Exhibit 10.2

 

Execution Copy

 

 

 

TERM LOAN AGREEMENT

 

Dated as of February 28, 2013

 

among

 

SUMMER INFANT (USA), INC.,

 

as the Lead Borrower

 

For

 

The Borrowers Named Herein

 

The Guarantors Named Herein

 

SALUS CAPITAL PARTNERS, LLC

 

as Administrative Agent and Collateral Agent,

 

and

 

The Other Lenders Party Hereto

 

 

 

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Article I DEFINITIONS AND ACCOUNTING TERMS

1

1.01

Defined Terms

1

1.02

Other Interpretive Provisions

32

1.03

Accounting Terms Generally

33

1.04

Rounding

33

1.05

Times of Day

33

1.06

Reserved

33

1.07

Currency Equivalents Generally

33

 

 

 

Article II TERM LOAN

34

2.01

Term Loan

34

2.02

Term Notes

34

2.03

Use of Proceeds

34

2.04

Protective Advances

34

2.05

Reserved

34

2.06

Prepayments

34

2.07

Termination of Term Commitments

35

2.08

Repayment of Loans

35

2.09

Interest

35

2.10

Fees

36

2.11

Computation of Interest and Fees

36

2.12

Evidence of Debt

36

2.13

Payments Generally; Agent’s Clawback

37

2.14

Sharing of Payments by Lenders

38

2.15

Reserved

38

 

 

 

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

39

3.01

Taxes

39

3.02

Reserved

41

3.03

Reserved

41

3.04

Increased Costs

41

3.05

Reserved

42

3.06

Mitigation Obligations; Replacement of Lenders

42

3.07

Survival

42

3.08

Designation of Lead Borrower as Borrowers’ Agent

42

 

 

 

Article IV CONDITIONS PRECEDENT TO MAKING OF TERM LOAN

43

4.01

Conditions of Term Loan

43

4.02

Reserved

46

 

 

 

Article V REPRESENTATIONS AND WARRANTIES

46

5.01

Organization and Qualification

46

5.02

Power and Authority

47

5.03

Enforceability

47

 

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5.04

Capital Structure

47

5.05

Title to Properties; Priority of Liens

47

5.06

Accounts

47

5.07

Financial Statements

47

5.08

Surety Obligations

48

5.09

Taxes

48

5.10

Brokers

48

5.11

Intellectual Property

48

5.12

Governmental Approvals

48

5.13

Compliance with Laws

48

5.14

Compliance with Environmental Laws

49

5.15

Burdensome Contracts

49

5.16

Litigation

49

5.17

No Defaults

49

5.18

ERISA

50

5.19

Trade Relations

51

5.20

Labor Relations

51

5.21

Payable Practices

51

5.22

Not a Regulated Entity

52

5.23

Margin Stock

52

5.24

Complete Disclosure

52

5.25

Business Plan

52

 

 

 

Article VI AFFIRMATIVE COVENANTS

52

6.01

Inspections; Appraisals

52

6.02

Financial and Other Information

53

6.03

Notices

54

6.04

Landlord and Storage Agreements

56

6.05

Compliance with Laws

56

6.06

Taxes

56

6.07

Insurance

56

6.08

Licenses

56

6.09

Future Subsidiaries

56

6.10

UK Pension Schemes

57

6.11

Preservation of Existence, Etc.

57

6.12

Maintenance of Properties

57

6.13

Use of Proceeds

57

6.14

Cash Management

57

6.15

Environmental Laws

57

6.16

Further Assurances

58

6.17

Compliance with Terms of Leaseholds

58

6.18

Material Contracts

58

6.19

Business Plan

59

 

 

 

Article VII NEGATIVE COVENANTS

59

7.01

Permitted Debt

59

7.02

Permitted Liens

60

 

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7.03

[Intentionally deleted]

61

7.04

Distributions; Upstream Payments

61

7.05

Restricted Investments

61

7.06

Disposition of Assets

61

7.07

Loans

61

7.08

Restrictions on Payment of Certain Debt

61

7.09

Fundamental Changes

62

7.10

Subsidiaries

62

7.11

Amendment of Material Documents

62

7.12

Use of Proceeds

62

7.13

Tax Consolidation

62

7.14

Accounting Changes

62

7.15

Restrictive Agreements

62

7.16

Hedging Agreements

62

7.17

Conduct of Business

62

7.18

Affiliate Transactions

63

7.19

Plans

63

7.20

Amendments to Subordinated Debt or ABL Debt

63

7.21

Deposit Accounts

63

7.22

Intellectual Property

63

7.23

Financial Covenants

63

7.24

Senior Leverage Ratio

64

7.25

Restrictions on Activities of Parent

64

7.26

Restrictions on Activities of Foreign Subsidiaries

64

 

 

 

Article VIII EVENTS OF DEFAULT AND REMEDIES

65

8.01

Events of Default

65

8.02

Remedies Upon Event of Default

67

8.03

Application of Funds

68

 

 

 

Article IX THE AGENT

69

9.01

Appointment and Authority

69

9.02

Rights as a Lender

69

9.03

Exculpatory Provisions

69

9.04

Reliance by Agent

70

9.05

Delegation of Duties

70

9.06

Resignation of Agent

71

9.07

Non-Reliance on Agent and Other Lenders

71

9.08

No Other Duties, Etc.

71

9.09

Agent May File Proofs of Claim

72

9.10

Collateral and Guaranty Matters

72

9.11

Notice of Transfer

73

9.12

Reports and Financial Statements

73

9.13

Agency for Perfection

74

9.14

Indemnification of Agent

74

9.15

Relation among Lenders

74

9.16

Reserved

74

 

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9.17

Co-Syndication Agents; Documentation Agent

74

 

 

 

Article X MISCELLANEOUS

74

10.01

Amendments, Etc.

74

10.02

Notices; Effectiveness; Electronic Communications

76

10.03

No Waiver; Cumulative Remedies

77

10.04

Expenses; Indemnity; Damage Waiver

77

10.05

Payments Set Aside

79

10.06

Successors and Assigns

79

10.07

Treatment of Certain Information; Confidentiality

83

10.08

Right of Setoff

83

10.09

Interest Rate Limitation

84

10.10

Counterparts; Integration; Effectiveness

84

10.11

Survival

84

10.12

Severability

84

10.13

Replacement of Lenders

85

10.14

Governing Law; Jurisdiction; Etc.

85

10.15

Waiver of Jury Trial

86

10.16

No Advisory or Fiduciary Responsibility

87

10.17

USA PATRIOT Act Notice

87

10.18

Foreign Asset Control Regulations

88

10.19

Time of the Essence

88

10.20

Press Releases

88

10.21

Additional Waivers

89

10.22

No Strict Construction

90

10.23

Attachments

90

10.24

ABL/Term Loan Intercreditor Agreement

90

 

 

 

SCHEDULES

 

 

 

 

 

1.01

Borrowers

 

1.02

Guarantors

 

2.01

Commitments and Applicable Percentages

 

5.04

Names and Capital Structure

 

5.05

Title to Properties; Priority of Liens

 

5.08

Surety Obligations

 

5.11

Patents, Trademarks, Copyrights and Licenses

 

5.13

Compliance with Applicable Laws

 

5.14

Environmental Matters

 

5.15

Restrictive Agreements

 

5.16

Litigation

 

5.18

Pension Plan Disclosures

 

5.20

Labor Contracts

 

6.02

Financial and Collateral Reporting

 

7.02

Existing Liens

 

7.18

Existing Affiliate Transactions

 

 

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10.02

Agent’s Office; Certain Addresses for Notices

 

 

EXHIBITS

 

 

Form of

 

 

A

Term Note

B

Compliance Certificate

C

Assignment and Assumption

 

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TERM LOAN AGREEMENT

 

This TERM LOAN AGREEMENT (“Agreement”) is entered into as of February 28, 2013,
among

 

SUMMER INFANT (USA), INC., a Rhode Island corporation (the “Lead Borrower”),

 

the Persons named on Schedule 1.01 hereto (collectively, the “Borrowers”),

 

the Persons named on Schedule 1.02 hereto (collectively, the “Guarantors”),

 

each lender from time to time party hereto (collectively, the “Lenders” and
individually, a “Lender”), and

 

SALUS CAPITAL PARTNERS, LLC, as Administrative Agent and Collateral Agent.

 

The Borrowers have requested that the Lenders provide a term loan facility and
certain other financial accommodations, and the Lenders have indicated their
willingness to lend on the terms and conditions set forth herein.

 

All Obligations of the Loan Parties to the Lenders hereunder and under the other
Loan Documents shall be full recourse to each of the Loan Parties and secured by
Agent’s security interest in and liens on all or substantially all of the assets
of the Loan Parties included in the Collateral.

 

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

 

ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS

 

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

 

“ABL Agent” means Bank of America, N.A., in its capacity as administrative agent
and collateral agent under the ABL Facility Documents, or any successor
administrative agent or collateral agent or other agent appointed under the ABL
Facility Documents in accordance with the provisions thereof.

 

“ABL Agreement” means the “ABL Agreement” as such term is defined in the
ABL/Term Loan Intercreditor Agreement.

 

“ABL Debt” means Indebtedness incurred pursuant to the ABL Facility Documents,
as in effect on the Closing Date (and as the same may be amended or refinanced
from time to time in accordance with the terms of the ABL/Term Loan
Intercreditor Agreement).

 

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“ABL Facility” means the Indebtedness incurred pursuant to (a) the “Loan and
Security Agreement”, dated as of February 28, 2013, among Summer Infant, Inc.,
certain Subsidiaries of Summer Infant, Inc. party thereto, the lenders party
thereto and the ABL Agent and (b) one or more other credit agreements evidencing
refinancing of the credit agreement referenced in clause (a) or any credit
agreement referenced in this clause (b), in each case subject to the Refinancing
Conditions; provided that the holders of such Indebtedness under this clause
(b) or a Representative acting on behalf of the holders of such Indebtedness
under this clause (b) shall have become party to the ABL/Term Loan Intercreditor
Agreement (or another Intercreditor agreement containing terms that are at least
as favorable in all material respects to the Secured Parties (as defined in the
ABL/Term Loan Intercreditor Agreement) as those contained in the ABL/Term Loan
Intercreditor Agreement), in each case as the same may be amended, supplemented,
waived or otherwise modified (or replaced) from time to time in a manner not
prohibited by the ABL/Term Loan Intercreditor Agreement.  Any reference to the
ABL Facility hereunder shall be deemed a reference to each ABL Facility then in
existence.

 

“ABL Facility Documents” means the “ABL Documents”, as such term is defined in
the ABL/Term Loan Intercreditor Agreement.

 

“ABL Priority Collateral” has the meaning as defined in the ABL/Term Loan
Intercreditor Agreement.

 

“ABL/Term Loan Intercreditor Agreement” means the Intercreditor Agreement of
even date herewith, between the Agent and the ABL Agent, relating to the ABL
Debt, as amended from time to time.

 

“ACH” means automated clearing house transfers.

 

“Accommodation Payment” as defined in Section 10.21(d).

 

“Account” means “account” as defined in the UCC (or, with respect to any account
receivable of any Canadian Guarantor to which the PPSA is applicable, as defined
in the PPSA or, with respect to any UK Guarantor, Book Debts), including all
rights to payment for goods sold or leased, or for services rendered.

 

“Acquisition” means a transaction or series of transactions resulting in
(a) acquisition of a business, division, or substantially all assets of a
Person; (b) record or beneficial ownership of 50% or more of the Equity
Interests of a Person; or (c) merger, consolidation or combination of a Borrower
or Subsidiary with another Person.

 

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

 

“Affiliate” means, with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified.  “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise.  “Controlling” and
“Controlled” have correlative meanings.

 

2

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

 

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

 

“Agreement” means this Term Loan Agreement.

 

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

 

“Anti-Terrorism Law” means any law relating to terrorism or money laundering,
including the USA Patriot Act, the Proceeds of Crime Act and the UK
Anti-Terrorism Laws.

 

“Applicable Law” means all laws, rules, regulations and governmental guidelines
applicable to the Person, conduct, transaction, agreement or matter in question,
including all applicable statutory law, common law and equitable principles, and
all provisions of constitutions, treaties, statutes, rules, regulations, orders
and decrees of Governmental Authorities, and including, without limitation, the
CPSC Regulations.

 

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

 

“Applicable Margin” means 10.00% per annum.

 

“Applicable Percentage” means with respect to any Lender at any time, the
portion of the Term Loan represented by the outstanding principal balance of
such Lender’s portion of the Term Loan at such time.  The initial Applicable
Percentage of each Lender is set forth opposite the name of such Lender on
Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender
becomes a party hereto, as applicable.

 

“Appraised Value” means, with respect to Intellectual Property, the fair market
value of Intellectual Property as set forth in the most recent appraisal of
Intellectual Property as determined from time to time by an independent
appraiser engaged by the Agent.

 

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

 

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

 

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

 

3

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

 

“Audited Financial Statements” means the audited consolidated balance sheet of
the Parent and its Subsidiaries for the Fiscal Year ended December 31, 2011, and
the related consolidated statements of income or operations, shareholders’
equity and cash flows for such Fiscal Year of the Parent and its Subsidiaries,
including the notes thereto.

 

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

 

“Bankruptcy Code” means Title 11 of the United States Code.

 

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

 

“Blocked Account” means a demand deposit, money market or other account
established by Agent at such financial institution as Agent may select in its
discretion, which account shall be subject to a Lien in favor of Agent.

 

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

 

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

 

“Book Debts” has the meaning as defined in the UK Security Agreements.

 

4

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“Borrowed Money” means, with respect to any Loan Party, without duplication, its
(a) Debt that (i) arises from the lending of money by any Person to such Loan
Party, (ii) is evidenced by notes, drafts, bonds, debentures, credit documents
or similar instruments, (iii) accrues interest or is a type upon which interest
charges are customarily paid (excluding trade payables owing in the Ordinary
Course of Business), or (iv) was issued or assumed as full or partial payment
for Property; (b) Capital Leases; (c) reimbursement obligations with respect to
letters of credit; and (d) guaranties of any Debt of the foregoing types owing
by another Person.

 

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

 

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

 

“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state where the Agent’s Office is located, or if the term
“Business Day” has a different meaning in the Canadian Security Agreements or
the UK Security Agreements, the definition in such other document shall control
as to issues covered in both this Agreement and such other document.

 

“Business Plan” means, with respect to any Fiscal Year, (i) a detailed forecast
prepared in good faith by management of the Borrowers for such Fiscal Year,
which shall include (without limitation) a Consolidated income statement,
balance sheet, and statement of cash flow, by month, each prepared in conformity
with GAAP and consistent with the Borrowers’ then current practices, the amount
of any proposed distributions to be made pursuant to Section 7.06 and such other
information (financial or otherwise) as is reasonably requested by the Agent,
and (ii) any revisions to such forecast made in good faith by the Borrower or
the Borrowers’ Board of Directors, in each case in form and substance
satisfactory to the Agent in its discretion.  For the avoidance of doubt, a
draft or preliminary plan prepared in good faith and submitted by the Borrowers
to the Agent shall be deemed the “Business Plan” hereunder until it has been
finalized and accepted by the Borrowers and the Borrowers’ Board of Directors,
after consultation with the Agent.  The Borrowers have delivered a true and
complete copy of the initial Business Plan to the Agent.

 

“Canadian Benefit Plans” means all employee benefit plans, programs or
arrangements of any nature or kind whatsoever that are not Canadian Pension
Plans or Canadian MEPPs and are maintained or contributed to by, or to which
there is any liability, contingent or otherwise by, any Loan Party or its
Subsidiaries which are governed by Canadian Applicable Law.

 

“Canadian Guarantor” means each Canadian Subsidiary that guarantees payment or
performance of the Obligations.  The definition of “Canadian Guarantors” means
all of such entities collectively.

 

“Canadian Guaranty” means that certain Guarantee and Indemnity Agreement of even
date herewith made by the Canadian Guarantor, as may be amended, restated or
otherwise modified from time to time.

 

“Canadian MEPP” means any “multi-employer pension plan” as such term is defined
in the PBA to which any Loan Party or its Subsidiaries has any liability,
contingent or otherwise.

 

5

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“Canadian Pension Plan” means a pension plan that is required to be registered
as a pension plan under any applicable pension benefits standards statute or tax
statute or regulation in Canada that any Loan Party or its Subsidiaries has any
liability, contingent or otherwise which are governed by Canadian Applicable
Law.

 

“Canadian Security Agreements” means (a) the General Security Agreement dated as
of the date hereof, in form and substance reasonably acceptable to Agent,
executed by the Canadian Guarantors in favor of Agent, as the same may be
amended, restated or supplemented from time to time, and (b) any other Canadian
security agreement required to be executed by any Loan Party in favor of Agent
after the Closing Date, in each case, as the same may be amended, restated or
supplemented from time to time.

 

“Canadian Subsidiary” means any Subsidiary of any Borrower that is organized
under the federal laws of Canada or any province or territory thereof.

 

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

 

“Capital Lease” means any lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, provided, however, notwithstanding
anything to the contrary in the financial statements of the Loan Parties, the
Lease dated March 24, 2009 between Faith Realty II, LLC and the Lead Borrower
shall not constitute a “Capital Lease” for purposes of this Agreement.

 

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

 

“Cash Equivalents” means (a) marketable obligations issued or unconditionally
guaranteed by, and backed by the full faith and credit of, the United States,
Canadian or the United Kingdom government, maturing within 12 months of the date
of acquisition; (b) certificates of deposit, time deposits and bankers’
acceptances maturing within 12 months of the date of acquisition, and overnight
bank deposits, in each case which are issued by Bank of America or a commercial
bank organized under the laws of the United States, Canada, the United Kingdom
or any state, province or district thereof, rated A-1 (or better) by S&P or P-1
(or better) by Moody’s at the time of acquisition, and (unless issued by a
Lender) not subject to offset rights; (c) repurchase obligations with a term of
not more than 30 days for underlying investments of the types described in
clauses (a) and (b) entered into with any bank described in clause (b);
(d) commercial paper issued by Bank of America or rated A-1 (or better) by S&P
or

 

6

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P-1 (or better) by Moody’s, and maturing within nine months of the date of
acquisition; and (e) shares of any money market fund that has substantially all
of its assets invested continuously in the types of investments referred to
above, has net assets of at least $500,000,000 and has the highest rating
obtainable from either Moody’s or S&P.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. § 9601 et seq.

 

“CERCLIS” means the Comprehensive Environmental Response, Compensation, and
Liability Information System maintained by the United States Environmental
Protection Agency.

 

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

 

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

 

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

 

(a)           any “person” or “group” (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any
employee benefit plan of such person or its subsidiaries, and any person or
entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) becomes the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a
person or group shall be deemed to have “beneficial ownership” of all securities
that such person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time (such right, an
“option right”)), directly or indirectly, of 35% or more of the Equity Interests
of a Borrower entitled to vote for members of the board of directors or
equivalent governing body of such Borrower on a fully-diluted basis (and taking
into account all such Equity Interests that such person or group has the right
to acquire pursuant to any option right);

 

(b)           during any period of 12 consecutive months, a majority of the
members of the board of directors or other equivalent governing body of a
Borrower cease to be composed of individuals (i) who were members of that board
or equivalent governing body on the first day of such period, (ii) whose
election or nomination to that board or equivalent governing body was approved
by individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or (iii) whose election or nomination to that board or other

 

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equivalent governing body was approved by individuals referred to in clauses
(i) and (ii) above constituting at the time of such election or nomination at
least a majority of that board or equivalent governing body (excluding, in the
case of both clause (ii) and clause (iii), any individual whose initial
nomination for, or assumption of office as, a member of that board or equivalent
governing body occurs as a result of an actual or threatened solicitation of
proxies or consents for the election or removal of one or more directors by any
person or group other than a solicitation for the election of one or more
directors by or on behalf of the board of directors);

 

(c)           the passage of thirty days from the date upon which any Person or
two or more Persons acting in concert shall have acquired by contract or
otherwise, or shall have entered into a contract or arrangement that, upon
consummation thereof, will result in its or their acquisition of the power to
exercise, directly or indirectly, a controlling influence over the management or
policies of a Borrower, or control over the Equity Interests of a Borrower
entitled to vote for members of the board of directors or equivalent governing
body of such Borrower on a fully-diluted basis (and taking into account all such
Equity Interests that such Person or group has the right to acquire pursuant to
any option right) representing 35% or more of the combined voting power of such
Equity Interests;

 

(d)           a Borrower ceases to own, directly or indirectly 100% of the
Equity Interests of any Guarantor;

 

(e)           the sale or transfer of all or substantially all of a Loan Party’s
assets except to another Loan Party; or

 

(f)            a Change of Control occurs under the ABL Facility.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Contingent Obligation” means any obligation of a Person arising from a
guaranty, indemnity or other assurance of payment or performance of any Debt,
lease, dividend or other obligation (“primary obligations”) of another obligor
(“primary obligor”) in any manner, whether directly or indirectly, including any
obligation of such Person under any (a) guaranty, endorsement, co-making or sale
with recourse of an obligation of a primary obligor; (b) obligation to make
take-or-pay or similar payments regardless of nonperformance by any other party
to an agreement; and (c) arrangement (i) to purchase any primary obligation or
security therefor, (ii) to supply funds for the purchase or payment of any
primary obligation, (iii) to maintain or assure working capital, equity capital,
net worth or solvency of the primary obligor, (iv) to purchase Property or
services for the purpose of assuring the ability of the primary obligor to
perform a primary obligation, or (v) otherwise to assure or hold harmless the
holder of any primary obligation against loss in respect thereof.  The amount of
any Contingent Obligation shall be deemed to be the stated or determinable
amount of the primary obligation (or, if less, the maximum amount for which such
Person may be liable under the instrument evidencing the Contingent Obligation)
or, if not stated or determinable, the maximum reasonably anticipated liability
with respect thereto.

 

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

 

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

 

“CPSC” means the U.S. Consumer Products Safety Commission.

 

“CPSC Regulations” means all laws and regulations enforced by the CPSC.

 

“CWA” means the Clean Water Act (33 U.S.C. §§ 1251 et seq.).

 

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

 

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“Credit Party Expenses” means, without limitation, (a) all reasonable
out-of-pocket expenses incurred by the Agent and its Affiliates, in connection
with this Agreement and the other Loan Documents, including without limitation
(i) the reasonable fees, charges and disbursements of (A) counsel for the Agent,
(B) outside consultants for the Agent, (C) appraisers, (D) commercial finance
examinations, (E) any custodian for the Agent or Lenders and (F) all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of the Obligations, (ii) in connection with (A) the
syndication of the credit facilities provided for herein, (B) the preparation,
negotiation, administration, management, execution and delivery of this
Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (C) the enforcement or protection of
their rights in connection with this Agreement or the Loan Documents or efforts
to monitor, preserve, protect, collect, or enforce the Collateral, or (D) any
workout, restructuring or negotiations in respect of any Obligations; and
(b) all customary fees and charges (as adjusted from time to time) of Agent with
respect to access to online Term Loan information, the disbursement of funds (or
the receipt of funds) to or for the account of Loan Parties (whether by wire
transfer or otherwise), together with any out-of-pocket costs and expenses
incurred in connection therewith; and (c) upon the occurrence and during the
continuance of an Event of Default after the Closing Date, all reasonable
out-of-pocket expenses incurred by the Credit Parties who are not the Agent or
any of its Affiliates, provided that such Credit Parties shall be entitled to
reimbursement for no more than one counsel representing all such Credit Parties
(absent a conflict of interest in which case the Credit Parties may engage and
be reimbursed for additional counsel).

