it was acquired in connection with a Permitted Acquisition, until the
completion of an appraisal and field examination of such Inventory, in each
case, reasonably satisfactory to Agent (which appraisal and field examination
may be conducted prior to the closing of such Permitted Acquisition).
“Eligible NVOCC” means, as of any date of determination, a Person (other than an
Affiliate) that is engaged by Borrowers as a freight forwarder or otherwise to
assist in the importation of In-Transit Inventory to the United States and that
is a party to an effective Imported Goods Agreement.
“Eligible Transferee” means (a) a commercial bank organized under the laws of
the United States, or any state thereof, and having total assets in excess of
$1,000,000,000, (b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $1,000,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company, insurance
company, or other financial institution that is engaged in making, purchasing,
or otherwise investing in commercial loans in the ordinary course of its
business and having (together with its Affiliates) total assets in excess of
$1,000,000,000, (d) any Affiliate (other than individuals) of a pre-existing
Lender, (e) so long as no Event of Default has occurred and is continuing, any
other Person approved by Agent and Borrowers (such approval by Borrowers not to
be unreasonably withheld, conditioned or delayed), and (f) during the
continuation of an Event of Default, any other Person approved by Agent;
provided, that, except in the case of clause (f) above, in no event shall an
Eligible Transferee include (i) any hedge fund or infrastructure fund or
(ii) any Person that participates in its ordinary course of business in the
provision of women’s and men’s wovens and knits or in the designing and
marketing of branded apparel in the United States, without, in any such case,
the prior written consent of Borrowers.
“Environmental Action” means any written complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other written communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials (a) from any assets, properties, or
businesses of any Borrower, any Subsidiary of a Borrower, or any of their
predecessors in interest, (b) from adjoining properties or businesses, or
(c) from or onto any facilities which received Hazardous Materials generated by
any Borrower, any Subsidiary of a Borrower, or any of their predecessors in
interest.
“Environmental Law” means any applicable federal, state, provincial, foreign or
local statute, law, rule, regulation, ordinance, code, binding and enforceable
guideline, binding and enforceable written policy, or rule of common law now or
hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, in each case, to the extent binding on Parent
or its Subsidiaries, relating to the environment, the effect of the environment
on employee health, or Hazardous Materials, in each case as amended from time to
time.
“Environmental Liabilities” means all liabilities, monetary obligations, losses,
damages, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts, or consultants, and costs of investigation and
feasibility studies), fines, penalties, sanctions, and interest incurred as a
result of any claim or demand, or Remedial Action required, by any Governmental
Authority or any third party, and which relate to any Environmental Action.

 

-11-

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

 

“Environmental Lien” means any Lien in favor of any Governmental Authority for
Environmental Liabilities.
“Equipment” means equipment (as that term is defined in the Code).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute thereto.
“ERISA Affiliate” means (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of Parent or its
Subsidiaries under IRC Section 414(b), (b) any trade or business subject to
ERISA whose employees are treated as employed by the same employer as the
employees of Parent or its Subsidiaries under IRC Section 414(c), (c) solely for
purposes of Section 302 of ERISA and Section 412 of the IRC, any organization
subject to ERISA that is a member of an affiliated service group of which Parent
or any of its Subsidiaries is a member under IRC Section 414(m), or (d) solely
for purposes of Section 302 of ERISA and Section 412 of the IRC, any Person
subject to ERISA that is a party to an arrangement with Parent or any of its
Subsidiaries and whose employees are aggregated with the employees of Parent or
its Subsidiaries under IRC Section 414(o).
“Event of Default” has the meaning specified therefor in Section 8 of the
Agreement.
“Excess Availability” means, as of any date of determination, (a) the lesser of
(i) the Maximum Revolver Amount or (ii) the Borrowing Base as of such date,
minus (b) the sum of (i) the aggregate Revolver Usage as of such date plus
(ii) the aggregate amount of all payables, other than payables which are being
disputed in good faith by a Loan Party, which are more than 60 days past their
due date.
“Excess Liquidity” means, as of any date of determination, (a) the lesser of
(i) the Maximum Revolver Amount or (ii) the Borrowing Base plus Qualified Cash
as of such date, minus (b) the sum of (i) the aggregate Revolver Usage as of
such date plus (ii) the aggregate amount of all payables, other than payables
which are being disputed in good faith by a Loan Party, which are more than
60 days past their due date.
“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time
to time.
“Excluded Copyrights” means the registered copyrights owned by MCI as of the
Closing Date.
“Existing Credit Facility” means Parent’s existing revolving credit facility
provided by HSBC Bank USA, N.A., as agent, and certain lenders.
“Factor” means The CIT Group/Commercial Services, Inc. or any other Person
reasonably satisfactory to Agent, each in its capacity as a factor, or provider
of credit protection, with respect to Accounts owing to Borrowers.
“Factored Accounts” means trade accounts receivable of Borrowers created in the
ordinary course of business which have been purchased by the Factor pursuant to
a Factoring Agreement.

 

-12-

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

 

“Factoring Agreement” means any factoring agreement between a borrower and the
Factor.
“Fee Letter” means that certain fee letter, dated as of even date with the
Agreement, between Borrowers and Agent, in form and substance reasonably
satisfactory to Agent.
“Federal Funds Rate” means, for any period, a fluctuating interest rate per
annum equal to, for each day during such period, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by Agent from three
Federal funds brokers of recognized standing selected by it.
“Fiscal Year” means the fiscal year of Parent and its Subsidiaries, which
currently ends on December 31, 2010.
“Fixed Charge Coverage Ratio” means, for any period, the ratio of (a) EBITDA for
such period minus unfinanced Capital Expenditures made (to the extent not
already incurred in a prior period) or incurred during such period, to (b) Fixed
Charges for such period, in each case as determined on a consolidated basis for
Parent and its Subsidiaries in accordance with GAAP.
“Fixed Charges” means, for any period, the sum, without duplication, of
(a) interest expense accrued (other than interest paid-in-kind, amortization of
financing fees, and other non-cash interest expense) during such period,
(b) principal payments in respect of Indebtedness that are required to be paid
during such period, and (c) all federal, state, and local income taxes paid or
due and payable during such period, and (d) all Restricted Junior Payments paid
during such period, in each case as determined on a consolidated basis for
Parent and its Subsidiaries in accordance with GAAP.
“Foreign Lender” means any Lender or Participant that is not a United States
person within the meaning of IRC section 7701(a)(30).
“Foreign Subsidiary” means, in the case of any Loan Party, any Subsidiary
thereof that is not organized under the laws of the United States or a state or
commonwealth thereof.
“Foreign Vendor” means a Person that sells Inventory to Borrowers and which
Person is located in a country other than the United States.
“Funding Date” means the date on which a Borrowing occurs.
“Funding Losses” has the meaning specified therefor in Section 2.12(b)(ii) of
the Agreement.
“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States, consistently applied; provided, however, that:
(a) all calculations relative to liabilities shall be made without giving effect
to Financial Accounting Standards Board Accounting Standard Codification Topic
825 or, to the extent applicable, Statement of Financial Accounting Standards
No. 159; and (b) except for purposes of calculating the Fixed Charge Coverage
Ratio (including the calculation of Fixed Charges), the terms “Capital Lease”
and “Indebtedness” shall not include any leases that would otherwise be required
to be classified as Capital Leases solely as a result of any Accounting Change
occurring after the Closing Date.

