Exhibit 10.1

 

Execution Copy

 

AMENDED AND RESTATED

REVOLVING CREDIT, TERM LOAN, GUARANTY, AND SECURITY AGREEMENT

 

PNC BANK, NATIONAL ASSOCIATION

(AS LENDER AND AS AGENT)

 

AND

 

U.S. BANK NATIONAL ASSOCIATION

(AS LENDER)

 

WITH

 

ROCKY BRANDS, INC.,

LEHIGH OUTFITTERS, LLC,

LIFESTYLE FOOTWEAR, INC.,

ROCKY BRANDS WHOLESALE LLC,

ROCKY BRANDS INTERNATIONAL, LLC,

ROCKY BRANDS CANADA, INC.,

CREATIVE RECREATION, LLC,

CREATIVE RECREATION RETAIL, LLC,

CREATIVE RECREATION INTERNATIONAL, LLC

 

(BORROWERS)

 

Dated as of December 19, 2014

 

 

 

 

TABLE OF CONTENTS

 

I DEFINITIONS 1   1.1. Accounting Terms 1   1.2. General Terms 1   1.3. Uniform
Commercial Code Terms 37   1.4. Certain Matters of Construction 38   1.5
Amendment and Restatement 39         II ADVANCES, PAYMENTS 39   2.1. Revolving
Advances 39   2.2. Procedure for Revolving Advances Borrowing 40   2.3.
Disbursement of Advance Proceeds 42   2.4. Term Loan 43   2.5. Maximum Advances
43   2.6. Repayment of Advances 43   2.7. Repayment of Excess Advances 44   2.8.
Statement of Account 44   2.9. Letters of Credit 44   2.10. Issuance of Letters
of Credit 45   2.11. Requirements For Issuance of Letters of Credit 45   2.12.
Disbursements, Reimbursement 46   2.13. Repayment of Participation Advances 47  
2.14. Documentation 47   2.15. Determination to Honor Drawing Request 47   2.16.
Nature of Participation and Reimbursement Obligations 48   2.17. Indemnity 49  
2.18. Liability for Acts and Omissions 50   2.19. Cash Collateral 51   2.20.
Additional Payments 51   2.21. Manner of Borrowing and Payment 51   2.22.
Mandatory Prepayments 53   2.23. Use of Proceeds 53   2.24. Defaulting Lender 53
  2.25. Increase of the Maximum Revolving Advance Amount 54   2.26. Reduction of
the Maximum Revolving Advance Amount 55         III INTEREST AND FEES 56   3.1.
Interest 56   3.2. Letter of Credit Fees 56   3.3. Facility Fee 57   3.4. Other
Fees and Charges 57   3.5. Computation of Interest and Fees 57   3.6. Maximum
Charges 58   3.7. Increased Costs 58   3.8. Basis For Determining Interest Rate
Inadequate or Unfair 59   3.9. Capital Adequacy. 60   3.10. Taxes 61

 

i

 

 

IV COLLATERAL:  GENERAL TERMS 63   4.1. Security Interest in the Collateral 63  
4.2. Perfection of Security Interest 64   4.3. Disposition of Property 64   4.4.
Preservation of Collateral 64   4.5. Ownership of Collateral 65   4.6. Defense
of Agent’s and Lenders’ Interests 65   4.7. Books and Records 66   4.8. Reserved
66   4.9. Compliance with Laws 66   4.10. Inspection of Premises 66   4.11.
Insurance 67   4.12. Failure to Pay Insurance 68   4.13. Payment of Taxes 68  
4.14. Payment of Leasehold Obligations 68   4.15. Receivables 68   4.16.
Inventory 73   4.17. Maintenance of Equipment 73   4.18. Exculpation of
Liability 73   4.19. Environmental Matters 73   4.20. Financing Statements 75  
      V REPRESENTATIONS AND WARRANTIES 76   5.1. Authority 76   5.2. Formation,
Qualification, Equity Interests, Subsidiaries 76   5.3. Survival of
Representations and Warranties 76   5.4. Tax Returns 77   5.5. Financial
Statements 77   5.6. Entity Names 77   5.7. O.S.H.A. and Environmental
Compliance 78   5.8. Solvency; No Litigation, Violation, Indebtedness or Default
78   5.9. Patents, Trademarks, Copyrights and Licenses 78   5.10. Licenses and
Permits 79   5.11. Default of Indebtedness 79   5.12. No Default 79   5.13. No
Burdensome Restrictions 79   5.14. No Labor Disputes 80   5.15. Margin
Regulations 80   5.16. Investment Company Act 80   5.17. Disclosure 80   5.18.
No Claims 80   5.19. Conflicting Agreements 80   5.20. Application of Certain
Laws and Regulations 80   5.21. Business and Property of Borrowers 80   5.22.
Section 20 Subsidiaries 80   5.23. Reserved 81   5.24 Reserved 81

 

ii

 

 

  5.25 Reserved 81   5.26. Withholdings and Remittances 81         VI
AFFIRMATIVE COVENANTS 81   6.1. Payment of Fees 81   6.2. Conduct of Business
and Maintenance of Existence and Assets 81   6.3. Reserved 82   6.4. Government
Receivables 82   6.5. Fixed Charge Coverage Ratio 82   6.6. Execution of
Supplemental Instruments 82   6.7. Payment of Indebtedness 82   6.8. Standards
of Financial Statements 82   6.9 Keepwell 83         VII NEGATIVE COVENANTS 83  
7.1. Merger, Consolidation, Acquisition and Sale of Assets 83   7.2. Creation of
Liens 83   7.3. Guarantees 83   7.4. Investments 83   7.5. Loans 84   7.6.
Reserved 84   7.7. Dividends 84   7.8. Indebtedness 84   7.9. Nature of Business
85   7.10. Transactions with Affiliates 85   7.11. Reserved 85   7.12.
Subsidiaries 85   7.13. Fiscal Year and Accounting Changes 85   7.14. Pledge of
Credit 85   7.15. Amendment of Articles of Incorporation, By-Laws, Certificate
of Formation, Operating Agreement; Change of Name 85   7.16. Compliance with
ERISA 86   7.17. Prepayment of Indebtedness 86   7.18. Membership/Partnership
Interests 86   7.19. Rocky Canada 86         VIII CONDITIONS PRECEDENT 86   8.1.
Conditions to Initial Advances 86   8.2. Conditions to Each Advance 88   8.3.
Conditions to Each Equipment Loan 89         IX INFORMATION AS TO BORROWERS 89  
9.1. Disclosure of Material Matters 89   9.2. Schedules 90   9.3. Environmental
Reports 90   9.4. Litigation 91   9.5. Material Occurrences 91   9.6. Government
Receivables 91   9.7. Annual Financial Statements 91

 

iii

 

 

  9.8. Reserved 91   9.9. Monthly Financial Statements 91   9.10. Other Reports
92   9.11. Additional Information 92   9.12. Projected Operating Budget 92  
9.13. Variances From Operating Budget 92   9.14. Notice of Suits, Adverse Events
92   9.15. ERISA Notices and Requests 93   9.16. Additional Documents 93   9.17.
Cash Reporting; Liquidity Calculation 93         X EVENTS OF DEFAULT 93   10.1.
Nonpayment 94   10.2. Breach of Representation 94   10.3. Financial Information
94   10.4. Judicial Actions 94   10.5. Noncompliance 94   10.6. Judgments 95  
10.7. Bankruptcy 95   10.8. Inability to Pay 95   10.9. [Reserved] 95   10.10.
Lien Priority 95   10.11. Cross Default 95   10.12. Breach of Guaranty 95  
10.13. Change of Control 95   10.14. Invalidity 95   10.15. Licenses 96   10.16.
Seizures 96   10.17. Operations 96   10.18. Anti-Money Laundering/International
Trade Law Compliance 96         XI LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT 97
  11.1. Rights and Remedies 97   11.2. Agent’s Discretion 98   11.3. Setoff 98  
11.4.  Appointment of Receiver 99   11.5. Rights and Remedies not Exclusive 100
  11.6. Allocation of Payments After Event of Default 100         XII WAIVERS
AND JUDICIAL PROCEEDINGS 101   12.1. Waiver of Notice 101   12.2. Delay 101  
12.3. Jury Waiver 101         XIII EFFECTIVE DATE AND TERMINATION 102   13.1.
Term 102   13.2. Termination 102         XIV REGARDING AGENT 103

 

iv

 

 

  14.1. Appointment 103   14.2. Nature of Duties 103   14.3. Lack of Reliance on
Agent and Resignation 104   14.4. Certain Rights of Agent 104   14.5. Reliance
104   14.6. Notice of Default 105   14.7. Indemnification 105   14.8. Agent in
its Individual Capacity 105   14.9. Delivery of Documents 105   14.10.
Borrowers’ Undertaking to Agent 105   14.11. No Reliance on Agent’s Customer
Identification Program 106   14.12. Other Agreements 106   14.13. Delegation 106
        XV BORROWING AGENCY 106   15.1. Borrowing Agency Provisions 106   15.2.
Waiver of Subrogation 107   15.3. Cross Guaranty 107   15.4. Subordination 108  
15.5. No Disposition 108         XVI MISCELLANEOUS 108   16.1. Governing Law 108
  16.2. Entire Understanding 109   16.3. Successors and Assigns; Participations;
New Lenders 111   16.4. Application of Payments 113   16.5. Indemnity 114  
16.6. Notice 114   16.7. Survival 116   16.8. Severability 116   16.9. Expenses
116   16.10. Injunctive Relief 117   16.11. Consequential Damages 117   16.12.
Captions 117   16.13. Counterparts; Facsimile Signatures 117   16.14.
Construction 117   16.15. Confidentiality; Sharing Information 118   16.16.
Publicity 118   16.17. Certifications From Banks and Participants; US PATRIOT
Act 118   16.18. Language 118   16.19. Judgment Currency 119   16.20. Anti-Money
Laundering/International Trade Law Compliance 119   16.21. No Claims 119

 

v

 

 

LIST OF EXHIBITS AND SCHEDULES

Exhibits

 

Exhibit 1.2 Borrowing Base Certificate Exhibit 4.15(j) US Assignment Exhibit
16.3 Commitment Transfer Supplement     Schedules       Schedule 1.2(a)
Permitted Encumbrances Schedule 4.5 Property, Equipment, Books & Records, and
Inventory Locations Schedule 4.11 Insurance Schedule 4.15(c) Chief Executive
Offices Schedule 4.15(h) Deposit and Investment Accounts Schedule 4.15(j)
Government Contracts Schedule 5.1 Consents Schedule 5.2(a) States of
Qualification and Good Standing Schedule 5.2(b) Equity Interests; Subsidiaries
Schedule 5.4 Federal Tax Identification Number Schedule 5.6 Prior Names Schedule
5.7 OSHA and Environmental Compliance Schedule 5.8(d) ERISA Plans Schedule 5.9
Intellectual Property, Source Code Escrow Agreements Schedule 5.10 Licenses and
Permits Schedule 5.12 Material Contracts Schedule 5.14 Labor Disputes Schedule
7.3 Guarantees Schedule 7.8 Existing Indebtedness

 

vi

 

 

AMENDED AND RESTATED

REVOLVING CREDIT, TERM LOAN, GUARANTY, AND SECURITY AGREEMENT

 

This Amended and Restated Revolving Credit, Term Loan, Guaranty, and Security
Agreement dated as of December 19, 2014 among Rocky Brands, Inc., an Ohio
corporation (“Parent”), Lehigh Outfitters, LLC, a Delaware limited liability
company (“Lehigh”), Lifestyle Footwear, Inc., a Delaware corporation
(“Lifestyle”), Rocky Brands Wholesale LLC, a Delaware limited liability company
(“Rocky Wholesale”), Rocky Brands International, LLC, an Ohio limited liability
company (“Rocky International”), Rocky Brands Canada, Inc., a corporation formed
under the laws of the Province of Nova Scotia and a continuation of a
corporation formed under the laws of the Province of Ontario (“Rocky Canada”),
Creative Recreation, LLC, an Ohio limited liability company (“Creative”),
Creative Recreation Retail, LLC, an Ohio limited liability company (“Creative
Retail”), and Creative Recreation International, LLC, an Ohio limited liability
company (“Creative International”) (Parent, Lehigh, Lifestyle, Rocky Wholesale,
Rocky International, Rocky Canada, Creative, Creative Retail, and Creative
International, collectively, the “Borrowers” and individually a “Borrower”), the
Lenders listed on the signature pages hereto or which hereafter become a party
hereto as lenders (collectively, the “Lenders” and individually a “Lender”) and
PNC Bank, National Association (“PNC”), as agent for Lenders (PNC, in such
capacity, the “Agent”).

 

IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrowers, Lenders and Agent hereby agree as follows:

 

IDEFINITIONS.

 

1.1.          Accounting Terms. As used in this Agreement, the Other Documents
or any certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrowers for the fiscal year ended December 31,
2013.

 

1.2.          General Terms. For purposes of this Agreement the following terms
shall have the following meanings:

 

“Access Agreement Locations” shall mean the premises leased by a Borrower in
Canada, Puerto Rico, Houston, Texas, Green Bay, Wisconsin and Columbia, South
Carolina and listed on Schedule 4.5.

 

“Account Control Notice” shall have the meaning set forth in Section
4.15(h)(ii).

 

“Advance Rates” shall have the meaning set forth in Section 2.1(a)(y)(iii).

 

“Advances” shall mean and include the Revolving Advances, Term Loans, and
Letters of Credit.

 

1

 

 

“Affiliate” of any Person shall mean (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director, managing member, general
partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or indirect, (x) to
vote 20% or more of the Equity Interests having ordinary voting power for the
election of directors of such Person or other Persons performing similar
functions for any such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by ownership of Equity Interests,
contract or otherwise.

 

“Agent” shall have the meaning set forth in the preamble to this Agreement and
shall include its successors and assigns.

 

“Agreement” shall mean this Amended and Restated Revolving Credit, Term Loan,
Guaranty, and Security Agreement, as the same may be amended, restated,
supplemented or otherwise modified from time to time.

 

“Alternate Base Rate” shall mean, for any day, a rate per annum equal to the
higher of (i) the Base Rate in effect on such day, (ii) the Federal Funds Open
Rate in effect on such day plus 1/2 of 1% and (iii) the Daily LIBOR Rate plus
1%. For purposes of this definition, “Daily LIBOR Rate” shall mean, for any day,
the rate per annum determined by Agent by dividing (x) the Published Rate by (y)
a number equal to 1.00 minus the percentage prescribed by the Federal Reserve
for determining the maximum reserve requirements with respect to any
eurocurrency funding by banks on such day. For the purposes of this definition,
“Published Rate” shall mean the rate of interest published each Business Day in
The Wall Street Journal “Money Rates” listing under the caption “London
Interbank Offered Rates” for a one month period (or, if no such rate is
published therein for any reason, then the Published Rate shall be the
eurodollar rate for a one month period as published in another publication
determined by Agent and used by Agent generally for determining the eurodollar
rate charged to commercial lending customers).

 

“Anti-Terrorism Law(s)” shall mean any Applicable Law relating to terrorism,
trade sanctions programs and embargoes, import/export licensing, money
laundering or bribery, all as amended, supplemented or replaced from time to
time.