 

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

 

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

 

“Debt” means as applied to any Person, without duplication, (a) all items that
would be included as liabilities on a balance sheet in accordance with GAAP,
including Capital Lease Obligations, but excluding trade payables incurred and
being paid in the Ordinary Course of Business; (b) all Contingent Obligations;
(c) all reimbursement obligations in connection with letters of credit issued
for the account of such Person; and (d) in the case of any Loan Party, the
Obligations.  The Debt of a Person shall include any recourse Debt of any
partnership in which such Person is a general partner or joint venturer.

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the

 

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United States or other applicable jurisdictions from time to time in effect and
affecting the rights of creditors generally.

 

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

 

“Default Rate” means an interest rate equal to the LIBO Rate plus the Applicable
Margin plus three and a half percent (3.50%) per annum.

 

“Discharge of ABL Obligations” has the meaning as defined in the ABL/Term Loan
Intercreditor Agreement.

 

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

 

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

 

“Distribution” means any declaration or payment of a distribution, interest or
dividend on any Equity Interest (other than a rights distribution and/or
payment-in-kind by the Parent); any

 

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distribution, advance or repayment of Debt to a holder of Equity Interests; or
any purchase, redemption, or other acquisition or retirement for value of any
Equity Interest.

 

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

 

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of
the United States of America, any State thereof or the District of Columbia
(excluding, for the avoidance of doubt, any Subsidiary organized under the laws
of Puerto Rico or any other territory).

 

“EBITDA” determined on a consolidated basis for Parent and Subsidiaries, equal
to the aggregate of (a) net income, calculated before (i) interest expense,
(ii) provision for income taxes and (iii) depreciation and amortization expense;
plus (b) the sum (without duplication) of the following: (i) expenses, fees and
charges incurred in connection with the closing of the transactions contemplated
by this Agreement; (ii) non-cash charges resulting from the write-down of
goodwill, furniture, fixtures, equipment and software; (iii) non-cash charges
associated with the issuance and periodic re-measurement of Equity Interests in
the Parent; (iv) non-cash losses attributable to deferred financing costs;
(v) non-cash losses attributable to fluctuations in currency values;
(vi) non-cash charges attributable to write-offs resulting from the exercise of
employee options to the extent permitted by this Agreement; (vii) non-cash
losses or charges resulting from the impact of purchase accounting adjustments
in connection with any Permitted Acquisition; (viii) other non-cash losses or
charges deducted in determining net income (including, without limitation,
non-cash losses or charges resulting from the application of Statement of
Financial Accounting Standards No. 142, Goodwill and other Intangible Assets
(FAS-142) and FAS-144, Accounting for Impairment of Long-Lived Assets);
(ix) losses attributable to the early retirement of Indebtedness (other than the
Obligations or the Permitted Term Debt); (x) transaction related fees and
expenses incurred in connection with any Permitted Disposition or any Permitted
Acquisition, all as approved by Agent in its Permitted Discretion;
(xi) indemnification payments made by the Loan Parties and for which the Loan
Parties have received reimbursement from third parties; (xii) fees and expenses
of advisors and independent consultants retained by Loan Parties and approved by
Agent in its Permitted Discretion; (xiii) fees and expenses paid to members of
the Board of Directors of the Parent in an aggregate amount not to exceed
$500,000 during any twelve-month period; (xiv) restructuring charges;
(xv) earn-out payments and severance payments which, when taken together with
amounts in subsection (xiv) shall not exceed $1,000,000 in the aggregate in any
twelve-month period; and (xvi) losses arising from the sale of fixed or capital
assets; minus the sum (without duplication) of the following: (i) non-cash
income or gains resulting form the write-up of goodwill, furniture, fixtures,
equipment and software; (ii) non-cash income or gains attributable to
fluctuations in currency values; (iii) any other non-cash income or gains;
(iv) income or gains arising from the sale of fixed or capital assets;
(v) income or gains attributable to the early retirement of Indebtedness (other
than the Obligations or Indebtedness under the ABL Facility); (vi) any other
non-recurring or extraordinary gains (in each case, to the extent included in
determining net income).

 

“Environmental Laws” means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the

 

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protection of the environment or the release of any materials into the
environment, including those related to hazardous substances or wastes, air
emissions and discharges to waste or public systems.

 

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

 

“Environmental Notice” means a notice (whether written or oral) from any
Governmental Authority or other Person of any possible noncompliance with,
investigation of a possible violation of, litigation relating to, or potential
fine or liability under any Environmental Law, or with respect to any
Environmental Release, environmental pollution or hazardous materials, including
any complaint, summons, citation, order, claim, demand or request for
correction, remediation or otherwise.

 

“Environmental Release” means a release as defined in CERCLA or under any other
Environmental Law.

 

“Equipment” has the meaning set forth in the UCC or the PPSA, as applicable.

 

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

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

 

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

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by any Loan Party or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of
operations that is treated as such a withdrawal

 

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under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Loan
Party or any ERISA Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to
terminate, the treatment of a plan amendment as a termination of a Pension Plan
or a Multiemployer Plan under Sections 4041 or 4041A of ERISA, or the
commencement of proceedings by the PBGC to terminate a Pension Plan or
Multiemployer Plan; (e) an event or condition which constitutes grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan; (f) the imposition of any
liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon a Borrower or any ERISA Affiliate;
or (g) the determination that any Pension Plan is considered to be an “at risk”
plan or that any Multiemployer Plan is considered to be in “endangered” or
“critical” status within the meaning of Sections 430, 431 and 432 of the Code or
Sections 303, 304 and 305 of ERISA.

 

“Event of Default” has the meaning specified in Section 8.01.  An Event of
Default shall be deemed to be continuing unless and until that Event of Default
has been duly waived as provided in Section 10.01 hereof.

 

“Excluded Accounts” means a DDA maintained by any Loan Party (a) which has been
established and is used exclusively for the sole purpose of making payroll and
withholding tax payments related thereto and other employee wage and benefit
payments to or for the benefit of such Loan Party’s employees and accrued and
unpaid employee compensation (including salaries, wages, benefits and expense
reimbursements), (b) which is a zero balance operational disbursement or similar
account, (c) has been established and is used exclusively for the sole purpose
of making and remitting sales and use taxes, VAT and/or such Canadian sales and
use tax equivalents or (d) which is used for petty cash or similar purposes so
long as the amount on deposit (i) in each such individual DDA described in this
clause (d) does not exceed $10,000 during any period of seventy-two consecutive
hours and (ii) in all DDAs referred to in this clause (d) does not exceed
$50,000 in the aggregate during any period of seventy-two consecutive hours.

 

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

 

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

 

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

 

“Existing Credit Agreement” means that certain Amended and Restated Credit
Agreement dated as of August 2, 2010 among the Borrowers, Bank of America, N.A.,
as agent, and a syndicate of lenders, as amended.

 

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

 

“Facility Guaranty” means any Guarantee made by a Guarantor in favor of the
Agent and the other Credit Parties, in form and substance reasonably
satisfactory to the Agent, as the same now exists or may hereafter be amended,
modified, supplemented, renewed, restated or replaced, including, without
limitation, the Canadian Guaranty and the UK Guaranty.

 

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

 

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

 

“Fee Letter” means the letter agreement, dated January 28, 2013, among the Lead
Borrower and the Agent.

 

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

 

“Fiscal Quarter” means each period of three months, commencing on the first day
of a Fiscal Year.

 

“Fiscal Year” means the fiscal year of Parent and Subsidiaries for accounting
and tax purposes, ending on December 31 of each year.

 

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“FLSA” means the Fair Labor Standards Act of 1938.

 

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

 

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

 

“Foreign Plan” means any employee benefit plan or arrangement (a) maintained or
contributed to by any Loan Party or Affiliate that is not subject to the laws of
the United States or Canada; or (b) mandated by a government other than the
United States or Canada for employees of any Loan Party or Affiliate.

 

“Foreign Subsidiary” means a Subsidiary that is a “controlled foreign
corporation” under Section 957 of the Code, such that a guaranty by such
Subsidiary of the Obligations or a Lien on the assets of such Subsidiary to
secure the Obligations would result in material tax liability to Borrowers,
provided, however, that SI Canada and SI UK shall be deemed to not be Foreign
Subsidiaries.

 

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

 

“Fund” means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.

 

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

 

“Governmental Approvals” means all authorizations, consents, approvals, licenses
and exemptions of, registrations and filings with, and required reports to, all
Governmental Authorities.

 

“Governmental Authority” means any federal, state, provincial, territorial,
municipal, local, foreign or other agency, authority, body, commission, court,
instrumentality, political subdivision, or other entity or officer exercising
executive, legislative, judicial, regulatory or administrative functions for any
governmental, judicial, investigative, regulatory or self-regulatory authority,
in each case whether associated with the United States, a state, district or
territory thereof, Canada, a province or territory thereof, the United Kingdom
or a country thereof or any other foreign entity or government.

 

“Guarantee” means, as to any Person, (a) any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other

 

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

 

“Guarantor” means the parties listed on Schedule 1.02 that shall be required to
execute and deliver a Facility Guaranty pursuant to Section 6.09.

 

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

 

“Hedging Agreement” means any “swap agreement” as defined in
Section 101(53B)(A) of the Bankruptcy Code.

 

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

 

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

 

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

 

(c)           all obligations of such Person to pay the deferred purchase price
of property or services (other than trade accounts payable in the Ordinary
Course of Business and, in each case, not past due for more than sixty (60) days
after the date on which such trade account payable was created);

 

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(d)           indebtedness (excluding prepaid interest thereon) secured by a
Lien on property owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements), whether or
not such indebtedness shall have been assumed by such Person or is limited in
recourse;

 

(e)           All Attributable Indebtedness of such Person;

 

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

 

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

 

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

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

 

“Information” has the meaning specified in Section 10.07.

 

“Intellectual Property” means all intellectual and similar Property of a Person,
including inventions, designs, patents, copyrights, trademarks, service marks,
trade names, trade secrets, confidential or proprietary information, customer
lists, know-how, software and databases; all embodiments or fixations thereof
and all related documentation, applications, registrations and franchises; all
licenses or other rights to use any of the foregoing; and all books and records
relating to the foregoing.

 

“Intellectual Property Claim” means any claim or assertion (whether in writing,
by suit or otherwise) that a Borrower’s or Subsidiary’s ownership, use,
marketing, sale or distribution of any Inventory, Equipment, Intellectual
Property or other Property violates another Person’s Intellectual Property.

 

“Inventory” means “inventory” as defined in the UCC (or, with respect to any
inventory of any Canadian Guarantor to which the PPSA is applicable, as defined
in the PPSA), including all goods intended for sale, lease, display or
demonstration; all work in process; and all raw materials, and other materials
and supplies of any kind that are or could be used in connection with the
manufacture, printing, packing, shipping, advertising, sale, lease or furnishing
of such goods, or otherwise used or consumed in a Borrower’s or Guarantor’s
business (but excluding Equipment).

 

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

 

“IRS” means the United States Internal Revenue Service.

 

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

 

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

 

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

 

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

 

“Lender” means each Lender having a Term Commitment as set forth on Schedule
2.01 hereto or in the Assignment and Assumption by which such Person becomes a
Lender, or after the making of the Term Loan, each Lender holding any portion of
the Term Loan, and collectively, all such Persons.

 

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

 

“LIBO Rate” means, at any date of determination, the greater of (i) 1.25% per
annum and (ii) the rate per annum for LIBOR (“LIBOR”), as published by
Bankrate.com (or other commercially available source providing quotations of
LIBOR as designated by the Agent from time to time) for an interest period of
ninety (90) days.  If such rate is not available at such time for any reason,
then the “LIBO Rate” shall be the rate per annum determined by the Agent to be
the rate at which deposits in Dollars in the approximate outstanding amount of
the Loans would be offered to major banks in the London interbank eurodollar
market in which Salus participates for an interest period of ninety (90) days.

 

“License” means any license or agreement under which a Loan Party is authorized
to use Intellectual Property in connection with any manufacture, marketing,
distribution or disposition of Collateral, any use of Property or any other
conduct of its business.

 

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“Lien” means any Person’s interest in Property securing an obligation owed to,
or a claim by, such Person, including any lien, security interest, pledge,
hypothecation, trust, reservation, encroachment, easement, right-of-way,
covenant, condition, restriction, leases, or other title exception or
encumbrance.

 

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

 

“Loan Account” has the meaning assigned to such term in Section 2.12(a).

 

“Loan Documents” means this Agreement, each Note, the Fee Letter, the ABL/Term
Loan Intercreditor Agreement, the Blocked Account Agreements, the Security
Documents, the Facility Guaranty, and any other instrument or agreement now or
hereafter executed and delivered in connection herewith, or in connection with
any transaction arising out of any Bank Products provided by the Agent or any of
its Affiliates, each as amended and in effect from time to time.

 

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

 

“Material Adverse Effect” means the effect of any event, fact, circumstance or
change that, taken alone or in conjunction with other events or circumstances,
(a) has a material adverse effect on the business, assets, Properties,
liabilities, operations condition (financial or otherwise) or prospects of
either (i) the Borrowers or (ii) the Parent and its Subsidiaries, taken as a
whole, on the value of any material Collateral, on the enforceability of any
Loan Document, or on the validity or priority of Agent’s Liens on any
Collateral; (b) that could materially impair the ability of the Borrowers or the
Guarantors to perform satisfactorily under the Loan Documents, including
repayment of any Obligations; (c) that could reasonably be expected to
materially and adversely affect the Loans or the transactions contemplated by
this Agreement and the Loan Documents; or (d) otherwise impairs the ability of
Agent or any Lender to enforce or collect any Obligations or realize upon any
Collateral.

 

“Material Contract” means any agreement or arrangement to which a Borrower or
Subsidiary is party (other than the Loan Documents) (a) that is deemed to be a
material contract under any securities law applicable to such Person, including
the Securities Act of 1933; (b) for which breach, termination, nonperformance or
failure to renew could reasonably be expected to have a Material Adverse Effect;
or (c) that relates to Subordinated Debt, or to Debt in an aggregate amount of
$3,000,000 or more.

 

“Material Indebtedness” means (i) the ABL Indebtedness, and (ii) other
Indebtedness (other than the Obligations) of the Loan Parties in an aggregate
principal amount exceeding $500,000.   For purposes of determining the amount of
Material Indebtedness at any time, (a)

 

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undrawn committed or available amounts shall be included, and (b) all amounts
owing to all creditors under any combined or syndicated credit arrangement shall
be included.

 

“Maturity Date” means  February 28, 2018.

 

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

 

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

 

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

 

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

 

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

 

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

 

“NPL” means the National Priorities List under CERCLA.

 

“Obligations” means (a) all advances to, and debts (including principal,
interest, fees, costs, and expenses), liabilities, obligations, covenants,
indemnities, and duties of, any Loan Party arising under any Loan Document or
otherwise with respect to the Term Loan (including payments in respect of
reimbursement of disbursements, interest thereon and obligations to provide cash
collateral therefor), whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising and including interest, fees, costs, expenses and indemnities
that accrue after the commencement by

 

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or against any Loan Party or any Affiliate thereof of any proceeding under any
Debtor Relief Laws naming such Person as the debtor in such proceeding,
regardless of whether such interest, fees, costs, expenses and indemnities are
allowed claims in such proceeding, and (b) any Other Liabilities.

 

“Ordinary Course of Business” means the ordinary course of business of any
Borrower or Subsidiary, consistent with past practices and undertaken in good
faith.

 

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

 

“OSHA” means the Occupational Safety and Hazard Act of 1970.

 

“Other Liabilities” means any obligation on account of any transaction with the
Agent or any of its Affiliates that arises out of any Bank Product entered into
with any Loan Party and any such Person, as each may be amended from time to
time.

 

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

 

“Outstanding Amount” means with respect to Term Loan on any date, the aggregate
outstanding principal amount thereof after giving effect to any prepayments or
repayments of the Term Loan occurring on such date.

 

“Parent” means Summer Infant, Inc., a Delaware corporation.

 

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

 

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

 

“Payment Item” means each check, draft or other item of payment payable to a
Borrower, including those constituting proceeds of any Collateral.

 

“PBA” means the Pensions Benefits Act (Ontario) or any other Canadian federal or
provincial pension benefit standards legislation pursuant to which any Canadian
Pension Plan is registered.

 

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“PBGC” means the Pension Benefit Guaranty Corporation.

 

“PCAOB” means the Public Company Accounting Oversight Board.

 

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

 

“Perfection Certificate” means those certain perfection certificates dated as of
the date hereof, executed and delivered by the Loan Parties in favor of the
Agent, for the benefit of the Credit Parties, and each other Perfection
Certificate (which shall be in form and substance reasonably acceptable to the
Agent) executed and delivered by the applicable Borrower or Guarantor in favor
of the Agent for the benefit of the Credit Parties contemporaneously with the
execution and delivery of a Joinder executed in accordance with Section 6.09, in
each case, as the same may be amended, restated, supplemented or otherwise
modified from time to time in accordance herewith.

 

“Permitted Acquisition” means any Permitted Acquisition as defined in the ABL
Agreement as in effect on the date hereof, provided that: (a) no Default or
Event of Default exists or is caused thereby; (b) upon giving pro forma effect
thereto, the Senior Leverage Ratio is in compliance with Section 7.23; and
(c) Borrowers deliver to Agent, at least 10 Business Days prior to the
Acquisition, copies of all material agreements relating thereto and a
certificate, in form and substance satisfactory to Agent, stating that the
Acquisition is a “Permitted Acquisition” and demonstrating compliance with the
foregoing requirements.

 

“Permitted Contingent Obligations” means Contingent Obligations (a) arising from
endorsements of Payment Items for collection or deposit in the Ordinary Course
of Business; (b) arising from Hedging Agreements permitted hereunder;
(c) existing on the Closing Date, and any extension or renewal thereof that does
not increase the amount of such Contingent Obligation when extended or renewed;
(d) incurred in the Ordinary Course of Business with respect to surety, appeal
or performance bonds, or other similar obligations; (e) arising from customary
indemnification obligations in favor of purchasers in connection with
dispositions of Equipment permitted hereunder; (f) arising under the Loan
Documents; or (g) in an aggregate amount of $3,000,000 or less at any time.

 

“Permitted Discretion” means a determination made by Agent, in good faith, in
the exercise of reasonable business judgment (from the perspective of a secured,
asset-based lender), based upon Agent’s consideration of factors that in the
exercise of such reasonable business judgment Agent reasonably believes:
(a) could be expected to materially and adversely affect the quantity, quality,
mix or value of Collateral (including any Applicable Law that may inhibit
collection of an Account), the enforceability or priority of Agent’s Liens, or
the amount that Agent and Lenders could receive in liquidation of any
Collateral; (b) that any collateral report or financial information delivered by
any Loan Party is incomplete, inaccurate or misleading in any material respect;
(c) could materially increase the likelihood of any Insolvency Proceeding

 

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involving a Loan Party; (d) could increase the credit risk of lending to
Borrowers on the security of the Collateral; or (e) could reasonably be expected
to result in a Default or Event of Default.

 

“Permitted Disposition” means any of the following:

 

(a)           until the Discharge of ABL Obligations, sales and other
dispositions of ABL Priority Collateral permitted under the ABL Facility
Documents in effect on the Closing Date;

 

(b)           after the Discharge of ABL Obligations, as long as no Default or
Event of Default exists and all Net Proceeds are remitted directly to the Term
Priority Account, a Disposition that is (i) a sale of Inventory in the Ordinary
Course of Business; (ii) a disposition of Equipment that, in the aggregate
during any 12 month period, has a fair market or book value (whichever is more)
of $500,000 or less; (iii) a disposition of Inventory that is obsolete,
unmerchantable or otherwise unsalable in the Ordinary Course of Business;
(iv) termination of a lease of real or personal Property that is not necessary
for the Ordinary Course of Business, could not reasonably be expected to have a
Material Adverse Effect and does not result from an Obligor’s default;
(v) approved in writing by Agent and Required Lenders; (vi) a Disposition of
Equipment in the ordinary course of business that is substantially worn,
damaged, obsolete or, in the judgment of the Lead Borrower, no longer useful or
necessary in its business or that of any Subsidiary and is replaced with similar
property having at least equivalent value; or (vii) sales of Real Estate of any
Loan Party (or sales of any Person or Persons created to hold such Real Estate
or the Equity Interests in such Person or Persons), including sale-leaseback
transactions involving any such Real Estate pursuant to leases on market terms,
as long as, (A) such sale is made for fair market value, (B) the proceeds of
such sale are utilized to repay the Obligations, and (C) in the case of any
sale-leaseback transaction permitted hereunder, the Agent shall have received
from each such purchaser or transferee a Collateral Access Agreement on terms
and conditions reasonably satisfactory to the Agent.

 

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

 

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

 

“Permitted Lien” has the meaning specified in Section 7.02.

 

“Permitted Purchase Money Debt” means Purchase Money Debt of Borrowers and
Subsidiaries that is unsecured or secured only by a Purchase Money Lien, as long
as the aggregate amount does not exceed $2,500,000 at any time when combined
with Capital Lease obligations permitted under Section 7.01(c).

 

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

 

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

 

“PPSA” means the Personal Property Security Act (Ontario) and/or the Personal
Property Security Act (New Brunswick), as applicable, and the regulations
thereunder; provided, that, if validity, perfection and effect of perfection and
non-perfection of Agent’s security interest in any Collateral of any Canadian
Guarantor or any other Loan Party are governed by the personal property security
laws of any jurisdiction other than Ontario or New Brunswick, PPSA shall mean
those personal property security laws and regulations thereunder (including the
Civil Code of Quebec in the case of the Province of Quebec) in such other
jurisdiction for the purposes of the provisions hereof relating to such
validity, perfection, and effect of perfection and non-perfection and for the
definitions related to such provisions, as from time to time in effect.