 

-13-

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

 

“Governing Documents” means, with respect to any Person, the certificate or
articles of incorporation, by-laws, or other organizational documents of such
Person.
“Governmental Authority” means any federal, state, local, or other governmental
or administrative body, instrumentality, board, department, or agency or any
court, tribunal, administrative hearing body, arbitration panel, commission, or
other similar dispute-resolving panel or body.
“Guarantors” means (a) Parent, (b) each Subsidiary of Parent (other than any
Subsidiary that is not required to become a Guarantor pursuant to Section 5.11),
and (c) each other Person that becomes a guarantor after the Closing Date
pursuant to Section 5.11 of the Agreement, and “Guarantor” means any one of
them.
“Guaranty” means that certain general continuing guaranty, dated as of even date
with the Agreement, executed and delivered by each extant Guarantor in favor of
Agent, for the benefit of the Lender Group and the Bank Product Providers, in
form and substance reasonably satisfactory to Agent.
“Hampshire Designers” has the meaning specified therefor in the preamble to the
Agreement.
“Hazardous Materials” means (a) substances that are defined or listed in, or
otherwise classified pursuant to, any applicable laws or regulations as
“hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic
substances,” or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP
toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
“Hedge Agreement” means a “swap agreement” as that term is defined in Section
101(53B)(A) of the Bankruptcy Code.
“Hedge Obligations” means any and all obligations or liabilities, whether
absolute or contingent, due or to become due, now existing or hereafter arising,
of Parent or its Subsidiaries arising under, owing pursuant to, or existing in
respect of Hedge Agreements entered into with one or more of the Bank Product
Providers.
“Hedge Provider” means Wells Fargo or any of its Affiliates.
“High Season” means the six fiscal month period of each Fiscal Year starting on
the first day of the fiscal month beginning in October of such Fiscal Year.
“Holdout Lender” has the meaning specified therefor in Section 14.2(a) of the
Agreement.
“HSBC Cash Collateral Account” means the deposit account held at HSBC Bank USA,
N.A. into which amounts are deposited as cash collateral for the Loan Parties’
obligations described in clause (m) of the definition of Permitted Indebtedness.

 

-14-

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

 

“Imported Goods Agreement” means an agreement among any customs broker or
non-vessel operating common carrier, one or more Borrowers, and Agent, in the
form attached hereto as Exhibit I-1 or otherwise in form and substance
reasonably satisfactory to Agent.
“Inactive Subsidiary” means, as of any date of determination, any Subsidiary of
Parent (other than a Borrower) with respect to which each of the following
conditions is satisfied: (a) such Subsidiary had gross revenues in the prior
Fiscal Year of not more than $250,000; (b) such Subsidiary has year-to-date
gross revenues in the current Fiscal Year of not more than $250,000; (c) neither
the aggregate fair market value, nor the aggregate book value, of such
Subsidiary’s assets (excluding intercompany balances, and, solely in respect of
MCA, (i) security deposits held by MCA in connection with sub-leases by MCA of
Real Property sub-let by MCA as of the Closing Date, and (ii) receivables
arising out of customs duty refunds relating to MCA’s operations prior to the
Closing Date) exceeds $250,000; (d) such Subsidiary is not the owner of any
Inventory or other assets included in the Borrowing Base, nor the owner or
licensee of any trademark used by any Borrower in connection with the sale,
distribution or manufacture of any Inventory; and (e) such Subsidiary is not a
party to any Material Contract. In the event any such condition is no longer
satisfied as to any Subsidiary that was previously classified as an Inactive
Subsidiary, such Subsidiary immediately shall cease to be an Inactive Subsidiary
for all purposes under the Agreement and the other Loan Documents without need
for any further action or notice under the Agreement or any other Loan Document;
provided, however, that in the event facts or circumstances existed with respect
to a Subsidiary that was previously classified as an Inactive Subsidiary that
would have constituted a breach of any covenant in the Loan Documents (or caused
a Default or Event of Default) if such Subsidiary was not then classified as an
Inactive Subsidiary, such facts or circumstances shall only constitute a breach
of the applicable covenant (or cause a Default or Event of Default) to the
extent that such facts or circumstances remain in effect on the date such
Subsidiary ceases to be classified as an Inactive Subsidiary.
“Indebtedness” as to any Person means (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes, or other similar instruments, and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, time drafts
and similar extensions of credit, (c) all obligations of such Person as a lessee
under Capital Leases, (d) all obligations or liabilities of others secured by a
Lien on any asset of such Person, irrespective of whether such obligation or
liability is assumed, (e) all obligations of such Person to pay the deferred
purchase price of assets (other than trade payables incurred in the ordinary
course of business and repayable in accordance with customary trade practices),
(f) all obligations of such Person owing under Hedge Agreements (which amount
shall be calculated based on the amount that would be payable by such Person if
the Hedge Agreement were terminated on the date of determination), (g) any
Prohibited Preferred Stock of such Person, and (h) any obligation of such Person
guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation
of any other Person that constitutes Indebtedness under any of clauses (a)
through (g) above. For purposes of this definition, (i) the amount of any
Indebtedness represented by a guaranty or other similar instrument shall be the
lesser of the principal amount of the obligations guaranteed and still
outstanding and the maximum amount for which the guaranteeing Person may be
liable pursuant to the terms of the instrument embodying such Indebtedness, and
(ii) the amount of any Indebtedness described in clause (d) above shall be the
lower of the amount of the obligation and the fair market value of the assets of
such Person securing such obligation.
“Indemnified Liabilities” has the meaning specified therefor in Section 10.3 of
the Agreement.
“Indemnified Person” has the meaning specified therefor in Section 10.3 of the
Agreement.

 

-15-

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

 

“Insolvency Proceeding” means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code or under any other state or federal
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
“Intercompany Subordination Agreement” means an intercompany subordination
agreement, executed and delivered by Parent, one or more of its Subsidiaries,
and Agent, the form and substance of which is reasonably satisfactory to Agent.
“Interest Period” means, with respect to each LIBOR Rate Loan, a period
commencing on the date of the making of such LIBOR Rate Loan (or the
continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan to a
LIBOR Rate Loan) and ending 1, 2, or 3 months thereafter; provided, however,
that (a) interest shall accrue at the applicable rate based upon the LIBOR Rate
from and including the first day of each Interest Period to, but excluding, the
day on which any Interest Period expires, (b) any Interest Period that would end
on a day that is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business Day, (c) with
respect to an Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period), the Interest Period shall
end on the last Business Day of the calendar month that is 1, 2, or 3 months
after the date on which the Interest Period began, as applicable, and
(d) Borrowers may not elect an Interest Period which will end after the Maturity
Date.
“In-Transit Inventory” means Inventory of Borrowers that is in the possession of
a common carrier and is in transit from a Foreign Vendor from a location outside
the continental United States to a location of Borrowers (or a location
designated by Borrowers) that is in the continental United States.
“Inventory” means inventory (as that term is defined in the Code).
“Inventory Reserves” means reserves (determined from time to time by Agent in
its Permitted Discretion) for (a) the estimated costs relating to unpaid freight
charges, warehousing or storage charges, customs brokers charges, taxes, duties,
and other similar unpaid costs associated with the acquisition and importation
of In-Transit Inventory by Borrowers, plus (b) the estimated reclamation claims
of unpaid sellers of In-Transit Inventory sold to Borrowers, plus (c) the
estimated royalties and license fees that will be required to be paid in
connection with the sale or disposition of Inventory of any Borrower which bears
a trademark (other than any trademark owned by a Loan Party).
“Investment” means, with respect to any Person, any investment by such Person in
any other Person (including Affiliates) in the form of loans, guarantees,
advances, capital contributions (excluding (a) commission, travel, and similar
advances to officers and employees of such Person made in the ordinary course of
business, and (b) bona fide Accounts arising in the ordinary course of
business), or acquisitions of Indebtedness, Stock, or all or substantially all
of the assets of such other Person (or of any division or business line of such
other Person), and any other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.
“IRC” means the Internal Revenue Code of 1986, as in effect from time to time.
“Issuing Lender” means WFCF or any other Lender that, at the request of
Borrowers and with the consent of Agent, agrees, in such Lender’s sole
discretion, to become an Issuing Lender for the purpose of issuing Letters of
Credit or Reimbursement Undertakings pursuant to Section 2.11 of the Agreement
and the Issuing Lender shall be a Lender.