 

“Applicable Law” shall mean all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant, Other Document or contract in question,
including all applicable common law and equitable principles; all provisions of
all applicable state, provincial, federal and foreign constitutions, statutes,
rules, regulations, treaties, directives and orders of any Governmental Body,
and all orders, judgments and decrees of all courts and arbitrators.

 

2

 

 

“Applicable Rate” for Revolving Advances, Term Loans, and the Facility Fee shall
mean, commencing as of the Restatement Date, the percentages per annum set forth
in Tier 1 of the pricing table below. Thereafter, effective as of the fifth
(5th) Business Day after receipt by Agent of a Liquidity Calculation for the
fiscal quarter ending December 31, 2014, and thereafter upon receipt of a
Liquidity Calculation for each subsequent fiscal quarter (each day of such
delivery, an “Adjustment Date”), the Applicable Rate shall be adjusted
prospectively, if necessary, to the applicable percentages per annum set forth
in the pricing table below corresponding to the Quarterly Liquidity of Borrowers
during the fiscal quarter ending immediately prior to the applicable Adjustment
Date:

 

Tier  Quarterly Liquidity  Applicable
Rates for
Eurodollar Rate
Revolving
Advances   Applicable
Rates for
Domestic Rate
Revolving
Advances   Applicable
Rates for
Eurodollar
Rate Term
Loans   Applicable
Rates for
Domestic
Rate Term
Loans   Applicable
Rates for
Facility Fee  1           ≥ $25,000,000   1.25%   -0.25%   1.50%   0.00%   0.25%
2          <$25,000,000 but ≥ $17,500,000   1.50%   -0.25%   1.75%   0.00% 
 0.20% 3          <$17,500,000 but ≥ $10,000,000   1.75%   0.00%   2.00% 
 0.25%   0.20% 4          < $10,000,000   2.00%   0.25%   2.25%   0.50%   0.20%

 

If the Borrowers shall fail to deliver a Liquidity Calculation for any fiscal
quarter on or before the fifth (5th) Business Day of the following fiscal
quarter, each Applicable Rate shall be conclusively presumed to equal the
highest Applicable Rate specified in the pricing table set forth above until the
date of delivery of such Liquidity Calculation, at which time the rate will be
adjusted prospectively based upon the Quarterly Liquidity reflected in such
Liquidity Calculation.

 

No downward adjustment of any Applicable Rate shall occur if, at the time such
downward adjustment would otherwise be made, there shall exist any Event of
Default, provided that such downward adjustment shall be made on the first (1st)
day of the month after the date on which the applicable Event of Default shall
have been waived by Agent in writing. During any period which an Event of
Default exists, the Applicable Rate(s) shall adjust to the highest Applicable
Rate(s) set forth above upon direction of the Agent or the Required Lenders.

 

If the Agent determines that (a) the Liquidity Calculation as of any applicable
date was inaccurate or otherwise is not consistent with Agent’s calculation of
Quarterly Liquidity, which calculation of Agent shall control in the event of
any inconsistency, and (b) Agent’s determination of the Quarterly Liquidity
would have resulted in different pricing for any period, then (y) if Agent’s
determination of the Quarterly Liquidity would have resulted in higher pricing
for such period, the Borrowers shall automatically and retroactively be
obligated to pay to the Agent, promptly upon demand by the Agent, an amount
equal to the excess of the amount of interest and fees that should have been
paid for such period over the amount of interest and fees actually paid for such
period; and (z) if Agent’s determination of the Quarterly Liquidity would have
resulted in lower pricing for such period, Borrowers shall be entitled to a
credit against interest or fees accruing after the date of determination;
provided, that, if Agent’s determination of the Quarterly Liquidity would have
resulted in higher pricing for one or more periods and lower pricing for one or
more other periods, then the amount payable by the Borrowers pursuant to clause
(y) above shall be based upon the excess, if any, of the amount of interest and
fees that should have been paid for all applicable periods over the amounts of
interest and fees actually paid for such periods.

 

3

 

 

“Authority” shall have the meaning set forth in Section 4.19(d).

 

“Average Availability” shall mean, as of the date of determination, the sum of
Undrawn Availability, plus Qualified Cash for each day of the sixty (60) day
period ending on such date, divided by sixty (60).

 

“Bank Products Obligations” shall have the meaning set forth in the definition
of Obligations.

 

“Bankruptcy Code” shall mean: (a) title 11 of the United States Code, (b) the
Bankruptcy and Insolvency Act (Canada), (c) the Companies’ Creditors Arrangement
Act (Canada), (d) the Winding-Up and Restructuring Act (Canada), as applicable,
or any similar legislation in a relevant jurisdiction, in each case as in effect
from time to time.

 

“Base Rate” shall mean the base commercial lending rate of PNC as publicly
announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.

 

“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of
ERISA) or a defined benefit pension plan under Canadian Employee Benefit Laws
for which any Borrower or any ERISA Affiliate of any Borrower has been an
“employer” (as defined in Section 3(5) of ERISA) or has held equivalent status
under Canadian Employee Benefit Laws within the past six (6) years.

 

“Blocked Accounts” shall have the meaning set forth in Section 4.15(h)(i).

 

“Blocked Account Agreement” shall have the meaning set forth in Section
4.14(h)(ii).

 

“Blocked Account Bank” shall have the meaning set forth in Section 4.15(h)(i).

 

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

 

“Borrower” or “Borrowers” shall have the meaning set forth in the preamble to
this Agreement and shall extend to all permitted successors and assigns of such
Persons, and any Person that shall join this Agreement as a Borrower hereunder.

 

“Borrowers’ Account” shall have the meaning set forth in Section 2.8.

 

“Borrowing Agent” shall mean Parent.

 

4

 

 

“Borrowing Base Certificate” shall mean a certificate in substantially the form
of Exhibit 1.2 duly executed by the Chief Executive Officer, Chief Financial
Officer or Controller of the Borrowing Agent and delivered to the Agent,
appropriately completed, by which such officer shall certify to Agent the
Formula Amount and calculation thereof as of the date of such certificate.

 

“Borrowing Period” shall have the meaning set forth in Section 2.4.

 

“Business Day” shall mean any day other than Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed
for business in East Brunswick, New Jersey, and, if the applicable Business Day
relates to Rocky Canada, in Toronto, Ontario, and, if the applicable Business
Day relates to any Eurodollar Rate Loans, such day must also be a day on which
dealings are carried on in the London interbank market.

 

“Canadian Dollar” and “CDN$” shall mean lawful currency of Canada.

 

“Canadian Employee Benefit Laws” means the Canadian Income Tax Act, the Pension
Benefits Standards Act 1985 (Canada), the Employment Insurance Act (Canada), the
Pension Benefits Act (Ontario), the Workplace Safety and Insurance Act 1997
(Ontario), the Occupational Health and Safety Act (Ontario) and the Employment
Standards Act 2000 (Ontario), and in each case the regulations thereunder, and
any federal, provincial or local counterparts or substantial equivalents
relating to employee benefits, in each case, as amended from time to time.

 

“Canadian Income Tax Act” shall mean the Income Tax Act (Canada), R.S.C. 1985,
c.1 (5th Supp.), as amended and the regulations thereunder.

 

“Canadian Pension Plan” shall mean a pension plan or plan that is a “registered
pension plan” as defined in the Canadian Income Tax Act or is subject to the
funding requirements of applicable pension benefits legislation in any Canadian
jurisdiction and is applicable to employees or former employees resident in
Canada of Rocky Canada.

 

"Canadian Security Document" shall mean the General Security Agreement, dated as
of the Initial Closing Date, between Rocky Canada and Agent, as the same may be
or may have been supplemented, amended, modified or restated from time to time.

 

“Canadian Union Plan” shall mean any pension plan for the benefit of employees
or former employees resident in Canada of Rocky Canada which is not maintained,
sponsored or administered by Rocky Canada, but to which Rocky Canada is or was
required to contribute pursuant to a collective agreement or participation
agreement.

 

“Capital Expenditures” shall mean expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements, replacements, substitutions
or additions thereto which have a useful life of more than one year, including
the total principal portion of Capitalized Lease Obligations, which, in
accordance with GAAP, would be classified as capital expenditures.

 

5

 

 

“Capitalized Lease Obligation” shall mean any Indebtedness of any Borrower
represented by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.

 

“Cash Dominion Period” shall mean any period commencing upon the occurrence of a
Triggering Event and ending upon the occurrence of a related Satisfaction Event.

 

“Cash Equivalents” shall mean (a) marketable direct obligations issued or
unconditionally guaranteed by the government of Canada or the United States or
issued by any agency thereof and backed by the full faith and credit of Canada
or the United States, as the case may be, in each case maturing within 1 year
from the date of acquisition thereof, (b) marketable direct obligations issued
by any province or territory of Canada or any state of the United States or any
political subdivision of any such province, territory or state or any public
instrumentality thereof maturing within 1 year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor’s Rating Group (“S&P”) or Moody’s
Investors Service, Inc. (“Moody’s”) or such other comparable rating companies in
Canada, (c) commercial paper maturing no more than 270 days from the date of
creation thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody’s or such other comparable rating
companies in Canada, (d) certificates of deposit or bankers’ acceptances
maturing within 1 year from the date of acquisition thereof issued by any bank
organized under the laws of Canada, or the United States or any state thereof,
having at the date of acquisition thereof combined capital and surplus of not
less than $250,000,000, (e) demand deposit accounts maintained with any bank
organized under the laws of the United States or any state thereof or the laws
of Canada so long as the amount maintained with any individual bank is less than
or equal to the maximum amount insured by the Federal Deposit Insurance
Corporation or the Canada Deposit Insurance Corporation, and (f) Investments in
money market funds substantially all of whose assets are invested in the types
of assets described in clauses (a) through (e) above.

 

“CCR” shall have the meaning set forth in Section 4.15(j)(iv).

 

“CEA” shall mean the Commodity Exchange Act (7 U.S.C.§1 et seq.), as amended
from time to time, and any successor statute.

 

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.

 

“CFTC” shall mean the Commodity Futures Trading Commission.

 

“Change in Law” shall mean the occurrence, after the Restatement Date, of any of
the following: (a) the adoption or taking effect of any Applicable Law; (b) any
change in any Applicable Law or in the administration, implementation,
interpretation or application thereof by any Governmental Body; or (c) the
making or issuance of any request, rule, guideline or directive (whether or not
having the force of law) by any Governmental Body; provided that notwithstanding
anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and
Consumer Protection Act and all requests, rules, regulations, guidelines,
interpretations or directives thereunder or issued in connection therewith
(whether or not having the force of Applicable Law) and (y) all requests, rules,
regulations, guidelines, interpretations 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 (whether or not having the force of law), 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, issued, promulgated or implemented.

 

6

 

 

“Change of Control” shall mean (a) other than between or among Borrowers, any
merger or consolidation of or with any Borrower or sale of all or substantially
all of the property or assets of any Borrower, or (b) that any Person, together
with its Affiliates, acquires Equity Interests in Parent in one or more
transactions such that they collectively own or control, directly or indirectly,
greater than or equal to 50% of the Equity Interests of Parent, or (c) that
Parent ceases to own, directly or indirectly, and control 100% of the
outstanding Equity Interests of (i) each of the other Borrowers and (ii) each of
its Subsidiaries, provided that, with respect to any Foreign Subsidiary, a
Change of Control shall not occur so long as Parent owns the greater of either
95% of the outstanding Equity Interests of such Foreign Subsidiary, or the
largest percentage of such Equity Interests which may be owned by Parent under
the laws of the jurisdiction in which such Foreign Subsidiary is organized.

 

“Charges” shall mean all taxes, charges, fees, imposts, levies or other
assessments, including all net income, gross income, gross receipts, sales, use,
ad valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation and property taxes, custom duties, fees,
assessments, Liens, claims and charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts, imposed by
any taxing or other authority, domestic or foreign (including the Pension
Benefit Guaranty Corporation or any environmental agency or superfund), upon the
Collateral, or any Borrower, Guarantor, or any of their respective Subsidiaries.

 

“Claims” shall have the meaning set forth in Section 16.21.

 

“Code” shall mean the Internal Revenue Code of 1986, as the same may be amended
or supplemented from time to time, and any successor statute of similar import,
and the rules and regulations thereunder, as from time to time in effect.

 

“Collateral” shall mean and include:

 

(a)          all Receivables other than Excluded Receivables;

 

(b)          all Equipment;

 

(c)          all General Intangibles;

 

(d)          all Inventory;

 

(e)          all Investment Property;

 

(f)          [reserved];

 

7

 

 

(g)          all Subsidiary Stock;

 

(h)          the Leasehold Interests;

 

(i)          all of each Borrower’s and Guarantor’s right, title and interest in
and to, whether now owned or hereafter acquired and wherever located, (i) its
respective goods and other property including, but not limited to, all
merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (ii) all of each Borrower’s and Guarantor’s rights as a
consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor,
including stoppage in transit, setoff, detinue, replevin, reclamation and
repurchase; (iii) all additional amounts due to any Borrower or Guarantor from
any Customer relating to the Receivables; (iv) other property, including
warranty claims, relating to any goods securing the Obligations; (v) all of each
Borrower’s and Guarantor’s contract rights, rights of payment which have been
earned under a contract right, instruments (including promissory notes),
documents, documents of title, chattel paper (including electronic chattel
paper), warehouse receipts, deposit accounts, accounts, letters of credit and
money; (vi) all commercial tort claims (whether now existing or hereafter
arising); (vii) if and when obtained by any Borrower or Guarantor, all real and
personal property of third parties in which either has been granted a lien or
security interest as security for the payment or enforcement of Receivables;
(viii) all letter of credit rights (whether or not the respective letter of
credit is evidenced by a writing); (ix) all supporting obligations; and (x) any
other goods, personal property or real property now owned or hereafter acquired
in which any Borrower or Guarantor has expressly granted a security interest or
may in the future grant a security interest to Agent hereunder, or in any
amendment or supplement hereto or thereto, or under any other agreement between
Agent and any Borrower or Guarantor;

 

(j)          all of each Borrower’s and Guarantor’s ledger sheets, ledger cards,
files, correspondence, records, books of account, business papers, computers,
computer software (owned by any Borrower or Guarantor or in which it has an
interest other than as licensee), computer programs, tapes, disks and documents
relating to (a), (b), (c), (d), (e), (g), (h) or (i) of this Paragraph; and

 

(k)          all proceeds and products of (a), (b), (c), (d), (e), (g), (h), (i)
and (j) in whatever form, including, but not limited to: cash, deposit accounts
(whether or not comprised solely of proceeds), certificates of deposit,
insurance proceeds (including hazard, flood and credit insurance), negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements, documents, eminent domain proceeds, condemnation proceeds
and tort claim proceeds.