 

“Prepayment Event” means:

 

(a)           Any Dispositions of Term Priority Collateral (including pursuant
to a sale and leaseback transaction) of any property or asset of a Loan Party;

 

(b)           Any casualty or other insured damage to, or any taking under power
of eminent domain or by condemnation or similar proceeding of (and payments in
lieu thereof), any property or asset of a Loan Party in an amount in excess of
$1,000,000, unless (i) the proceeds therefrom are required to be paid to the
holder of a Lien on such property or asset having priority over the Lien of the
Agent or (ii) the proceeds therefrom are deposited into a segregated account and
utilized for purposes of replacing or repairing the assets in respect of which
such proceeds, awards or payments were received within 180 days of the
occurrence of the damage to or loss of the assets being repaired or replaced,
provided, that if a Default or Event of Default exists, the $1,000,000 minimum
amount shall not apply;

 

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

 

(d)           The incurrence by a Loan Party of any Indebtedness for borrowed
money other than Permitted Debt;

 

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

 

(f)            Any Disposition that is not a Permitted Disposition made pursuant
to clause (b) of the definition of Permitted Disposition.

 

“Proceeds of Crime Act” means the Proceeds of Crime (Money Laundering) and
Terrorist Financing Act (Canada).

 

“Properly Contested” means, with respect to any obligation of a Loan Party, (a)
the obligation is subject to a bona fide dispute regarding amount or the Loan
Party’s liability to pay;

 

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(b) the obligation is being properly contested in good faith by appropriate
proceedings promptly instituted and diligently pursued; (c) appropriate reserves
have been established in accordance with GAAP; (d) non-payment could not have a
Material Adverse Effect, nor result in forfeiture or sale of any assets of the
Loan Party; (e) no Lien is imposed on assets of the Loan Party, unless bonded
and stayed to the satisfaction of Agent; and (f) if the obligation results from
entry of a judgment or other order, such judgment or order is stayed pending
appeal or other judicial review.

 

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.

 

“Protective Advance” has the meaning specified in Section 2.04.

 

“Purchase Money Debt” means (a) Debt (other than the Obligations) for payment of
any of the purchase price of fixed assets; (b) Debt (other than the Obligations)
incurred within 10 days before or after acquisition of any fixed assets, for the
purpose of financing any of the purchase price thereof; and (c) any renewals,
extensions or refinancings (but not increases) thereof.

 

“Purchase Money Lien” means a Lien that secures Purchase Money Debt, encumbering
only the fixed assets acquired with such Debt and constituting a Capital Lease
or a purchase money security interest under the UCC or the PPSA.

 

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

 

 “Refinancing Conditions” means (i) the following conditions for Refinancing
Debt (other than the ABL Debt): (a) it is in an aggregate principal amount that
does not exceed the principal amount of the Debt being extended, renewed or
refinanced; (b) it has a final maturity no sooner than, a weighted average life
no less than, and an interest rate no greater than, the Debt being extended,
renewed or refinanced; (c) it is subordinated to the Obligations at least to the
same extent as the Debt being extended, renewed or refinanced; (d) the
representations, covenants and defaults applicable to it are no less favorable
to Borrowers than those applicable to the Debt being extended, renewed or
refinanced; (e) no additional Lien is granted to secure it; (f) no additional
Person is obligated on such Debt; and (g) upon giving effect to it, no Default
or Event of Default exists; and (ii) in respect of the ABL Debt, Refinancing
Debt not prohibited by the ABL/Term Loan Intercreditor Agreement.

 

“Refinancing Debt” means Borrowed Money that is the result of an extension,
renewal or refinancing of Debt permitted under Section 7.01(b), (d) or (f).

 

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

 

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

 

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

 

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

 

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

 

“Required Lenders” means, as of any date of determination, the Agent and Lenders
holding more than fifty percent (50%) of the then outstanding principal balance
of the Term Loan.

 

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

 

“Restricted Investment” means any Investment by a Borrower or Subsidiary, other
than (a) Investments in Subsidiaries to the extent existing on the Closing Date;
(b) Cash Equivalents that are subject to Agent’s Lien and control, pursuant to
documentation in form and substance satisfactory to Agent; (c) loans and
advances permitted under Section 7.07; (d) Permitted Acquisitions and (e)
Investments in Foreign Subsidiaries in an aggregate amount not to exceed
$250,000 per Fiscal Year.

 

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

 

“Restrictive Agreement” means an agreement (other than a Loan Document) that
conditions or restricts the right of any Loan Party or Subsidiary thereof to
incur or repay Borrowed Money, to grant Liens on any assets, to declare or make
Distributions, to modify, extend or renew any agreement evidencing Borrowed
Money, or to repay any intercompany Debt.

 

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“Royalties” means all royalties, fees, expense reimbursement and other amounts
payable by a Loan Party under a License.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Senior Leverage Ratio” means the ratio of (a) all amounts outstanding under
this Agreement and the ABL Agreement to (b) EBITDA for the trailing twelve-month
period ending as of the last day of the Fiscal Month then most recently ending.

 

“SI Asia” means Summer Infant Asia, Ltd., a Hong Kong Private Limited Company.

 

“SI Canada” means Summer Infant Canada, Limited, a corporation formed under the
laws of the Province of New Brunswick.

 

“SI UK” means Summer Infant Europe Limited, a private company with limited
liability incorporated in and registered under the laws of England and Wales
with company number 4322137.

 

“Solvent” means, as to any Person, such Person (a) owns Property whose fair
salable value is greater than the amount required to pay all of its debts
(including contingent, subordinated, unmatured and unliquidated liabilities);
(b) owns Property whose present Fair Salable Value (as defined below) is greater
than the probable total liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) of such Person as they become absolute
and matured; (c) is able to pay all of its debts as they mature; (d) has capital
that is not

 

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unreasonably small for its business and is sufficient to carry on its business
and transactions and all business and transactions in which it is about to
engage; (e) is not “insolvent” within the meaning of Section 101(32) of the
Bankruptcy Code (for SI UK this subsection (e) shall not be applicable); and (f)
has not incurred (by way of assumption or otherwise) any obligations or
liabilities (contingent or otherwise) under any Loan Documents, or made any
conveyance in connection therewith, with actual intent to hinder, delay or
defraud either present or future creditors of such Person or any of its
Affiliates.  “Fair Salable Value” means the amount that could be obtained for
assets within a reasonable time, either through collection or through sale under
ordinary selling conditions by a capable and diligent seller to an interested
buyer who is willing (but under no compulsion) to purchase.

 

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

 

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the FRB to which the Agent is subject with respect to the
Adjusted LIBO Rate, for eurocurrency funding (currently referred to as
“Eurocurrency Liabilities” in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.  Term
Loans shall be deemed to constitute eurocurrency funding and to be subject to
such reserve requirements without benefit of or credit for proration, exemptions
or offsets that may be available from time to time to any Lender under such
Regulation D or any comparable regulation. The Statutory Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in any
reserve percentage.

 

“Subordinated Debt” means Indebtedness which is expressly subordinated in right
of payment to the prior payment in full of the Obligations and which is in form
and on terms (including maturity, interest, fees, repayment, covenants and
subordination) approved in writing by the Agent.

 

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

 

“Synthetic Lease Obligation” means the monetary obligation of a Person under (a)
a so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property (including sale and leaseback
transactions), in each case, creating obligations that do not appear on the
balance sheet of such Person but which, upon the application of any Debtor
Relief Laws to such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment).

 

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

 

“Term Borrowing” means the borrowing of the Term Loan made by each of the
Lenders on the Closing Date pursuant to Section 2.01.

 

“Term Commitment” means, as to each Lender, its obligation to make a portion of
the Term Loan pursuant to Section 2.01 in an aggregate principal amount not to
exceed the amount set forth opposite such Lender’s name on Schedule 2.01 or in
the Assignment and Assumption pursuant to which such Lender becomes a party
hereto, as applicable.  As of the Closing Date, the aggregate amount of the Term
Commitments is $15,000,000.

 

“Term Loan” means the term loan made by the Lenders on the Closing Date pursuant
to Section 2.01.

 

“Term Note” means a promissory note made by the Borrowers in favor of a Lender
evidencing the Term Loan made by such Lender, substantially in the form of
Exhibit A.

 

“Term Priority Account” means that certain account of the Agent, account number
at Sovereign Bank ending in xxxx1418, or such other account as Agent may
designate from time to time, into which (i) all proceeds of the Term Priority
Collateral shall be deposited as and to the extent required hereby and (ii) all
payments owed to Agent under this Agreement or the other Loan Documents shall be
made, or such other account as may be specified in writing by the Agent as the
“Term Priority Account”.

 

“Term Priority Collateral” has the meaning set forth in the ABL/Term Loan
Intercreditor Agreement.

 

“Termination Date” means the earliest to occur of (i) the Maturity Date, or (ii)
the date on which the maturity of the Obligations is accelerated (or deemed
accelerated) in accordance with Article VIII.

 

“Termination Event” means (a) the whole or partial withdrawal of any Canadian
Guarantor from a Canadian Pension Plan or Canadian MEPP during a plan year; or
(b) the filing of a notice of intent to terminate in whole or in part a Canadian
Pension Plan or Canadian MEPP or the treatment of a Canadian Pension Plan or
Canadian MEPP amendment as a termination or partial termination; or (c) the
institution of proceedings by any Governmental Authority to terminate in whole
or in part or have a trustee appointed to administer a Canadian Pension Plan or
Canadian MEPP; or (d) any other event or condition which might constitute
grounds for the termination or winding up or partial termination or winding up
of any Canadian Pension Plan or Canadian MEPP.

 

“Total Outstandings” means, at any date of determination, the outstanding
principal balance of the Term Loan plus accrued but unpaid interest therein, any
accrued but unpaid Credit Party Expenses and any other accrued and unpaid
Obligations.

 

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

 

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

 

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

 

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

 

“UK Anti-Terrorism Laws” means the Criminal Justice (Terrorism and Conspiracy)
Act 1998, the Terrorism Act 2000, the Anti-Terrorism, Crime and Security Act
2001, the Prevention of Terrorism Act 2005, the Terrorism Act 2006, the Money
Laundering Regulations 2007 and the Counter-Terrorism Act 2008.

 

“UK Guarantor” means, collectively, SI UK and each other UK Subsidiary that
guarantees payment or performance of the Obligations from time to time.  The
definition of “UK Guarantors” means all of such entities collectively.

 

“UK Guaranty” means that certain Guarantee of even date herewith made by the UK
Guarantor, as may be amended, restated or otherwise modified from time to time.

 

“UK Pension Scheme” means any pension, retirement benefits or other employee
benefit scheme established by any UK Guarantor.

 

“UK Security Agreements” means (a) the Debenture dated as of the date hereof, in
form and substance reasonably acceptable to Agent, executed by the UK Guarantor
in favor of Agent, as the same may be amended, restated or supplemented from
time to time, and (b) any other UK security agreement required to be executed by
any Loan Party in favor of Agent after the Closing Date, in each case, as the
same may be amended, restated or supplemented from time to time.

 

“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan’s assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to the Code, ERISA or the Pension Protection
Act of 2006 for the applicable plan year; and with respect to a Canadian Pension
Plan, shall mean the amount, if any, by which a Canadian Pension Plan’s
liabilities, calculated on a solvency basis and going concern basis (using
actuarial methods and assumptions which are consistent with the valuations last
filed with the applicable Governmental Authorities and consistent with GAAP),
exceeds the market value of such Canadian Pension Plan’s assets as disclosed in
a finalized or draft actuarial report most recently filed with the applicable
Governmental Authority or commissioned by any Loan Party (specifically excluding
SI UK from this definition).

 

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

 

“Unrestricted Subsidiaries” means any Subsidiary which is not a Guarantor.

 

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

 

“Value” means, with respect to Inventory, its value determined on the basis of
the lower of cost or market, calculated on a first-in, first out basis, and
excluding any portion of cost attributable to intercompany profit among Loan
Parties and their Affiliates.

 

“Yield Revenue” means (i) all amounts which are (or would be) payable on account
of interest on the principal portion of the Term Loan to be prepaid through
twelve months after the Closing Date (assuming that the applicable portion of
the Term Loan had not been prepaid and that interest accrued at the rate in
effect on the date of prepayment), less (ii) any interest on the applicable
portion of the Term Loan amount paid in cash from and after the Closing Date
through the date of prepayment.

 

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

 

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

 

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

 

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

 

(d)           Any reference herein or in any other Loan Document to the
satisfaction, repayment, or payment in full of the Obligations shall mean the
repayment in Dollars in full in cash or immediately available funds (or, in the
case of contingent reimbursement obligations with respect to Letters of Credit
and Bank Products and any other contingent Obligations, providing other
collateral as may be requested by the Agent) of all of the Obligations other
than (i) unasserted contingent indemnification Obligations, and (ii) any
Obligations relating to Bank Products that, at such time, are allowed by the
applicable Bank Product provider to remain outstanding without being required to
be repaid or otherwise collateralized as may be requested by the Agent.

 

1.03        Accounting Terms Generally.

 

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

 

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

 

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

 

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

 

1.06        Reserved.

 

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

 

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

 

ARTICLE II
TERM LOAN

 

2.01        Term Loan.  Subject to the terms and conditions set forth herein,
each Lender severally agrees to make a loan to the Borrowers on the Closing Date
in a principal amount not to exceed the Term Commitment of such Lender.  Amounts
repaid in respect of the Term Loan may not be reborrowed, and upon each Lender’s
making of such portion of the Term Loan, the Term Commitment of such Lender
shall be terminated.

 

2.02        Term Notes.  The Term Loan made by each Lender and interest accruing
thereon shall be evidenced by the records of Agent.  At the request of any
Lender, the Borrowers shall deliver a Term Note to such Lender.

 

2.03        Use of Proceeds.  The proceeds of the Term Loan shall be used by
Borrowers solely in accordance with Section 6.13.

 

2.04        Protective Advances.   The Agent shall be authorized, with the prior
Consent of each of the Lenders, at any time after the Closing Date, to make
advances (“Protective Advances”) up to an aggregate principal amount not to
exceed at any time $1,000,000, if the Agent deems such Protective Advances
necessary or desirable to preserve or protect the Collateral, or to enhance the
collectability or repayment of the Obligations with respect to the Term Loan. 
Each Lender shall participate in each Protective Advance in accordance with its
Applicable Percentage.

 

2.05        Reserved.

 

2.06        Prepayments.

 

(a)           Subject to Section 2.10 and the Fee Letter, the Borrowers may,
upon irrevocable notice from the Lead Borrower to the Agent, at any time or from
time to time voluntarily prepay Loans in whole or in part without premium or
penalty; provided that (i) such notice must be received by the Agent not later
than 11:00 a.m. three Business Days prior to any date of prepayment of Term
Loans; and (ii) any prepayment of Term Loans shall be in a principal amount of
$1,000,000 or a whole multiple of $1,000,000 in excess thereof.  Each such
notice shall specify the date and amount of such prepayment.  The Agent will
promptly notify each Lender of its receipt of each such notice, and of the
amount of such Lender’s Applicable Percentage of such prepayment.  If such
notice is given by the Lead Borrower, the Borrowers shall make such prepayment
and the payment amount specified in such notice shall be due and

 

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payable on the date specified therein.  Any prepayment of a Term Loan shall be
accompanied by all accrued interest on the amount prepaid, together with any
additional amounts required pursuant to Section 3.05.  Each such prepayment
shall be applied to the Loans of the Lenders in accordance with their respective
Applicable Percentages.

 

(b)           If, as a result of an inspection allowed by Section 6.01(b), the
Outstanding Amount exceeds forty-five percent (45%) of the Appraised Value of
Intellectual Property, the Borrowers shall immediately prepay the Term Loan in
an amount equal to such excess.

 

(c)           Subject to the terms of the ABL/Term Loan Intercreditor Agreement,
the Borrowers shall prepay the Term Loan in an amount equal to the Net Proceeds
received by a Loan Party on account of a Prepayment Event immediately upon
receipt thereof by such Loan Party.

 

2.07        Termination of Term Commitments.  The Term Commitment of each Lender
shall automatically terminate upon such Lender’s funding of its portion of the
Term Loan, which shall occur no later than the Closing Date.

 

2.08        Repayment of Loans.  The principal of the Term Loan shall be repaid
in installments of $375,000 on the last Business Day of each Fiscal Quarter,
commencing with the quarter ending on September 30, 2013 and in full on the
Termination Date.  The Borrowers shall repay to the Lenders on the Termination
Date the aggregate principal amount of the Term Loan outstanding on such date,
along with accrued but unpaid interest and all other Obligations outstanding
with respect to the Term Loan.

 

2.09        Interest.

 

(a)           Subject to the provisions of Section 2.09(b) below, the Term Loan
shall bear interest on the outstanding principal amount thereof at a rate per
annum equal to the LIBO Rate plus the Applicable Margin.

 

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

 

(ii)           If any other Event of Default exists, then the Agent may, and
upon the request of the Required Lenders shall, notify the Lead Borrower that
all outstanding Obligations shall thereafter bear interest at a fluctuating
interest rate per annum at all times equal to the Default Rate and thereafter
such Obligations shall bear interest at the Default Rate to the fullest extent
permitted by Applicable Law.

 

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

 

(c)           Interest on each Loan shall be due and payable in arrears on the
last Business Day of each Fiscal Month and at such other times as may be
specified herein.  Interest hereunder shall be due and payable in accordance
with the terms hereof before and after

 

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judgment, and before and after the commencement of any proceeding under any
Debtor Relief Law.

 

2.10        Fees.  The Borrowers shall pay to the Agent the fees and other
obligations in the amounts and at the times specified in the Fee Letter.  Such
fees and other obligations shall be fully earned when paid and shall not be
refundable for any reason whatsoever.

 

2.11        Computation of Interest and Fees.  All computations of fees and
interest shall be made on the basis of a 360-day year and actual days elapsed. 
Interest shall accrue on the Term Loan for the day on which the Term Loan is
made.  For purposes of the Interest Act (Canada), (i) whenever any interest or
fee under this Agreement is calculated using a rate based on a year of 360 days,
the rate determined pursuant to such calculation, when expressed as an annual
rate, is equivalent to (x) the applicable rate based on a year of 360 days,
(y) multiplied by the actual number of days in the calendar year in which the
period for which such interest or fee is payable (or compounded) ends, and
(z) divided by 360 and (ii) the principle of deemed reinvestment of interest
does not apply to any interest calculation under this Agreement.  The rates of
interest stipulated in this Agreement are intended to be nominal rates and not
effective rates or yields.  For purposes of the calculation of interest on the
the Term Loan and the Outstanding Amount, all payments made by or on account of
the Borrowers shall be deemed to have been applied to the Term Loan one
(1) Business Day after receipt of such payments by the Agent (as such receipt is
determined pursuant to Section 2.13).  Each determination by the Agent of an
interest rate or fee hereunder shall be conclusive and binding for all purposes,
absent manifest error.

 

2.12        Evidence of Debt.

 

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

 

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

 

2.13        Payments Generally; Agent’s Clawback.

 

(a)           General.  All payments to be made by the Borrowers shall be made
without condition or deduction for any counterclaim, defense, recoupment or
setoff.  Except as otherwise expressly provided herein, all payments by the
Borrowers hereunder shall be made to the Agent, for the account of the
respective Lenders to which such payment is owed, at the Agent’s Office in
Dollars and in immediately available funds not later than 2:00 p.m. on the date
specified herein.  The Agent will promptly distribute to each Lender its
Applicable Percentage (or other applicable share as provided herein) of such
payment in like funds as received by wire transfer to such Lender’s Lending
Office.  All payments received by the Agent after 2:00 p.m. shall be deemed
received on the next succeeding Business Day and any applicable interest or fee
shall continue to accrue and shall be calculated pursuant to Section 2.10.  If
any payment to be made by the Borrowers shall come due on a day other than a
Business Day, payment shall be made on the next following Business Day, and such
extension of time shall be reflected in computing interest or fees, as the case
may be.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Each Loan Party consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against such
Loan Party rights of setoff and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of such Loan Party in the
amount of such participation, subject to any claims that any Loan Party has or
may have against the assignor Lender.

 

2.15        Reserved.

 

 

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

 

3.01        Taxes.

 

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

 

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

 

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

 

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

 

(e)           Status of Lenders.  Any Foreign Lender that is entitled to an
exemption from or reduction of withholding tax under the law of the jurisdiction
in which any Borrower is resident for tax purposes, or any treaty to which such
jurisdiction is a party, with respect to payments hereunder or under any other
Loan Document shall deliver to the Lead Borrower (with a copy to the Agent), at
the time or times prescribed by applicable law or reasonably requested by the
Lead Borrower or the Agent, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate of withholding. Such delivery shall be provided
on the Closing Date and on or

 

39

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before such documentation expires or becomes obsolete or after the occurrence of
an event requiring a change in the documentation most recently delivered.  In
addition, any Lender, if requested by the Lead Borrower or the Agent, shall
deliver such other documentation prescribed by applicable law or reasonably
requested by the Lead Borrower or the Agent as will enable the Lead Borrower or
the Agent to determine whether or not such Lender is subject to backup
withholding or information reporting requirements.

 

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

 

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

 

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

 

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

 

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

 

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

 

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returns (or any other information relating to its taxes that it deems
confidential) to the Borrowers or any other Person.

 

3.02        Reserved.

 

3.03        Reserved.

 

3.04        Increased Costs.

 

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

 

(i)            impose, modify or deem applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of,
deposits with or for the account of, or credit extended or participated in by,
any Lender;

 

(ii)           subject any Lender to any tax of any kind whatsoever with respect
to this Agreement, any participation in any Term Loan made by it, or change the
basis of taxation of payments to such Lender in respect thereof (except for
Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of,
or any change in the rate of, any Excluded Tax payable by such Lender); or

 

(iii)          impose on any Lender or the London interbank market any other
condition, cost or expense affecting this Agreement or Term Loans made by such
Lender or participation therein;

 

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

 

(b)           Capital Requirements.  If any Lender determines that any Change in
Law, other than a change in the Code regarding income taxes payable by any such
Lender, affecting such Lender or any Lending Office of such Lender or such
Lender’s holding company, if any, regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender’s capital or on
the capital of such Lender’s holding company, if any, as a consequence of this
Agreement, the Term Commitments of Such Lender or the Term Loan made by such
Lender, to a level below that which such Lender or such Lender’s holding company
could have achieved but for such Change in Law (taking into consideration such
Lender’s policies and the policies of such Lender’s holding company with respect
to capital adequacy), then from time to time the Borrowers will pay to such
Lender such additional amount or amounts as will compensate such Lender or such
Lender’s holding company for any such reduction suffered.

 

(c)           Certificates for Reimbursement.  A certificate of a Lender setting
forth the amount or amounts necessary to compensate such Lender or its holding
company, as the case may be, as specified in subsection (a) or (b) of this
Section and delivered to the Lead Borrower

 

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shall be conclusive absent manifest error.  The Borrowers shall pay such Lender
the amount shown as due on any such certificate within ten (10) days after
receipt thereof.