 

-16-

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

 

“Item-Eyes” has the meaning specified therefor in the preamble to the Agreement.
“JPM Chase” means JPMorgan Chase Bank, N.A.
“JPM Chase Collection Account” means one or more existing collection accounts
maintained by Parent or Borrowers with JPM Chase during the Transition Period
for the receipt of Collections.
“Junior Preferred Stock” means the Series A Junior Participating Preferred
Stock, par value $0.10 per share, of Parent.
“Lender” has the meaning set forth in the preamble to the Agreement, shall
include the Issuing Lender and the Swing Lender, and shall also include any
other Person made a party to the Agreement pursuant to the provisions of
Section 13.1 of the Agreement and “Lenders” means each of the Lenders or any one
or more of them.
“Lender Group” means each of the Lenders (including the Issuing Lender and the
Swing Lender) and Agent, or any one or more of them.
“Lender Group Expenses” means, without duplication, all (a) costs or expenses
(including taxes, and insurance premiums) required to be paid by Parent or its
Subsidiaries under any of the Loan Documents that are paid, advanced, or
incurred by the Lender Group, (b) out-of-pocket fees or charges paid or incurred
by Agent in connection with the Lender Group’s transactions with Parent or its
Subsidiaries under any of the Loan Documents, including, fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC searches and including
searches with the patent and trademark office, the copyright office, or the
department of motor vehicles), filing, recording, publication, appraisal
(including periodic collateral appraisals or business valuations to the extent
of the fees and charges (and up to the amount of any limitation) contained in
the Agreement or the Fee Letter), real estate surveys, real estate title
policies and endorsements, and environmental audits, (c) out-of-pocket costs and
expenses incurred by Agent in the disbursement of funds to Borrowers or other
members of the Lender Group (by wire transfer or otherwise), (d) out-of-pocket
charges paid or incurred by Agent resulting from the dishonor of checks payable
by or to any Loan Party, (e) reasonable out-of-pocket costs and expenses paid or
incurred by the Lender Group to correct any default or enforce any provision of
the Loan Documents, or during the continuance of an Event of Default, in gaining
possession of, maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any portion
thereof, irrespective of whether a sale is consummated, (f) reasonable
out-of-pocket audit fees and expenses (including travel, meals, and lodging) of
Agent related to any inspections or audits to the extent of the fees and charges
(and up to the amount of any limitation) contained in the Agreement or the Fee
Letter, (g) reasonable out-of-pocket costs and expenses of third party claims or
any other suit paid or incurred by the Lender Group in enforcing or defending
the Loan Documents or in connection with the transactions contemplated by the
Loan Documents or the Lender Group’s relationship with Parent or any of its
Subsidiaries, (h) Agent’s reasonable costs and expenses (including reasonable
attorneys’ fees) incurred in advising, structuring, drafting, reviewing,
administering (including travel, meals, and lodging), or amending the Loan
Documents, and (i) Agent’s and each Lender’s reasonable costs and expenses
(including reasonable attorneys, accountants, consultants, and other advisors
fees and expenses) incurred in terminating, enforcing (including attorneys,
accountants, consultants, and other advisors fees and expenses incurred in
connection with a “workout,” a “restructuring,” or an Insolvency Proceeding
concerning Parent or any of its Subsidiaries or in exercising rights or remedies
under the Loan Documents), or defending the Loan Documents, irrespective of
whether suit is brought, or in taking any Remedial Action concerning the
Collateral; provided, that, (1) without limitation of the inclusion of costs

 

-17-

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

 

and expenses of Agent’s advisors (including attorneys, accountants, consultants,
and other advisors) as Lender Group Expenses, the costs and expenses of advisors
to the other Lenders that are included as Lender Group Expenses under this
clause (i) shall be limited to the costs and expenses (including reasonable
attorneys’ fees) of one law firm as counsel to such Lenders, one accountant to
such Lenders, one consultant to such Lenders, and one other advisor of any
category to such Lenders, and (2) to the extent reasonably available to Agent
and Lenders, Agent and Lenders shall provide to Borrowers reasonable
documentation with respect to costs and expenses of third-party service
providers that are included as Lender Group Expenses, which documentation may
take the form of a summary invoice and need not be provided to Borrowers as a
condition precedent to Agent’s right to pay any Lender Group Expenses or charge
the Loan Account therefor.
“Lender Group Representatives” has the meaning specified therefor in Section
17.9 of the Agreement.
“Lender-Related Person” means, with respect to any Lender, such Lender, together
with such Lender’s Affiliates, officers, directors, employees, attorneys, and
agents.
“Letter of Credit” means a standby or trade letter of credit issued by Issuing
Lender or Underlying Issuer, as the context requires, for the account of Parent
or a Borrower.
“Letter of Credit Collateralization” means either (a) providing cash collateral
(pursuant to documentation reasonably satisfactory to Agent, including
provisions that specify that the Letter of Credit fee and all usage charges set
forth in the Agreement will continue to accrue while the Letters of Credit are
outstanding) to be held by Agent for the benefit of those Lenders with a
Commitment in an amount equal to 105% of the then existing Letter of Credit
Usage, (b) causing the Letters of Credit to be returned to the Issuing Lender,
or (c) providing Agent with a standby letter of credit, in form and substance
reasonably satisfactory to Agent, from a commercial bank acceptable to Agent (in
its sole discretion) in an amount equal to 105% of the then existing Letter of
Credit Usage (it being understood that the Letter of Credit fee and all usage
charges set forth in the Agreement will continue to accrue while the Letters of
Credit are outstanding and that any such fees that accrue must be an amount that
can be drawn under any such standby letter of credit).
“Letter of Credit Disbursement” means a payment made by Issuing Lender or
Underlying Issuer pursuant to a Letter of Credit.
“Letter of Credit Usage” means, as of any date of determination, the aggregate
undrawn amount of all outstanding Letters of Credit.
“LIBOR Deadline” has the meaning specified therefor in Section 2.12(b)(i) of the
Agreement.
“LIBOR Notice” means a written notice in the form of Exhibit L-1.
“LIBOR Option” has the meaning specified therefor in Section 2.12(a) of the
Agreement.
“LIBOR Rate” means the rate per annum rate appearing on Bloomberg L.P.’s (the
“Service”) Page BBAM1/(Official BBA USD Dollar Libor Fixings) (or on any
successor or substitute page of such Service, or any successor to or substitute
for such Service) 2 Business Days prior to the commencement of the requested
Interest Period, for a term and in an amount comparable to the Interest Period
and the amount of the LIBOR Rate Loan requested (whether as an initial LIBOR
Rate Loan or as a continuation of a LIBOR Rate Loan or as a conversion of a Base
Rate Loan to a LIBOR Rate Loan) by Borrowers in accordance with the Agreement,
which determination shall be conclusive in the absence of manifest error.