 

Notwithstanding anything contained in this Agreement to the contrary, the term
“Collateral” shall not include the following (collectively, the “Excluded
Property”):

 

8

 

 

(i)          any Borrower’s or Guarantor’s rights or interests in or under any
license, contract or agreement to the extent, but only to the extent that such a
grant would, under the terms of such license, contract or agreement, constitute
or result in (i) the abandonment, invalidation or unenforceability of any
material right, title or interest of such Borrower or Guarantor therein, or (ii)
a breach, termination, or a default under such license, contract or agreement
(other than to the extent that any such term would be rendered ineffective
pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor
provision or provisions) or pursuant to the PPSA of any relevant jurisdiction or
any other Applicable Law (including any bankruptcy or insolvency laws) or
principles of equity), provided that (A) immediately upon either (A) an Event of
Default pursuant to Section 10.7 or (B) the ineffectiveness, lapse or
termination of any such term, the Collateral shall include, and such Borrower or
Guarantor shall be deemed to have granted a security interest as of the Initial
Closing Date in, all such rights and interests as if such term had never been in
effect, and (B) to the extent that any such lease, license, contract or
agreement would otherwise constitute Collateral (but for the provisions of this
paragraph), all receivables from each Borrower’s or Guarantor’s performance
under such license, contract or agreement and all proceeds resulting from the
sale or disposition by each Borrower or Guarantor of any rights of each Borrower
or Guarantor under such license, contract or agreement shall constitute
Collateral,

 

(ii)         Investment Property constituting Equity Interests of any Foreign
Subsidiary (other than Rocky Canada which shall be subject to a pledge of 100%
of its Equity Interests) of any Borrower or Guarantor; provided that the Agent
shall have a Lien upon 65% of the Equity Interests of each such Foreign
Subsidiary,

 

(iii)        any Real Property, and

 

(iv)        the trademark applications, trade names, and trademarks of the
Borrowers or Guarantors.

 

“Collateral Access Agreement” shall mean an agreement in form and substance
satisfactory to the Agent in its Permitted Discretion which is executed in favor
of Agent by (a) a Person who owns or occupies premises at which any Collateral
may be located from time to time and by which such Person shall waive or
subordinate lien rights and authorize Agent from time to time to enter upon the
premises to access, inspect or remove the Collateral from such premises or to
use such premises to store or dispose of such Collateral, or (b) a Person who
has possession, custody or control of Collateral and by which such Person shall
waive lien rights and agree to grant Agent access to the Collateral upon request
and to follow the instructions of Agent with respect to the disposition of such
Collateral.

 

“Collection Accounts” shall have the meaning set forth in Section 4.15(h)(i).

 

“Commitment Percentage” of any Lender shall mean the percentage set forth below
such Lender’s name on the signature page hereof as same may be adjusted upon any
assignment by a Lender pursuant to Section 16.3(c) or (d).

 

“Commitment Transfer Supplement” shall mean a document in the form of Exhibit
16.3 hereto, properly completed and otherwise in form and substance satisfactory
to Agent by which the Purchasing Lender purchases and assumes a portion of the
obligation of Lenders to make Advances under this Agreement.

 

“Compliance Certificate” shall mean a compliance certificate to be signed by the
Chief Financial Officer or Controller of Borrowing Agent, which shall state
that, based on an examination sufficient to permit such officer to make an
informed statement, no Default or Event of Default exists, or if such is not the
case, specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by Borrowers with respect to
such default and, such certificate shall have appended thereto a calculation of
the Fixed Charge Coverage Ratio for the periods required by Sections 7.7, if
applicable, 9.7 and 9.9.

 

9

 

 

“Consents” shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Bodies and
other third parties, domestic or foreign, necessary to carry on any Borrower’s
business or necessary (including to avoid a conflict or breach under any
agreement, instrument, other document, license, permit or other authorization)
for the execution, delivery or performance of this Agreement, the Other
Documents, including any Consents required under all applicable federal, state,
provincial or other Applicable Law.

 

“Consigned Inventory” shall mean Inventory of any Borrower that is in the
possession of another Person on a consignment, sale or return, or other basis
that does not constitute a final sale and acceptance of such Inventory.

 

“Contract Rate” shall have the meaning set forth in Section 3.1(b).

 

“Controlled Group” shall mean, at any time, each Borrower and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control and all other entities which, together with
any Borrower, are treated as a single employer under Section 414 of the Code.

 

“Covered Entity” shall mean (a) each Borrower, each Borrower’s Subsidiaries, all
Guarantors, and all pledgors of Collateral in connection with the Obligations,
and (b) each Person that, directly or indirectly, is in control of a Person
described in clause (a) above. For purposes of this definition, control of a
Person shall mean the direct or indirect (x) ownership of, or power to vote, 25%
or more of the issued and outstanding Equity Interests having ordinary voting
power for the election of directors of such Person or other Persons performing
similar functions for such Person, or (y) power to direct or cause the direction
of the management and policies of such Person whether by ownership of Equity
Interests, contract or otherwise.

 

“Customer” shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Borrower,
pursuant to which such Borrower is to deliver any personal property or perform
any services.

 

“Customs” shall have the meaning set forth in Section 2.11(b).

 

"Deemed Credit Request" shall have the meaning set forth in Section 2.2(b).

 

“Default” shall mean an event, circumstance, default, or condition which, with
the giving of notice or passage of time or both, would constitute an Event of
Default.

 

“Default Rate” shall have the meaning set forth in Section 3.1(c).

 

“Defaulting Lender” shall have the meaning set forth in Section 2.24(a).

 

10

 

 

“Designated Lender” shall have the meaning set forth in Section 16.2(c).

 

“Dollar” and the sign “$” shall mean lawful money of the United States of
America.

 

“Domestic Rate Loan” shall mean any Advance that bears interest based upon the
Alternate Base Rate.

 

"Domestic Subsidiary" shall mean any direct or indirect Subsidiary of a Person
that is organized under the laws of any state of the United States or the
District of Columbia (other than an indirect Subsidiary of a Person which is a
direct or indirect Subsidiary of another Subsidiary which is not organized under
such laws)

 

“Drawing Date” shall have the meaning set forth in Section 2.12(b).

 

“Earnings Before Interest and Taxes” shall mean for any period, for Parent and
its Subsidiaries on a consolidated basis, the sum of (i) net income (or loss)
for such period (excluding extraordinary gains and losses), plus (ii) all
interest expense for such period, plus (iii) all charges against income for such
period for federal, state and local taxes.

 

“EBITDA” shall mean for any period the sum of (i) Earnings Before Interest and
Taxes for such period, plus (ii) depreciation expenses for such period, plus
(iii) amortization expenses for such period.

 

“EBITDA Adjustment” means the lesser of (a) $750,000, and (b) the amount of the
non-recurring transaction expenses incurred in connection with the Permitted
Acquisition by Creative on December 13, 2013, to the extent such expenses have
been included as expenses in the determination of net income, have not been
capitalized, and have been paid in cash prior to, or within 60 days after the
closing thereof.

 

“Effective Date” means the date indicated in a document or agreement to be the
date on which such document or agreement becomes effective, or, if there is no
such indication, the date of execution of such document or agreement.

 

“Eligible Contract Participant” shall mean an “eligible contract participant” as
defined in the CEA and regulations thereunder.

 

11

 

 

“Eligible Finished Goods Inventory” shall mean and include finished goods
Inventory, with respect to each Borrower, valued at the lower of cost or market,
determined on a first-in-first-out basis, which is not, in Agent’s Permitted
Discretion, obsolete, slow moving or unmerchantable and which Agent, in its
Permitted Discretion, shall not deem ineligible Inventory, based on such
considerations as Agent may from time to time deem appropriate including whether
the Inventory is subject to a perfected, first priority security interest in
favor of Agent and no other Lien (other than a Permitted Encumbrance). In
addition, Inventory shall not be Eligible Finished Goods Inventory if it (a)
does not conform to all standards imposed by any Governmental Body which has
regulatory authority over such goods or the use or sale thereof, (b) constitutes
Consigned Inventory, (c) is the subject of an Intellectual Property Claim; (d)
commencing on the date that is thirty (30) days (or such later date as Agent
shall determine in its sole discretion) after the Restatement Date, is subject
to a License Agreement or other agreement that in any material respect limits,
conditions or restricts any Borrower’s or Agent’s right to sell or otherwise
dispose of such Inventory, unless Agent is a party to a Licensor/Agent Agreement
with the Licensor under such License Agreement; (e) is situated at a location
not listed on Schedule 4.5 as of the Restatement Date or is situated at an
Access Agreement Location and no Collateral Access Agreement is in effect in
favor of Agent unless a rent reserve has been established by Agent with respect
thereto, (f) unless it is Eligible In-Transit Finished Goods Inventory, it is
located outside the continental United States, Canada, or Puerto Rico, or at a
location that is not listed on Schedule 4.5, provided that, finished goods
Inventory located in Puerto Rico may only constitute Eligible Finished Goods
Inventory to the extent that the total amount of Eligible Raw Materials
Inventory located in Puerto Rico and Eligible Finished Goods Inventory located
in Puerto Rico included in the Formula Amount (after application of the Finished
Goods Inventory Advance Rate) would not exceed $2,000,000 at any time. Eligible
Finished Goods Inventory shall not include Inventory being acquired pursuant to
a trade Letter of Credit (other than any trade Letter of Credit issued
hereunder) to the extent such trade Letter of Credit remains outstanding.

 

“Eligible Government Receivable” shall have the meaning provided in the
definition of “Eligible Receivables”.

 

“Eligible In-Transit Finished Goods Inventory” shall include Inventory: (a)
which title has passed to a Borrower, (b) which is insured to the full value
thereof with Agent as lender loss payee under the applicable insurance policy
and evidence of such insurance has been provided to Agent, (c) which is
in-transit with a carrier to a facility listed on Schedule 4.5, (d) which would
otherwise be Eligible Finished Goods Inventory except for its location, (e) for
which Agent or the customs broker or other representative shall have in its
possession a true and correct copy of the bill of lading and other shipping
documents for such inventory, (f) which (i) if the applicable bill of lading is
non-negotiable and the Inventory is in transit within the United States, a duly
executed Collateral Access Agreement from the applicable customs broker for such
Inventory, or all related unpaid freight charges and customs duties related to
the shipment thereof shall be reserved for, or (ii) if the applicable bill of
lading is negotiable, confirmation that the bill is issued in the name of a
Borrower and consigned to the order of the Agent or an agent thereof, and an
acceptable agreement has been executed with a Borrower’s customs broker, in
which the customs broker or other representative agrees that it is holding
possession of the negotiable bill as agent for the Agent and will grant the
Agent access to the Inventory, (g) for which the carrier is not an Affiliate of
the applicable vendor or supplier of the Inventory, and (h) the customs broker
is not an Affiliate of a Borrower; provided however that, in each case, all
related unpaid freight charges and customs duties related to such shipment shall
be reserved for unless a lien waiver among the applicable Borrower, the
applicable customs broker, freight carrier, shipping company or shipping agent,
as the case may be, and Agent has been executed and delivered to the Agent, in
each case in form and substance satisfactory to the Agent in its Permitted
Discretion, and provided further that, the inclusion of such Inventory in the
Formula Amount shall not cause the total amount of Eligible In-Transit Finished
Goods Inventory in the Formula Amount (after application of the Finished Goods
Inventory Advance Rate) to exceed $8,000,000 at any time.

 

“Eligible Inventory” shall mean collectively Eligible Finished Goods Inventory,
Eligible Raw Material Inventory, and Eligible In-Transit Finished Goods
Inventory.

 

12

 

 

“Eligible Raw Materials Inventory” shall mean and include raw materials
Inventory with respect to each Borrower, valued at the lower of cost or market
value, determined on a first-in-first-out basis, which is not, in Agent’s
Permitted Discretion, obsolete, slow moving or unmerchantable and which Agent,
in its Permitted Discretion, shall not deem ineligible Inventory, based on such
considerations as Agent may from time to time deem appropriate including whether
the Inventory is subject to a perfected, first priority security interest in
favor of Agent and no other Lien (other than a Permitted Encumbrance). In
addition, Inventory shall not be Eligible Raw Materials Inventory if it (a) does
not conform to all standards imposed by any Governmental Body which has
regulatory authority over such goods or the use or sale thereof, (b) constitutes
Consigned Inventory, (c) is the subject of an Intellectual Property Claim; (d)
commencing on the date that is thirty (30) days (or such later date as Agent
shall determine in its sole discretion) after the Restatement Date, is subject
to a License Agreement or other agreement that in any material respect limits,
conditions or restricts any Borrower’s or Agent’s right to sell or otherwise
dispose of such Inventory, unless Agent is a party to a Licensor/Agent Agreement
with the Licensor under such License Agreement; (e) is situated at a location
not listed on Schedule 4.5 as of the Restatement Date, or is situated at an
Access Agreement Location and no Collateral Access Agreement is in effect in
favor of Agent unless a rent reserve has been established by Agent with respect
thereto, (f) is located outside the continental United States, Canada, or Puerto
Rico, or at a location that is not listed on Schedule 4.5, provided that, raw
material Inventory located in Puerto Rico may only constitute Eligible Raw
Material Inventory to the extent that the total amount of Eligible Raw Materials
Inventory located in Puerto Rico and Eligible Finished Goods Inventory located
in Puerto Rico included in the Formula Amount (after application of the Raw
Materials Inventory Advance Rate) would not exceed $2,000,000 at any time.
Eligible Raw Materials Inventory shall not include Inventory being acquired
pursuant to a trade Letter of Credit to the extent such trade Letter of Credit
remains outstanding.

 

“Eligible Receivables” shall mean and include with respect to each Borrower,
each Receivable of such Borrower arising in the Ordinary Course of Business and
which Agent, in its Permitted Discretion, shall deem to be an Eligible
Receivable, based on such considerations as Agent may from time to time deem
appropriate. A Receivable shall not be deemed eligible unless such Receivable is
subject to Agent’s first priority perfected security interest and no other Lien
(other than Permitted Encumbrances), and is evidenced by an invoice or other
documentary evidence reasonably satisfactory to Agent. In addition, no
Receivable shall be an Eligible Receivable if:

 

(a)          it arises out of a sale made by any Borrower to an Affiliate of any
Borrower or to a Person controlled by an Affiliate of any Borrower;

 

(b)          for Receivables with payment terms of thirty (30) days or less, it
is due or unpaid more than the sooner of sixty (60) days after the original due
date or ninety (90) days after the original invoice date;

 

(c)          for Receivables with payment terms of greater than thirty (30) days
but not in excess of sixty (60) days, it is due or unpaid more than the sooner
of sixty (60) days after the original due date or one hundred twenty (120) days
after the original invoice date;

 

13

 

 

(d)          for Receivables with payment terms of greater than sixty (60) days,
it is due or unpaid more than the sooner of thirty (30) days after the original
due date or one hundred eighty (180) days after the original invoice date;

 

(e)          fifty percent (50%) or more of the Receivables from such Customer
are not deemed Eligible Receivables hereunder;

 

(f)          any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached in any material
respect;

 

(g)          the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property or call
a meeting of its creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under any state or federal or foreign bankruptcy laws
(as now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent,
(vi) file a petition seeking to take advantage of any other law providing for
the relief or reorganization of debtors, (vii) acquiesce to, or fail to have
dismissed, any petition which is filed against it in any involuntary case under
such bankruptcy laws, or (viii) take any action for the purpose of effecting any
of the foregoing;

 

(h)          the sale is to a Customer outside the continental United States of
America or Canada, unless the sale is on letter of credit, guaranty or
acceptance terms, in each case acceptable to Agent in its Permitted Discretion;

 

(i)          the sale to the Customer is on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return
basis or is evidenced by chattel paper;

 

(j)          Agent believes, in its Permitted Discretion, that collection of
such Receivable is insecure or that such Receivable may not be paid by reason of
the Customer’s financial inability to pay;

 

(k)          the Customer is the United States, any state, territory, or any
department, agency or instrumentality of any of them, provided that such a
Receivable may be an Eligible Receivable if (a) such Receivable would otherwise
qualify as an Eligible Receivable, (b) such Receivable has payment terms of
thirty (30) days or less, and (c) the applicable Borrower complies with Section
4.15(j) with respect to such Receivable (each an “Eligible Government
Receivable”);

 

(l)          the Receivable is an Eligible Government Receivable and would cause
the total amount of Eligible Government Receivables in the Formula Amount (after
application of the Receivables Advance Rate) to exceed 3.33% of the Maximum
Revolving Advance Amount at any time, but only to the extent of such excess;

 

(m)          the Customer is the government of Canada, any province, territory,
or any department, agency or instrumentality of any of them;

 

14

 

 

(n)         the goods giving rise to such Receivable have not been delivered to
and accepted by the Customer or the services giving rise to such Receivable have
not been performed by the applicable Borrower and accepted by the Customer or
the Receivable otherwise does not represent a final sale;

 

(o)         the Receivable would cause the total amount of Eligible Receivables
due from a specific Customer to constitute more than ten percent (10%) of all
Eligible Receivables of Borrowers, but only to the extent of such excess;

 

(p)         the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim, the Customer is also a creditor or supplier of a
Borrower or the Receivable is contingent in any respect or for any reason, but
only to the extent of any such offset, deduction, defense, or other dispute;

 

(q)         the applicable Borrower has made any agreement with any Customer for
any deduction therefrom, except for discounts or allowances made in the Ordinary
Course of Business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto;

 

(r)          any return, rejection or repossession of the merchandise has
occurred or the rendition of services has been disputed;

 

(s)         such Receivable is not payable to a Borrower;

 

(t)          such Receivable is not otherwise satisfactory to Agent as
determined by Agent in its Permitted Discretion;

 

(u)         such Receivable is an Excluded Receivable; or

 

(v)         such Receivable arises out of a sale made by Creative, Creative
Retail, or Creative International unless otherwise approved in writing by Agent
in its sole discretion.