 

(d)           Delay in Requests.  Failure or delay on the part of any Lender to
demand compensation pursuant to the foregoing provisions of this Section shall
not constitute a waiver of such Lender’s right to demand such compensation,
provided that the Borrowers shall not be required to compensate a Lender
pursuant to the foregoing provisions of this Section for any increased costs
incurred or reductions suffered more than nine months prior to the date that
such Lender notifies the Lead Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s intention to claim
compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the nine-month period
referred to above shall be extended to include the period of retroactive effect
thereof).

 

(e)           Reserved.

 

3.05        Reserved.

 

3.06        Mitigation Obligations; Replacement of Lenders.

 

(a)           Designation of a Different Lending Office.  If any Lender requests
compensation under Section 3.04, or the Borrowers are required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to
Section 3.02, then such Lender shall use reasonable efforts to designate a
different Lending Office for funding or booking its portion of the Term Loan
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the
need for the notice pursuant to Section 3.02, as applicable, and (ii) in each
case, would not subject such Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Lender.  The Borrowers hereby
agree to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

 

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

 

3.07        Survival.  All of the Borrowers’ obligations under this Article III
shall survive repayment of the Term Loan and all other Obligations hereunder.

 

3.08        Designation of Lead Borrower as Borrowers’ Agent.

 

(a)           Each Borrower hereby irrevocably designates and appoints the Lead
Borrower as such Borrower’s agent to obtain the Term Loan, the proceeds of which
shall be available to each Borrower for such uses as are permitted under this
Agreement.  As the disclosed principal for its agent, each Borrower shall be
obligated to each Credit Party on

 

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account of the Term Loan so made as if made directly by the applicable Credit
Party to such Borrower, notwithstanding the manner by which such Term Loan is
recorded on the books and records of the Lead Borrower and of any other
Borrower.  In addition, each Loan Party other than the Borrowers hereby
irrevocably designates and appoints the Lead Borrower as such Loan Party’s agent
to represent such Loan Party in all respects under this Agreement and the other
Loan Documents.

 

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

 

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

 

ARTICLE IV
CONDITIONS PRECEDENT TO MAKING OF TERM LOAN

 

4.01        Conditions of Term Loan.  The obligation of each Lender to make the
Term Loan hereunder is subject to satisfaction of the following conditions
precedent:

 

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

 

(i)            executed counterparts of this Agreement sufficient in number for
distribution to the Agent, each Lender and the Lead Borrower; provided that the
form of this Agreement shall have been approved by the Agent’s credit
authorities;

 

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

 

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

 

(iv)          copies of each Loan Party’s Organization Documents and such other
documents and certifications as the Agent may reasonably require to evidence
that

 

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each Loan Party is duly organized or formed, and that each Loan Party is validly
existing, in good standing and qualified to engage in business in each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification, except to the extent that
failure to so qualify in such jurisdiction could not reasonably be expected to
have a Material Adverse Effect;

 

(v)           favorable opinions of (A) Poore & Rosenbaum LLP, US counsel to the
Borrowers, (B) Stikeman Elliott LLP, special Ontario counsel to the Canadian
Guarantor, (C) Stewart McKelvey, special New Brunswick counsel to the Canadian
Guarantor, (D) Vedder Price LLP, special UK counsel to Agent, and such local
counsel as the Agent may reasonably request, addressed to the Agent and each
Lender, as to such matters concerning the Loan Parties and the Loan Documents as
the Agent may reasonably request;

 

(vi)          a certificate signed by a Responsible Officer of the Lead Borrower
certifying (A) that the representations and warranties of each Loan Party
contained in Article V or in any other Loan Document, or which are contained in
any document furnished at any time under or in connection herewith or therewith,
are true and correct on and as of the Closing Date, except to the extent that
such representations and warranties specifically refer to an earlier date, in
which case they shall be true and correct as of such earlier date, (B) that
there has been no event or circumstance since the date of the Audited Financial
Statements that has had or could be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect except as otherwise
disclosed by the Parent in its filings with the SEC, (C) to the Solvency of the
Loan Parties as of the Closing Date after giving effect to the transactions
contemplated hereby, (D) the Parent and its Subsidiaries, taken as a whole, are
Solvent, and (E) either that (1) no consents, licenses or approvals are required
in connection with the execution, delivery and performance by such Loan Party
and the validity against such Loan Party of the Loan Documents to which it is a
party, or (2) that all such consents, licenses and approvals have been obtained
and are in full force and effect;

 

(vii)         a duly completed Compliance Certificate as of the last day of the
Fiscal Quarter of the Parent and its Subsidiaries most recently ended prior to
the Closing Date, signed by a Responsible Officer of the Lead Borrower;

 

(viii)        evidence that all insurance required to be maintained pursuant to
the Loan Documents and all endorsements in favor of the Agent required under the
Loan Documents have been obtained and are in effect and Agent has been named
loss payee and additional insured on all applicable insurance policies;

 

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

 

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(x)           the Loan Parties shall have entered into definitive financing
documentation with respect to the ABL Debt on terms and conditions reasonably
acceptable to Agent, the Borrowers shall have received the cash proceeds of such
ABL Debt, and Agent and the holders of the ABL Debt shall have entered into the
ABL/Term Loan Intercreditor Agreement.

 

(xi)          the Security Documents and certificates evidencing any stock being
pledged thereunder, together with undated stock powers executed in blank, each
duly executed by the applicable Loan Parties, each of which shall have been
approved by the Agent’s credit authorities;

 

(xii)         all other Loan Documents, each duly executed by the applicable
Loan Parties, each of which shall have been approved by the Agent’s credit
authorities;

 

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

 

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

 

(xv)         (A) all documents and instruments, including Uniform Commercial
Code and PPSA financing statements, required by law or reasonably requested by
the Agent to be filed, registered or recorded to create or perfect the first
priority Liens intended to be created under the Loan Documents and all such
documents and instruments shall have been so filed, registered or recorded to
the satisfaction of the Agent, and (B) Collateral Access Agreements as required
by the Agent; and

 

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

 

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

 

(c)           There shall not have occurred any default of any Material Contract
of any Loan Party since January 22, 2013.

 

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

 

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

 

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

 

(g)           The Agent and the Lenders shall have received all documentation
and other information required by regulatory authorities under applicable “know
your customer” and anti-money laundering rules and regulations, including
without limitation the USA PATRIOT Act.

 

(h)           No material changes in governmental regulations or policies
affecting any Loan Party or any Credit Party shall have occurred prior to the
Closing Date.

 

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

 

(j)            The Agent and the Lenders shall have received a pro forma
consolidated and consolidating opening balance sheet of the Lead Borrower and
its Subsidiaries.

 

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

 

4.02        Reserved.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties to enter into this Agreement and to make the Term
Loan, each Loan Party represents and warrants to the Agent and the other Credit
Parties that:

 

5.01        Organization and Qualification.  Each Loan Party and each Subsidiary
thereof is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization.  Each Loan Party and each Subsidiary
thereof is duly qualified, authorized to do business and in good standing as a
foreign corporation in each jurisdiction where failure to be so qualified could
reasonably be expected to have a Material Adverse Effect.

 

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5.02        Power and Authority.  Each Loan Party is duly authorized to execute,
deliver and perform its Loan Documents.  The execution, delivery and performance
of the Loan Documents have been duly authorized by all necessary action, and do
not (a) require any consent or approval of any holders of Equity Interests of
any Loan Party, except those already obtained; (b) contravene the Organization
Documents of any Loan Party; (c) violate or cause a default under any Applicable
Law or Material Contract; or (d) result in or require the imposition of any Lien
(other than Permitted Eiens) on any Loan Party’s Property.

 

5.03        Enforceability.  Each Loan Document is a legal, valid and binding
obligation of each Loan Party party thereto, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors’ rights generally.

 

5.04        Capital Structure.  Schedule 5.04 shows (a) for each Loan Party and
each Subsidiary thereof, its name, jurisdiction of organization and any
agreement binding on the holders of its Equity Interests with respect to such
Equity Interests, and (b) for each Subsidiary of the Parent, its authorized and
issued Equity Interests and the names of the holders of its Equity Interests. 
Except as disclosed on Schedule 5.04, in the five years preceding the Closing
Date, no Loan Party or Subsidiary thereto has acquired any substantial assets
from any other Person nor been the surviving entity in a merger or combination. 
Each Loan Party has good title to its Equity Interests in its Subsidiaries,
subject only to Liens in favor of Agent and the ABL Agent, and all such Equity
Interests are duly issued, fully paid and non-assessable.  Except for the Equity
Interests issued under the 2006 Performance Equity Plan of the Company and the
2012 Incentive Compensation Plan for the Company, there are no outstanding
purchase options, warrants, subscription rights, agreements to issue or sell,
convertible interests, phantom rights or powers of attorney relating to Equity
Interests of any Loan Party or any Subsidiary thereof.

 

5.05        Title to Properties; Priority of Liens.  Each Loan Party and each
Subsidiary thereof has good and marketable title to (or valid leasehold
interests in) all of its Real Estate, and good title to all of its personal
Property, including all Property reflected in any financial statements delivered
to Agent or Lenders, in each case free of Liens except Permitted Liens.  Except
as otherwise indicated on Schedule 5.05, each Loan Party and each Subsidiary
thereof has paid and discharged all lawful claims that, if unpaid, could become
a Lien on its Properties, other than Permitted Liens.  All Liens of Agent in the
Collateral are duly perfected, first priority Liens, subject only to Permitted
Liens that are expressly allowed to have priority over Agent’s Liens.

 

5.06        Reserved.

 

5.07        Financial Statements.  The consolidated and consolidating balance
sheets, and related statements of income, cash flow and shareholder’s equity, of
Parent and its Subsidiaries that have been and are hereafter delivered to Agent
and Lenders, are prepared in accordance with GAAP, and fairly present the
financial positions and results of operations of Parent and Subsidiaries at the
dates and for the periods indicated.  All projections delivered from time to
time to Agent and Lenders have been prepared in good faith, based on reasonable
assumptions in light of the circumstances at such time.  Since December 31,
2011, except as otherwise disclosed by the Parent in its filings with the SEC,
there has been no change in the business, assets,

 

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Properties, liabilities, operations, condition (financial or otherwise) or
prospects of the Loan Parties, taken as a whole, that could reasonably be
expected to have a Material Adverse Effect.  No financial statement delivered to
Agent or Lenders at any time contains any untrue statement of a material fact,
nor fails to disclose any material fact necessary to make such statement not
materially misleading.  The Loan Parties, taken as a whole, are Solvent.

 

5.08        Surety Obligations.  Except as disclosed on Schedule 5.08, no Loan
Party or Subsidiary thereof is obligated as surety or indemnitor under any bond
or other Material Contract that assures payment or performance of any obligation
of any Person, except as permitted hereunder.

 

5.09        Taxes.  Each Loan Party and each Subsidiary thereof has filed all
federal, state, provincial, municipal, foreign and local tax returns and other
reports that it is required by law to file, and has paid, or made provision for
the payment of, all Taxes upon it, its income and its Properties that are due
and payable, except to the extent being Properly Contested.  The provision for
Taxes on the books of each Loan Party and Subsidiary is adequate for all years
not closed by applicable statutes, and for its current Fiscal Year.

 

5.10        Brokers.  There are no brokerage commissions, finder’s fees or
investment banking fees payable in connection with any transactions contemplated
by the Loan Documents.

 

5.11        Intellectual Property.  Except as set forth in Schedule 5.11, each
Loan Party and each Subsidiary thereof owns or has the lawful right to use all
Intellectual Property necessary for the conduct of its business, without
conflict with any rights of others.  There is no pending or, to any Loan Party’s
knowledge, threatened Intellectual Property Claim with respect to any Loan
Party, any Subsidiary thereof or any of their Property (including any
Intellectual Property).  Except as disclosed on Schedule 5.11, no Loan Party or
Subsidiary thereof pays or owes any Royalty or other compensation to any Person
with respect to any Intellectual Property.  All Intellectual Property owned,
used or licensed by, or otherwise subject to any interests of, any Loan Party or
Subsidiary is shown on Schedule 5.11.

 

5.12        Governmental Approvals.  Each Loan Party and each Subsidiary thereof
has, is in compliance with, and is in good standing with respect to, all
Governmental Approvals necessary to conduct its business and to own, lease and
operate its Properties.  All necessary import, export or other licenses, permits
or certificates for the import or handling of any goods or other Collateral have
been procured and are in effect, and Loan Parties and Subsidiaries thereof have
complied with all foreign and domestic laws with respect to the shipment and
importation of any goods or Collateral, except where noncompliance could not
reasonably be expected to have a Material Adverse Effect.

 

5.13        Compliance with Laws.  Each Loan Party and each Subsidiary thereof
has duly complied, and its Properties and business operations are in compliance,
in all material respects with all Applicable Law, except where noncompliance
could not reasonably be expected to have a Material Adverse Effect.  There have
been (i) no citations, notices of noncompliance or requests for information
issued to any Loan Party by the CPSC other than those described on Schedule
5.13, and (ii) no notices or orders of material noncompliance issued to any Loan
Party by any other Governmental Authority under any Applicable Law.  To the best
knowledge of the

 

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Loan Parties, no Inventory has been produced by Loan Parties in violation of the
FLSA or in violation of any CPSC Regulations.  The Loan Parties have current and
effective certificates of compliance for each children’s product and each
children’s toy that the Loan Parties sell, manufacture or distribute.  The Loan
Parties conduct current testing of all children’s products and children’s toys
that the Loan Parties sell, manufacture or distribute.  Except as described on
Schedule 5.13, there are no pending or, to the knowledge of the Loan Parties,
threatened regulatory actions or investigations by the CPSC with respect to the
Loan Parties or any of the products or toys that the Loan Parties sell,
manufacture or distribute.  To the best knowledge of the Loan Parties, none of
the products or toys that the Loan Parties sell, manufacture or distribute
contains a defect that could create a substantial product hazard or could create
an unreasonable risk of serious injury or death.  The Loan Parties have complied
in a timely manner with all reporting requirements under the CPSC Regulations. 
To the best knowledge of the Loan Parties, the Loan Parties have not
misrepresented in any report filed by the Loan Parties with the CPSC, the scope
of the hazards posed by any toys or products that the Loan Parties sell,
manufacture or distribute or the numbers of incidents or injuries that have been
caused by or that have been alleged to have been caused by such toys and
products.

 

5.14        Compliance with Environmental Laws.  Except as disclosed on Schedule
5.14, no Loan Party’s or any of its Subsidiary’s past or present operations,
Real Estate or other Properties are subject to any federal, state, provincial,
municipal or local investigation to determine whether any remedial action is
needed to address any environmental pollution, hazardous material or
environmental clean-up.  No Loan Party or Subsidiary thereof has received any
Environmental Notice.  No Loan Party or Subsidiary thereof has any contingent
liability with respect to any Environmental Release, environmental pollution or
hazardous material on any Real Estate now or previously owned, leased or
operated by it.

 

5.15        Burdensome Contracts.  No Loan Party or Subsidiary thereof is a
party or subject to any contract, agreement or charter restriction that could
reasonably be expected to have a Material Adverse Effect.  No Loan Party or
Subsidiary thereof is party or subject to any Restrictive Agreement, except as
shown on Schedule 5.15.  No such Restrictive Agreement prohibits the execution,
delivery or performance of any Loan Document by a Loan Party.

 

5.16        Litigation.  Except as shown on Schedule 5.16, there are no
proceedings or investigations pending or, to any Loan Party’s knowledge,
threatened against any Loan Party or any Subsidiary thereof, or any of their
businesses, operations, Properties, prospects or conditions, that (a) relate to
any Loan Documents or transactions contemplated thereby; or (b) could reasonably
be expected to have a Material Adverse Effect if determined adversely to any
Loan Party or any Subsidiary thereof.  Except as shown on such Schedule, no Loan
Party has a Commercial Tort Claim (other than, as long as no Default or Event of
Default exists, a Commercial Tort Claim for less than $100,000).  No Loan Party
or Subsidiary thereof is in default with respect to any order, injunction or
judgment of any Governmental Authority.

 

5.17        No Defaults.  No event or circumstance has occurred or exists that
constitutes a Default or Event of Default.  No Loan Party or Subsidiary thereof
is in default, and no event or circumstance has occurred or exists that with the
passage of time or giving of notice would constitute a default, under any
Material Contract or in the payment of any Borrowed Money.

 

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There is no basis upon which any party (other than a Loan Party or Subsidiary)
could terminate a Material Contract prior to its scheduled termination date.

 

5.18        ERISA.  Except as disclosed on Schedule 5.18:

 

(a)           Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code, and other federal and state laws. 
Each Plan that is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS or an application for
such a letter is currently being processed by the IRS with respect thereto and,
to the knowledge of Borrowers, nothing has occurred which would prevent, or
cause the loss of, such qualification.  Each Loan Party and ERISA Affiliate has
met all applicable requirements under the Code, ERISA and the Pension Protection
Act of 2006, and no application for a waiver of the minimum funding standards or
an extension of any amortization period has been made with respect to any Plan.

 

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

 

(c)           (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan, Canadian Pension Plan or Canadian MEPP has any
Unfunded Pension Liability; (iii) no Loan Party or ERISA Affiliate has incurred,
or reasonably expects to incur, any liability under Title IV of ERISA with
respect to any Pension Plan (other than premiums due and not delinquent under
Section 4007 of ERISA); (iv) no Loan Party or ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; (v) no Loan Party or ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA; and (vi) as of the most
recent valuation date for any Pension Plan or Multiemployer Plan, the funding
target attainment percentage (as defined in Section 430(d)(2) of the Code) is at
least 60%, and no Loan Party or ERISA Affiliate knows of any fact or
circumstance that could reasonably be expected to cause the funding target
attainment percentage for any such plan to drop below 60% as of such date.

 

(d)           With respect to any Foreign Plan, (i) all employer and employee
contributions required by law or by the terms of the Foreign Plan have been
made, or, if applicable, accrued, in accordance with normal accounting
practices; (ii) the fair market value of the assets of each funded Foreign Plan,
the liability of each insurer for any Foreign Plan funded through insurance, or
the book reserve established for any Foreign Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations with respect to all current and former participants in such Foreign
Plan according to the actuarial assumptions and valuations most recently used to
account for

 

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such obligations in accordance with applicable generally accepted accounting
principles; and (iii) it has been registered as required and has been maintained
in good standing with applicable regulatory authorities.

 

(e)           Except as would not reasonably be expected to result in a Material
Adverse Effect: (i) each Loan Party is in compliance with the requirements of
the PBA and other federal, provincial or territorial Applicable Laws with
respect to each Canadian Pension Plan, (ii) to the knowledge of the Loan
Parties, no fact or situation that may reasonably be expected to result in
liability to Loan Parties exists in connection with any Canadian Pension Plan,
(iii) no Loan Party or any Subsidiary of a Loan Party has any withdrawal
liability in connection with a Canadian Pension Plan or Canadian MEPP, and
(iv) no Canadian MEPP requires any Loan Party to make deficit payments.  No
Termination Event has occurred.  No Lien has arisen in respect of Loan Party or
their property in connection with any Canadian Pension Plan or Canadian MEPP
(save for contribution amounts not yet due).  All required contributions of any
Loan Party to each Canadian Pension Plan and Canadian MEPP have been made.  No
Canadian Benefit Plan is self insured, has deficit reserve or permits a
retroactive increase in premiums.  All Canadian Pension Plans are administered
by a Loan Party, or a Loan Party is the delegated administrator.

 

(f)            Neither SI UK nor any of its Subsidiaries is or has at any time
been (i) an employer (for the purposes of sections 38 to 51 of the Pensions Act
2004) of an occupational pension scheme which is not a money purchase scheme
(both terms as defined in the Pensions Schemes Act 1993); or (ii) “connected”
with or an “associate” of (as those terms are used in sections 38 and 43 of the
Pensions Act 2004) such an employer.

 

5.19        Trade Relations.  Except as set forth on the Parent’s filings with
the Securities and Exchange Commission, there exists no actual or threatened
termination, limitation or modification of any business relationship between any
Loan Party or Subsidiary thereof and any customer or supplier, or any group of
customers or suppliers, who individually or in the aggregate are material to the
business of such Loan Party or Subsidiary.  There exists no condition or
circumstance that could reasonably be expected to impair the ability of any Loan
Party or any Subsidiary thereof to conduct its business at any time hereafter in
substantially the same manner as conducted on the Closing Date.

 

5.20        Labor Relations.  Except as described on Schedule 5.20, no Loan
Party or Subsidiary thereof is party to or bound by any collective bargaining
agreement, management agreement or consulting agreement (other than design
services consulting agreements and other consulting agreements that have been
disclosed to Agent).  There are no material grievances, disputes or
controversies with any union or other organization of any Loan Party’s or its
Subsidiary’s employees, or, to any Loan Party’s knowledge, any asserted or
threatened strikes, work stoppages or demands for collective bargaining.

 

5.21        Payable Practices.  No Loan Party or Subsidiary thereof has made any
material change in its historical accounts payable practices from those in
effect on the Closing Date.

 

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5.22        Not a Regulated Entity.  No Loan Party is (a) an “investment
company” or a “person directly or indirectly controlled by or acting on behalf
of an investment company” within the meaning of the Investment Company Act of
1940; or (b) subject to regulation under the Federal Power Act, the Interstate
Commerce Act, any public utilities code or any other Applicable Law regarding
its authority to incur Debt.

 

5.23        Margin Stock.  No Loan Party or Subsidiary thereof 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 Loan
proceeds will be used by Loan Parties to purchase or carry, or to reduce or
refinance any Debt incurred to purchase or carry, any Margin Stock or for any
related purpose governed by Regulations T, U or X of the Board of Governors.

 

5.24        Complete Disclosure.  No Loan Document contains any untrue statement
of a material fact, nor fails to disclose any material fact necessary to make
the statements contained therein not materially misleading.  There is no fact or
circumstance that any Loan Party has failed to disclose to Agent in writing that
could reasonably be expected to have a Material Adverse Effect.

 

5.25        Business Plan.  The Borrowers are making commercially reasonable
efforts to operate their business in all material respects in a manner
consistent with the Business Plan most recently delivered pursuant to
Section 6.02(d) and accepted by the Agent.

 

ARTICLE VI
AFFIRMATIVE COVENANTS

 

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

 

6.01        Inspections; Appraisals.

 

(a)           Permit representative and independent contractors of the Agent
from time to time, subject (except when a Default or Event of Default exists) to
reasonable notice and normal business hours, to visit and inspect the Properties
of any Loan Party or Subsidiary, inspect, audit and make extracts from any Loan
Party’s or Subsidiary’s books and records, and discuss with its officers,
employees, agents, advisors and independent accountants such Loan Party’s or
Subsidiary’s business, Business Plan, financial condition, assets, prospects and
results of operations.  Lenders may participate in any such visit or inspection,
at their own expense.  Neither Agent nor any Lender shall have any duty to any
Loan Party to make any inspection, nor to share any results of any inspection,
appraisal or report with any Loan Party.  Loan Parties acknowledge that all
inspections, appraisals and reports are prepared by Agent and Lenders for their
purposes, and Loan Parties shall not be entitled to rely upon them.