 

-18-

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

 

“LIBOR Rate Loan” means each portion of an Advance that bears interest at a rate
determined by reference to the LIBOR Rate.
“LIBOR Rate Margin” means 2.50%.
“Licensor Agreement” means a letter or agreement from any licensor of any
trademark under which a Borrower sells Inventory (other than any trademark owned
by a Loan Party), in form and substance reasonably satisfactory to Agent, with
respect to the rights of Agent to use such trademark to sell or otherwise
dispose of such Inventory.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment,
charge, deposit arrangement, encumbrance, easement, lien (statutory or other),
security interest, or other security arrangement and any other preference,
priority, or preferential arrangement of any kind or nature whatsoever,
including any conditional sale contract or other title retention agreement, the
interest of a lessor under a Capital Lease and any synthetic or other financing
lease having substantially the same economic effect as any of the foregoing.
“Loan Account” has the meaning specified therefor in Section 2.9 of the
Agreement.
“Loan Documents” means the Agreement, any Borrowing Base Certificate, the
Controlled Account Agreements, the Control Agreements, the Copyright Security
Agreement, the Fee Letter, the Guaranty, any Intercompany Subordination
Agreement, the Letters of Credit, any Mortgages, the Patent Security Agreement,
the Security Agreement, the Trademark Security Agreement, any note or notes
executed by Borrowers in connection with the Agreement and payable to any member
of the Lender Group, any letter of credit application entered into by Borrowers
in connection with the Agreement, and any other agreement entered into, now or
in the future, by Parent or any of its Subsidiaries and any member of the Lender
Group in connection with the Agreement.
“Loan Party” means any Borrower or any Guarantor.
“Low Season” means the six fiscal month period of each Fiscal Year starting on
the first day of the fiscal month beginning in April of such Fiscal Year.
“Margin Stock” as defined in Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
“Material Adverse Change” means (a) a material adverse change in the business,
operations, results of operations, assets, liabilities or financial condition of
Parent and its Subsidiaries, taken as a whole, (b) a material impairment of the
ability of the Loan Parties, taken as a whole, to perform their obligations
under the Loan Documents to which they are parties or of the Lender Group’s
ability to enforce the Obligations or realize upon the Collateral, or (c) a
material impairment of the enforceability or priority of Agent’s Liens with
respect to the Collateral as a result of an action or failure to act on the part
of Parent or its Subsidiaries.
“Material Contract” means, with respect to any Person, (i) each contract or
agreement to which such Person or any of its Subsidiaries is a party involving
aggregate consideration payable to or by such Person or such Subsidiary of
$3,000,000 or more in any Fiscal Year (other than purchase orders in the
ordinary course of the business of such Person or such Subsidiary and other than
contracts that by their terms may be terminated by such Person or Subsidiary in
the ordinary course of its business upon less than 60 days notice without
penalty or premium), and (ii) all other contracts or agreements, the loss of
which could reasonably be expected to result in a Material Adverse Change.

 

-19-

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

 

“Maturity Date” has the meaning specified therefor in Section 3.3 of the
Agreement.
“Maximum Revolver Amount” means $50,000,000, decreased by the amount of
reductions in the Commitments made in accordance with Section 2.4(c) of the
Agreement.
“MCA” means Marisa Christina Apparel, Inc., a Delaware corporation.
“MCI” means Marisa Christina, Inc., a Delaware corporation.
“Moody’s” has the meaning specified therefor in the definition of Cash
Equivalents.
“Mortgages” means, individually and collectively, one or more mortgages, deeds
of trust, or deeds to secure debt, executed and delivered by Parent or its
Subsidiaries in favor of Agent, in form and substance reasonably satisfactory to
Agent, that encumber any Real Property Collateral.
“Net Income” means, for any period, the net income of Parent and its
Subsidiaries, as determined on a consolidated basis in accordance with GAAP,
plus, to the extent such costs were deducted from net income during such period,
(a) any non-cash write-off incurred during such period as a result of the
special directors and officers insurance policy purchased by Parent in
December 2007, but not to exceed $3,400,000, (b) any non-cash expense for equity
incentive compensation issued by Parent, but not to exceed $600,000 in any
Fiscal Year, and (c) any non-cash loss incurred from the disposal of fixed
assets, but not to exceed $500,000.
“Net Liquidation Percentage” means the percentage of the book value of
Borrowers’ Inventory that is estimated to be recoverable in an orderly
liquidation of such Inventory net of all associated costs and expenses of such
liquidation, such percentage to be as determined from time to time by an
appraisal company selected by Agent.
“Obligations” means, without duplication, (a) all loans (including the Advances
(inclusive of Protective Advances and Swing Loans)), debts, principal, interest
(including any interest that accrues after the commencement of an Insolvency
Proceeding, regardless of whether allowed or allowable in whole or in part as a
claim in any such Insolvency Proceeding), reimbursement or indemnification
obligations with respect to Reimbursement Undertakings or with respect to
Letters of Credit (irrespective of whether contingent), premiums, liabilities
(including all amounts charged to the Loan Account pursuant to the Agreement),
obligations (including indemnification obligations), fees (including the fees
provided for in the Fee Letter), Lender Group Expenses (including any fees or
expenses that accrue after the commencement of an Insolvency Proceeding,
regardless of whether allowed or allowable in whole or in part as a claim in any
such Insolvency Proceeding), guaranties, covenants, and duties of any kind and
description owing by any Loan Party pursuant to or evidenced by the Agreement or
any of the other Loan Documents and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and including all interest not paid when due
and all other expenses or other amounts that Borrowers are required to pay or
reimburse by the Loan Documents or by law or otherwise in connection with the
Loan Documents, (b) all debts, liabilities, or obligations (including
reimbursement obligations, irrespective of whether contingent) owing by
Borrowers or any other Loan Party to an Underlying Issuer now or hereafter
arising from or in respect of Underlying Letters of Credit, and (c) all Bank
Product Obligations. Any reference in the Agreement or in the Loan Documents to
the Obligations shall include all or any portion thereof and any extensions,
modifications, renewals, or alterations thereof, both prior and subsequent to
any Insolvency Proceeding.

 

-20-

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

 

“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the
Treasury.
“Originating Lender” has the meaning specified therefor in Section 13.1(e) of
the Agreement.
“Overadvance” has the meaning specified therefor in Section 2.5 of the
Agreement.
“Parent” has the meaning specified therefor in the preamble to the Agreement.
“Participant” has the meaning specified therefor in Section 13.1(e) of the
Agreement.
“Patent Security Agreement” has the meaning specified therefor in the Security
Agreement.
“Patriot Act” has the meaning specified therefor in Section 4.18 of the
Agreement.
“Payoff Date” means the first date on which all of the Obligations are paid in
full and the Commitments of the Lenders are terminated.
“Permitted Acquisition” means any Acquisition, in one or more transactions or
series of transactions, by Borrowers of assets of any Person located in the
United States (such assets being referred to as the “Acquired Assets”);
provided, that, (a) the total consideration (including the principal amount of
Acquired Indebtedness) paid or incurred in respect of all such Acquisitions is
not greater than $5,000,000; (b) the Acquired Assets are related, ancillary or
complementary to the business of Borrowers; (c) as of the date of each such
Acquisition and immediately after giving effect thereto, no Default or Event of
Default shall have occurred and be continuing; (d) Agent shall have received not
less than 5 Business Days’ prior written notice thereof setting forth in
reasonable detail the nature and terms thereof, together with pro forma
financial statements and Projections giving effect to the consummation thereof
and prepared on a basis consistent with the financial statements and Projections
required to be delivered under the Agreement; (e) the Acquired Assets which
constitute Collateral shall be free and clear of any Lien (other than Permitted
Liens) and Agent shall have received evidence reasonably satisfactory to it of
the same; (f) promptly upon consummation of any such Acquisition, (i) Borrower
shall deliver, or cause to be delivered, to Agent, true, correct and complete
copies of all agreements, documents and instruments relating to such
Acquisition, and (ii) at the request of Agent, Borrowers shall, at Borrowers’
expense, duly execute and deliver, or cause to be duly executed and delivered,
such further agreements, documents and instruments, and do or cause to be done
such further acts, as may be necessary to evidence, perfect, maintain and
enforce the security interests of Agent in the Acquired Assets and the priority
thereof; (g) each such Acquisition shall be a bona fide arms’ length transaction
with a Person other than an Affiliate; (h) Borrowers shall have Excess Liquidity
in an amount equal to or greater than $20,000,000 (in the case of the
calculation of Excess Liquidity based on a Borrowing Base Certificate prepared
as of a date during the High Season) or $10,000,000 (in the case of the
calculation of Excess Liquidity based on a Borrowing Base Certificate prepared
as of a date during the Low Season), in each case immediately after giving
effect to the consummation of the proposed Acquisition; and (i) Agent shall have
received a certificate of a financial officer or executive officer of Parent
certifying to Agent as to the matters set forth in this definition.