 

“Eligibility Date” shall mean, with respect to each Borrower and Guarantor and
each Swap, the date on which this Agreement or any Other Document becomes
effective with respect to such Swap (for the avoidance of doubt, the Eligibility
Date shall be the Effective Date of such Swap if this Agreement or any Other
Document is then in effect with respect to such Borrower or Guarantor, and
otherwise it shall be the Effective Date of this Agreement and/or such Other
Document(s) to which such Borrower or Guarantor is a party).

 

“Environmental Complaint” shall have the meaning set forth in Section 4.19(d).

 

“Environmental Laws” shall mean all federal, state, provincial, and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state, provincial, and local
governmental agencies and authorities with respect thereto.

 

15

 

 

“Equipment” shall mean and include as to each Borrower all of such Borrower’s
goods (other than Inventory) whether now owned or hereafter acquired and
wherever located including all equipment, machinery, apparatus, motor vehicles,
fittings, furniture, furnishings, fixtures, parts, accessories and all
replacements and substitutions therefor or accessions thereto.

 

“Equipment Loan(s)” shall have the meaning set forth in Section 2.4.

 

“Equipment Note” shall have the meaning set forth in Section 2.4.

 

"Equivalent Amount" shall mean, on any date, the amount of Dollars into which
Canadian Dollars may be converted based on such conversion rate or rates as may
from time to time be available to Agent in its usual and customary practices for
such currencies on such date.

 

“Equity Interests” of any Person shall mean any and all shares, rights to
purchase, options, warrants, general, limited or limited liability partnership
interests, member interests, participation or other equivalents of or interest
in (regardless of how designated) equity of such Person, whether voting or
nonvoting, including common stock, preferred stock, convertible securities or
any other “equity security” (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.

 

“Eurodollar Rate” shall mean for any Eurodollar Rate Loan for the then current
Interest Period relating thereto the interest rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) determined by Agent by dividing (i)
the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute
Bloomberg page that displays rates at which US dollar deposits are offered by
leading banks in the London interbank deposit market), or the rate which is
quoted by another source selected by Agent which has been approved by the
British Bankers’ Association as an authorized information vendor for the purpose
of displaying rates at which US dollar deposits are offered by leading banks in
the London interbank deposit market (an “Alternative Source”), at approximately
11:00 a.m., London time two (2) Business Days prior to the first day of such
Interest Period (or if there shall at any time, for any reason, no longer exist
a Bloomberg Page BBAM1 (or any substitute page) or any Alternate Source, a
comparable replacement rate determined by Agent at such time (which
determination shall be conclusive absent manifest error)) for an amount
comparable to such Eurodollar Rate Loan and having a borrowing date and a
maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus
the Reserve Percentage.

 

The Eurodollar Rate shall be adjusted with respect to any Eurodollar Rate Loan
that is outstanding on the effective date of any change in the Reserve
Percentage as of such effective date. Agent shall give prompt notice to the
Borrowing Agent of the Eurodollar Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive absent manifest error.

 

“Eurodollar Rate Loan” shall mean an Advance at any time that bears interest
based on the Eurodollar Rate.

 

16

 

 

“Event of Default” shall have the meaning set forth in Article X.

 

“Exchange Act” shall have the mean the Securities Exchange Act of 1934, as
amended.

 

“Excluded Hedge Liability or Liabilities” shall mean, with respect to each
Borrower and Guarantor, each of its Swap Obligations if, and only to the extent
that, all or any portion of this Agreement or any Other Document that relates to
such Swap Obligation is or becomes illegal under the CEA, or any rule,
regulation or order of the CFTC, solely by virtue of such Borrower’s and/or
Guarantor’s failure to qualify as an Eligible Contract Participant on the
Eligibility Date for the applicable Swap. Notwithstanding anything to the
contrary contained in the foregoing or in any other provision of this Agreement
or any Other Document, the foregoing is subject to the following provisos: (a)
if a Swap Obligation arises under a master agreement governing more than one
Swap, this definition shall apply only to the portion of such Swap Obligation
that is attributable to Swaps for which such guaranty or security interest is or
becomes illegal under the CEA, or any rule, regulations or order of the CFTC,
solely as a result of the failure by such Borrower or Guarantor for any reason
to qualify as an Eligible Contract Participant on the Eligibility Date for such
Swap; (b) if a guarantee of a Swap Obligation would cause such obligation to be
an Excluded Hedge Liability but the grant of a security interest would not cause
such obligation to be an Excluded Hedge Liability, such Swap Obligation shall
constitute an Excluded Hedge Liability for purposes of the guaranty but not for
purposes of the grant of the security interest; and (c) if there is more than
one Borrower or Guarantor executing this Agreement or the Other Documents and a
Swap Obligation would be an Excluded Hedge Liability with respect to one or more
of such Persons, but not all of them, the definition of Excluded Hedge Liability
or Liabilities with respect to each such Person shall only be deemed applicable
to (i) the particular Swap Obligations that constitute Excluded Hedge
Liabilities with respect to such Person, and (ii) the particular Person with
respect to which such Swap Obligations constitute Excluded Hedge Liabilities.

 

“Excluded Property” shall have the meaning set forth in the definition of
Collateral.

 

“Excluded Receivables” shall mean any Receivable owing by a Customer that is a
Sanctioned Person or that arises out of a transaction or activity that would
violate any Anti-Terrorism Laws.

 

“Excluded Taxes” shall mean, with respect to the Agent, any Lender, Participant,
Issuer or any other recipient of any payment to be made by or on account of any
Obligations, (a) taxes imposed on or measured by its overall net income (however
denominated), and franchise taxes imposed on it (in lieu of net income taxes),
by the jurisdiction (or any political subdivision thereof) under the laws of
which such recipient is organized or in which its principal office is located
or, in the case of any Lender, Participant, or Issuer, in which its applicable
lending office is located, (b) any branch profits taxes imposed by the United
States of America or any similar tax imposed by any other jurisdiction in which
a Borrower is located, (c) in the case of a Foreign Lender, 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),
acquires an interest in any Advance or commitment for an Advance, 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 3.10(e), except to the extent
that such Foreign Lender or Participant (or its assignor or seller of a
participation, if any) was entitled, at the time of designation of a new lending
office (or assignment or sale of a participation), to receive additional amounts
from a Borrower with respect to such withholding tax pursuant to Section
3.10(a), (d) any Taxes imposed on any “withholding payment” payable to such
recipient as a result of the failure of such recipient to satisfy the
requirements set forth in the FATCA after December 31, 2012; and (e) Other
Connection Taxes.

 

17

 

 

“Existing Credit Facility” shall have the meaning set forth in Section 1.5.

 

“Existing Loan Agreement” shall have the meaning set forth in Section 1.5.

 

“Facility Fee” shall have the meaning set forth in Section 3.3.

 

“FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of
this Agreement (or any amended or successor version that is substantively
comparable and not materially more onerous to comply with) and any current or
future regulations or official interpretations thereof.

 

“Federal Funds Effective Rate” for any day shall mean the rate per annum (based
on a year of 360 days and actual days elapsed and rounded upward to the nearest
1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the “Federal Funds
Effective Rate” as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.

 

“Federal Funds Open Rate” for any day shall mean the rate per annum (based on a
year of 360 days and actual days elapsed) which is the daily federal funds open
rate as quoted by ICAP North America, Inc. (or any successor) as set forth on
the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such
other substitute Bloomberg Screen that displays such rate), or as set forth on
such other recognized electronic source used for the purpose of displaying such
rate as selected by PNC (an “Alternate Source”) (or if such rate for such day
does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on
any Alternate Source, or if there shall at any time, for any reason, no longer
exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate
Source, a comparable replacement rate determined by Agent and used by Agent
generally for determining the daily federal funds open rate at such time (which
determination shall be conclusive absent manifest error); provided however, that
if such day is not a Business Day, the Federal Funds Open Rate for such day
shall be the “open” rate on the immediately preceding Business Day. If and when
the Federal Funds Open Rate changes, the rate of interest with respect to any
advance to which the Federal Funds Open Rate applies will change automatically
without notice to the Borrowers, effective on the date of any such change.

 

18

 

 

“Federal Assignment of Claims Act” shall mean the Assignment of Claims Act of
1940, as amended, 31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section
15 et seq., as the same now exists or may from time to time hereafter be
amended, modified, recodified, or supplemented, together with all rules,
regulations, and interpretations thereunder or related thereto.

 

“Finished Goods Inventory Advance Rate” shall have the meaning set forth in
Section 2.1(a)(y)(ii).

 

“Fixed Charge Coverage Ratio” shall mean and include for any fiscal period, for
Parent and its Subsidiaries on a consolidated basis, the ratio of (a) EBITDA,
plus non-cash charges against net income other than write-downs of Eligible
Accounts and Eligible Inventory, minus Unfinanced Capital Expenditures made,
minus expenses for income or franchise taxes included as an expense in the
determination of net income (other than any provision for deferred taxes), minus
payment of deferred taxes relating to income and franchise taxes accrued in any
prior period, plus the EBITDA Adjustment, to (b) Senior Debt Payments made, plus
dividends or redemptions paid by Parent, plus aggregate payments made on account
of pension-related obligations to the extent not deducted as an expense in the
determination of EBITDA during such fiscal period, all for the same fiscal
period.

 

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

 

“Foreign Subsidiary” of any Person, shall mean any Subsidiary of such Person
that is not a Domestic Subsidiary.

 

“Formula Amount” shall have the meaning set forth in Section 2.1(a)(y).

 

“GAAP” shall mean generally accepted accounting principles in the United States
of America in effect from time to time.

 

“General Intangibles” shall mean and include as to each Borrower all of such
Borrower’s general intangibles or intangibles (other than trademark
applications, trade names and trademarks), whether now owned or hereafter
acquired, including all payment intangibles, all choses in action, causes of
action, corporate or other business records, inventions, designs, patents,
patent applications, equipment formulations, manufacturing procedures, quality
control procedures, trade secrets, goodwill, copyrights, design rights,
software, computer information, source codes, codes, records and updates,
registrations, licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to such Borrower to secure payment of any of
the Receivables by a Customer (other than to the extent covered by Receivables)
all rights of indemnification and all other intangible property of every kind
and nature (other than Receivables, trademark applications, trade names and
trademarks).

 

“Governmental Acts” shall have the meaning set forth in Section 2.17.

 

19

 

 

“Governmental Body” shall mean any nation or government, any state, province, or
other political subdivision thereof or any entity, authority, agency, division
or department exercising the legislative, judicial, regulatory or administrative
functions of or pertaining to a government.

 

“Guarantor” shall mean any Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations and “Guarantors” means
collectively all such Persons. As of the Restatement Date, there are no
Guarantors.

 

“Guarantor Security Agreement” shall mean any Security Agreement executed by any
Guarantor in favor of Agent securing the Guaranty of such Guarantor, in form and
substance satisfactory to Agent and such Guarantor.

 

“Guaranty” shall mean any guaranty of the obligations of Borrowers executed by a
Guarantor in favor of Agent for its benefit and for the ratable benefit of
Lenders, in form and substance satisfactory to Agent and such Guarantor.

 

“Hazardous Discharge” shall have the meaning set forth in Section 4.19(d).

 

“Hazardous Substance” shall mean, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, Hazardous Wastes, hazardous or Toxic Substances or related materials
as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49
U.S.C. Sections 1801, et seq.), RCRA, or any other applicable Environmental Law
and in the regulations adopted pursuant thereto.

 

“Hazardous Wastes” shall mean all waste materials subject to regulation under
CERCLA, RCRA or applicable state or provincial law, and any other applicable
Federal, provincial, and state laws now in force or hereafter enacted relating
to hazardous waste disposal.

 

“Hedge Agreement” shall mean any and all transactions, agreements, or documents
now existing or hereafter entered into by any Borrower that provides for an
interest rate, credit, commodity or equity swap, cap, floor, collar, forward
foreign exchange transaction, currency swap, cross currency rate swap, currency
option, or any combination of, or option with respect to, these or similar
transactions, for the purpose of hedging Borrowers’ exposure to fluctuations in
interest or exchange rates, loan, credit exchange, security or currency
valuations or commodity prices.

 

“Hedge Liabilities” shall have the meaning provided in the definition of
“Lender-Provided Hedge”.

 

“Indebtedness” of a Person at a particular date shall mean all obligations of
such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise,
customer deposits, trade payables and other accrued expenses and liabilities
incurred in the Ordinary Course of Business (not constituting Indebtedness for
borrowed money)) and in any event, without limitation by reason of enumeration,
shall include all indebtedness, debt and other similar monetary obligations of
such Person whether direct or guaranteed, and all premiums, if any, due at the
required prepayment dates of such indebtedness, and all indebtedness secured by
a Lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any Lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.

 

20

 

 

“Indemnified Taxes” shall mean Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by or on account of any of the Obligations.

 

“Ineligible Security” shall mean any security which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of the
Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.

 

“Initial Closing Date” shall mean October 20, 2010.

 

“Insolvency Proceeding” shall mean any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other national,
state, provincial or federal bankruptcy or insolvency law, assignments for the
benefit of creditors, or proceedings seeking reorganization, arrangement,
liquidation, or other similar relief.

 

“Intellectual Property” shall mean property constituting under any Applicable
Law a patent, patent application, copyright, trademark, service mark, trade
name, mask work, trade secret or license or other right to use any of the
foregoing.