 

(b)           Reimburse Agent for all reasonable charges, costs and expenses of
Agent in connection with (i) examinations of any Loan Party’s books and records
or any other financial or Collateral matters as Agent deems appropriate, up to
two times per Fiscal Year; (ii) appraisals of Intellectual Property, up to one
time per Fiscal Year; and (iii) following the Discharge of ABL

 

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Obligations, appraisals of Inventory, up to two times per Fiscal Year; provided,
however, that if an examination or appraisal is initiated during a Default or
Event of Default, all charges, costs and expenses therefor shall be reimbursed
by Borrowers without regard to such limits.  Loan Parties agree to pay Agent’s
then standard charges for examination activities, including the standard charges
of Agent’s internal examination and appraisal groups, as well as the charges of
any third party used for such purposes.  Notwithstanding the foregoing, the
Agent may cause additional examinations and appraisals to be undertaken as it in
its discretion deems necessary or appropriate, at its own expense.

 

6.02        Financial and Other Information.  Keep adequate records and books of
account with respect to its business activities, in which proper entries are
made in accordance with GAAP reflecting all financial transactions; and furnish
to Agent and Lenders:

 

(a)           as soon as available, and in any event within 90 days after the
close of each Fiscal Year, balance sheets as of the end of such Fiscal Year and
the related statements of income, cash flow and shareholders’ equity for such
Fiscal Year, on consolidated and consolidating bases for Loan Parties and
Subsidiaries, which consolidated statements shall be audited and certified
(without qualification) by a firm of independent certified public accountants of
recognized standing selected by Borrowers and acceptable to Agent, and shall set
forth in comparative form corresponding figures for the preceding Fiscal Year
and other information reasonably acceptable to Agent;

 

(b)           as soon as available, and in any event within 45 days after the
end of each Fiscal Quarter ending thereafter, unaudited balance sheets as of the
end of such quarter and the related statements of income and cash flow for such
Fiscal Quarter and for the portion of the Fiscal Year then elapsed, on
consolidated and, to the extent applicable, consolidating bases for Loan Parties
and Subsidiaries, setting forth in comparative form corresponding figures for
the preceding Fiscal Year and certified by a Responsible Officer of the Loan
Parties as prepared in accordance with GAAP and fairly presenting in all
material respects the financial position and results of operations for such
Fiscal Quarter and period, subject to normal year-end adjustments and the
absence of footnotes;

 

(c)           as soon as available, and in any event within 30 days after the
end of each month, unaudited balance sheets as of the end of such month and the
related statements of income and cash flow for such month and for the portion of
the Fiscal Year then elapsed, on consolidated and, to the extent applicable,
consolidating bases for Loan Parties and Subsidiaries, setting forth in
comparative form corresponding figures for the preceding Fiscal Year and
certified by the chief financial officer of Lead Borrower as prepared in
accordance with GAAP and fairly presenting the financial position and results of
operations for such month and period, subject to normal year end adjustments and
the absence of footnotes;

 

(d)           as soon as available, and in any event within 30 days before the
end of each Fiscal Year of the Parent, the Business Plan of the Parent and its
Subsidiaries on a monthly basis for the immediately following Fiscal Year
(including the Fiscal Year in which the Maturity Date occurs), and as soon as
available, any significant revisions to the Business Plan with respect to such
Fiscal Year.

 

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(e)           concurrently with delivery of financial statements under clauses
(a), (b) and (c) above, or more frequently if requested by Agent while a Default
or Event of Default exists, a Compliance Certificate executed by the chief
financial officer of Lead Borrower;

 

(f)            concurrently with delivery of financial statements under clause
(a) above, copies of all management letters and other material reports submitted
to Borrowers by their accountants in connection with such financial statements;

 

(g)           not later than 30 days prior to the end of each Fiscal Year,
projections of Borrowers’ consolidated balance sheets, results of operations,
and cash flow for the next Fiscal Year, month by month;

 

(h)           at Agent’s request, a listing of each Borrower’s trade payables,
specifying the trade creditor and balance due, and a detailed trade payable
aging, all in form satisfactory to Agent;

 

(i)            promptly after the sending or filing thereof, copies of any proxy
statements, financial statements or reports that any Borrower has made generally
available to its shareholders; copies of any regular, periodic and special
reports or registration statements or prospectuses that any Borrower files with
the Securities and Exchange Commission or any other Governmental Authority, or
any securities exchange; and copies of any press releases or other statements
made available by a Borrower to the public concerning material changes to or
developments in the business of such Borrower;

 

(j)            promptly after the sending or filing thereof, copies of any
annual report to be filed in connection with each Plan, Canadian Pension Plan or
Foreign Plan;

 

(k)           copies of any Borrowing Base Certificate (as defined in the ABL
Agreement) concurrently with delivery of any Borrowing Base Certificate to the
ABL Agent; and

 

(l)            such other reports and information (financial or otherwise) as
Agent may request from time to time in connection with any Collateral or any
Loan Party’s or Subsidiary’s financial condition or business.

 

6.03        Notices.

 

(a)           Notify Agent and Lenders in writing promptly after a Loan Party’s
obtaining knowledge thereof, of any of the following that affects a Loan Party:
(i) the threat or commencement of any proceeding or investigation, whether or
not covered by insurance, if an adverse determination could have a Material
Adverse Effect; (ii) any pending or threatened labor dispute, strike or walkout,
or the expiration of any material labor contract; (iii) any default under or
termination of a Material Contract; (iv) the existence of any Default or Event
of Default; (v) any judgment in an amount exceeding $1,000,000; (vi) the
assertion of any Intellectual Property Claim, if an adverse resolution could
have a Material Adverse Effect; (vii) any violation or asserted violation of any
Applicable Law (including ERISA, OSHA, FLSA or any Environmental Laws), if an
adverse resolution could have a Material Adverse Effect; (viii) any
Environmental Release by a Loan Party or on any Property owned, leased or
occupied by a Loan

 

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Party; or receipt of any Environmental Notice; (ix) the occurrence of any ERISA
Event or Termination Event; (x) the discharge by the Parent of its present
Registered Public Accounting Firm or any withdrawal or resignation by such
Registered Public Accounting Firm; (xi) any opening of a new office or place of
business, at least 30 days prior to such opening; (xii) simultaneously with
delivery of such notice under the ABL Agreement, the existence of any default or
event of default under the ABL Facility Documents; (xiii) the threat or
commencement of any regulatory action or investigation by the CPSC with respect
to any Loan Party or with respect to any product or toy sold, manufactured or
distributed by any Loan Party; (xiv) the receipt by any Loan Party of any
Epidemiological Report, the posting of any notice on SaferProducts.gov, or
request for information issued to any Loan Party by the CPSC, all with respect
to any product or toy sold, manufactured or distributed by any Loan Party;
(xv) the commencement of any voluntary or involuntary recall of any product or
toy that the Loan Parties sell, manufacture or distribute; (xvi) of any material
change in accounting policies or financial reporting practices by any Loan Party
or any Subsidiary thereof; (xvii) of any change in any Loan Party’s senior
executive officers; (xviii) of any collective bargaining agreement or other
labor contract to which a Loan Party becomes a party, or the application for the
certification of a collective bargaining agent; (xix) of the filing of any Lien
for unpaid Taxes against any Loan Party in excess of $250,000; (xx) of any
casualty or other insured damage to any material portion of the Collateral or
the commencement of any action or proceeding for the taking of any interest in a
material portion of the Collateral under power of eminent domain or by
condemnation or similar proceeding or if any material portion of the Collateral
is damaged or destroyed; (xxi) of any transaction of the nature contained in
Article VII hereof; (xxii) of any decision by any Loan Party not to pay rent, or
the failure by any Loan Party to pay rent, at any distribution centers or
warehouses or any of such Loan Party’s other locations; or (xxiii) any
cancellation, any material change or any increase (which increase is as a result
of deterioration in the risk profile of any Loan Party or Subsidiary) in the
deductible in any insurance policy or coverage maintained by any Loan Party. 
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of the Lead Borrower setting forth details of the occurrence
referred to therein and stating what action the Lead Borrower has taken and
proposes to take with respect thereto.  Each notice pursuant to
Section 6.03(a)(iv) shall describe with particularity any and all provisions of
this Agreement and any other Loan Document that have been breached.

 

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

 

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6.04                        Landlord and Storage Agreements.  Upon request,
provide Agent with copies of all existing agreements, and promptly after
execution thereof provide Agent with copies of all future agreements, between a
Loan Party and any landlord, warehouseman, processor, shipper, bailee or other
Person that owns any premises at which any Collateral may be kept or that
otherwise may possess or handle any Collateral.

 

6.05                        Compliance with Laws.  Comply with all Applicable
Laws, including ERISA, PBA, Environmental Laws, FLSA, OSHA, Anti-Terrorism Laws,
CPSC Regulations and laws regarding collection and payment of Taxes, and
maintain all Governmental Approvals necessary to the ownership of its Properties
or conduct of its business, unless failure to comply (other than failure to
comply with Anti-Terrorism Laws) or maintain could not reasonably be expected to
have a Material Adverse Effect.  Without limiting the generality of the
foregoing, if any Environmental Release occurs at or on any Properties of any
Loan Party or Subsidiary, it shall act promptly and diligently to investigate
and report to Agent and all appropriate Governmental Authorities the extent of,
and to make appropriate remedial action to eliminate, such Environmental
Release, whether or not directed to do so by any Governmental Authority. 
Maintain adequate testing and other procedures to ensure the safety of all
products and toys that the Loan Parties sell, manufacture or distribute.

 

6.06                        Taxes.  Pay and discharge all Taxes prior to the
date on which they become delinquent or penalties attach, unless such Taxes are
being Properly Contested.

 

6.07                        Insurance.  In addition to the insurance required
hereunder with respect to Collateral, maintain insurance with insurers (with a
Best Rating of at least A-, unless otherwise approved by Agent) satisfactory to
Agent, (a) with respect to the Properties and business of Loan Parties and
Subsidiaries of such type (including product liability, workers’ compensation,
larceny, embezzlement, or other criminal misappropriation insurance), in such
amounts, and with such coverages and deductibles as are customary for companies
similarly situated; and (b) business interruption insurance in an amount not
less than $20,000,000, with deductibles and subject to an insurance assignment
satisfactory to Agent, which shall provide for the proceeds of business
interruption insurance to be payable to Agent for application to the
Obligations.

 

6.08                        Licenses.  Keep each License which constitutes a
Material Contract affecting any Collateral (including the manufacture,
distribution or disposition of Inventory) or any other material Property of Loan
Parties and Subsidiaries in full force and effect; promptly notify Agent of any
proposed modification to any such License, or entry into any new License which
constitutes a Material Contract, in each case at least 30 days prior to its
effective date; pay all Royalties when due; and notify Agent of any default or
breach asserted by any Person to have occurred under any License which
constitutes a Material Contract.

 

6.09                        Future Subsidiaries.  Promptly notify Agent upon any
Person becoming a Subsidiary and, if such Person is not a Foreign Subsidiary,
cause it to guaranty the Obligations in a manner satisfactory to Agent, and to
execute and deliver such documents, instruments and agreements and to take such
other actions as Agent shall require to evidence and perfect a Lien in favor of
Agent on all assets of such Person, including delivery of such legal opinions,
in form and substance satisfactory to Agent, as it shall deem appropriate.

 

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6.10                        UK Pension Schemes.  Ensure that neither SI UK nor
any of its Subsidiaries is or has been at any time an employer (for the purposes
of sections 38 to 51 of the Pensions Act 2004) of an occupational pension scheme
which is not a money purchase scheme (both terms as defined in the Pension
Schemes Act 1993) or “connected” with or an “associate” of (as those terms are
used in sections 38 or 43 of the Pensions Act 2004) such an employer.

 

6.11                        Preservation of Existence, Etc.  Preserve, renew and
maintain in full force and effect its legal existence and good standing under
the Laws of the jurisdiction of its organization or formation except in a
transaction permitted by Section 7.06 or 7.09; (b) take all reasonable action to
maintain all rights, privileges, permits, licenses and franchises necessary or
desirable in the normal conduct of its business, except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect; and (c) preserve or renew all of its Intellectual Property, except to
the extent such Intellectual Property is no longer used or useful in the conduct
of the business of the Loan Parties.

 

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

 

6.13                        Use of Proceeds.  Use the proceeds of the Term Loan
(a) to pay off a portion of the Existing Credit Facility to the extent the
availability under the ABL Facility on the Closing Date is insufficient for this
purpose, (b) to finance the acquisition of working capital assets of the
Borrowers, including the purchase of inventory and equipment, in each case in
the Ordinary Course of Business, (c) to finance Capital Expenditures of the
Borrowers, and (d) for general corporate purposes of the Loan Parties, in each
case to the extent expressly permitted under Applicable Law and the Loan
Documents.  For the avoidance of doubt, the proceeds of the Term Loan shall not
be used to finance any Permitted Acquisition.

 

6.14                        Cash Management.  Maintain Blocked Account
Agreements as required under the ABL Agreement.  If the ABL Agreement is no
longer in effect, the Loan Parties shall, and shall cause each Subsidiary to
satisfy the customary requirements of the Agent.

 

6.15                        Environmental Laws.  (a) Conduct its operations and
keep and maintain its Real Estate in material compliance with all Environmental
Laws; (b) obtain and renew all environmental permits necessary for its
operations and properties; and (c) implement any and all investigation,
remediation, removal and response actions that are appropriate or necessary to
maintain the value and marketability of the Real Estate or to otherwise comply
with Environmental Laws pertaining to the presence, generation, treatment,
storage, use, disposal, transportation or release of any Hazardous Materials on,
at, in, under, above, to, from or about any of its Real Estate, provided,
however, that neither a Loan Party nor any of its Subsidiaries shall be required
to undertake any such cleanup, removal, remedial or other action to the extent
that its obligation to do so is being contested in good faith and by proper
proceedings and adequate reserves have been set aside and are being maintained
by the Loan Parties with respect to such circumstances in accordance with GAAP.

 

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6.16                        Further Assurances.

 

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

 

(b)                                 If any material assets are acquired by any
Loan Party after the Closing Date (other than assets constituting Collateral
under the Security Documents that become subject to the perfected Lien under the
Security Documents upon acquisition thereof and in accordance with the ABL/Term
Loan Intercreditor Agreement), notify the Agent thereof, and the Loan Parties
will cause such assets to be subjected to a Lien securing the Obligations and
will take such actions as shall be necessary or shall be requested by the Agent
to grant and perfect such Liens, including actions described in paragraph (a) of
this Section 6.16, all at the expense of the Loan Parties. In no event shall
compliance with this Section 6.16 waive or be deemed a waiver or Consent to any
transaction giving rise to the need to comply with this Section 6.16 if such
transaction was not otherwise expressly permitted by this Agreement.

 

(c)                                  Use, and cause each of the Subsidiaries to
use, their commercially reasonable efforts to obtain lease terms in any Lease
entered into by any Loan Party after the Closing Date not expressly prohibiting
the recording in the relevant real estate filing office of an appropriate
memorandum of lease.

 

(d)                                 Following the Discharge of ABL Obligations,
upon the request of the Agent, cause each of its customs brokers, freight
forwarders, consolidators and/or carriers to deliver an agreement (including,
without limitation, a Customs Broker/Carrier Agreement) to the Agent covering
such matters and in such form as the Agent may reasonably require.

 

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

 

6.17                        Compliance with Terms of Leaseholds.  Except as
otherwise expressly permitted hereunder, (a) make all payments and otherwise
perform all obligations in respect of all Leases to which any Loan Party or any
of its Subsidiaries is a party, keep such Leases in full force and effect,
(b) not allow such Leases to lapse or be terminated or any rights to renew such
Leases to be forfeited or cancelled, (c) notify the Agent of any default by any
party with respect to such Leases and cooperate with the Agent in all respects
to cure any such default, and (d) cause each of its Subsidiaries to do the
foregoing.

 

6.18                        Material Contracts.  (a) Perform and observe all the
terms and provisions of each Material Contract to be performed or observed by
it, (b) maintain each such Material Contract in full force and effect,
(c) enforce each such Material Contract in accordance with its

 

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terms, (d) take all such action to such end as may be from time to time
requested by the Agent, (e) upon request of the Agent, make to each other party
to each such Material Contract such demands and requests for information and
reports or for action as any Loan Party or any of its Subsidiaries is entitled
to make under such Material Contract, and (f) cause each of its Subsidiaries to
do the foregoing.

 

6.19                        Business Plan.  Generally operate the business of
the Borrowers in all material respects in a manner consistent with the Business
Plan most recently delivered pursuant to Section 6.02(d) hereof and accepted by
the Agent in its discretion, provided that such operation does not guarantee
that actual results will match the estimates contained in the Business Plan.

 

ARTICLE VII

NEGATIVE COVENANTS

 

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

 

7.01                        Permitted Debt.  Create, incur, guarantee or suffer
to exist any Debt, except (“Permitted Debt”):

 

(a)                                 the Obligations;

 

(b)                                 the Debt under the ABL Facility;

 

(c)                                  Permitted Purchase Money Debt and
obligations with respect to Capital Leases so long as the aggregate amount
outstanding under this clause (c) does not exceed $2,500,000 at any time;

 

(d)                                 Borrowed Money (other than the Obligations,
Subordinated Debt and Permitted Purchase Money Debt), but only to the extent
outstanding on the Closing Date and not satisfied with proceeds of the initial
Loans;

 

(e)                                  Debt with respect to Bank Products incurred
in the Ordinary Course of Business;

 

(f)                                   Debt that is in existence when a Person
becomes a Subsidiary or that is secured by an asset when acquired by a Borrower
or Subsidiary, as long as such Debt was not incurred in contemplation of such
Person becoming a Subsidiary or such acquisition, and does not exceed $1,000,000
in the aggregate at any time;

 

(g)                                  Permitted Contingent Obligations;

 

(h)                                 Refinancing Debt as long as each Refinancing
Condition is satisfied; and

 

(i)                                     Debt that is not included in any of the
preceding clauses of this Section, is not secured by a Lien and does not exceed
$500,000 in the aggregate at any time.

 

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7.02                        Permitted Liens.  Create or suffer to exist any Lien
upon any of its Property, except the following (collectively, “Permitted
Liens”):

 

(a)                                 Liens in favor of Agent;

 

(b)                                 Liens in favor of the ABL Agent subject to
the ABL/Term Loan Intercreditor Agreement;

 

(c)                                  Purchase Money Liens securing Permitted
Purchase Money Debt;

 

(d)                                 Liens for Taxes not yet due or being
Properly Contested;

 

(e)                                  inchoate statutory Liens (other than Liens
for Taxes or imposed under ERISA) arising in the Ordinary Course of Business,
but only if (i) payment of the obligations secured thereby is not yet due or is
being Properly Contested, and (ii) such Liens do not materially impair the value
or use of the Property or materially impair operation of the business of any
Borrower or Subsidiary;

 

(f)                                   Liens incurred or deposits made in the
Ordinary Course of Business to secure the performance of tenders, bids, leases,
contracts (except those relating to Borrowed Money), statutory obligations and
other similar obligations, or arising as a result of progress payments under
government contracts, as long as such Liens are at all times junior to Agent’s
Liens;

 

(g)                                  Liens arising in the Ordinary Course of
Business that are subject to Collateral Access Agreements;

 

(h)                                 Liens arising by virtue of a judgment or
judicial order against any Borrower or Subsidiary, or any Property of a Borrower
or Subsidiary, as long as such Liens are (i) in existence for less than 20
consecutive days or being Properly Contested, and (ii) at all times junior to
Agent’s Liens;

 

(i)                                     easements, rights-of-way, restrictions,
covenants or other agreements of record, and other similar charges or
encumbrances on Real Estate, that do not secure any monetary obligation and do
not interfere with the Ordinary Course of Business;

 

(j)                                    normal and customary rights of setoff
upon deposits in favor of depository institutions, and Liens of a collecting
bank on Payment Items in the course of collection;

 

(k)                                 Liens securing Debt permitted by
Section 7.01(b) so long as such Lien does not cover more than the property
subject to such Capital Lease;

 

(l)                                     with respect to any Collateral covered
by the UK Security Agreements, any Security (as such term is defined in the UK
Security Agreements) arising solely by operation of law or in the ordinary
course of trading securing amounts not more than 30 days overdue and not arising
as a result of any default or omission of a Loan Party or its Subsidiaries; and

 

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(o)                                 existing Liens shown on Schedule 7.02.

 

Notwithstanding anything to the contrary contained in this Agreement or any
other Loan Document (including any provision for, reference to, or
acknowledgement of, any Lien or Permitted Lien), nothing herein and no approval
by the Agent or any Lender of any Lien or Permitted Lien (whether such approval
is oral or in writing) shall be construed as or deemed to constitute a
subordination by the Agent or such Lender of any security interest or other
right, interest or Lien in or to the Collateral or any part thereof in favor of
any Lien or Permitted Lien or any holder of any Lien or Permitted Lien.

 

7.03                        [Intentionally deleted].

 

7.04                        Distributions; Upstream Payments.  Declare or make
any Distributions, except Upstream Payments; or create or suffer to exist any
encumbrance or restriction on the ability of a Subsidiary to make any Upstream
Payment, except for restrictions under the Loan Documents, the ABL Facility
Documents, under Applicable Law or in effect on the Closing Date as shown on
Schedule 5.15.

 

7.05                        Restricted Investments.  Make any Restricted
Investment.

 

7.06                        Disposition of Assets.  Make any Asset Disposition,
except a Permitted Disposition, a disposition of Equipment under clause (d) of
the definition of Permitted Disposition, or a transfer of Property by a
Subsidiary or Loan Party to a Borrower.

 

7.07                        Loans.  Make any loans or other advances of money to
any Person, except (a) advances to an officer or employee for salary, travel
expenses, commissions and similar items in the Ordinary Course of Business;
(b) prepaid expenses and extensions of trade credit made in the Ordinary Course
of Business; (c) deposits with financial institutions permitted hereunder; 
(d) as long as no Default or Event of Default exists, intercompany loans by a
Loan Party to another Loan Party, provided that intercompany loans from the
Borrowers (i) to the Canadian Guarantors shall not exceed $500,000 in the
aggregate at any time and (ii) to the UK Guarantors shall not exceed $500,000 in
the aggregate at any time; and (e) so long as no Default or Event of Default
exists, intercompany loans by Loan Parties to Foreign Subsidiaries not to exceed
$250,000 in the aggregate at any time.

 

7.08                        Restrictions on Payment of Certain Debt.  Except in
connection with any Refinancing permitted under Section 7.01, make any payments
(whether voluntary or mandatory, or a prepayment, redemption, retirement,
defeasance or acquisition) with respect to any (a) Subordinated Debt, except
regularly scheduled payments of principal, interest and fees, but only to the
extent permitted under any subordination agreement relating to such Debt (and a
Responsible Officer of Lead Borrower shall certify to Agent, not less than five
Business Days prior to the date of payment, that all conditions under such
agreement have been satisfied); or (b) Borrowed Money (other than the
Obligations) prior to its due date under the agreements evidencing such Debt as
in effect on the Closing Date (or as amended thereafter with the consent of
Agent); provided that the Loan Party may make payments under the ABL Facility in
accordance with the ABL/Term Loan Intercreditor Agreement.