 

-21-

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

 

“Permitted Discretion” means a determination made in the exercise of reasonable
(from the perspective of an asset-based lender providing the type of credit
facility contemplated by the Agreement) business judgment.
“Permitted Dispositions” means:
(a) sales, abandonment, or other dispositions of Equipment that is substantially
worn, damaged, or obsolete in the ordinary course of business,
(b) sales of Inventory to buyers in the ordinary course of business,
(c) the use or transfer of money or Cash Equivalents in a manner that is not
prohibited by the terms of the Agreement or the other Loan Documents,
(d) the licensing, on a non-exclusive basis, of patents, trademarks, copyrights,
and other intellectual property rights in the ordinary course of business,
(e) sales or other dispositions of Equipment in the ordinary course of business
for fair market value, to the extent that (i) such Equipment is exchanged for
credit against the purchase price of similar replacement Equipment or (ii) the
proceeds are reasonably promptly applied to pay the purchase price of such
replacement Equipment,
(f) the granting of Permitted Liens,
(g) the sale of Cash Equivalents, for cash or other Cash Equivalents, in the
ordinary course of business for fair market value,
(h) the sale or transfer of assets by any Loan Party to another Loan Party or by
a non-Loan Party to a Loan Party or another non-Loan Party, so long as any Liens
granted in favor of Agent in the assets so sold or transferred remain in full
force and effect and perfected to at least the extent as in effect immediately
prior to such sale or transfer,
(i) dispositions permitted by Section 6.3 of the Agreement,
(j) the sale or discount, in each case without recourse, of Accounts arising in
the ordinary course of business, but only in connection with the compromise or
collection thereof,
(k) any involuntary loss, damage or destruction of property,
(l) any involuntary condemnation, seizure or taking, by exercise of the power of
eminent domain or otherwise, or confiscation or requisition of use of property,
(m) the leasing or subleasing of assets of Parent or its Subsidiaries in the
ordinary course of business,
(n) the sale or issuance of Stock (other than Prohibited Preferred Stock) of
Parent,
(o) the lapse of registered patents, trademarks and other intellectual property
of Parent and its Subsidiaries to the extent not economically desirable in the
conduct of their business and so long as such lapse is not materially adverse to
the interests of the Lenders,

 

-22-

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

 

(p) the making of a Restricted Junior Payment that is expressly permitted to be
made pursuant to the Agreement,
(q) the making of a Permitted Investment,
(r) the sale of the works of art listed on Schedule P-3,
(s) the release of a claim against a third party pursuant to settlement thereof,
(t) the sale of Factored Accounts to the Factor pursuant to a Permitted
Factoring Sale, and
(u) dispositions of assets (other than Accounts, intellectual property,
licenses, Stock of Subsidiaries of Parent, or Material Contracts) not otherwise
permitted in clauses (a) through (t) above so long as made at fair market value
and the aggregate fair market value of all assets disposed of in all such
dispositions since the Closing Date (including the proposed disposition) would
not exceed $1,000,000.
“Permitted Factoring Sale” means the sale and/or assignment of Factored Accounts
in the ordinary course of business pursuant to a Factoring Agreement that is
reasonably acceptable to Agent, so long as an Assignment of Factoring Proceeds
is in effect with respect thereto.
“Permitted Indebtedness” means:
(a) Indebtedness evidenced by the Agreement or the other Loan Documents, as well
as Indebtedness owed to Underlying Issuers with respect to Underlying Letters of
Credit,
(b) Indebtedness set forth on Schedule 4.19 and any Refinancing Indebtedness in
respect of such Indebtedness,
(c) Permitted Purchase Money Indebtedness and any Refinancing Indebtedness in
respect of such Indebtedness,
(d) endorsement of instruments or other payment items for deposit,
(e) Indebtedness consisting of (i) unsecured guarantees incurred in the ordinary
course of business with respect to surety and appeal bonds, performance bonds,
bid bonds, appeal bonds, completion guarantee and similar obligations;
(ii) unsecured guarantees arising with respect to customary indemnification
obligations to purchasers in connection with Permitted Dispositions; and
(iii) unsecured guarantees with respect to Indebtedness of Parent or one of its
Subsidiaries, to the extent that the Person that is obligated under such
guaranty could have incurred such underlying Indebtedness,
(f) Indebtedness incurred in the ordinary course of business under performance,
surety, statutory, and appeal bonds,
(g) Indebtedness owed to any Person providing property, casualty, liability, or
other insurance to Parent or any of its Subsidiaries, so long as the amount of
such Indebtedness is not in excess of the amount of the unpaid cost of, and
shall be incurred only to defer the cost of, such insurance for the year in
which such Indebtedness is incurred and such Indebtedness is outstanding only
during such year,

 

-23-

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

 

(h) the incurrence by Parent or its Subsidiaries of Indebtedness under Hedge
Agreements that are incurred for the bona fide purpose of hedging the interest
rate, commodity, or foreign currency risks associated with Parent’s and its
Subsidiaries’ operations and not for speculative purposes,
(i) Indebtedness incurred in respect of credit cards, credit card processing
services, debit cards, stored value cards, purchase cards (including so-called
“procurement cards” or “P-cards”), or Cash Management Services, in each case,
incurred in the ordinary course of business,
(j) unsecured Indebtedness of Parent or any other Loan Party owing to former
employees, officers, or directors (or any spouses, ex-spouses, or estates of any
of the foregoing) incurred in connection with the repurchase by such Loan Party
of its Stock that has been issued to such Persons, so long as (i) no Default or
Event of Default has occurred and is continuing or would result from the
incurrence of such Indebtedness, (ii) the aggregate amount of all such
Indebtedness outstanding at any one time does not exceed $1,000,000, and
(iii) such Indebtedness is subordinated to the Obligations on terms and
conditions reasonably acceptable to Agent,
(k) Indebtedness composing Permitted Investments,
(l) Acquired Indebtedness assumed in connection with any Permitted Acquisition,
(m) reimbursement and other obligations with respect to the letters of credit
described in the payoff letter delivered by HSBC Bank USA, N.A. on the Closing
Date, provided no such letters of credit shall be renewed or otherwise extended
without Agent’s consent, and
(n) unsecured Indebtedness not otherwise described in the preceding clauses of
the definition of Permitted Indebtedness not exceeding $3,000,000 in aggregate
at any one time outstanding.
“Permitted Intercompany Advances” means loans made by (a) a Loan Party to
another Loan Party, (b) a non-Loan Party to another non-Loan Party, and (c) a
non-Loan Party to a Loan Party, so long as the parties thereto are party to an
Intercompany Subordination Agreement.
“Permitted Investments” means:
(a) Investments in cash and Cash Equivalents,
(b) Investments in negotiable instruments deposited or to be deposited for
collection in the ordinary course of business,
(c) advances made in connection with purchases of goods or services in the
ordinary course of business (including loans made to vendors in the ordinary
course of business for the sole purpose of purchasing raw materials to be used
by vendors for the development and manufacture of samples and goods exclusively
for the Loan Parties),
(d) Investments received in settlement of amounts due to any Loan Party or any
of its Subsidiaries effected in the ordinary course of business or owing to any
Loan Party or any of its Subsidiaries as a result of Insolvency Proceedings
involving an Account Debtor or upon the foreclosure or enforcement of any Lien
in favor of a Loan Party or its Subsidiaries,
(e) Investments owned by any Loan Party or any of its Subsidiaries on the
Closing Date and set forth on Schedule P-1,