 

“Intellectual Property Claim” shall mean the assertion by any Person of a claim
that the ownership, use, marketing, sale or distribution of any Inventory or
Intellectual Property violates any ownership of or right to use any Intellectual
Property of such Person which results in a cease and desist order with respect
to such Inventory or Intellectual Property or the practical equivalent of such
an order.

 

“Intercompany Obligations” shall have the meaning set forth in Section 15.4.

 

“Interest Period” shall mean the period provided for any Eurodollar Rate Loan
pursuant to Section 2.2(c).

 

“Inventory” shall mean and include as to each Borrower all of such Borrower’s
now owned or hereafter acquired goods, merchandise and other personal property,
wherever located, to be furnished under any consignment arrangement, contract of
service or held for sale or lease, all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description which are or
might be used or consumed in such Borrower’s business or used in selling or
furnishing such goods, merchandise and other personal property, and all
documents of title or other documents representing them.

 

“Investment Property” shall mean and include as to each Borrower, all of such
Borrower’s now owned or hereafter acquired securities (whether certificated or
uncertificated), securities entitlements, securities accounts, commodities
contracts and commodities accounts.

 

21

 

 

“Issuer” shall mean any Person who issues a Letter of Credit and/or accepts a
draft pursuant to the terms hereof.

 

“Leasehold Interests” shall mean all of each Borrower’s right, title and
interest in and to the premises leased by each Borrower.

 

“Lender” and “Lenders” shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.

 

“Lender Parties” shall have the meaning set forth in Section 16.21.

 

“Lender-Provided Hedge” shall mean a Hedge Agreement with any Lender and with
respect to which the Agent confirms meets the following requirements: (i) it is
documented on a standard International Swap Dealer Association Agreement or
other form agreement acceptable to Agent, (ii) it provides for the method of
calculating the reimbursable amount of the provider's credit exposure in a
reasonable and customary manner, and (iii) it is entered into for hedging
(rather than speculative) purposes. The liabilities of any Borrower to the
provider of any Lender-Provided Hedge (the “Hedge Liabilities”) shall be
“Obligations” hereunder, guaranteed obligations under each Guaranty and secured
obligations hereunder, and otherwise treated as Obligations for purposes of each
of the Other Documents. The Liens securing the Hedge Liabilities shall be pari
passu with the Liens securing all other Obligations under this Agreement and the
Other Documents.

 

“Letter of Credit Fees” shall have the meaning set forth in Section 3.2.

 

“Letter of Credit Borrowing” shall have the meaning set forth in Section
2.12(d).

 

“Letter of Credit Sublimit” shall mean ten percent (10%) of Maximum Revolving
Advance Amount.

 

“Letters of Credit” shall have the meaning set forth in Section 2.9.

 

“License Agreement” shall mean any agreement between any Borrower and a Licensor
pursuant to which such Borrower is authorized to use any Intellectual Property
of such Licensor in connection with the manufacturing, marketing, sale or other
distribution of any Inventory of such Borrower.

 

“Licensor” shall mean any Person from whom any Borrower obtains the right to use
(whether on an exclusive or non-exclusive basis) any Intellectual Property in
connection with such Borrower’s manufacture, marketing, sale or other
distribution of any Inventory or otherwise in connection with such Borrower’s
business operations.

 

“Licensor/Agent Agreement” shall mean an agreement between Agent and a Licensor,
in form and content satisfactory to Agent and such Licensor, by which Agent is
given the right, vis-a-vis such Licensor, to enforce Agent’s Liens with respect
to and to dispose of any Borrower’s Inventory with the benefit of any
Intellectual Property applicable thereto, irrespective of such Borrower’s
default under any License Agreement with such Licensor.

 

22

 

 

“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation, hypothec,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including any conditional sale or other title retention
agreement, any lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code, the PPSA, or comparable law of any
jurisdiction.

 

“Liquidity Calculation” shall mean a calculation by Borrowing Agent of the
Quarterly Liquidity of Borrowers using Agent’s on-line Collateral monitoring
system and including both a schedule of the amount of Qualified Cash as of the
end of each Business Day during the applicable fiscal quarter and the amount
owing to Borrowers’ trade creditors which are 60 days or more past due as of the
end of such quarter, executed by the Chief Executive Officer, Chief Financial
Officer or Controller of the Borrowing Agent and delivered to the Agent,
appropriately completed, by which such officer shall certify to Agent the
Quarterly Liquidity and calculation thereof as of the date of such certificate.

 

“Material Adverse Effect” shall mean a material adverse effect on (a) the
condition (financial or otherwise), results of operations, assets, business, or
properties of the Borrowers, and their respective Subsidiaries taken as a whole,
(b) the ability of the Borrowers taken as a whole to duly and punctually pay or
perform the Obligations in accordance with the terms thereof, (c) the value of
the Collateral, taken as a whole, or Agent’s Liens on the Collateral or the
priority of such Liens or (d) the practical realization of the benefits of
Agent’s and each Lender’s rights and remedies under this Agreement, or under any
Other Document in any material respect.

 

“Material Contract” shall mean, with respect to any Person, each contract or
agreement to which such Person or any of its Subsidiaries is a party, the loss,
termination or modification of which could reasonably be expected to result in a
Material Adverse Effect.

 

“Maximum Equipment Loan Amount” shall mean $5,000,000 less repayments of the
Equipment Loans.

 

“Maximum Face Amount” shall mean, with respect to any outstanding Letter of
Credit, the face amount of such Letter of Credit including all automatic
increases provided for in such Letter of Credit, whether or not any such
automatic increase has become effective.

 

“Maximum Revolving Advance Amount” shall mean $75,000,000, as adjusted in
accordance with Section 2.25 or 2.26.

 

“Maximum Undrawn Amount” shall mean with respect to any outstanding Letter of
Credit, the amount of such Letter of Credit that is or may become available to
be drawn, including all automatic increases provided for in such Letter of
Credit, whether or not any such automatic increase has become effective.

 

“Modified Commitment Transfer Supplement” shall have the meaning set forth in
Section 16.3(d).

 

23

 

 

“Multiemployer Plan” shall mean a “multiemployer plan” as defined in Sections
3(37) and 4001(a)(3) of ERISA.

 

“Multiple Employer Plan” shall mean a Plan which has two or more contributing
sponsors (including any Borrower or any member of the Controlled Group) at least
two of whom are not under common control, as such a plan is described in Section
4064 of ERISA.

 

“Non-Qualifying Party” shall mean any Borrower or any Guarantor that on the
Eligibility Date fails for any reason to qualify as an Eligible Contract
Participant.

 

“Note(s)” shall mean the Revolving Credit Note and the Term Note.

 

“Obligations” shall mean and include: (a) any and all Indebtedness, loans,
advances, debts, liabilities, guaranties, obligations, covenants and duties
owing by any Borrower or Guarantor to Lenders or Agent or to any other direct or
indirect subsidiary or affiliate of Agent or any Lender under this Agreement and
the Other Documents, including any Lender-Provided Hedge, of any kind or nature,
present or future (including any interest or other amounts accruing thereon
after maturity, or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding relating to
any Borrower or Guarantor, whether or not a claim for post-filing or
post-petition interest or other amounts is allowed in such proceeding), plus (b)
any and all Indebtedness, liabilities, debts or advances arising out of
overdrafts or deposit or other accounts or electronic funds transfers (whether
through automated clearing houses or otherwise) or out of the Agent’s or any
Lenders non-receipt of or inability to collect funds or otherwise not being made
whole in connection with depository transfer check or other similar arrangements
(such Indebtedness, liabilities, debts or advances described in this clause (b),
the “Bank Products Obligations”), and, in the case of both clauses (a) and (b),
whether direct or indirect (including those acquired by assignment or
participation), absolute or contingent, joint or several, due or to become due,
now existing or hereafter arising, liquidated or unliquidated, regardless of how
such indebtedness or liabilities arise or by what agreement or instrument they
may be evidenced and all costs and expenses of Agent and any Lender incurred in
the documentation, negotiation, modification, enforcement, collection or
otherwise in connection with any of the foregoing, including but not limited to
reasonable attorneys’ fees and expenses and all obligations of any Borrower or
Guarantor to Agent or Lenders to perform acts or refrain from taking any action.
Notwithstanding anything to the contrary contained in the foregoing, the
Obligations shall not include any Excluded Hedge Liabilities.

 

“Ordinary Course of Business” shall mean with respect to any Borrower, the
ordinary course of such Borrower’s business as conducted on the Restatement
Date.

 

“Other Connection Taxes” means, with respect to the Agent, any Lender,
Participant, Issuer or any other recipient, Taxes imposed as a result of a
present or former connection between such recipient and the jurisdiction
imposing such Tax (other than connections arising from such recipient having
executed, delivered, become a party to, performed its obligations under,
received payments under, received or perfected a security interest under,
engaged in any other transaction pursuant to or enforced any Other Document, or
sold or assigned an interest in any Advance, this Agreement or Other Document)

 

24

 

 

“Other Documents” shall mean any Note, any Guaranty, the Canadian Security
Document, any Guarantor Security Agreement, any Lender-Provided Hedge and any
and all other agreements, instruments and documents, including guaranties,
pledges, powers of attorney, consents, interest or currency swap agreements or
other similar agreements and all other writings heretofore, now or hereafter
executed by any Borrower or any Guarantor and/or delivered to Agent or any
Lender in respect of the transactions contemplated by this Agreement.

 

“Other Taxes” shall mean 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 Document or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
Other Document, except any such Taxes that are Other Connection Taxes imposed
with respect to an assignment.

 

“Out-of-Formula Loans” shall have the meaning set forth in Section 16.2(d).

 

“Parent” is defined in the preamble.

 

“Parent and its Subsidiaries on a consolidated basis” shall mean the
consolidation in accordance with GAAP of the accounts or other items of Parent
and its respective Subsidiaries.

 

“Participant” shall have the meaning set forth in Section 16.3(b).

 

“Participation Advance” shall have the meaning set forth in Section 2.12(d).

 

“Participation Commitment” shall mean each Lender’s obligation to buy a
participation of the Letters of Credit issued hereunder.

 

“Payment Condition(s)” shall have the meaning set forth in Section 7.7.

 

“Payment Office” shall mean initially Two Tower Center Boulevard, East
Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrowing Agent and to each Lender to be the
Payment Office.

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA or any successor.

 

“Pension Benefit Plan” shall mean at any time any employee pension benefit plan
(including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Code and either (i) is maintained by any member of the
Controlled Group for employees of any member of the Controlled Group; or (ii)
has at any time within the preceding five years been maintained by any entity
which was at such time a member of the Controlled Group for employees of any
entity which was at such time a member of the Controlled Group.

 

“Permitted Acquisition” shall mean any acquisition made by any Borrower or
Subsidiary of a Borrower, provided, that:

 

25

 

 

(a)         immediately before and after the consummation of such acquisition,
no Default or Event of Default shall have occurred and be continuing;

 

(b)         Borrowing Agent shall have furnished to Agent at least ten (10)
Business Days (or such shorter period as permitted by Agent in its reasonable
discretion) prior to the consummation of such acquisition:

 

(i)          written notice of such proposed acquisition;

 

(ii)         a term sheet and/or commitment letter, executed if available,
setting forth in reasonable detail the terms and conditions of such acquisition
and, at the request of Agent, such other information and documents that Agent
may reasonably request;

 

(iii)        pro forma consolidated financial statements for the twelve (12)
month period immediately following the expected date of the consummation of such
acquisition, presented in accordance with GAAP, taking into consideration such
acquisition and funding of all loans in connection therewith;

 

(iv)        a certificate of Borrowing Agent’s chief financial officer
demonstrating, on a pro forma basis, (x) compliance with the Fixed Charge
Coverage Ratio for one (1) year following the consummation of such acquisition,
and (y) Undrawn Availability plus Qualified Cash is greater than the lesser of:
(A) 13.33% of the Formula Amount, or (B) 13.33% of the Maximum Revolving Advance
Amount, but in no event shall such amount be less than $10,000,000, immediately
prior to and after giving effect to such acquisition and the Revolving Advances
to be funded in connection therewith. The calculation of Undrawn Availability
for purposes of clause (y) herein shall exclude any and all of the acquired (or
to be acquired) assets of any Person unless Agent has first completed field
exams and appraisals (to the extent deemed necessary by the Agent in its sole
discretion) relating to such assets with results satisfactory to the Agent in
its Permitted Discretion and such assets are otherwise Eligible Inventory or
Eligible Receivables;

 

(v)         copies of all financial information presented to the Board of
Directors in connection with such acquisition;

 

(c)         all property to be so acquired in connection with such acquisition
shall be free and clear of any and all Liens, except for Permitted Encumbrances
(and if any such property is subject to any Lien not permitted by this clause
(c), then concurrently with such acquisition such Lien shall be released);

 

(d)         the Subsidiary to be acquired or formed as a result of such
acquisition shall be, in the reasonable judgment of the Borrowers, engaged in
the same line of business or a business ancillary, complementary or reasonably
related thereto of the Borrowers and such Subsidiary will be a direct
wholly-owned Subsidiary of a Borrower, provided that such Subsidiary may be an
indirect wholly-owned Subsidiary of a Borrower if the Agent consents in writing,
provided further that any such business would not subject the Agent or any
Lender to regulatory or third-party approvals in connection with the exercise of
its rights and remedies under this Agreement or any Other Documents other than
approvals applicable to the exercise of such rights and remedies with respect to
Borrowers prior to such acquisition;

 

26

 

 

(e)          such acquisition shall be effected in such a manner so that the
acquired Equity Interests or assets (if an asset acquisition) are owned by a
Borrower and, if effected by merger, amalgamation, or consolidation involving a
Borrower, the continuing or surviving Person shall be a Borrower;

 

(f)          such acquisition shall have been approved by the board of directors
or other governing body of the Person whose Equity Interests or assets are
proposed to be acquired to the extent required by the governing documents of the
Person whose Equity Interests or assets are proposed to be acquired or by
Applicable Law;

 

(g)          Agent shall be satisfied that all acts necessary to perfect Agent’s
Liens in the assets acquired by any Borrower, Guarantor or Domestic Subsidiary
have been taken; provided that, in the case of an acquisition of assets
constituting Equity Interests, Agent’s Liens shall be perfected with respect to
the Equity Interests in and the assets of the acquired Person (other than in the
case of a Foreign Subsidiary, where Agent shall have a perfected Lien upon 65%
of the Equity Interests of such Foreign Subsidiary only);

 

(h)          all or substantially all of the business and assets of the entity
being acquired are located in the United States, Canada, Puerto Rico or other
country acceptable to Agent;

 

(i)          the Purchase Price for such acquisition shall not individually or
in the aggregate with all other acquisitions during any calendar year exceed
$40,000,000, provided, that in connection with any Permitted Acquisitions, such
amounts shall be increased on a dollar for dollar basis by the amount of
Purchase Price paid from the actual proceeds of the issuance of Equity Interests
by any Borrower; and

 

(j)          nothing contained in this definition of Permitted Acquisition shall
permit a Borrower to make any acquisition prohibited by any other provision of
this Agreement.

 

“Permitted Advances” shall mean (a) Accounts owing to Borrowers, customer
deposits, prepaid expenses and accrued expenses created or acquired in the
Ordinary Course of Business and payable on customary trade terms of a Borrower,
(b) advances to sales representatives of Borrowers in the Ordinary Course of
Business and consistent with past practices not to exceed $100,000 per sales
representative and $1,000,000 in the aggregate with respect to all sales
representatives in each case for Parent and its Subsidiaries on a Consolidated
Basis, and (c) any loans or advances that are included in the definition of
“Permitted Investments.”