 

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7.09                        Fundamental Changes.  Change its name or conduct
business under any fictitious name; change its tax, charter or other
organizational identification number; change its form or state of organization;
liquidate, wind up its affairs or dissolve itself; or merge, combine or
consolidate with any Person, whether in a single transaction or in a series of
related transactions, except for (a) amalgamations, mergers or consolidations of
a wholly-owned Subsidiary with another wholly-owned Subsidiary or into a
Borrower; or (b) Permitted Acquisitions.

 

7.10                        Subsidiaries.  Form or acquire any Subsidiary after
the Closing Date, except in accordance with Sections 6.09, 7.05 or 7.09; or
permit any existing Subsidiary to issue any additional Equity Interests except
director’s qualifying shares.

 

7.11                        Amendment of Material Documents.  Amend, modify or
otherwise change any of (a) its Organization Documents, except in connection
with either a rights distribution by the Parent or a transaction permitted under
Section 7.09, or (b) any Material Contract or Material Indebtedness (other than
allowed under the ABL/Term Loan Intercreditor Agreement on account of any
refinancing thereof otherwise permitted hereunder), in each case to the extent
that such amendment, modification or waiver would result in a Default or Event
of Default under any of the Loan Documents, would be materially adverse to the
Credit Parties or otherwise would be reasonably likely to have a Material
Adverse Effect.

 

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

 

7.13                        Tax Consolidation.  File or consent to the filing of
any consolidated income tax return with any Person other than Loan Parties and
Subsidiaries.

 

7.14                        Accounting Changes.  Make any material change in
accounting treatment or reporting practices, except as required by GAAP and in
accordance with Section 1.03; or change its Fiscal Year.

 

7.15                        Restrictive Agreements.  Become a party to any
Restrictive Agreement, except a Restrictive Agreement (a) in effect on the
Closing Date (including the ABL Facility Documents); (b) relating to secured
Debt permitted hereunder, as long as the restrictions apply only to collateral
for such Debt; or (c) constituting customary restrictions on assignment in
leases and other contracts.

 

7.16                        Hedging Agreements.  Enter into any Hedging
Agreement, except to hedge risks arising in the Ordinary Course of Business and
not for speculative purposes.

 

7.17                        Conduct of Business.  Engage in any business, other
than (i) the businesses conducted by the Loan Parties on the Closing Date and
activities incidental or supplemental thereto, and (ii) businesses similar to
the business conducted by the Loan Parties on the Closing Date or other
businesses approved by Agent in its Permitted Discretion.

 

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7.18                        Affiliate Transactions.  Enter into or be party to
any transaction with an Affiliate, except (a) transactions expressly permitted
by the Loan Documents; (b) payment of reasonable compensation to officers and
employees for services actually rendered, and payment of customary directors’
fees and indemnities; (c) transactions solely among Borrowers; (d) transactions
with Affiliates that were consummated prior to the Closing Date, as shown on
Schedule 7.18; (e) intercompany loans permitted under Section 7.07; and
(f) transactions with Affiliates in the Ordinary Course of Business, upon fair
and reasonable terms fully disclosed to Agent and no less favorable than would
be obtained in a comparable arm’s-length transaction with a non-Affiliate.

 

7.19                        Plans.  Become party to any Multiemployer Plan,
Canadian Plan, Canadian MEPP or Foreign Plan, other than any in existence on the
Closing Date.

 

7.20                        Amendments to Subordinated Debt or ABL Debt.  Amend,
supplement or otherwise modify the (a) the ABL Agreement or any other document,
instrument or agreement relating to the ABL Debt except as permitted by the
ABL/Term Loan Intercreditor Agreement or (b) amend, supplement or otherwise
modify any document, instrument or agreement relating to the Subordinated Debt,
if such modification (i) increases the principal balance of such Debt, or
increases any required payment of principal or interest; (ii) accelerates the
date on which any installment of principal or any interest is due, or adds any
additional redemption, put or prepayment provisions; (iii) shortens the final
maturity date or otherwise accelerates amortization; (iv) increases the interest
rate; (v) increases or adds any fees or charges; (vi) modifies any covenant in a
manner or adds any representation, covenant or default that is more onerous or
restrictive in any material respect for any Loan Party or Subsidiary, or that is
otherwise materially adverse to any Loan Party, any Subsidiary or Lenders; or
(vii) results in the Obligations not being fully benefited by the subordination
provisions thereof.

 

7.21                        Deposit Accounts.  Following the Discharge of ABL
Obligations, open new Blocked Accounts unless the Loan Parties shall have
delivered to the Agent appropriate Blocked Account Agreements in form reasonably
satisfactory to the Agent.  No Loan Party shall maintain any bank accounts other
than the ones expressly contemplated herein.

 

7.22                        Intellectual Property.  License any of its
Intellectual Property without the prior written consent of the Agent.

 

7.23                        Financial Covenants.  As long as any Loans or
Obligations are outstanding, Loan Parties shall not permit the Consolidated
EBITDA, calculated as of the last day of each month for each of the consecutive
month periods set forth below, to be less than the amounts set forth below for
such periods:

 

Period of Consecutive Months
Beginning March 1, 2013 and Ending

 

Minimum Consolidated
EBITDA

 

 

 

 

 

March 31, 2013

 

$

750,000

 

April 30, 2013

 

$

1,500,000

 

May 31, 2013

 

$

2,500,000

 

June 30, 2013

 

$

3,500,000

 

 

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Period of Consecutive Months
Beginning March 1, 2013 and Ending

 

Minimum Consolidated
EBITDA

 

 

 

 

 

July 31, 2013

 

$

4,500,000

 

August 31, 2013

 

$

6,000,000

 

September 30, 2013

 

$

7,000,000

 

October 31, 2013

 

$

8,000,000

 

November 30, 2013

 

$

9,000,000

 

December 31, 2013

 

$

10,000,000

 

January 31, 2014

 

$

11,000,000

 

February 28, 2014

 

$

12,000,000

 

 

7.24                        Senior Leverage Ratio.  Commencing on February 28,
2013, permit the Senior Leverage Ratio, to be less than 1.0:1.0.  Commencing
February 28, 2014, the Senior Leverage Ratio shall be tested monthly on the last
day of each calendar month.  The Senior Leverage Ratio shall be established by
the Agent for the period commencing on February 28, 2014 and thereafter, based
upon the Business Plan, and such Senior Leverage Ratio shall provide for a
general cushion or variance of 20% to 25% to the Business Plan.

 

7.25                        Restrictions on Activities of Parent.  Loan Parties
covenant and agree that the Parent shall not (i) hold any assets other than the
Equity Interests of Lead Borrower, SI UK or SI Asia cash and Cash Equivalents,
(ii) have any material liabilities other than liabilities under the Loan
Documents and under the ABL Facility Documents, tax liabilities in the Ordinary
Course of Business, liabilities under employment agreements and written
employment arrangements, and corporate, administrative and operating expenses in
the Ordinary Course of Business, or (iii) engage in any business other than
owning the Equity Interests of Lead Borrower and activities incidental to such
ownership, acting as a co-borrower in respect of the Obligations hereunder and
under the ABL Facility Documents, and granting to Agent for the benefit of
Lenders, and granting to ABL Agent for the benefit of ABL Lenders, security
interests in and Liens upon its assets pursuant to the Security Documents and
ABL Facility Documents to which it is a party.

 

7.26                        Restrictions on Activities of Foreign Subsidiaries. 
Loan Parties covenant and agree that (a) no Loan Party shall guaranty any
liabilities or obligations of any Foreign Subsidiary; (b) no Loan Party shall
make any Investment in, or transfer any properties or assets to, any Foreign
Subsidiary, other than as permitted under Sections 7.05 and 7.18; (c) no Foreign
Subsidiary shall create or suffer to exist any encumbrance or restriction on the
ability of a Subsidiary to make any Upstream Payment, except for restrictions
under the Loan Documents, under Applicable Law or in effect on the Closing Date
as shown on Schedule 5.15 and (d) the aggregate outstanding Debt owed by Foreign
Subsidiaries (excluding Debt owed to Loan Parties that is permitted under
Section 7.07) shall not at any time exceed the foreign currency equivalent of
$250,000.

 

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ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

 

8.01                        Events of Default.  Each of the following shall be
an “Event of Default” if it occurs for any reason whatsoever, whether voluntary
or involuntary, by operation of law or otherwise:

 

(a)                                 A Loan Party fails to pay any Obligations
when due (whether at stated maturity, on demand, upon acceleration or
otherwise);

 

(b)                                 Any representation, warranty or other
written statement of a Loan Party made in connection with any Loan Documents or
transactions contemplated thereby is incorrect or misleading in any material
respect when given;

 

(c)                                  A Loan Party breaches or fails to perform
any covenant contained in Section 6.01, 6.02, 6.03(a)(iii), 6.03(a)(iv),
6.03(a)(v), 6.03(a)(xi), 6.03(a)(xii), 6.03(a)(xx), 6.03(a)(xxi), 6.07, 6.09,
6.11, 6.13, or Article VII;

 

(d)                                 A Loan Party breaches or fails to perform
any covenant contained in Section 6.03(a)(i), 6.03(a)(ii), 6.03(a)(vi),
6.03(a)(vii), 6.03(a)(viii), 6.03(a)(ix), 6.03(a)(x), 6.03(a)(xvi),
6.03(a)(xvii), 6.03(a)(xviii), 6.03(a)(xix), 6.03(a)(xxii), or 6.03(a)(xxiii),
and such breach or failure is not cured within 10 Business Days after a
Responsible Officer of such Loan Party has knowledge thereof or receives notice
thereof from Agent, whichever is sooner; provided, however, that such notice and
opportunity to cure shall not apply if the breach or failure to perform is not
capable of being cured within such period or is a willful breach by a Loan
Party;

 

(e)                                  A Loan Party breaches or fails to perform
any other covenant contained in any Loan Documents, and such breach or failure
is not cured within 15 days after a Responsible Officer of such Loan Party has
knowledge thereof or receives notice thereof from Agent, whichever is sooner;
provided, however, that such notice and opportunity to cure shall not apply if
the breach or failure to perform is not capable of being cured within such
period or is a willful breach by a Loan Party;

 

(f)                                   A Guarantor repudiates, revokes or
attempts to revoke its Guaranty; a Loan Party or third party denies or contests
the validity or enforceability of any Loan Documents or Obligations, or the
perfection or priority of any Lien granted to Agent; or any Loan Document ceases
to be in full force or effect for any reason (other than a waiver or release by
Agent and Lenders);

 

(g)                                  Any (i) breach or default of a Loan Party
occurs under the ABL Debt or any Hedging Agreement, or any breach or default of
a Loan Party occurs under any instrument or agreement to which it is a party or
by which it or any of its Properties is bound, relating to any Debt (other than
the Obligations) in excess of $1,000,000, if, with respect to this clause (ii),
the maturity of or any payment with respect to such Debt may be accelerated or
demanded due to such breach;

 

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(h)                                 Any judgment or order for the payment of
money is entered against a Loan Party in an amount that exceeds, individually or
cumulatively with all unsatisfied judgments or orders against all Loan Parties,
$1,000,000 (net of insurance coverage therefor that has not been denied by the
insurer), unless a stay of enforcement of such judgment or order is in effect,
by reason of a pending appeal or otherwise;

 

(i)                                     A loss, theft, damage or destruction
occurs with respect to any Collateral if the amount not covered by insurance
exceeds $1,000,000;

 

(j)                                    A Loan Party is enjoined, restrained or
in any way prevented by any Governmental Authority from conducting any material
part of its business; a Loan Party suffers the loss, revocation or termination
of any material license, permit, lease or agreement necessary to its business;
there is a cessation of any material part of a Loan Party’s business for a
material period of time; any material Collateral or Property of a Loan Party is
taken or impaired through condemnation; a Loan Party agrees to or commences any
liquidation, dissolution or winding up of its affairs; or a Loan Party is not
Solvent;

 

(k)                                 An Insolvency Proceeding is commenced by a
Loan Party; a Loan Party makes an offer of settlement, extension or composition
to its unsecured creditors generally; a trustee is appointed to take possession
of any substantial Property of or to operate any of the business of a Loan
Party; or an Insolvency Proceeding is commenced against a Loan Party and:  the
Loan Party consents to institution of the proceeding, the petition commencing
the proceeding is not timely contested by the Loan Party, the petition is not
dismissed within 30 days after filing, or an order for relief is entered in the
proceeding;

 

(l)                                     (i) An ERISA Event occurs with respect
to a Pension Plan or Multiemployer Plan that has resulted or could reasonably be
expected to result in liability of a Loan Party to a Pension Plan, Multiemployer
Plan or PBGC or that constitutes grounds for appointment of a trustee for or
termination by the PBGC of any Pension Plan or Multiemployer Plan; a Loan Party
or ERISA Affiliate fails to pay when due any installment payment with respect to
its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan;
(ii) a Termination Event shall occur which constitutes grounds for the
termination under any Applicable Law, of any Canadian Pension Plan or Canadian
MEPP or for the appointment by the appropriate Governmental Authority of a
trustee for any Canadian Pension Plan, or if any Canadian Pension Plan or
Canadian MEPP shall be terminated or any such trustee shall be requested or
appointed, or if any Loan Party is in default with respect to payments to a
Canadian Pension Plan or Canadian MEPP resulting from their complete or partial
withdrawal from such Canadian Pension Plan or Canadian MEPP or failure of any
Loan Party to make required payments to any Canadian Pension Plan or Canadian
MEPP, or any Lien arises in respect of Loan Partys (save for contribution
amounts not yet due) in connection with any Canadian Pension Plan or Canadian
MEPP, or an Unfunded Pension Liability; (iii) an event occurs which constitutes
grounds for the termination of any UK Pension Scheme or for the appointment of a
receiver, liquidator, administrator or trustee in bankruptcy of any UK Pension
Scheme or if any Loan Party is in default with respect to the terms of payment
or the performance of its obligations under any UK Pension Scheme or any Lien
arises in respect of any Loan Party in connection with any UK Pension Scheme or
(iv) any event similar to the foregoing occurs or exists with respect to a
Foreign Plan;

 

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(m)                             A Loan Party or any of its Responsible Officers
is criminally indicted or convicted for (i) a felony committed in the conduct of
the Loan Party’s business, or (ii) violating any state or federal law (including
the Controlled Substances Act, Money Laundering Control Act of 1986 and Illegal
Exportation of War Materials Act) that could lead to forfeiture of any material
Property or any Collateral;

 

(n)                                 A Change of Control occurs;

 

(o)                                 Any event occurs or condition exists that
has a Material Adverse Effect; or

 

(p)                                 Any fine is issued against any Loan Parties
by the CPSC in an amount that exceeds, individually or cumulatively with all
other fines issued by the CPSC against the Loan Parties within the prior 12
months, $1,000,000; or

 

(q)                                 Loan Parties institute a recall of products
or toys having an aggregate Value of $2,000,000  or more.

 

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

 

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

 

(b)                                 [Intentionally omitted];

 

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

 

(d)                                 Credit Bidding.  The Agent or any Lender may
purchase, in any public or private sale conducted under the provision of the UCC
(including pursuant section 9-610 and 9-620 of the UCC), the provisions of the
Bankruptcy Code (including pursuant to section 363 of the Bankruptcy Code) or at
any sale or foreclosure conducted by the Agent (whether by judicial action or
otherwise) in accordance with Applicable Law, all or any portion of the
Collateral.  The Lenders hereby irrevocably authorize the Agent, upon written
consent of the Required Lenders, to Credit Bid (in an amount and on such terms
as may be directed by the Required Lenders) and purchase at any such sale
(either directly or through one or more acquisition vehicles) all or any portion
of the Collateral on behalf of and for the benefit of the Lenders.

 

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provided, however, that upon the occurrence of any Event of Default with respect
to any Loan Party or any Subsidiary thereof under Section 8.01(k), terminate,
the unpaid principal amount of all the Term Loan and all interest and other
amounts as aforesaid shall automatically become due and payable, in each case
without further act of the Agent or any Lender.

 

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

 

8.03                        Application of Funds.  After the exercise of
remedies provided for in Section 8.01 (or after the Term Loan has automatically
become immediately due and payable as set forth in the proviso to Section 8.01),
any amounts received on account of the Obligations shall be applied by the Agent
in the following order, in each case to the extent such Obligations are allowed
or allowable in any bankruptcy or insolvency proceeding or under any Debtor
Relief Law:

 

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

 

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

 

Third, to payment of that portion of the Obligations constituting accrued and
unpaid interest on the Term Loan and other Obligations, and fees ratably among
the Lenders in proportion to the respective amounts described in this clause
Third payable to them;

 

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

 

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

 

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

 

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ARTICLE IX

THE AGENT

 

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

 

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

 

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

 

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

 

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

 

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

 

The Agent shall not be liable for any action taken or not taken by it (i) with
the Consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary, or as the Agent shall believe
in good faith shall be necessary, under the circumstances as provided in
Sections 10.01 and 8.01) or (ii) in the absence of its own gross negligence or

 

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willful misconduct as determined by a final and non-appealable judgment of a
court of competent jurisdiction.

 

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

 

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

 

9.04                        Reliance by Agent.  The Agent shall be entitled to
rely upon, and shall not incur any liability for relying upon, any notice,
request, certificate, consent, statement, instrument, document or other writing
(including, but not limited to, any electronic message, Internet or intranet
website posting or other distribution) believed by it to be genuine and to have
been signed, sent or otherwise authenticated by the proper Person.  The Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to have been made by the proper Person, and shall not incur any liability
for relying thereon.  In determining compliance with any condition hereunder to
the making of its Term Commitment, that by its terms must be fulfilled to the
satisfaction of a Lender, the Agent may presume that such condition is
satisfactory to such Lender unless the Agent shall have received written notice
to the contrary from such Lender prior to the making of Term Commitment.  The
Agent may consult with legal counsel (who may be counsel for any Loan Party),
independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with the advice of
any such counsel, accountants or experts.

 

9.05                        Delegation of Duties.  The Agent may perform any and
all of its duties and exercise its rights and powers hereunder or under any
other Loan Document by or through any one or more sub agents appointed by the
Agent.  The Agent and any such sub agent may perform any and all of its duties
and exercise its rights and powers by or through their respective Related
Parties.  The exculpatory provisions of this Article shall apply to any such sub
agent and to the Related Parties of the Agent and any such sub agent, and shall
apply to their respective activities

 

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in connection with the syndication of the credit facilities provided for herein
as well as activities as the Agent.

 

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

 

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

 

9.08                        No Other Duties, Etc.  Anything herein to the
contrary notwithstanding, none of the Bookrunners, Syndication Agent or
Documentation Agent listed on the cover page hereof

 

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shall have any powers, duties or responsibilities under this Agreement or any of
the other Loan Documents, except in its capacity as the Agent or a Lender
hereunder.

 

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

 

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

 

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

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Agent and, if the Agent shall consent
to the making of such payments directly to the Lenders, to pay to the Agent any
amount due for the reasonable compensation, expenses, disbursements and advances
of the Agent and its agents and counsel, and any other amounts due the Agent
under Sections 2.10 and 10.04.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)                                 agrees to furnish the Agent (and thereafter
at such frequency as the Agent may reasonably request) with a summary of all
Other Liabilities due or to become due to such Lender. In connection with any
distributions to be made hereunder, the Agent shall be entitled to assume that
no amounts are due to any Lender on account of Other Liabilities unless the
Agent has received written notice thereof from such Lender;

 

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

 

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

 

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

 

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

 

(f)                                   without limiting the generality of any
other indemnification provision contained in this Agreement, agrees: (i) to hold
the Agent and any such other Lender preparing a Report harmless from any action
the indemnifying Lender may take or conclusion the indemnifying Lender may reach
or draw from any Report in connection with the Term Loan that

 

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the indemnifying Lender has made or may make to the Borrowers, or the
indemnifying Lender’s participation in, or the indemnifying Lender’s purchase
of, the Term Loan; and (ii) to pay and protect, and indemnify, defend, and hold
the Agent and any such other Lender preparing a Report harmless from and
against, the claims, actions, proceedings, damages, costs, expenses, and other
amounts (including attorney costs) incurred by the Agent and any such other
Lender preparing a Report as the direct or indirect result of any third parties
who might obtain all or part of any Report through the indemnifying Lender.

 

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

 

9.14                        Indemnification of Agent.  Without limiting the
obligations of the Loan Parties hereunder, the Lenders hereby agree to indemnify
the Agent and any Related Party, as the case may be, ratably according to their
Applicable Percentages, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by, or asserted against the Agent and its Related Parties in any way relating to
or arising out of this Agreement or any other Loan Document or any action taken
or omitted to be taken by the Agent and its Related Parties in connection
therewith; provided, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent’s and its Related
Parties’ gross negligence or willful misconduct as determined by a final and
nonappealable judgment of a court of competent jurisdiction.

 

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

 

9.16                        Reserved.

 

9.17                        Co-Syndication Agents; Documentation Agent. 
Notwithstanding the provisions of this Agreement or any of the other Loan
Documents, no Person who is or becomes a Co-Syndication Agent or a Documentation
Agent shall have any powers, rights, duties, responsibilities or liabilities
with respect to this Agreement and the other Loan Documents.

 

ARTICLE X

MISCELLANEOUS

 

10.01                 Amendments, Etc.  No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no Consent to any departure by
any Loan Party therefrom, shall be effective unless in writing signed by the
Agent, with the Consent of the Required Lenders, and the Lead Borrower or the
applicable Loan Party, as the case may be, and

 

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acknowledged by the Agent, and each such waiver or Consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that no such amendment, waiver or consent shall:

 

(a)                                 increase the Term Commitment of any Lender
(or reinstate any Term Commitment terminated pursuant to Section 8.01) without
the written Consent of such Lender;

 

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

 

(c)                                  as to any Lender, reduce the principal of,
or the rate of interest specified herein on, any portion of the Term Loan held
by such Lender, or (subject to clause (iv) of the second proviso to this
Section 10.01) any fees or other amounts payable hereunder or under any other
Loan Document to or for the account of such Lender, or change the manner of
computation of any financial ratio (including any change in any applicable
defined term) used in determining the Applicable Margin that would result in a
reduction of any interest rate on any Loan or any fee payable hereunder without
the written Consent of each Lender entitled to such amount; provided, however,
that only the Consent of the Required Lenders shall be necessary (i) to amend
the definition of “Default Rate” or (ii) to amend any financial covenant
hereunder (or any defined term used therein) even if the effect of such
amendment would be to reduce the rate of interest on the Term Loan or to reduce
any fee payable hereunder;

 

(d)                                 as to any Lender, change Section 2.14 or
Section 8.03 in a manner that would alter the pro rata sharing of payments
required thereby without the written Consent of such Lender;

 

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

 

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

 

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

 

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

 

and, provided further, that (i) no amendment, waiver or Consent shall, unless in
writing and signed by the Agent in addition to the Lenders required above,
affect the rights or duties of the

 

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Agent under this Agreement or any other Loan Document; and (ii) the Fee Letter
may be amended, or rights or privileges thereunder waived, in a writing executed
only by the parties thereto.