 

-24-

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

 

(f) guarantees permitted under the definition of Permitted Indebtedness,
(g) Permitted Intercompany Advances,
(h) Stock or other securities acquired in connection with the satisfaction or
enforcement of Indebtedness or claims due or owing to a Loan Party or its
Subsidiaries (in bankruptcy of customers or suppliers or otherwise outside the
ordinary course of business) or as security for any such Indebtedness or claims,
(i) deposits of cash, or in the form of a letter of credit, made in the ordinary
course of business to secure performance of operating leases,
(j) non-cash loans to employees, officers, and directors of Parent or any of its
Subsidiaries for the purpose of purchasing Stock in Parent so long as the
proceeds of such loans are used in their entirety to purchase such stock in
Parent,
(k) Permitted Acquisitions,
(l) Investments in the form of capital contributions and the acquisition of
Stock made by any Loan Party in any other Loan Party,
(m) Investments resulting from entering into (i) Bank Product Agreements, or
(ii) agreements relative to Indebtedness that is permitted under clause (i) of
the definition of Permitted Indebtedness, and
(n) so long as no Event of Default has occurred and is continuing or would
result therefrom, any other Investments in an aggregate amount not to exceed
$500,000 during the term of the Agreement.
“Permitted Liens” means
(a) Liens granted to, or for the benefit of, Agent to secure the Obligations,
(b) Liens for unpaid taxes, assessments, or other governmental charges or levies
that either (i) are not yet delinquent, or (ii) do not have priority over
Agent’s Liens and the underlying taxes, assessments, or charges or levies are
the subject of Permitted Protests,
(c) judgment Liens arising solely as a result of the existence of judgments,
orders, or awards that do not constitute an Event of Default under Section 8.3
of the Agreement,
(d) Liens set forth on Schedule P-2; provided, however, that to qualify as a
Permitted Lien, any such Lien described on Schedule P-2 shall only secure the
Indebtedness that it secures on the Closing Date and any Refinancing
Indebtedness in respect thereof,
(e) the interests of lessors under operating leases and non-exclusive licensors
under license agreements,
(f) purchase money Liens or the interests of lessors under Capital Leases to the
extent that such Liens or interests secure Permitted Purchase Money Indebtedness
and so long as (i) such Lien attaches only to the asset purchased or acquired
and the proceeds thereof, and (ii) such Lien only secures the Indebtedness that
was incurred to acquire the asset purchased or acquired or any Refinancing
Indebtedness in respect thereof,

 

-25-

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

 

(g) Liens arising by operation of law in favor of warehousemen, landlords,
carriers, mechanics, materialmen, laborers, or suppliers, incurred in the
ordinary course of business and not in connection with the borrowing of money,
and which Liens either (i) are for sums not yet delinquent, or (ii) are the
subject of Permitted Protests,
(h) Liens on amounts deposited to secure Parent’s and its Subsidiaries’
obligations in connection with worker’s compensation or other unemployment
insurance,
(i) Liens on amounts deposited to secure Parent’s and its Subsidiaries’
obligations in connection with the making or entering into of bids, tenders, or
leases in the ordinary course of business and not in connection with the
borrowing of money,
(j) Liens on amounts deposited to secure Parent’s and its Subsidiaries’
reimbursement obligations with respect to surety or appeal bonds obtained in the
ordinary course of business,
(k) with respect to any Real Property, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof,
(l) non-exclusive licenses of patents, trademarks, copyrights, and other
intellectual property rights in the ordinary course of business,
(m) Liens that are replacements of Permitted Liens to the extent that the
original Indebtedness is the subject of permitted Refinancing Indebtedness and
so long as the replacement Liens only encumber those assets that secured the
original Indebtedness (plus improvements thereon),
(n) rights of setoff or bankers’ liens upon deposits of cash in favor of banks
or other depository institutions, solely to the extent incurred in connection
with the maintenance of such deposit accounts in the ordinary course of
business,
(o) Liens granted in the ordinary course of business on the unearned portion of
insurance premiums securing the financing of insurance premiums to the extent
the financing is permitted under the definition of Permitted Indebtedness,
(p) Liens in Factored Accounts (and returned goods and intangible assets
relating thereto) pursuant to a Permitted Factoring Sale,
(q) Liens on Real Property or Equipment assumed in connection with a Permitted
Acquisition, but solely to the extent such Liens secure Acquired Indebtedness,
(r) Liens in favor of customs and revenue authorities arising as a matter of law
to secure payment of customs duties in connection with the importation of goods,
and
(s) Liens in favor of HSBC Bank USA, N.A. on the HSBC Cash Collateral Account
and amounts deposited therein.
“Permitted Preferred Stock” means and refers to any Preferred Stock issued by
Parent (and not by one or more of its Subsidiaries) that is not Prohibited
Preferred Stock.

 

-26-

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

 

“Permitted Protest” means the right of Parent or any of its Subsidiaries to
protest any Lien (other than any Lien that secures the Obligations), taxes
(other than payroll taxes or taxes that are the subject of a United States
federal tax lien), or rental payment, provided that (a) a reserve with respect
to such obligation is established on Parent’s or its Subsidiaries’ books and
records in such amount as is required under GAAP, (b) any such protest is
instituted promptly and prosecuted diligently by Parent or its Subsidiary, as
applicable, in good faith, and (c) while any such protest is pending, there will
be no impairment of the enforceability, validity, or priority of any of Agent’s
Liens.
“Permitted Purchase Money Indebtedness” means, as of any date of determination,
Purchase Money Indebtedness incurred after the Closing Date in an aggregate
principal amount outstanding at any one time not in excess of $1,000,000.
“Person” means natural persons, corporations, limited liability companies,
limited partnerships, general partnerships, limited liability partnerships,
joint ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.
“Preferred Stock” means, as applied to the Stock of any Person, the Stock of any
class or classes (however designated) that is preferred with respect to the
payment of dividends, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over shares of Stock of
any other class of such Person.
“Primary Obligor” means, as of any date of determination, (a) Parent, (b) each
Borrower, and (c) each other Guarantor that, as of the date of determination, is
not an Inactive Subsidiary.
“Prior Season Inventory” means finished goods Inventory of any Borrower which
was manufactured for sale in a shipping season prior to the current shipping
season of such Borrower and which Inventory has been approved by Agent as Prior
Season Inventory (for purposes of this definition, the term “shipping season”
means the period of time in which Inventory of any Borrower is shipped for sale,
such period to be determined in a manner consistent with such Borrower’s past
business practices).
“Prohibited Preferred Stock” means any Preferred Stock that by its terms is
mandatorily redeemable or subject to any other payment obligation (including any
obligation to pay dividends, other than dividends of shares of Preferred Stock
of the same class and series payable in kind or dividends of shares of common
stock) on or before a date that is less than 1 year after the Maturity Date, or,
on or before the date that is less than 1 year after the Maturity Date, is
redeemable at the option of the holder thereof for cash or assets or securities
(other than distributions in kind of shares of Preferred Stock of the same class
and series or of shares of common stock); provided, however, that “Prohibited
Preferred Stock” shall not include the Rights or Junior Preferred Stock.
“Projections” means Parent’s forecasted (a) balance sheets, (b) profit and loss
statements, and (c) cash flow statements, all prepared on a consolidated basis
consistent with Parent’s historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
“Pro Rata Share” means, as of any date of determination:
(a) with respect to a Lender’s obligation to make Advances and right to receive
payments of principal, interest, fees, costs, and expenses with respect thereto,
(i) prior to the Commitments being terminated or reduced to zero, the percentage
obtained by dividing (y) such Lender’s Commitment, by (z) the aggregate
Commitments of all Lenders, and (ii) from and after the time that the
Commitments have been terminated or reduced to zero, the percentage obtained by
dividing (y) the outstanding principal amount of such Lender’s Advances by
(z) the outstanding principal amount of all Advances,