 

“Permitted Discretion” shall mean a determination made in the exercise of
reasonable (from the perspective of a secured asset based lender) judgment.

 

“Permitted Dispositions” shall have the meaning set forth in Section 4.3.

 

“Permitted Encumbrances” shall mean:

 

(a)           Liens in favor of Agent for the benefit of Agent and Lenders;

 

27

 

 

(b)           Liens for taxes, assessments or other governmental charges not
delinquent or being Properly Contested;

 

(c)           Liens disclosed in the financial statements referred to in Section
5.5, the existence of which Agent has consented to in writing;

 

(d)           deposits or pledges to secure obligations under worker’s
compensation, social security or similar laws, or under unemployment insurance;

 

(e)           deposits or pledges to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety and
appeal bonds and other obligations of like nature arising in the Ordinary Course
of Business;

 

(f)           Liens arising by virtue of the rendition, entry or issuance
against any Borrower or any Subsidiary, or any property of any Borrower or any
Subsidiary, of any judgment, writ, order, or decree for so long as each such
Lien (i) is in existence for less than 20 consecutive days after it first arises
or is being Properly Contested and (ii) is at all times junior in priority to
any Liens in favor of Agent;

 

(g)           mechanics’, workers’, materialmen’s, warehouse, statutory landlord
or other like Liens arising in the Ordinary Course of Business with respect to
obligations which are not due or which are being Properly Contested;

 

(h)           Liens placed upon fixed assets hereafter acquired to secure a
portion of the purchase price thereof, provided that (i) any such Lien shall not
encumber any other property of any Borrower and (ii) the aggregate amount of
Indebtedness secured by such Liens incurred as a result of such purchases shall
not exceed the amount provided for in Section 7.8(b);

 

(i)            Canadian statutory Liens in respect of deemed statutory trusts
under pensions benefits and employment standards legislation; and

 

(j)           Liens disclosed on Schedule 1.2(a); provided that such Liens shall
secure only those obligations which they secure on the Restatement Date (and
extensions, renewals and refinancings of such obligations permitted by Section
7.8) and shall not subsequently apply to any other property or assets of any
Borrower.

 

(k)           Liens securing Indebtedness permitted under Section 7.8(b) which
attach solely to the assets being leased or financed;

 

(l)            Liens securing Indebtedness for financing insurance premiums
which attach solely to the applicable insurance policies and proceeds thereof;

 

(m)          Liens of any licensor or licensee on Intellectual Property arising
in connection with license agreements entered into in the Ordinary Course of
Business;

 

28

 

 

(n)          any Lien, UCC-1 or PPSA financing statement, interest or title of a
lessor under any operating lease entered into in the Ordinary Course of
Business, or any interest or title of any lessee under any leases or subleases
of real property, with respect solely to the leased property and not to any
Collateral;

 

(o)          with respect solely to Real Property, defects and irregularities in
title, survey exceptions, non-monetary encumbrances, licenses, covenants,
restrictions, easements or reservations of others for rights-of-way, roads,
pipelines, railroad crossings, services, utilities or other similar purposes;
outstanding mineral rights or reservations (including rights with respect to the
removal of material resources) which do not materially diminish the value of the
Real Property, assuming usage of such surface estate similar to that being
carried on by any Person as of the Restatement Date, and Liens arising with
respect to zoning restrictions, licenses, covenants, building restrictions and
other similar charges or encumbrances on the use of Real Property of such Person
which do not materially interfere with the ordinary conduct of such Person’s
business thereon;

 

(p)          Liens consisting of UCC-1 financing statements or similar notices
filed by a Person of a type listed in Section 9-505 of the UCC solely in such
capacity;

 

(q) Liens arising in connection with a judgment or attachment that would not
constitute an Event of Default under this Agreement; and

 

(r)          Extensions, renewals and replacements of Liens referred to in
clauses (a) through (q) above; provided, however, that any such extension,
renewal or replacement Lien shall be limited to the property or assets covered
by the Lien extended, renewed or replaced and that the obligations secured by
any such extension, renewal or replacement Lien shall be in an amount not
greater than the amount of the obligations secured by the Lien extended, renewed
or replaced.

 

“Permitted Guarantees” shall mean (a) warranties made in the Ordinary Course of
Business, (b) any guaranty by a Borrower of any liabilities of any other
Borrower or a Subsidiary of a Borrower to any lessor or licensor, (c)
indemnities in agreements evidencing Indebtedness permitted hereunder, (d) any
indemnities by any Borrower of any liability of its directors, officers and
employees in their capacities as such as permitted by Applicable Law, (e) any
guaranty of any Indebtedness permitted under this Agreement, and (f) indemnities
in respect of statutory obligations, bonding agreements, brokerage and deposit
agreements, engagement letters, commitment letters, and agreements for,
acquisitions, divestures and other like agreements.

 

“Permitted Investments” shall mean any of the following:

 

(a)          obligations or securities issued or directly and fully guaranteed
or insured by the United States of America or any agency or instrumentality
thereof or any Canadian equivalent thereof;

 

(b)          United States dollar-denominated time deposits, certificates of
deposit and bankers acceptances of any bank whose short-term debt rating from
S&P, is at least A-1 or the equivalent or whose short-term debt rating from
Moody’s is at least P-1 or the equivalent with maturities of not more than six
months from the date of acquisition or any Canadian equivalent thereof;

 

29

 

 

(c)          commercial paper with a rating of at least A-1 or the equivalent by
S&P or at least P-1 or the equivalent by Moody’s maturing within six months
after the date of acquisition or any Canadian equivalent thereof;

 

(d)          marketable direct obligations issued by any state of the United
States or any political subdivision of any such state or any public
instrumentality thereof maturing within six months from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody’s;

 

(e)          Investments in money market funds substantially all the assets of
which are comprised of securities of the types described in clauses (a) through
(d) above;

 

(f)          Deposit Accounts maintained in accordance with the Blocked Account
Agreements;

 

(g)          Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with, customers and
suppliers arising in the Ordinary Course of Business;

 

(h)       deposits made in the Ordinary Course of Business consistent with past
practices to secure the performance of leases or in connection with bidding on
government contracts;

 

(i)          loans to employees in an aggregate amount not in excess of $100,000
at any one time per such employee (not to exceed in the aggregate at any time
outstanding the sum of $1,000,000 with respect to all employees of the
Borrowers), for the purpose of funding such employees’ purchase of Equity
Interests of the Parent, in each case for Parent and its Subsidiaries on a
Consolidated Basis;

 

(j)          Investments or intercompany loans and advances of (i) Parent or a
Subsidiary in or to any other Subsidiary (subject to a maximum amount of such
loans and advances (which, for clarification, do not include trade payables
incurred in the Ordinary Course of Business) by Parent and any other Borrower to
any and all such Subsidiaries of $10,000,000 in the aggregate at any one time
outstanding (provided that upon request by Agent, each such loan and advance
shall be evidenced by a promissory note in form and substance satisfactory to
Agent which is pledged by the payee as additional security for the
Obligations)), or (ii) any Subsidiary in or to the Parent;

 

(k)          additional Investments not otherwise permitted in this Section not
to exceed $1,000,000 in the aggregate at any one time outstanding for Parent and
its Subsidiaries on a Consolidated Basis;

 

(l)          Investments in certificates of deposit and bank deposits with
financial institutions located in Puerto Rico and the Dominican Republic, solely
to the extent necessary to maintain preferred tax treatment or country of origin
status in such locations, not to exceed $5,000,000 in the aggregate at any time
outstanding for Parent and its Subsidiaries on a Consolidated Basis;

 

30

 

 

(m)          Investments constituting Permitted Acquisitions;

 

(n)          Investments in Hedge Agreements, derivative agreements, materials
future contracts or other arrangements in connection with Indebtedness, in all
cases not for speculative purposes, not to exceed in the aggregate a notional
amount of $35,000,000 at any time outstanding for Parent and its Subsidiaries on
a Consolidated Basis; and

 

(o)          Deposit Accounts with financial institutions available for
withdrawal on demand, subject to the provisions of Section 4.15(h).

 

“Person” shall mean any individual, sole proprietorship, partnership, limited
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited or unlimited liability
company, limited liability partnership, institution, public benefit corporation,
joint venture, entity or Governmental Body (whether federal, state, provincial,
county, city, municipal or otherwise, including any instrumentality, division,
agency, body or department thereof).

 

“PNC” shall have the meaning set forth in the preamble to this Agreement and
shall extend to all of its successors and assigns.

 

“PPSA” shall mean the Personal Property Security Act of the applicable Canadian
province or provinces in respect of Rocky Canada and in the Province of Quebec,
shall mean the applicable provisions of the Civil Code of Quebec, each as
amended from time to time.

 

“Prior Related Event” shall have the meaning set forth in Section 16.21.

 

“Priority Payables” shall mean the full amount of the liabilities of any
Borrower which (i) have a trust imposed to provide for payment or a security
interest, pledge, lien, hypothec or charge ranking or capable of ranking senior
to or pari passu with security interests, liens, hypothecs or charges securing
the Obligations on any Collateral under any federal, provincial, state, county,
district, municipal, or local law of Canada or (ii) have a right imposed to
provide for payment ranking or capable of ranking senior to or pari passu with
the Obligations under federal, provincial, state, county, district, municipal,
local law, regulation or directive of Canada, including, but not limited to,
claims for unremitted and/or accelerated rents, taxes, wages, withholdings
taxes, value added taxes, amounts payable to an insolvency administrator,
employee withholdings or deductions, vacation pay, severance and termination
pay, workers’ compensation obligations, government royalties or pension
obligations in each case to the extent such trust, or security interest, lien
hypothec or charge has been or may be imposed.

 

31

 

 

“Properly Contested” shall mean, in the case of any Indebtedness or Lien, as
applicable, of any Person (including any taxes) that is not paid as and when due
or payable by reason of such Person’s bona fide dispute concerning its liability
to pay same or concerning the amount thereof, (a) such Indebtedness or Lien, as
applicable, is being properly contested in good faith by appropriate proceedings
promptly instituted and diligently conducted; (b) such Person has established
appropriate reserves as shall be required in conformity with GAAP; (c) the
non-payment of such Indebtedness will not have a Material Adverse Effect and
will not result in the forfeiture of any assets of such Person that will have a
Material Adverse Effect; (d) no Lien is imposed upon any of such Person’s assets
with respect to such Indebtedness unless such Lien is at all times junior and
subordinate in priority to the Liens in favor of the Agent (except only with
respect to Charges that have priority as a matter of Applicable Law) and
enforcement of such Lien is stayed during the period prior to the final
resolution or disposition of such dispute; (e) if such Indebtedness or Lien, as
applicable, results from, or is determined by the entry, rendition or issuance
against a Person or any of its assets of a judgment, writ, order or decree,
enforcement of such judgment, writ, order or decree is stayed pending a timely
appeal or other judicial review; and (f) if such contest is abandoned, settled
or determined adversely (in whole or in part) to such Person, such Person
forthwith pays such Indebtedness and all penalties, interest and other amounts
due in connection therewith.

 

“Purchase Price” shall mean, with respect to any acquisition, the sum of,
without duplication, (a) the aggregate consideration, whether cash, property
(including the face amount of any promissory note or any other debt instrument
issued in connection with such acquisition) or securities (including the fair
market value of any Equity Interests of any Borrower issued in connection
therewith), paid or delivered by a Borrower, plus (b) the aggregate amount of
Indebtedness of the acquired business, plus (c) all transaction costs and
contingent obligations incurred by a Borrower.

 

“Purchasing CLO” shall have the meaning set forth in Section 16.3(d).

 

“Purchasing Lender” shall have the meaning set forth in Section 16.3(c).

 

“Qualified Cash” shall mean, as of any date of determination, the amount of
unrestricted cash and Cash Equivalents of Borrowers that is in deposit accounts
maintained by PNC at a branch office of PNC located within the United States or
Canada, or over which the Agent has determined it has exclusive springing
control regardless of whether a Triggering Event has occurred.

 

“Qualified ECP Loan Party” shall mean each Borrower or Guarantor that on the
Eligibility Date is (a) a corporation, partnership, proprietorship,
organization, trust, or other entity other than a “commodity pool” as defined in
Section 1a(10) of the CEA and CFTC regulations thereunder that has total assets
exceeding $10,000,000 or (b) an Eligible Contract Participant that can cause
another person to qualify as an Eligible Contract Participant on the Eligibility
Date under Section 1a(18)(A)(v)(II) of the CEA by entering into or otherwise
providing a “letter of credit or keepwell, support, or other agreement” for
purposes of Section 1a(18)(A)(v)(II) of the CEA.

 

“Quarterly Liquidity” shall mean, for any fiscal quarter, an amount equal to (a)
the daily average (as of the end of each Business Day) during such fiscal
quarter of the sum of: (i) the lesser of (A) the Formula Amount minus the
outstanding amount of the Revolving Advances, or (B) the Maximum Revolving
Advance Amount minus the Maximum Undrawn Amount of all Letters of Credit minus
the outstanding amount of the Revolving Advances, plus (ii) Qualified Cash,
minus (b) all amounts owing to Borrowers’ trade creditors which are 60 days or
more past due as of the end of such fiscal quarter.

 

“Raw Material Inventory Advance Rate” shall have the meaning set forth in
Section 2.1(a)(y)(iii).

 

32

 

 

“RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901
et seq., as same may be amended from time to time.

 

“Real Property” shall mean all of each Borrower’s right, title and interest in
and to the real estate identified on Schedule 4.5 hereto and related
improvements, or which is hereafter owned or leased by any Borrower.

 

“Receivables” shall mean and include, as to each Borrower, all of such
Borrower’s accounts, contract rights, instruments (including those evidencing
indebtedness owed to such Borrower by its Affiliates), documents, chattel paper
(including electronic chattel paper), general intangibles relating to accounts,
drafts and acceptances, credit card receivables and all other forms of
obligations owing to such Borrower arising out of or in connection with the sale
or lease of Inventory or the rendition of services, all supporting obligations,
guarantees and other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or assigned
to Agent hereunder.

 

“Receivables Advance Rate” shall have the meaning set forth in Section
2.1(a)(y)(i).

 

“Register” shall have the meaning set forth in Section 16.3(e).

 

“Reimbursement Obligation” shall have the meaning set forth in Section 2.12(b).

 

“Release” shall have the meaning set forth in Section 5.7(c)(i).

 

“Reportable Compliance Event” shall mean that any Covered Entity becomes a
Sanctioned Person, or is indicted, arraigned, or custodially detained in
connection with any Anti-Terrorism Law or any predicate crime to any
Anti-Terrorism Law, or has knowledge of facts or circumstances to the effect
that it is reasonably likely that any aspect of its operations is in actual or
probable violation of any Anti-Terrorism Law.

 

“Reportable Event” shall mean a reportable event described in Section 4043(c) of
ERISA or the regulations promulgated thereunder.

 

“Required Lenders” shall mean Lenders holding at least sixty-six and two-thirds
percent (66 2/3%) of the Advances and, if no Advances are outstanding, shall
mean Lenders holding sixty-six and two-thirds percent (66 2/3%) of the
Commitment Percentages; provided, however, if there are fewer than three (3)
Lenders, Required Lenders shall mean all Lenders.