 

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

 

10.02                 Notices; Effectiveness; Electronic Communications.

 

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

 

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

 

(ii)                                  if to any other Lender, to the address,
telecopier number, electronic mail address or telephone number specified in its
Lender Questionnaire.

 

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

 

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

 

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

 

(c)                                  Change of Address, Etc.  Each of the Loan
Parties and the Agent may change its address, telecopier or telephone number for
notices and other communications hereunder by notice to the other parties
hereto.  Each other Lender may change its address, telecopier or telephone
number for notices and other communications hereunder by notice to the Lead
Borrower and the Agent.  In addition, each Lender agrees to notify the Agent
from time to time to ensure that the Agent has on record (i) an effective
address, contact name, telephone number, telecopier number and electronic mail
address to which notices and other communications may be sent and (ii) accurate
wire instructions for such Lender.

 

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

 

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

 

10.04                 Expenses; Indemnity; Damage Waiver.

 

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

 

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(b)                                 Indemnification by the Loan Parties.  The
Loan Parties shall indemnify the Agent (and any sub-agent thereof), each other
Credit Party, and each Related Party of any of the foregoing Persons (each such
Person being called an “Indemnitee”) against, and hold each Indemnitee harmless
(on an after tax basis) from, any and all losses, claims, causes of action,
damages, liabilities, settlement payments, costs, and related expenses
(including the fees, charges and disbursements of any counsel for any
Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by
any third party or by any Borrower or any other Loan Party arising out of, in
connection with, or as a result of (i) the execution or delivery of this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the performance by the parties hereto of their respective
obligations hereunder or thereunder or the consummation of the transactions
contemplated hereby or thereby, or, in the case of the Agent (and any sub-agents
thereof) and their Related Parties only, the administration of this Agreement
and the other Loan Documents, (ii) the Term Loan or the use or proposed use of
the proceeds therefrom, (iii) any actual or alleged presence or release of
Hazardous Materials on or from any property owned or operated by any Loan Party
or any of its Subsidiaries, or any Environmental Liability related in any way to
any Loan Party or any of its Subsidiaries, (iv) any claims of, or amounts paid
by any Credit Party to, a Blocked Account Bank or other Person which has entered
into a control agreement with any Credit Party hereunder, or (v) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory, whether
brought by a third party or by any Borrower or any other Loan Party or any of
the Loan Parties’ directors, shareholders or creditors, and regardless of
whether any Indemnitee is a party thereto, in all cases, whether or not caused
by or arising, in whole or in part, out of the comparative, contributory or sole
negligence of the Indemnitee; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses (x) are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee or (y) result from a claim
brought by a Borrower or any other Loan Party against an Indemnitee for breach
in bad faith of such Indemnitee’s obligations hereunder or under any other Loan
Document, if the Borrowers or such Loan Party has obtained a final and
nonappealable judgment in its favor on such claim as determined by a court of
competent jurisdiction.

 

(c)                                  Reimbursement by Lenders.  Without limiting
their obligations under Section 9.14 hereof, to the extent that the Loan Parties
for any reason fail to indefeasibly pay any amount required under subsection
(a) or (b) of this Section to be paid by it, each Lender severally agrees to pay
to the Agent (or any such sub-agent), or such Related Party, as the case may be,
such Lender’s Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount, provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against the Agent (or any such sub-agent) or against any Related Party
of any of the foregoing acting for the Agent (or any such sub-agent) in
connection with such capacity.  The obligations of the Lenders under this
subsection (c) are subject to the provisions of Section 2.13(d).

 

(d)                                 Waiver of Consequential Damages, Etc.  To
the fullest extent permitted by applicable Law, the Loan Parties shall not
assert, and hereby waive, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as

 

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opposed to direct or actual damages) arising out of, in connection with, or as a
result of, this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby, the transactions contemplated hereby or thereby,
any Loan or the use of the proceeds thereof.  No Indemnitee shall be liable for
any damages arising from the use by unintended recipients of any information or
other materials distributed to such unintended recipients by such Indemnitee
through telecommunications, electronic or other information transmission systems
in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby other than for direct or actual
damages resulting from the gross negligence or willful misconduct of such
Indemnitee as determined by a final and nonappealable judgment of a court of
competent jurisdiction.

 

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

 

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

 

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

 

10.06                 Successors and Assigns.

 

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

 

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

 

(i)                                     Minimum Amounts

 

(A)                               in the case of an assignment of the entire
remaining amount of the assigning Lender’s Term Loan at the time owing to it or
in the case of an assignment to a Lender or an Affiliate of a Lender or an
Approved Fund with respect to a Lender, no minimum amount need be assigned; and

 

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

 

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

 

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

 

(iv)                              Assignment and Assumption.  The parties to
each assignment shall execute and deliver to the Agent an Assignment and
Assumption, together with a processing and recordation fee of $3,500, provided,
however, that the Agent may, in its sole discretion, elect to waive such
processing and recordation fee in the case of any assignment. The assignee, if
it shall not be a Lender, shall deliver to the Agent an Lender Questionnaire.

 

Subject to acceptance and recording thereof by the Agent pursuant to subsection
(c) of this Section, from and after the effective date specified in each
Assignment and Assumption, the assignee thereunder shall be a party to this
Agreement and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Assumption, be released from its obligations
under this Agreement (and, in the case of an Assignment and Assumption covering
all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto) but shall continue

 

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to be entitled to the benefits of Sections 3.01, 3.04 and 10.04 with respect to
facts and circumstances occurring prior to the effective date of such
assignment.  Upon request, the Borrowers (at their expense) shall execute and
deliver a Term Note to the assignee Lender.  Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this subsection shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with
Section 10.06(d).

 

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

 

(d)                                 Participations.  Any Lender may at any time,
without the consent of, or notice to, the Loan Parties or the Agent, sell
participations to any Person (other than a natural person or the Loan Parties or
any of the Loan Parties’ Affiliates or Subsidiaries) (each, a “Participant”) in
all or a portion of such Lender’s rights and/or obligations under this Agreement
(including all or a portion of the Term Loan owing to it); provided that
(i) such Lender’s obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations and (iii) the Loan Parties, the Agent and
the Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement.  Any
Participant shall agree in writing to comply with all confidentiality
obligations set forth in Section 10.07 as if such Participant was a Lender
hereunder.  Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, waiver or other modification described in the first proviso to
Section 10.01 that affects such Participant.  Subject to subsection (e) of this
Section, the Loan Parties agree that each Participant shall be entitled to the
benefits of Sections 3.01 and 3.04 to the same extent as if it were a Lender and
had acquired its interest by assignment pursuant to Section (b).  To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 10.08 as though it were a Lender, provided such Participant agrees to be
subject to Section 2.14 as though it were a Lender.  Each Lender, acting for
this purpose as an agent of the Loan Parties, shall maintain at its offices a
record of each agreement or instrument effecting any participation and a
register for the recordation of the names and addresses of its Participants and
their rights with respect to principal amounts and other Obligations from time
to time (each a “Participation Register”).  The entries in each Participation
Register shall be conclusive absent manifest error and the Loan Parties, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in a Participant Register as a Participant for all purposes of this
Agreement (including, for the avoidance of doubt, for purposes of entitlement to
benefits under Section 3.01, Section 3.04, and

 

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Section 10.08).  The Participation Register shall be available for inspection by
the Lead Borrower and any Lender, at any reasonable time and from time to time
upon reasonable prior notice.

 

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

 

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

 

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

 

(h)                                 Reserved.

 

(i)                                     Transactions by Salus Entity. 
Notwithstanding anything in this Agreement or any other Loan Document to the
contrary, (A) neither Salus nor any Affiliate thereof (each, a “Salus Entity”)
shall be required to comply with this Section 10.06 in connection with any
transaction involving any other Salus Entity or any of its or their lenders or
funding or financing sources, and no Salus Entity shall have any obligation to
disclose any such transaction to any Person, and (B) there shall be no
limitation or restriction on (i) the ability of any Salus Entity to assign or
otherwise transfer its rights and/or obligation under this Agreement or any
other Loan Document, any Term Commitment, the Term Loan, or any other Obligation
to any other Salus Entity or any lender or financing or funding source of a
Salus Entity or (ii) any such lender’s or funding or financing source’s ability
to assign or otherwise transfer its rights and/or obligations under this
Agreement or any other Loan Document, any Term Commitment, the Term Loan, or any
other Obligation; provided, however, that Salus shall continue to be liable as a
“Lender” under this Agreement and the other Loan Documents unless such other
Person complies with the provisions of this Agreement to become a “Lender”.

 

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10.07                 Treatment of Certain Information; Confidentiality.  Each
of the Credit Parties agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its
Affiliates and to its and its Affiliates’ respective partners, directors,
officers, employees, agents, funding sources, attorneys, advisors and
representatives (it being understood that the Persons to whom such disclosure is
made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority purporting to have jurisdiction over it (including
any self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable Laws or regulations or
by any subpoena or similar legal process, (d) to any other party hereto, (e) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any action or proceeding relating to this Agreement or any other
Loan Document or the enforcement of rights hereunder or thereunder, (f) subject
to an agreement containing provisions substantially the same as those of this
Section, to (i) any assignee of or Participant in, or any prospective assignee
of or Participant in, any of its rights or obligations under this Agreement or
(ii) any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to any Loan Party and its obligations, (g) with
the consent of the Lead Borrower or (h) to the extent such Information
(x) becomes publicly available other than as a result of a breach of this
Section or (y) becomes available to any Credit Party or any of their respective
Affiliates on a non-confidential basis from a source other than the Loan
Parties.

 

For purposes of this Section, “Information” means all information received from
the Loan Parties or any Subsidiary thereof relating to the Loan Parties or any
Subsidiary thereof or their respective businesses, other than any such
information that is available to any Credit Party on a non-confidential basis
prior to disclosure by the Loan Parties or any Subsidiary thereof, provided
that, in the case of information received from any Loan Party or any Subsidiary
after the Closing Date, such information is clearly identified at the time of
delivery as confidential.  Any Person required to maintain the confidentiality
of Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.

 

Each of the Credit Parties acknowledges that (a) the Information may include
material non-public information concerning the Loan Parties or a Subsidiary, as
the case may be, (b) it has developed compliance procedures regarding the use of
material non-public information and (c) it will handle such material non-public
information in accordance with applicable Law, including Federal and state
securities Laws.

 

10.08                 Right of Setoff.  Subject to the provisions of the
ABL/Term Loan Intercreditor Agreement, if an Event of Default shall have
occurred and be continuing or if any Lender shall have been served with a
trustee process or similar attachment relating to property of a Loan Party, each
Lender, and each of their respective Affiliates is hereby authorized at any time
and from time to time, after obtaining the prior written consent of the Agent or
the Required Lenders, to the fullest extent permitted by applicable law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by such Lender, or any such
Affiliate to or for the credit or the account of the Borrowers or any other Loan
Party against any and all of the

 

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Obligations now or hereafter existing under this Agreement or any other Loan
Document to such Lender, regardless of the adequacy of the Collateral, and
irrespective of whether or not such Lender shall have made any demand under this
Agreement or any other Loan Document and although such obligations of the
Borrowers or such Loan Party may be contingent or unmatured or are owed to a
branch or office of such Lender different from the branch or office holding such
deposit or obligated on such indebtedness.  The rights of each Lender and its
respective Affiliates under this Section are in addition to other rights and
remedies (including other rights of setoff) that such Lender or its respective
Affiliates may have.  Each Lender agrees to notify the Lead Borrower and the
Agent promptly after any such setoff and application, provided that the failure
to give such notice shall not affect the validity of such setoff and
application.

 

10.09                 Interest Rate Limitation.  Notwithstanding anything to the
contrary contained in any Loan Document, the interest paid or agreed to be paid
under the Loan Documents shall not exceed the maximum rate of non-usurious
interest permitted by Applicable Law (the “Maximum Rate”).  If the Agent or any
Lender shall receive interest in an amount that exceeds the Maximum Rate, the
excess interest shall be applied to the principal of the Loans or, if it exceeds
such unpaid principal, refunded to the Borrowers.  In determining whether the
interest contracted for, charged, or received by the Agent or a Lender exceeds
the Maximum Rate, such Person may, to the extent permitted by applicable Law,
(a) characterize any payment that is not principal as an expense, fee, or
premium rather than interest, (b) exclude voluntary prepayments and the effects
thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal
parts the total amount of interest throughout the contemplated term of the
Obligations hereunder.

 

10.10                 Counterparts; Integration; Effectiveness.  This Agreement
may be executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract.  This Agreement and the other
Loan Documents constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.  Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Agent and when the Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto.  Delivery of an executed counterpart of a signature
page of this Agreement by telecopy, pdf., or other electronic transmission shall
be as effective as delivery of a manually executed counterpart of this
Agreement.

 

10.11                 Survival.  All representations and warranties made
hereunder and in any other Loan Document or other document delivered pursuant
hereto or thereto or in connection herewith or therewith shall survive the
execution and delivery hereof and thereof.  Such representations and warranties
have been or will be relied upon by the Credit Parties, and shall continue in
full force and effect as long as the Term Loan or any other Obligation hereunder
shall remain unpaid or unsatisfied.  Further, the provisions of Sections 3.01,
3.04 and 10.04 and Article IX shall survive and remain in full force and effect
regardless of the repayment of the Obligations or the termination of this
Agreement or any provision hereof.

 

10.12                 Severability.  If any provision of this Agreement or the
other Loan Documents is held to be illegal, invalid or unenforceable, (a) the
legality, validity and enforceability of the remaining provisions of this
Agreement and the other Loan Documents shall not be affected or

 

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impaired thereby and (b) the parties shall endeavor in good faith negotiations
to replace the illegal, invalid or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of
the illegal, invalid or unenforceable provisions.  The invalidity of a provision
in a particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.

 

10.13                 Replacement of Lenders.  If any Lender requests
compensation under Section 3.04, or if the Borrowers are required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 3.01, then the Borrowers may, at their sole
expense and effort, upon notice to such Lender and the Agent, require such
Lender to assign and delegate, without recourse (in accordance with and subject
to the restrictions contained in, and consents required by, Section 10.06), all
of its interests, rights and obligations under this Agreement and the related
Loan Documents to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment), provided that:

 

(a)                                 the Borrowers shall have paid to the Agent
the assignment fee specified in Section 10.06(b);

 

(b)                                 such Lender shall have received payment of
an amount equal to the outstanding principal of its Term Commitment, accrued
interest thereon, accrued fees and all other amounts payable to it hereunder and
under the other Loan Documents (including any amounts under Section 3.05) from
the assignee (to the extent of such outstanding principal and accrued interest
and fees) or the Borrowers (in the case of all other amounts);

 

(c)                                  in the case of any such assignment
resulting from a claim for compensation under Section 3.04 or payments required
to be made pursuant to Section 3.01, such assignment will result in a reduction
in such compensation or payments thereafter; and

 

(d)                                 such assignment does not conflict with
applicable Laws.

 

A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrowers to require such assignment and delegation
cease to apply.

 

10.14                 Governing Law; Jurisdiction; Etc.

 

(a)                                 GOVERNING LAW.  THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT
INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

(b)                                 SUBMISSION TO JURISDICTION.  EACH LOAN PARTY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW
YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF
NEW YORK, AND ANY

 

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APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE LOAN PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE
LOAN PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS
AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT
PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN
THE COURTS OF ANY JURISDICTION.

 

(c)                                  WAIVER OF VENUE.  EACH LOAN PARTY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS
SECTION.  EACH OF THE LOAN PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM
TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(d)                                 SERVICE OF PROCESS.  EACH PARTY HERETO
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN
SECTION 10.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY
HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

(e)                                  ACTIONS COMMENCED BY LOAN PARTIES. EACH
LOAN PARTY AGREES THAT ANY ACTION COMMENCED BY ANY LOAN PARTY ASSERTING ANY
CLAIM OR COUNTERCLAIM ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT SHALL BE BROUGHT SOLELY IN A COURT OF THE STATE OF NEW YORK
SITTING IN NEW YORK COUNTY OR ANY FEDERAL COURT SITTING THEREIN AS THE AGENT
MAY ELECT IN ITS SOLE DISCRETION AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF
SUCH COURTS WITH RESPECT TO ANY SUCH ACTION.

 

10.15                 Waiver of Jury Trial.  EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR
ANY OTHER THEORY).

 

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EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

10.16                 No Advisory or Fiduciary Responsibility.  In connection
with all aspects of each transaction contemplated hereby, the Loan Parties each
acknowledge and agree that: (i) the credit facility provided for hereunder and
any related arranging or other services in connection therewith (including in
connection with any amendment, waiver or other modification hereof or of any
other Loan Document) are an arm’s-length commercial transaction between the Loan
Parties, on the one hand, and the Credit Parties, on the other hand, and each of
the Loan Parties is capable of evaluating and understanding and understands and
accepts the terms, risks and conditions of the transactions contemplated hereby
and by the other Loan Documents (including any amendment, waiver or other
modification hereof or thereof); (ii) in connection with the process leading to
such transaction, each Credit Party is and has been acting solely as a principal
and is not the financial advisor, agent or fiduciary, for the Loan Parties or
any of their respective Affiliates, stockholders, creditors or employees or any
other Person; (iii) none of the Credit Parties has assumed or will assume an
advisory, agency or fiduciary responsibility in favor of the Loan Parties with
respect to any of the transactions contemplated hereby or the process leading
thereto, including with respect to any amendment, waiver or other modification
hereof or of any other Loan Document (irrespective of whether any of the Credit
Parties has advised or is currently advising any Loan Party or any of its
Affiliates on other matters) and none of the Credit Parties has any obligation
to any Loan Party or any of its Affiliates with respect to the transactions
contemplated hereby except those obligations expressly set forth herein and in
the other Loan Documents; (iv) the Credit Parties and their respective
Affiliates may be engaged in a broad range of transactions that involve
interests that differ from those of the Loan Parties and their respective
Affiliates, and none of the Credit Parties has any obligation to disclose any of
such interests by virtue of any advisory, agency or fiduciary relationship; and
(v) the Credit Parties have not provided and will not provide any legal,
accounting, regulatory or tax advice with respect to any of the transactions
contemplated hereby (including any amendment, waiver or other modification
hereof or of any other Loan Document) and each of the Loan Parties has consulted
its own legal, accounting, regulatory and tax advisors to the extent it has
deemed appropriate.  Each of the Loan Parties hereby waives and releases, to the
fullest extent permitted by law, any claims that it may have against each of the
Credit Parties with respect to any breach or alleged breach of agency or
fiduciary duty.

 

10.17                 USA PATRIOT Act Notice.  Each Lender that is subject to
the USA Patriot Act (as hereinafter defined) and the Agent (for itself and not
on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “USA Patriot Act”), it is required to obtain, verify
and record information that identifies each Loan Party, which information
includes the name and address of each Loan Party and other information that will
allow such Lender or the Agent, as applicable, to identify each Loan Party in
accordance with the USA Patriot Act. Each

 

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Loan Party is in compliance, in all material respects, with the USA Patriot
Act.  No part of the proceeds of the Term Loan will be used by the Loan Parties,
directly or indirectly, for any payments to any governmental official or
employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

10.18                 Foreign Asset Control Regulations.  Neither of the advance
of the Term Loan nor the use of the proceeds of any thereof will violate the
Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading
With the Enemy Act”) or any of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended)
(the “Foreign Asset Control Regulations”) or any enabling legislation or
executive order relating thereto (which for the avoidance of doubt shall
include, but shall not be limited to (a) Executive Order 13224 of September 21,
2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the
“Executive Order”) and (b) the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Public Law 107-56)).  Furthermore, none of the Borrowers or their Affiliates
(a) is or will become a “blocked person” as described in the Executive Order,
the Trading With the Enemy Act or the Foreign Assets Control Regulations or
(b) engages or will engage in any dealings or transactions, or be otherwise
associated, with any such “blocked person” or in any manner violative of any
such order.

 

10.19                 Time of the Essence.  Time is of the essence of the Loan
Documents.

 

10.20                 Press Releases.

 

(a)                                 Each Credit Party executing this Agreement
agrees that neither it nor its Affiliates will in the future issue any press
releases or other public disclosure using the name of the Agent or its
Affiliates or referring to this Agreement or the other Loan Documents without at
least two (2) Business Days’ prior notice to the Agent and without the prior
written consent of the Agent unless (and only to the extent that) such Credit
Party or Affiliate is required to do so under Applicable Law and then, in any
event, such Credit Party or Affiliate will consult with the Agent before issuing
such press release or other public disclosure.

 

(b)                                 Each Loan Party consents to the publication
by the Agent or any Lender of advertising material, including any “tombstone” or
comparable advertising, on its website or in other marketing materials of Agent,
relating to the financing transactions contemplated by this Agreement using any
Loan Party’s name, product photographs, logo, trademark or other insignia.  The
Agent or such Lender shall provide a draft reasonably in advance of any
advertising material to the Lead Borrower for review and comment prior to the
publication thereof.  The Agent reserves the right to provide to industry trade
organizations and loan syndication and pricing reporting services information
necessary and customary for inclusion in league table measurements.

 

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10.21                 Additional Waivers.

 

(a)                                 The Obligations are the joint and several
obligation of each Loan Party. To the fullest extent permitted by Applicable
Law, the obligations of each Loan Party shall not be affected by (i) the failure
of any Credit Party to assert any claim or demand or to enforce or exercise any
right or remedy against any other Loan Party under the provisions of this
Agreement, any other Loan Document or otherwise, (ii) any rescission, waiver,
amendment or modification of, or any release from any of the terms or provisions
of, this Agreement or any other Loan Document, or (iii) the failure to perfect
any security interest in, or the release of, any of the Collateral or other
security held by or on behalf of the Agent or any other Credit Party.

 

(b)                                 The obligations of each Loan Party  shall
not be subject to any reduction, limitation, impairment or termination for any
reason (other than the indefeasible payment in full in cash of the Obligations
after the termination of the Term Commitments), including any claim of waiver,
release, surrender, alteration or compromise of any of the Obligations, and
shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of any of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Loan Party hereunder shall
not be discharged or impaired or otherwise affected by the failure of the Agent
or any other Credit Party to assert any claim or demand or to enforce any remedy
under this Agreement, any other Loan Document or any other agreement, by any
waiver or modification of any provision of any thereof, any default, failure or
delay, willful or otherwise, in the performance of any of the Obligations, or by
any other act or omission that may or might in any manner or to any extent vary
the risk of any Loan Party or that would otherwise operate as a discharge of any
Loan Party as a matter of law or equity (other than the indefeasible payment in
full in cash of all the Obligations after the termination of the Term
Commitments).