 

-27-

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

 

(b) with respect to a Lender’s obligation to participate in Letters of Credit
and Reimbursement Undertakings, to reimburse the Issuing Lender, and right to
receive payments of fees with respect thereto, (i) prior to the Commitments
being terminated or reduced to zero, the percentage obtained by dividing
(y) such Lender’s Commitment, by (z) the aggregate Commitments of all Lenders,
and (ii) from and after the time that the Commitments have been terminated or
reduced to zero, the percentage obtained by dividing (y) the outstanding
principal amount of such Lender’s Advances by (z) the outstanding principal
amount of all Advances; provided, however, that if all of the Advances have been
repaid in full and Letters of Credit remain outstanding, Pro Rata Share under
this clause shall be determined based upon subclause (i) of this clause as if
the Commitments had not been terminated or reduced to zero and based upon the
Commitments as they existed immediately prior to their termination or reduction
to zero, and
(c) with respect to all other matters as to a particular Lender (including the
indemnification obligations arising under Section 15.7 of the Agreement),
(i) prior to the Commitments being terminated or reduced to zero, the percentage
obtained by dividing (y) such Lender’s Commitment, by (z) the aggregate amount
of Commitments of all Lenders, and (ii) from and after the time that the
Commitments have been terminated or reduced to zero, the percentage obtained by
dividing (y) the outstanding principal amount of such Lender’s Advances, by
(z) the outstanding principal amount of all Advances; provided, however, that if
all of the Advances have been repaid in full and Letters of Credit remain
outstanding, Pro Rata Share under this clause shall be determined based upon
subclause (i) of this clause as if the Commitments had not been terminated or
reduced to zero and based upon the Commitments as they existed immediately prior
to their termination or reduction to zero.
“Protective Advances” has the meaning specified therefor in Section 2.3(d)(i) of
the Agreement.
“Purchase Money Indebtedness” means Indebtedness (other than the Obligations,
but including Capitalized Lease Obligations), incurred at the time of, or within
90 days after, the acquisition of any fixed assets for the purpose of financing
all or any part of the acquisition cost thereof.
“Qualified Cash” means, as of any date of determination, the amount of all
unrestricted cash and Cash Equivalents of Parent and Borrowers (other than
Restricted Cash) that is in a Deposit Account or Securities Account that is the
subject of a Control Agreement and is maintained in the United States with Wells
Fargo or an Affiliate thereof; provided, that, solely during the Transition
Period, “Qualified Cash” shall also include the available amount of cash of
Parent and Borrowers that is in a Deposit Account maintained in the United
States with JPM Chase (other than the JPM Chase Collection Account), which such
Deposit Account is the subject of a Control Agreement.
“Qualified Import Letter of Credit” means a Letter of Credit that (a) is issued
to facilitate the purchase by Borrowers of Inventory that would be Eligible
Inventory but for the fact that such Inventory is the subject of a Qualified
Import Letter of Credit (it being understood that no Inventory shall be included
in the Borrowing Base as Eligible Inventory if such Inventory is the subject of
a Qualified Import Letter of Credit), (b) is in form and substance acceptable to
Agent, and (c) is issued to support an Underlying Letter of Credit that only is
drawable by the beneficiary thereof by the presentation of, among other
documents, an Acceptable Bill of Lading.

 

-28-

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

 

“Real Property” means any estates or interests in real property now owned or
hereafter acquired by Parent or its Subsidiaries and the improvements thereto.
“Real Property Collateral” means the Real Property (if any) identified on
Schedule R-1 and any Real Property hereafter acquired by Parent or its
Subsidiaries that is required to be subjected to a Mortgage in accordance with
Section 5.11 or 5.12 of the Agreement.
“Record” means information that is inscribed on a tangible medium or that is
stored in an electronic or other medium and is retrievable in perceivable form.
“Refinancing Indebtedness” means refinancings, renewals, or extensions of
Indebtedness so long as:
(a) such refinancings, renewals, or extensions do not result in an increase in
the principal amount of the Indebtedness so refinanced, renewed, or extended,
other than by the amount of premiums paid thereon and the fees and expenses
incurred in connection therewith and by the amount of unfunded commitments with
respect thereto,
(b) such refinancings, renewals, or extensions do not result in a shortening of
the average weighted maturity (measured as of the refinancing, renewal, or
extension) of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions that, taken as a whole, are or could reasonably be
expected to be materially adverse to the interests of the Lenders,
(c) if the Indebtedness that is refinanced, renewed, or extended was
subordinated in right of payment to the Obligations, then the terms and
conditions of the refinancing, renewal, or extension must include subordination
terms and conditions that are at least as favorable to the Lender Group as those
that were applicable to the refinanced, renewed, or extended Indebtedness, and
(d) the Indebtedness that is refinanced, renewed, or extended is not recourse to
any Person that is liable on account of the Obligations other than those Persons
which were obligated with respect to the Indebtedness that was refinanced,
renewed, or extended.
“Reimbursement Undertaking” has the meaning specified therefor in Section
2.11(a) of the Agreement.
“Remedial Action” means all actions taken to (a) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate, or in any way address Hazardous
Materials in the indoor or outdoor environment, (b) prevent or minimize a
release or threatened release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment, (c) restore or reclaim natural resources or the
environment, (d) perform any pre-remedial studies, investigations, or
post-remedial operation and maintenance activities, or (e) conduct any other
actions with respect to Hazardous Materials required by Environmental Laws.
“Replacement Lender” has the meaning specified therefor in Section 2.13(b) of
the Agreement.
“Report” has the meaning specified therefor in Section 15.16 of the Agreement.
“Required Lenders” means, at any time, Lenders whose aggregate Pro Rata Shares
(calculated under clause (c) of the definition of Pro Rata Shares) exceed 50%;
provided, however, that at any time there are 2 or more Lenders, “Required
Lenders” must include at least 2 Lenders.