 

“Reserve Percentage” shall mean as of any day the maximum percentage in effect
on such day as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the reserve requirements (including
supplemental, marginal and emergency reserve requirements) with respect to
eurocurrency funding (currently referred to as “Eurocurrency Liabilities”).

 

“Restatement Date” shall mean the date of this Agreement.

 

“Revolving Advance(s)” shall mean Advances made other than Letters of Credit and
the Term Loans.

 

33

 

 

“Revolving Credit Note” shall have the meaning set forth in Section 2.1(a).

 

“Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the
sum of the Alternate Base Rate plus the Applicable Rate for Revolving Advances
with respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus
the Applicable Rate for Revolving Advances with respect to Eurodollar Rate
Loans.

 

“Sanctioned Country” shall mean a country subject to a sanctions program
maintained under any Anti-Terrorism Law.

 

“Sanctioned Person” shall mean any individual person, group, regime, entity or
thing listed or otherwise recognized as a specially designated, prohibited,
sanctioned or debarred person, group, regime, entity or thing, or subject to any
limitations or prohibitions (including but not limited to the blocking of
property or rejection of transactions), under any Anti-Terrorism Law.

 

“Satisfaction Event” shall mean the first (1st) date after a Triggering Event on
which both of the following conditions are satisfied: (a) the sum of Undrawn
Availability plus Qualified Cash is greater than the lesser of: (i) 20.00% of
the Formula Amount, or (i) 20.00% of the Maximum Revolving Advance Amount, but
in no event shall such amount be less than $15,000,000, for a period of
forty-five (45) or more consecutive calendar days after such Triggering Event,
and (b) no Default or Event of Default is continuing.

 

“SEC” shall mean the Securities and Exchange Commission or any successor
thereto.

 

“Section 20 Subsidiary” shall mean the Subsidiary of the bank holding company
controlling PNC, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Senior Debt Payments” shall mean and include all cash actually expended by any
Borrower to make (a) interest payments on any Advances hereunder, plus (b) net
payments on account of all Hedging Agreements, plus (c) payments for all fees,
commissions and charges paid to Agent, Issuer, or any Lender set forth herein
and with respect to any Advances, plus (d) payments on Capitalized Lease
Obligations, plus (e) principal payments on the Term Loans, plus (f) payments
with respect to any other Indebtedness for borrowed money (other than the
Revolving Advances and Letters of Credit) but excluding the satisfaction of any
Indebtedness to the extent simultaneously refinanced with the proceeds of any
Indebtedness permitted to be incurred hereunder other than the proceeds
Revolving Advances.

 

“Senior Obligations” shall have the meaning set forth in Section 15.4.

 

“Settlement Date” shall mean the Initial Closing Date and thereafter Wednesday
or Thursday of each week or more frequently if Agent deems appropriate unless
such day is not a Business Day in which case it shall be the next succeeding
Business Day.

 

34

 

 

“Solvent” shall mean as to any Person (i) the ability to pay its debts as they
mature, (ii) having capital sufficient to carry on its business and all
businesses in which it is about to engage, and (iii) (A) as of the Restatement
Date, the fair present saleable value of its assets, calculated on a going
concern basis, is in excess of the amount of its liabilities, and (B) subsequent
to the Restatement Date, the fair saleable value of its assets (calculated on a
going concern basis) will be in excess of the amount of its liabilities;
provided, however, that (w) the determination of whether a Person is Solvent
shall take into account all such Person's properties and liabilities regardless
of whether, or the amount at which, any such property or liability is included
on a balance sheet of such Person prepared in accordance with GAAP, including
properties such as contingent contribution or subrogation rights, business
prospects, distribution channels and goodwill; (x) the determination of the sum
of a Person's properties at a fair valuation or the present fair saleable value
of a Person's properties shall be made on a going concern basis; (y) in
computing the amount of contingent or unrealized assets or contingent or
unliquidated liabilities at any time, such assets and liabilities will be
computed at the amounts which, in light of all the facts and circumstances
existing at such time, represent the amount that reasonably can be expected to
become realized assets or matured liabilities, as the case may be; and (z) in
computing the amount that would be required to pay a Person's probable liability
on its existing debts as they become absolute and matured, reasonable valuation
techniques, including a present value analysis, shall be applied using such
rates over such periods as are appropriate under the circumstances.

 

“Subsidiary” of any Person shall mean a corporation or other entity of whose
Equity Interests having ordinary voting power (other than Equity Interests
having such power only by reason of the happening of a contingency) to elect a
majority of the directors of such corporation, or other Persons performing
similar functions for such entity, are owned, directly or indirectly, by such
Person; provided, however, that the term “Subsidiary” shall not include EJ Asia
Limited.

 

“Subsidiary Stock” shall mean all of the issued and outstanding Equity Interests
of any Subsidiary owned by any Borrower (not to exceed 65% of the Equity
Interests of any Foreign Subsidiary other than Rocky Canada).

 

“Swap” shall mean any “swap” as defined in Section 1a(47) of the CEA and
regulations thereunder other than (a) a swap entered into on, or subject to the
rules of, a board of trade designated as a contract market under Section 5 of
the CEA, or (b) a commodity option entered into pursuant to CFTC Regulation
32.3(a).

 

“Swap Obligation” means any obligation to pay or perform under any agreement,
contract or transaction that constitutes a Swap which is also a Lender-Provided
Hedge.

 

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

 

“Term” shall have the meaning set forth in Section 13.1.

 

“Term Loan(s)” shall mean the Equipment Loans, together with any other term
loans extended hereunder.

 

35

 

 

“Term Loan Rate” shall mean an interest rate per annum equal to (a) the sum of
the Alternate Base Rate plus the Applicable Rate for Term Loans with respect to
Domestic Rate Loans, and (b) the sum of the Eurodollar Rate plus the Applicable
Rate for Term Loans with respect to Eurodollar Rate Loans.

 

“Term Note(s)” shall mean the Equipment Note, together with any other note
evidencing a Term Loan.

 

“Termination Event” shall mean (i) a Reportable Event with respect to any
Pension Benefit Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower
or any member of the Controlled Group from a Pension Benefit Plan or
Multiemployer Plan during a plan year in which such entity was a “substantial
employer” as defined in Section 4001(a)(2) of ERISA; (iii) the providing of
notice of intent to terminate a Pension Benefit Plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of
proceedings to terminate a Pension Benefit Plan or Multiemployer Plan; (v) any
event or condition (a) which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Pension Benefit Plan or Multiemployer Plan, or (b) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; (vi) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of any Borrower or any member of the Controlled Group from a
Multiemployer Plan; (vii) providing any security to any Pension Benefit Plan
under Section 436(f) of the Code by Borrower or any member of the Controlled
Group or (viii) any event, action, condition, proceeding or otherwise that
constitutes (a) the institution by any Governmental Body of proceedings to
terminate a Canadian Pension Plan under pension benefit laws of Canada or (b) an
event or condition that provides a basis under pension benefit laws of Canada
for the termination by any Governmental Body of, or the appointment of a
Governmental Body of an administrator of, any Canadian Pension Plan.

 

“Toxic Substance” shall mean and include any material present on the Real
Property which has been shown to have significant adverse effect on human health
or which is subject to regulation under the Toxic Substances Control Act (TSCA),
15 U.S.C. §§ 2601 et seq., applicable state law, or any other applicable Federal
or state laws now in force or hereafter enacted relating to toxic substances.
“Toxic Substance” includes but is not limited to asbestos, polychlorinated
biphenyls (PCBs) and lead-based paints.

 

“Transferee” shall have the meaning set forth in Section 16.3(d).

 

“Triggering Event” shall mean either: (a) the occurrence of an Event of Default,
or (b) the first (1st) date after the Restatement Date (or the most recent
Satisfaction Event if a Triggering Event has previously occurred) on which the
sum of Undrawn Availability plus Qualified Cash is less than the lesser of: (i)
13.33% of the Formula Amount, or (ii) 13.33% of the Maximum Revolving Advance
Amount, but in no event shall such amount be less than $10,000,000, for a period
of ten (10) or more consecutive days, or (c) any single date on which the sum of
Undrawn Availability plus Qualified Cash is less than the lesser of: (i) 10.00%
of the Formula Amount, or (ii) 10.00% of the Maximum Revolving Advance Amount,
but in no event shall such amount be less than $7,500,000.

 

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“Undrawn Availability” at a particular date shall mean an amount equal to (a)
the lesser of (i) the Formula Amount, or (ii) the Maximum Revolving Advance
Amount, minus the Maximum Undrawn Amount of all Letters of Credit, minus (b) the
sum of (i) the outstanding amount of Revolving Advances, plus (ii) amounts due
and owing to any Borrower’s trade creditors which are outstanding sixty (60)
days or more past the due date thereof.

 

“Unfinanced Capital Expenditures” shall mean all Capital Expenditures of
Borrower other than those made utilizing financing provided by the applicable
seller or third party lenders. For the avoidance of doubt, a Capital Expenditure
made by a Borrower utilizing a Revolving Advance shall be deemed an Unfinanced
Capital Expenditure unless such Revolving Advance is repaid during the same
fiscal quarter that such Capital Expenditure is made with financing permitted
hereunder and provided by the applicable seller or third-party lenders.

 

“Uniform Commercial Code” shall have the meaning set forth in Section 1.3.

 

“US Assignment” shall have the meaning set forth in Section 4.15(j).

 

“USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.

 

“Week” shall mean the time period commencing with the opening of business on a
Wednesday and ending on the end of business the following Tuesday.

 

“Withholding Agent” means Borrowers and Agent.

 

1.3.          Uniform Commercial Code Terms. All terms used herein and defined
in the Uniform Commercial Code as adopted in the State of Ohio from time to time
(the “Uniform Commercial Code”) shall have the meaning given therein unless
otherwise defined herein. Without limiting the foregoing, unless otherwise
defined herein, the terms “accounts”, “chattel paper”, “commercial tort claims”,
“instruments”, “general intangibles”, “goods”, “payment intangibles”,
“proceeds”, “supporting obligations”, “securities”, “investment property”,
“documents”, “deposit accounts”, “software”, “letter of credit rights”,
“inventory”, “equipment” and “fixtures”, as and when used in the description of
Collateral shall have the meanings given to such terms in Articles 8 or 9 of the
Uniform Commercial Code. To the extent the definition of any category or type of
collateral is expanded by any amendment, modification or revision to the Uniform
Commercial Code, such expanded definition will apply automatically as of the
date of such amendment, modification or revision. All terms used herein and
defined in the PPSA (in respect of Collateral located in Canada) shall have the
meaning given therein unless otherwise defined herein.  Without limiting the
foregoing, the terms “accounts”, “chattel paper”, “goods”, “instruments”,
“intangibles”, “proceeds”, “securities”, “investment property”, “document of
title”, “inventory”, “equipment” and “fixtures”, as and when used in the
description of Collateral located in Canada shall have the meanings given to
such terms in the PPSA.  To the extent the definition of any category or type of
collateral is expanded by any amendment, modification or revision to the PPSA,
such expanded definition will apply automatically as of the date of such
amendment, modification or revision.

 

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1.4.          Certain Matters of Construction. The terms “herein”, “hereof” and
“hereunder” and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. All references
herein to Articles, Sections, Exhibits and Schedules shall be construed to refer
to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Any
pronoun used shall be deemed to cover all genders. Wherever appropriate in the
context, terms used herein in the singular also include the plural and vice
versa. All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. Unless otherwise
provided, all references to any instruments or agreements to which Agent is a
party, including references to any of the Other Documents, shall include any and
all modifications or amendments thereto and any and all extensions or renewals
thereof. All references herein to the time of day shall mean the time in Ohio.
All references herein to “province” or like terms shall include territory and
like terms. Unless otherwise provided, all financial calculations shall be
performed with Inventory valued on a first-in, first-out basis. Whenever the
words “including” or “include” shall be used, such words shall be understood to
mean “including, without limitation” or “include, without limitation”. All
references to “province” or like terms shall include “territory” or like terms.
A Default or Event of Default shall be deemed to exist and be continuing at all
times during the period commencing on the date that such Default or Event of
Default occurs to the date on which such Default or Event of Default is waived
in writing pursuant to this Agreement or is cured within any period of cure
expressly provided for in this Agreement. Any Lien referred to in this Agreement
or any of the Other Documents as having been created in favor of Agent, any
agreement entered into by Agent pursuant to this Agreement or any of the Other
Documents, any payment made by or to or funds received by Agent pursuant to or
as contemplated by this Agreement or any of the Other Documents, or any act
taken or omitted to be taken by Agent, shall, unless otherwise expressly
provided, be created, entered into, made or received, or taken or omitted, for
the benefit or account of Agent and Lenders. Wherever the phrase “to the best of
Borrowers’ knowledge” or words of similar import relating to the knowledge or
the awareness of any Borrower are used in this Agreement or Other Documents,
such phrase shall mean and refer to the actual knowledge of a senior officer of
any Borrower. All covenants hereunder shall be given independent effect so that
if a particular action or condition is not permitted by any of such covenants,
the fact that it would be permitted by an exception to, or otherwise within the
limitations of, another covenant shall not avoid the occurrence of a default if
such action is taken or condition exists. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached will not affect the incorrectness of a breach of a
representation or warranty hereunder. To the extent it is necessary to determine
Undrawn Availability, the occurrence of any Event of Default, or compliance with
any provision hereof for which measurement is based on Dollars, any amount of
Canadian Dollars shall be deemed to be the Equivalent Amount of Dollars.

 

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1.5.          Amendment and Restatement. Certain of Borrowers, PNC, as Agent and
Lender, and U.S. Bank National Association, as Lender, are parties to a
Revolving Credit, Guaranty, and Security Agreement dated as of October 20, 2010
(as amended by Amendment No. 1 to Loan Agreement effective as of May 9, 2013 and
by a Joinder and Amendment No. 2 to Loan Documents effective as of December 13,
2013, the “Existing Loan Agreement”) with respect to a revolving credit facility
(the “Existing Credit Facility”) extended to such Borrowers. This Agreement
amends and restates the Existing Loan Agreement in its entirety. As such, this
Agreement represents in part a renewal of, and is issued in substitution and
exchange for, and not in satisfaction or novation of, the obligations and other
liabilities under the Existing Loan Agreement and the Existing Credit Facility.
The obligations and other liabilities under the Existing Credit Facility are
continuing obligations of such Borrowers and are hereby acknowledged and
ratified by such Borrowers, and nothing herein shall be construed to deem such
obligations and other liabilities paid, or to release or terminate any Lien
given to secure such indebtedness or any guaranty thereof. In addition, any
Borrower which was not party to the Existing Loan Agreement or the Other
Documents (as defined therein) prior to its execution hereof, agrees to be bound
by the terms hereof, and by its execution of this Agreement, joins in and
assumes the obligations and other liabilities of a “Borrower” hereunder and
under the Other Documents. All references to the “Loan Agreement” or words of
like import in any document, instrument or agreement executed and delivered in
connection with the Existing Credit Facility shall be deemed to refer to this
Agreement as this Agreement may be further amended, restated, supplemented or
extended. Nothing contained in this Agreement will be construed as waiving any
continuing Default or Event of Default under the Existing Loan Agreement or will
affect or impair any right, power, or remedy of Agent or Lenders under or with
respect to such continuing Default or Event of Default. Any such continuing
Default or Event of Default shall remain in effect except to the extent this
Agreement has amended the provisions of the Existing Loan Agreement to delete
the term of the Existing Loan Agreement which was the basis for such continuing
Default or Event of Default.