 

(c)                                  To the fullest extent permitted by
applicable Law, each Loan Party waives any defense based on or arising out of
any defense of any other Loan Party or the unenforceability of the Obligations
or any part thereof from any cause, or the cessation from any cause of the
liability of any other Loan Party, other than the indefeasible payment in full
in cash of all the Obligations and the termination of the Term Commitments. The
Agent and the other Credit Parties may, at their election, foreclose on any
security held by one or more of them by one or more judicial or non-judicial
sales, accept an assignment of any such security in lieu of foreclosure,
compromise or adjust any part of the Obligations, make any other accommodation
with any other Loan Party, or exercise any other right or remedy available to
them against any other Loan Party, without affecting or impairing in any way the
liability of any Loan Party hereunder except to the extent that all the
Obligations have been indefeasibly paid in full in cash and the Term Commitments
have been terminated.  Each Loan Party waives any defense arising out of any
such election even though such election operates, pursuant to applicable Law, to
impair or to extinguish any right of reimbursement or subrogation or other right
or remedy of such Loan Party against any other Loan Party, as the case may be,
or any security.

 

(d)                                 Each Borrower is obligated to repay the
Obligations as joint and several obligors under this Agreement.  Upon payment by
any Loan Party of any Obligations, all rights of such Loan Party against any
other Loan Party arising as a result thereof by way of right of subrogation,
contribution, reimbursement, indemnity or otherwise shall in all respects be

 

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subordinate and junior in right of payment to the prior indefeasible payment in
full in cash of all the Obligations and the termination of the Term Commitments.
In addition, any indebtedness of any Loan Party now or hereafter held by any
other Loan Party is hereby subordinated in right of payment to the prior
indefeasible payment in full of the Obligations and no Loan Party will demand,
sue for or otherwise attempt to collect any such indebtedness.  If any amount
shall erroneously be paid to any Loan Party on account of (i) such subrogation,
contribution, reimbursement, indemnity or similar right or (ii) any such
indebtedness of any Loan Party, such amount shall be held in trust for the
benefit of the Credit Parties and shall forthwith be paid to the Agent to be
credited against the payment of the Obligations, whether matured or unmatured,
in accordance with the terms of this Agreement and the other Loan Documents. 
Subject to the foregoing, to the extent that any Borrower shall, under this
Agreement as a joint and several obligor, repay any of the Obligations
constituting Loans made to another Borrower hereunder or other Obligations
incurred directly and primarily by any other Borrower (an “Accommodation
Payment”), then the Borrower making such Accommodation Payment shall be entitled
to contribution and indemnification from, and be reimbursed by, each of the
other Borrowers in an amount, for each of such other Borrowers, equal to a
fraction of such Accommodation Payment, the numerator of which fraction is such
other Borrower’s Allocable Amount and the denominator of which is the sum of the
Allocable Amounts of all of the Borrowers.  As of any date of determination, the
“Allocable Amount” of each Borrower shall be equal to the maximum amount of
liability for Accommodation Payments which could be asserted against such
Borrower hereunder without (a) rendering such Borrower “insolvent” within the
meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the Uniform
Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent
Conveyance Act (“UFCA”), (b) leaving such Borrower with unreasonably small
capital or assets, within the meaning of Section 548 of the Bankruptcy Code,
Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Borrower
unable to pay its debts as they become due within the meaning of Section 548 of
the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA.

 

10.22                 No Strict Construction.  The parties hereto have
participated jointly in the negotiation and drafting of this Agreement.  In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.

 

10.23                 Attachments.  The exhibits, schedules and annexes attached
to this Agreement are incorporated herein and shall be considered a part of this
Agreement for the purposes stated herein, except that in the event of any
conflict between any of the provisions of such exhibits and the provisions of
this Agreement, the provisions of this Agreement shall prevail.

 

10.24                 ABL/Term Loan Intercreditor Agreement.  Notwithstanding
anything herein to the contrary, each of Agent, on behalf of the Lenders, and
each Loan Party acknowledges that the Lien and security interests granted to
Agent pursuant to this Agreement and the other Loan Documents and the exercise
of any right or remedy by Agent thereunder and the obligations of the Loan
Parties under this Agreement and the other Loan Documents are subject to the
provisions of the ABL/Term Loan Intercreditor Agreement, which Agent is hereby
directed by the Lenders to execute and deliver, and perform in accordance with
its terms.  In the event of any conflict between the terms of the ABL/Term Loan
Intercreditor Agreement and this Agreement

 

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or any other Loan Document, the terms of the ABL/Term Loan Intercreditor
Agreement shall govern and control and notwithstanding anything to the contrary
herein, Agent and the Lenders hereby agree and acknowledge that prior to the
Discharge of ABL Obligations any requirement of this Agreement to deliver any
ABL Priority Collateral, or the proceeds thereof, to Agent shall be deemed
satisfied by delivery of such ABL Priority Collateral or the proceeds thereof to
the ABL Agent.

 

[Remainder of page intentionally left blank; signature begin on following page]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date first above
written.

 

 

BORROWERS:

 

 

 

SUMMER INFANT, INC.

 

 

 

By:

/s/ Paul Francese

 

 

 

 

Name:

Paul Francese

 

 

 

 

Title:

CFO

 

 

 

 

 

SUMMER INFANT (USA), INC.

 

 

 

By:

/s/ Paul Francese

 

 

 

 

Name:

Paul Francese

 

 

 

 

Title:

CFO

 

 

 

 

 

GUARANTORS:

 

 

 

SUMMER INFANT EUROPE LIMITED

 

 

 

By:

/s/ Jason P. Macari

 

 

 

 

Name:

Jason P. Macari

 

 

 

 

Title:

Director

 

 

 

 

 

SUMMER INFANT CANADA, LIMITED

 

 

 

By:

/s/ David S. Hemendinger

 

 

 

 

Name:

David S. Hemendinger

 

 

 

 

Title:

COO

 

Signature Page to Term Loan Agreement

 

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

 

 

SALUS CAPITAL PARTNERS, LLC, as Agent

 

 

 

 

 

By:

/s/ Jonas D.L. McCray

 

Name:

Jonas D.L. McCray

 

Title:

Senior Vice President

 

Signature Page to Term Loan Agreement

 

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

 

 

SALUS CAPITAL PARTNERS, LLC, as a Lender

 

 

 

 

 

By:

/s/ Jonas D.L. McCray

 

Name:

Jonas D.L. McCray

 

Title:

Senior Vice President

 

Signature Page to Term Loan Agreement

 

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

 

EXHIBIT A

 

Term Note

 

FOR VALUE RECEIVED, the undersigned (the “Borrowers”), hereby jointly and
severally promise to pay to [                                          ] or
registered assigns (the “Lender”), in accordance with the provisions of the Term
Loan Agreement (as hereinafter defined), the principal sum of
[                                       ($                                )],
or, if less, the aggregate unpaid principal balance of each Committed Loan from
time to time made by the Lender to the Borrowers under that certain Term Loan
Agreement, dated as of February 28, 2013, among the Borrowers named therein, the
Guarantors named therein, the Lenders from time to time party thereto, and Salus
Capital Partners, LLC, as Agent (as amended, restated, extended, supplemented or
otherwise modified in writing from time to time, the “Term Loan Agreement;” the
terms defined therein being used herein as therein defined).

 

The Borrowers promise to pay interest on the unpaid principal amount of the Term
Loan made by the Lender from the date of such Term Loan until such principal
amount is paid in full, at such interest rates and at such times as provided in
the Term Loan Agreement.  All payments of principal and interest shall be made
to the Agent for the account of the Lender in Dollars in immediately available
funds at the Agent’s Office.  If any amount is not paid in full when due
hereunder, such unpaid amount shall bear interest, to be paid upon demand, from
the due date thereof until the date of actual payment (and before as well as
after judgment) computed at the per annum rate set forth in the Term Loan
Agreement.

 

This Term Note is one of the Term Notes referred to in the Term Loan Agreement
and the holder is entitled to the benefits thereof.  The Term Loan made by the
Lender shall be evidenced by one or more loan accounts or records maintained by
the Lender in the ordinary course of business.  The Lender may also attach
schedules to this Term Note and endorse thereon the date, amount and maturity of
its Term Loans and payments with respect thereto.

 

Each Borrower, for itself, its successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
non-payment of this Term Note.

 

Delivery of an executed counterpart of a signature page of this Term Note by fax
transmission or other electronic mail transmission (e.g. “pdf” or “tif”) shall
be effective as delivery of a manually executed counterpart of this Term Note.

 

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF, BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

[Exhibit A]

 

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

 

IN WITNESS THEREOF, the Borrowers have caused this Term Note to be duly executed
as of the date set forth above.

 

 

SUMMER INFANT (USA), INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

SUMMER INFANT, INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

[Signature Page to Term Note]

 

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EXHIBIT B

 

Compliance Certificate

 

Financial Statement Date:  [                ,         ]

 

TO:                                                                          
Salus Capital Partners, LLC, as Agent

 

RE:                                                                          
Term Loan Agreement, dated as of February 28, 2013, by and among Summer Infant
(USA), Inc., a Rhode Island corporation for itself and as Lead Borrower for the
other Borrowers party thereto from time to time (in such capacity, the “Lead
Borrower”), the other Borrowers party thereto from time to time, the Guarantors
party thereto from time to time, the Lenders party thereto from time to time,
and Salus Capital Partners, LLC, as Agent (as amended, modified, extended,
restated, replaced, or supplemented from time to time, the “Term Loan
Agreement”; capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Term Loan Agreement)

 

DATE:                                                          [Date]

 

The undersigned Responsible Officer hereby certifies, in [his/her] capacity as a
Responsible Officer and not in [his/her] individual capacity, as of the date
hereof, that [he/she] is the [                                          ] of the
Lead Borrower, and that, as such, [he/she] is authorized to execute and deliver
this Compliance Certificate to the Agent on the behalf of the Lead Borrower and
the other Loan Parties, and that:

 

[Use following paragraph 1 for fiscal year-end financial statements]

 

1.                                      The Lead Borrower has delivered the
year-end audited Consolidated and consolidating financial statements required by
Section 6.02(a) of the Term Loan Agreement for the Fiscal Year of the Lead
Borrower and its Subsidiaries ended as of the above date, together with the
report and opinion of an independent certified public accountant required by
such section.  Such consolidating financial statements are fairly stated in all
material respects when considered in relation to such Consolidated financial
statements of the Lead Borrower and its Subsidiaries.

 

[Use following paragraph 1 for fiscal quarter-end financial statements]

 

1.                                      The Lead Borrower has delivered the
unaudited financial Consolidated and consolidating statements required by
Section 6.02(b) of the Term Loan Agreement for the Fiscal Quarter of the Lead
Borrower and its Subsidiaries ended as of the above date.  Such Consolidated
financial statements fairly present the financial condition, results of
operations, Shareholders’ Equity and cash flows of the Lead Borrower and its
Subsidiaries as of the end of such Fiscal Quarter in accordance with GAAP,
subject only to normal year-end audit

 

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

 

adjustments and the absence of footnotes, and such consolidating financial
statements are fairly stated in all material respects when considered in
relation to such Consolidated financial statements of the Lead Borrower and its
Subsidiaries.

 

[Use following paragraph 1 for fiscal month-end financial statements]

 

1.                                      The Lead Borrower has delivered the
unaudited financial Consolidated and consolidating statements required by
Section 6.02(c) of the Term Loan Agreement for the Fiscal Month of the Lead
Borrower and its Subsidiaries ended as of the above date.  Such Consolidated
financial statements fairly present the financial condition, results of
operations, Shareholders’ Equity and cash flows of the Lead Borrower and its
Subsidiaries as of the end of such Fiscal Month in accordance with GAAP, subject
only to normal quarterly and year-end audit adjustments and the absence of
footnotes, and such consolidating financial statements are fairly stated in all
material respects when considered in relation to such Consolidated financial
statements of the Lead Borrower and its Subsidiaries.

 

2.                                      The undersigned has reviewed and is
familiar with the terms of the Term Loan Agreement and has made, or has caused
to be made under [his/her] supervision, a detailed review of the transactions
and condition (financial or otherwise) of the Lead Borrower and its Subsidiaries
during the accounting period covered by such financial statements.

 

3.                                      A review of the activities of the Lead
Borrower and its Subsidiaries during such fiscal period has been made under the
supervision of the undersigned with a view to determining whether during such
fiscal period the Lead Borrower and each of the other Loan Parties performed and
observed all its obligations under the Loan Documents, and

 

[select one:]

 

[to the best knowledge of the undersigned, during such fiscal period each of the
Loan Parties performed and observed each covenant and condition of the Loan
Documents applicable to it, and no Default or Event of Default has occurred and
is continuing.]

 

[or]

 

[to the best knowledge of the undersigned, the following covenants or conditions
have not been performed or observed and the following is a list of each such
Default and Event of Default and its nature and status:]

 

Delivery of an executed counterpart of a signature page of this Compliance
Certificate by fax transmission or other electronic mail transmission (e.g.
“pdf” or “tif”) shall be effective as delivery of a manually executed
counterpart of this Compliance Certificate.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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SUMMER INFANT (USA), INC., as Lead Borrower

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

[Signature Page to Compliance Certificate]

 

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EXHIBIT C

 

Assignment and Assumption

 

This Assignment and Assumption (this “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and [between][among]
[the][each](1) Assignor identified in item 1 below ([the][each, an] “Assignor”)
and [the][each](2) Assignee identified in item 2 below ([the][each, an]
“Assignee”).  [It is understood and agreed that the rights and obligations of
[the Assignors][the Assignees](3) hereunder are several and not joint.](4) 
Capitalized terms used but not defined herein shall have the meanings given to
them in the Term Loan Agreement identified below (the “Term Loan Agreement”),
receipt of a copy of which is hereby acknowledged by the Assignee.  The Standard
Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to
and incorporated herein by reference and made a part of this Assignment and
Assumption as if set forth herein in full.

 

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and
assigns to [the Assignee][the respective Assignees], and [the][each] Assignee
hereby irrevocably purchases and assumes from [the Assignor][the respective
Assignors], subject to and in accordance with the Standard Terms and Conditions
and the Term Loan Agreement, as of the Effective Date inserted by the Agent as
contemplated below (a) all of [the Assignor’s][the respective Assignors’] rights
and obligations in [its capacity as a Lender][their respective capacities as
Lenders] under the Term Loan Agreement and any other Loan Documents in the
amount[s] and equal to the percentage interest[s] identified below of all the
outstanding rights and obligations under the respective facilities identified
below and (b) to the extent permitted to be assigned under applicable law, all
claims, suits, causes of action and any other right of [the Assignor (in its
capacity as a Lender)][the respective Assignors (in their respective capacities
as Lenders)] against any Person, whether known or unknown, arising under or in
connection with the Term Loan Agreement, any other Loan Documents or the loan
transactions governed thereby or in any way based on or related to any of the
foregoing, including, but not limited to, contract claims, tort claims,
malpractice claims, statutory claims and all other claims at law or in equity
related to the rights and obligations sold and assigned pursuant to clause
(a) above (the rights and obligations sold and assigned by [the][any] Assignor
to [the][any] Assignee pursuant to clauses (a) and (b) above being referred to
herein collectively as [the][an] “Assigned Interest”).  Each such sale and
assignment is without recourse to [the][any] Assignor and, except as expressly
provided in this Assignment and Assumption, without representation or warranty
by [the][any] Assignor.

 

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(1)                                 For bracketed language here and elsewhere in
this form relating to the Assignor(s), if the assignment is from a single
Assignor, choose the first bracketed language.  If the assignment is from
multiple Assignors, choose the second bracketed language.

 

(2)                                 For bracketed language here and elsewhere in
this form relating to the Assignee(s), if the assignment is to a single
Assignee, choose the first bracketed language.  If the assignment is to multiple
Assignees, choose the second bracketed language.

 

(3)                                 Select as appropriate.

 

(4)                                 Include bracketed language if there are
either multiple Assignors or multiple Assignees.

 

[Exhibit C]

 

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1.                                      Assignor[s]:
                                                        

                                                         

 

2.                                      Assignee[s]:
                                                        

                                                         

[for each Assignee, indicate [Affiliate][Approved Fund] of Lender]]

 

3.                                      Lead Borrower:  Summer Infant
(USA), Inc., a Rhode Island corporation

 

4.                                      Agent:  Salus Capital Partners, LLC, as
the administrative agent and the collateral agent under the Term Loan Agreement

 

5.                                      Term Loan Agreement:  Term Loan
Agreement, dated as of February 28, 2013 (as amended, restated, supplemented or
otherwise modified and in effect from time to time), among the Lead Borrower,
the other Borrowers party thereto, the Guarantors party thereto, the Lenders
party thereto from time to time, and Salus Capital Partners, LLC, as Agent

 

6.                                      Assigned Interest:

 

Assignor[s](5)

 

Assignee[s](6)

 

Amount of
Assignor’s
Loans(7)

 

Amount
of
Loans
Assigned(8)

 

Percentage
of
Assignor’s
Loans
Assigned(9)

 

Resulting
Loans
Amount
for
Assignor

 

Resulting
Loans
Amount
for
Assignee

 

 

 

 

 

$

 

 

$

 

 

 

%

$

 

 

$

 

 

 

 

 

 

$

 

 

$

 

 

 

%

$

 

 

$

 

 

 

 

 

 

$

 

 

$

 

 

 

%

$

 

 

$

 

 

 

[7.                                  Trade Date:
                                      ](10)

 

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(5)  List each Assignor, as appropriate.

 

(6)  List each Assignee, as appropriate.

 

(7)  Amounts in this column and in the column immediately to the right to be
adjusted by the counterparties to take into account any payments or prepayments
made between the Trade Date and the Effective Date.

 

(8)  Subject to minimum amount requirements pursuant to Section 10.06(b)(i) of
the Term Loan Agreement and subject to proportionate amount requirements
pursuant to Section 10.06(b)(ii) of the Term Loan Agreement.

 

(9)  Set forth, to at least 9 decimals, as a percentage of the Loans of all
Lenders thereunder.

 

(10)  To be completed if the Assignor and the Assignee intend that the minimum
assignment amount is to be determined as of the Trade Date.

 

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

 

Effective Date:                                      , 20     [TO BE INSERTED BY
AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR

 

 

 

[NAME OF ASSIGNOR]

 

 

 

By:

 

 

 

Name:

 

Title:

 

 

 

 

 

ASSIGNEE

 

 

 

[NAME OF ASSIGNEE]

 

 

 

By:

 

 

 

Name:

 

Title:

 

 

 

[Consented to and](11) Accepted:

 

 

 

SALUS CAPITAL PARTNERS, LLC,

 

as Agent

 

 

 

By:

 

 

 

Name:

 

Title:

 

 

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(11)   To be added only if the consent of the Agent is required by the terms of
the Term Loan Agreement.

 

[Signature Page to Assignment and Assumption]

 

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ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

 

Standard Terms and Conditions for Assignment and Assumption

 

1.                                      Representations and Warranties.

 

1.1.                            Assignor.  [The][Each] Assignor (a) represents
and warrants that (i) it is the legal and beneficial owner of [the][the
relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and
clear of any lien, encumbrance or other adverse claim and (iii) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby; and (b) assumes no responsibility with respect to (i) any statements,
warranties or representations made in or in connection with the Term Loan
Agreement or any other Loan Document, (ii) the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan Documents or any
collateral thereunder, (iii) the financial condition of the Borrower, any of its
Subsidiaries or Affiliates or any other Person obligated in respect of any Loan
Document or (iv) the performance or observance by the Borrower, any of its
Subsidiaries or Affiliates or any other Person of any of their respective
obligations under any Loan Document.

 

1.2.                            Assignee.  [The][Each] Assignee (a) represents
and warrants that (i) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby and to become a Lender under the
Term Loan Agreement, (ii) it meets all the requirements to be an assignee under
the terms of the Term Loan Agreement (subject to such consents, if any, as may
be required under the terms of the Term Loan Agreement), (iii) from and after
the Effective Date, it shall be bound by the provisions of the Term Loan
Agreement and the other Loan Documents as a Lender thereunder and, to the extent
of [the][the relevant] Assigned Interest, shall have the obligations of a Lender
thereunder, (iv) it is sophisticated with respect to decisions to acquire assets
of the type represented by [the][such] Assigned Interest and either it, or the
Person exercising discretion in making its decision to acquire [the][such]
Assigned Interest, is experienced in acquiring assets of such type, (v) it has
received a copy of the Term Loan Agreement, and has received or has been
accorded the opportunity to receive copies of the most recent financial
statements delivered pursuant to the terms of the Term Loan Agreement, and such
other documents and information as it deems appropriate to make its own credit
analysis and decision to enter into this Assignment and Assumption and to
purchase [the][such] Assigned Interest, (vi) it has, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Assignment and Assumption and to purchase
[the][such] Assigned Interest, and (vii) if it is a Foreign Lender, attached
hereto is any documentation required to be delivered by it pursuant to the terms
of the Term Loan Agreement, duly completed and executed by [the][such] Assignee;
and (b) agrees that (i) it will, independently and without reliance upon the
Agent, [the][any] Assignor 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 the Loan Documents, and
(ii) it will perform in accordance with their terms all of the obligations which
by the terms of the Loan Documents are required to be performed by it as a
Lender.

 

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

 

2.                                      Payments.  From and after the Effective
Date, the Agent shall make all payments in respect of [the][each] Assigned
Interest (including payments of principal, interest, fees and other amounts) to
[the][the relevant] Assignor for amounts which have accrued to but excluding the
Effective Date and to [the][the relevant] Assignee for amounts which have
accrued from and after the Effective Date.

 

3.                                      General Provisions.  This Assignment and
Assumption shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and assigns.  This Assignment and
Assumption may be executed in any number of counterparts, which together shall
constitute one instrument.  Delivery of an executed counterpart of a signature
page of this Assignment and Assumption by fax transmission or other electronic
mail transmission (e.g. “pdf” or “tif”) shall be effective as delivery of a
manually executed counterpart of this Assignment and Assumption.  This
Assignment and Assumption shall be governed by, and construed in accordance
with, the law of the State of New York, without giving effect to principles of
conflicts of laws thereof, but including Section 5-1401 of the New York General
Obligation Law.

 

4.                                      Fees.  Unless waived by the Agent in
accordance with Section 10.06(b)(iv) of the Term Loan Agreement, this Assignment
and Assumption shall be delivered to the Agent with a processing recordation fee
of $3,500.

 

5.                                      Delivery.  If the Assignee is not a
Lender, the Assignee shall deliver to the Agent an Administrative Questionnaire.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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