 

-29-

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

 

“Required Licensor” means, with respect to Inventory of a Borrower that is sold
under a licensed trademark, each licensor that has licensed such trademark to
such Borrower to the extent that the gross revenues received (or expected to be
received) by Borrowers with respect to the sale of Inventory subject to such
licensed trademark (and any related licensed trademarks) equals or exceeds
$5,000,000 for any twelve month period (taking into account sales as well as
unfilled orders). As of the Closing Date, “Required Licensors” are Geoffrey
Beene, Inc. (as to the “Geoffrey Beene” licensed trademark), Levi Strauss & Co.
(as to the “Dockers” and “Dockers Premium” licensed trademarks), Alexander
Julian, Inc. (as to the “Alexander Julian” licensed trademark, and JA Apparel
Corp. (as to the “JOE Joseph Abboud” licensed trademark).
“Required Liquidity” means that Excess Liquidity exceeds $25,000,000.
“Responsible Officer” means each of the chief executive officer, president,
controller, chief financial officer, treasurer, corporate secretary or general
counsel of any Loan Party, as applicable, or any other officer having
substantially the same authority and responsibility.
“Restricted Cash” means, as of any date of determination, the available amount
of unrestricted cash of Borrowers that is in a Deposit Account maintained in the
United States with Wells Fargo, and which such Deposit Account is the subject of
a Control Agreement that provides Agent sole dominion and control over such
Deposit Account and the cash contained therein (including the sole right to
authorize the release of cash therefrom); provided, that, (a) Borrowers may
request that Agent authorize the release of cash from any such Deposit Account,
and Agent shall promptly thereafter endeavor to cause the release of such cash
from such Deposit Account to the Designated Account, so long as (i) Borrowers
provide Agent written notice of such request at least 2 Business Days prior to
the proposed release date, which notice shall set forth the Dollar amount of
cash proposed to be released and wire transfer instructions for the Designated
Account, (ii) no Default or Event of Default has occurred and is continuing or
would result therefrom, and (iii) Excess Availability would not be less than
$3,000,000 after giving effect to the release of such cash from such Deposit
Account; (b) solely during the Transition Period, “Restricted Cash” shall also
include the available amount of cash of Borrowers that is in a Deposit Account
maintained in the United States with JPM Chase and used by Borrowers for the
receipt of Collections, and which such Deposit Account is the subject of a
Control Agreement that provides that all available funds contained therein are
to be transferred to a Deposit Account (that is subject to a Control Agreement)
maintained with Wells Fargo or otherwise per Agent’s instructions; and (c) in no
event shall “Restricted Cash” include any Qualified Cash.
“Restricted Junior Payment” means to (a) declare or pay any dividend or make any
other payment or distribution on account of Stock issued by Parent (including
any payment in connection with any merger or consolidation involving Parent) or
to the direct or indirect holders of Stock issued by Parent in their capacity as
such (other than dividends or distributions payable in Stock (other than
Prohibited Preferred Stock) issued by Parent, or (b) purchase, redeem, or
otherwise acquire or retire for value (including in connection with any merger
or consolidation involving Parent) any Stock issued by Parent.
“Revolver Usage” means, as of any date of determination, the sum of (a) the
amount of outstanding Advances, plus (b) the amount of the Letter of Credit
Usage.
“Rights” means the rights to purchase Junior Preferred Stock as contemplated by
the Rights Plan.
“Rights Plan” means that certain Rights Agreement, dated as of August 13, 2008,
by and between Parent and Mellon Investor Services LLC, as Rights Agent, as
amended from time to time.

 

-30-

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

 

“Sanctioned Entity” means (a) a country or a government of a country, (b) an
agency of the government of a country, (c) an organization directly or
indirectly controlled by a country or its government, (d) a Person resident in
or determined to be resident in a country, in each case, that is subject to a
country sanctions program administered and enforced by OFAC.
“Sanctioned Person” means a person named on the list of Specially Designated
Nationals maintained by OFAC.
“S&P” has the meaning specified therefor in the definition of Cash Equivalents.
“Scott James” has the meaning specified therefor in the preamble to the
Agreement.
“SEC” means the United States Securities and Exchange Commission and any
successor thereto.
“Securities Account” means a securities account (as that term is defined in the
Code).
“Securities Act” means the Securities Act of 1933, as amended from time to time,
and any successor statute.
“Security Agreement” means a security agreement, dated as of even date with the
Agreement, in form and substance reasonably satisfactory to Agent, executed and
delivered by Borrowers and Guarantors to Agent.
“Settlement” has the meaning specified therefor in Section 2.3(e)(i) of the
Agreement.
“Settlement Date” has the meaning specified therefor in Section 2.3(e)(i) of the
Agreement.
“Solvent” means, with respect to any Person on a particular date, that, at fair
valuations, the sum of such Person’s assets is greater than all of such Person’s
debts.
“Stock” means all shares, options, warrants, interests, participations, or other
equivalents (regardless of how designated) of or in a Person, whether voting or
nonvoting, including common stock, preferred stock, or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the SEC under the Exchange Act).
“Subsidiary” of a Person means a corporation, partnership, limited liability
company, or other entity in which that Person directly or indirectly owns or
controls the shares of Stock having ordinary voting power to elect a majority of
the board of directors (or appoint other comparable managers) of such
corporation, partnership, limited liability company, or other entity.
“Swing Lender” means WFCF or any other Lender that, at the request of Borrowers
and with the consent of Agent agrees, in such Lender’s sole discretion, to
become the Swing Lender under Section 2.3(b) of the Agreement.
“Swing Loan” has the meaning specified therefor in Section 2.3(b) of the
Agreement.

 

-31-

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

 

“Taxes” means any taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction or by
any political subdivision or taxing authority thereof or therein with respect to
such payments and all interest, penalties or similar liabilities with respect
thereto; provided, however, that Taxes shall exclude (i) any tax imposed on the
net income or net profits of any Lender or any Participant (including any branch
profits taxes), in each case imposed by the jurisdiction (or by any political
subdivision or taxing authority thereof) in which such Lender or such
Participant is organized or the jurisdiction (or by any political subdivision or
taxing authority thereof) in which such Lender’s or such Participant’s principal
office is located in each case as a result of a present or former connection
between such Lender or such Participant and the jurisdiction or taxing authority
imposing the tax (other than any such connection arising solely from such Lender
or such Participant having executed, delivered or performed its obligations or
received payment under, or enforced its rights or remedies under the Agreement
or any other Loan Document); (ii) taxes resulting from a Lender’s or a
Participant’s failure to comply with the requirements of Section 16(c) or (d) of
the Agreement, and (iii) any United States federal withholding taxes that would
be imposed on amounts payable to a Foreign Lender based upon the applicable
withholding rate in effect at the time such Foreign Lender becomes a party to
the Agreement (or designates a new lending office), except that Taxes shall
include (A) in the case of any assignee that is a Foreign Lender, any amount
that such Foreign Lender’s assignor was previously entitled to receive pursuant
to Section 16(a) of the Agreement, and (B) additional United States federal
withholding taxes that may be imposed after the time such Foreign Lender becomes
a party to the Agreement (or designates a new lending office), as a result of a
change in law, rule, regulation, order or other decision with respect to any of
the foregoing by any Governmental Authority.
“Tax Lender” has the meaning specified therefor in Section 14.2(a) of the
Agreement.
“Trademark Security Agreement” has the meaning specified therefor in the
Security Agreement.
“Transition Period” has the meaning specified therefor on Schedule 3.6.
“Trigger Level” means, (a) in the case of any determination made based on a
Borrowing Base Certificate prepared as of a date during the High Season,
$25,000,000, and (b) in the case of any determination made based on a Borrowing
Base Certificate prepared as of a date during the Low Season, $10,000,000.
“Underlying Issuer” means Wells Fargo or one of its Affiliates.
“Underlying Letter of Credit” means a Letter of Credit that has been issued by
an Underlying Issuer.
“United States” means the United States of America.
“Voidable Transfer” has the meaning specified therefor in Section 17.8 of the
Agreement.
“Wells Fargo” means Wells Fargo Bank, National Association, a national banking
association.
“WFCF” means Wells Fargo Capital Finance, LLC, a Delaware limited liability
company.

 

-32-