 

IIADVANCES, PAYMENTS.

 

2.1.          Revolving Advances.

 

(a)          Amount of Revolving Advances. Subject to the terms and conditions
set forth in this Agreement including Section 2.1(b), each Lender, severally and
not jointly, will make Revolving Advances to Borrowers in aggregate amounts
outstanding at any time equal to such Lender’s Commitment Percentage of the
lesser of (x) the Maximum Revolving Advance Amount less the Maximum Undrawn
Amount of all Letters of Credit or (y) an amount equal to the sum of the
following (the “Formula Amount”):

 

(i)          up to 85% (“Receivables Advance Rate”), of Eligible Receivables,
plus

 

(ii)         up to the lesser of (A) 75% of the value of Eligible Finished Goods
Inventory (“Finished Goods Inventory Advance Rate”), or (B) 85% of the appraised
net orderly liquidation value of Eligible Finished Goods Inventory (as evidenced
by an Inventory appraisal satisfactory to Agent in its Permitted Discretion),
plus

 

(iii)        up to the lesser of (A) 50% of the value of the Eligible Raw
Material Inventory (“Raw Material Inventory Advance Rate” and together with the
Finished Goods Inventory Advance Rate and the Receivables Advance Rate,
collectively, the “Advance Rates”), or (B) 85% of the appraised net orderly
liquidation value of Eligible Raw Materials Inventory (as evidenced by an
Inventory appraisal satisfactory to Agent in its Permitted Discretion), minus

 

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(iv)        the amount by which the sum of Section 2.1(a)(y)(ii) plus Section
2.1(a)(y)(iii) exceeds sixty percent (60%) of the Maximum Revolving Advance
Amount, minus

 

(v)         the Maximum Undrawn Amount of all Letters of Credit, minus

 

(vi)        such reserves as Agent may deem proper and necessary from time to
time in its Permitted Discretion, including with respect to the Priority
Payables.

 

The Revolving Advances shall be evidenced by one or more secured promissory
notes (collectively, the “Revolving Credit Note”).

 

(b)          Discretionary Rights. The Advance Rates may be increased or
decreased by Agent at any time and from time to time in the exercise of its
Permitted Discretion. Each Borrower consents to any such increases or decreases
and acknowledges that decreasing the Advance Rates or increasing or imposing
reserves may limit or restrict Advances requested by Borrowing Agent. Agent
shall give Borrowing Agent five (5) days prior written notice of its intention
to decrease the Advance Rates. The rights of Agent under this subsection are
subject to the provisions of Section 16.2(b).

 

2.2.          Procedure for Revolving Advances Borrowing.

 

(a)          Domestic Rate Loan Requests. Borrowing Agent on behalf of any
Borrower may notify Agent prior to 12:00 Noon on a Business Day of a Borrower’s
request to incur, on that day, a Revolving Advance comprised of a Domestic Rate
Loan hereunder. In the event Borrower desires an Equipment Loan comprised of a
Domestic Rate Loan hereunder, Borrowing Agent shall give Agent at least three
(3) Business Days’ prior written notice.

 

(b)          Deemed Credit Requests. The Borrowers shall be deemed to have made
a request for a Revolving Advance (a "Deemed Credit Request"), which Deemed
Credit Request shall be irrevocable upon any interest, principal, fee or other
Obligation of the Borrowers hereunder becoming due, for a Revolving Advance
comprised of a Domestic Rate Loan in an amount necessary to pay such interest,
principal, fee or other Obligation. Each Lender agrees that its obligation to
make or participate in Revolving Advances pursuant to a Deemed Credit Request is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including the occurrence of any Default or Event of Default or the
failure of any condition precedent.

 

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(c)          Eurodollar Rate Loan Requests. In the event any Borrower desires to
obtain a Eurodollar Rate Loan, Borrowing Agent shall give Agent written notice
by no later than 12:00 Noon on the day which is three (3) Business Days prior to
the date such Eurodollar Rate Loan is to be borrowed, specifying (i) the date of
the proposed borrowing (which shall be a Business Day), (ii) the type of
borrowing and the amount on the date of such Advance to be borrowed, which
amount shall be in an aggregate principal amount that is not less than
$1,000,000 and integral multiples of $500,000 in excess thereof, and (iii) the
duration of the first Interest Period therefor. Interest Periods for Eurodollar
Rate Loans shall be for one, two, three or six months; provided, if an Interest
Period would end on a day that is not a Business Day, it shall end on the next
succeeding Business Day unless such day falls in the next succeeding calendar
month in which case the Interest Period shall end on the next preceding Business
Day. No Eurodollar Rate Loan shall be made available to any Borrower during the
continuance of a Default or an Event of Default. After giving effect to each
requested Eurodollar Rate Loan, including those which are converted from a
Domestic Rate Loan under Section 2.2(d), there shall not be outstanding more
than eight (8) Eurodollar Rate Loans, in the aggregate. Each Interest Period of
a Eurodollar Rate Loan shall commence on the date such Eurodollar Rate Loan is
made and shall end on such date as Borrowing Agent may elect as set forth in
subsection (c)(iii) above provided that the exact length of each Interest Period
shall be determined in accordance with the practice of the interbank market for
offshore Dollar deposits and no Interest Period shall end after the last day of
the Term. Borrowing Agent shall elect the initial Interest Period applicable to
a Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(c) or by its notice of conversion given to Agent pursuant to Section
2.2(d), as the case may be. Borrowing Agent shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not later than 12:00 Noon on the day which is three (3) Business Days
prior to the last day of the then current Interest Period applicable to such
Eurodollar Rate Loan. If Agent does not receive timely notice of the Interest
Period elected by Borrowing Agent, Borrowing Agent shall be deemed to have
elected to convert to a Domestic Rate Loan subject to Section 2.2(d) herein
below.

 

(d)          Rate Conversions and Continuations. Provided that no Event of
Default shall have occurred and be continuing, Borrowing Agent may, on the last
Business Day of the then current Interest Period applicable to any outstanding
Eurodollar Rate Loan, or on any Business Day with respect to Domestic Rate
Loans, convert or continue any such loan into a loan of another type in the same
aggregate principal amount provided that any conversion or continuation of a
Eurodollar Rate Loan shall be made only on the last Business Day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Borrowing
Agent desires to convert or continue a loan, Borrowing Agent shall give Agent
written notice by no later than 12:00 Noon (i) on the day which is three (3)
Business Days’ prior to the date on which such conversion or continuation is to
occur with respect to a conversion from a Domestic Rate Loan to a Eurodollar
Rate Loan or a continuation of a Eurodollar Rate Loan as a Eurodollar Rate Loan,
or (ii) on the day which is one (1) Business Day prior to the date on which such
conversion is to occur with respect to a conversion from a Eurodollar Rate Loan
to a Domestic Rate Loan, specifying, in each case, the date of such conversion
or continuation, the loans to be converted or continued and if the conversion is
from a Domestic Rate Loan to any other type of loan, the duration of the first
Interest Period therefor.

 

(e)          Eurodollar Rate Loan Prepayments. At its option and upon written
notice given prior to 12:00 Noon at least three (3) Business Days’ prior to the
date of such prepayment, any Borrower may prepay the Eurodollar Rate Loans in
whole at any time or in part from time to time with accrued interest on the
principal being prepaid to the date of such repayment. Such Borrower shall
specify the date of prepayment of Advances which are Eurodollar Rate Loans and
the amount of such prepayment. In the event that any prepayment of a Eurodollar
Rate Loan is required or permitted on a date other than the last Business Day of
the then current Interest Period with respect thereto, such Borrower shall
indemnify Agent and Lenders therefor in accordance with Section 2.2(f).

 

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(f)          Indemnity. Each Borrower shall indemnify Agent and Lenders and hold
Agent and Lenders harmless from and against any and all losses or expenses that
Agent and Lenders may sustain or incur as a consequence of any prepayment,
conversion of or any default by any Borrower in the payment of the principal of
or interest on any Eurodollar Rate Loan or failure by any Borrower to complete a
borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan
after notice thereof has been given, including, but not limited to, any interest
payable by Agent or Lenders to lenders of funds obtained by it in order to make
or maintain its Eurodollar Rate Loans hereunder. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by Agent
or any Lender to Borrowing Agent shall be conclusive absent manifest error.

 

(g)          Illegality of Eurodollar Rate Loans. Notwithstanding any other
provision hereof, if any Applicable Law or any Change in Law, shall make it
unlawful for any Lender (for purposes of this subsection (g), the term “Lender”
shall include any Lender and the office or branch where any Lender or any
corporation or bank controlling such Lender makes or maintains any Eurodollar
Rate Loans) to make or maintain its Eurodollar Rate Loans, the obligation of
Lenders to make Eurodollar Rate Loans hereunder shall forthwith be cancelled and
Borrowers shall, if any affected Eurodollar Rate Loans are then outstanding,
promptly upon request from Agent, either pay all such affected Eurodollar Rate
Loans or convert such affected Eurodollar Rate Loans into loans of another type.
If any such payment or conversion of any Eurodollar Rate Loan is made on a day
that is not the last day of the Interest Period applicable to such Eurodollar
Rate Loan, Borrowers shall pay Agent, upon Agent’s request, such amount or
amounts as may be necessary to compensate Lenders for any loss or expense
sustained or incurred by Lenders in respect of such Eurodollar Rate Loan as a
result of such payment or conversion, including (but not limited to) any
interest or other amounts payable by Lenders to lenders of funds obtained by
Lenders in order to make or maintain such Eurodollar Rate Loan. A certificate as
to any additional amounts payable pursuant to the foregoing sentence submitted
by Lenders to Borrowing Agent shall be conclusive absent manifest error.

 

2.3.          Disbursement of Advance Proceeds. All Advances shall be disbursed
from whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrowers to Agent or Lenders,
shall be charged to Borrowers’ Account on Agent’s books. During the Term,
Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by Borrowing Agent on behalf of any
Borrower shall, with respect to requested Revolving Advances to the extent
Lenders make such Revolving Advances, be made available to the applicable
Borrower on the day so requested by way of credit to such Borrower’s operating
account at PNC, or such other bank as Borrowing Agent may designate following
notification to Agent, in immediately available federal funds or other
immediately available funds or, with respect to Deemed Credit Requests, be
disbursed to Agent to be applied to the outstanding Obligations giving rise to
such deemed request.

 

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2.4.          Equipment Loan. Subject to the terms and conditions of this
Agreement, each Lender, severally and not jointly, shall, from time to time,
make available advances to the Borrowers to finance any such Borrower’s purchase
of Equipment for use in such Borrower’s business (each, an “Equipment Loan” and
collectively, the “Equipment Loans”). All such Equipment Loans shall be in such
amounts as are requested by Borrower, but in no event shall any Equipment Loan
exceed 80% of the net invoice cost (excluding taxes, shipping, delivery,
handling, installation, overhead and other so called “soft” costs) of the
Equipment then to be purchased by Borrower and the total amount of all Equipment
Loans outstanding hereunder shall not exceed, in the aggregate, the Maximum
Equipment Loan Amount. Once repaid an Equipment Loan may not be reborrowed.
Advances consisting of Equipment Loans shall be accumulated from the Restatement
Date through the one (1) year anniversary of the Restatement Date (the
“Borrowing Period”). At the end of the Borrowing Period, no additional Equipment
Loans shall be made and the sum of all Equipment Loans made during the Borrowing
Period shall amortize on the basis of a sixty (60) month schedule. The Equipment
Loans shall be, with respect to principal, payable in equal monthly installments
based upon the amortization schedule set forth above, commencing on January 1,
2016 and on the first (1st) day of each month thereafter with the balance
payable upon the expiration of the Term, subject to acceleration upon the
occurrence of an Event of Default under this Agreement or termination of this
Agreement. The Equipment Loans shall be evidenced by one or more secured
promissory notes (collectively, the “Equipment Note”). The Equipment Loans may
consist of Domestic Rate Loans or Eurodollar Rate Loans, or a combination
thereof, as Borrower may request. In the event that Borrower desires to obtain
or continue a Eurodollar Rate Loan or to convert a Domestic Rate Loan to a
Eurodollar Rate Loan, Borrower shall comply with the notification requirements
set forth in Sections 2.2(c) and (d) and the provisions of Sections 2.2(c)
through (g) shall apply.

 

2.5.          Maximum Advances. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving
Advance Amount less the Maximum Undrawn Amount of all Letters of Credit or (b)
the Formula Amount.

 

2.6.          Repayment of Advances.

 

(a)          The Revolving Advances shall be due and payable in full on the last
day of the Term subject to earlier prepayment as herein provided. The Term Loans
shall be due and payable as provided in Section 2.4 and in the Term Note,
subject to mandatory prepayments as herein provided.

 

(b)          Each Borrower recognizes that the amounts evidenced by checks,
notes, drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by Agent on the date received. In
consideration of Agent’s agreement to conditionally credit Borrowers’ Account as
of the next Business Day following the Agent’s receipt of those items of
payment, each Borrower agrees that, in computing the charges under this
Agreement, all items of payment shall be deemed applied by Agent on account of
the Obligations one (1) Business Day after (i) the Business Day following the
Agent’s receipt of such payments via wire transfer or electronic depository
check or (ii) in the case of payments received by Agent in any other form, the
Business Day such payment constitutes good funds in Agent’s account. Agent is
not, however, required to credit Borrowers’ Account for the amount of any item
of payment which is unsatisfactory to Agent and Agent may charge Borrowers’
Account for the amount of any item of payment which is returned to Agent unpaid.

 

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(c)          All payments of principal, interest and other amounts payable
hereunder, or under any of the Other Documents shall be made to Agent at the
Payment Office not later than 1:00 p.m. on the due date therefor in lawful money
of the United States of America in federal funds or other funds immediately
available to Agent. Agent shall have the right to effectuate payment on any and
all Obligations due and owing hereunder by a Deemed Credit Request as provided
in Section 2.2(b).

 

(d)          Borrowers shall pay principal, interest, and all other amounts
payable hereunder, or under any Other Document, without any deduction
whatsoever, including, but not limited to, any deduction for any withholding,
setoff or counterclaim.

 

2.7.          Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.

 

2.8.          Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account (“Borrowers’ Account”) in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each calendar month, Agent shall send
to Borrowing Agent a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Agent and Borrowers during such month. The monthly statements shall be deemed
correct and binding upon Borrowers in the absence of manifest error and shall
constitute an account stated between Lenders and Borrowers unless Agent receives
a written statement of Borrowers’ specific exceptions thereto within thirty (30)
days after such statement is received by Borrowing Agent. The records of Agent
with respect to the loan account shall be conclusive evidence absent manifest
error of the amounts of Advances and other charges thereto and of payments
applicable thereto.

 

2.9.          Letters of Credit. Subject to the terms and conditions hereof,
Agent shall issue or cause the issuance of standby and/or trade letters of
credit (“Letters of Credit”) for the account of any Borrower; provided, however,
that Agent will not be required to issue or cause to be issued any Letters of
Credit to the extent that the issuance thereof would then cause the sum of (a)
the Revolving Advances plus (b) the Maximum Undrawn Amount of all Letters of
Credit to exceed the lesser of (i) the Maximum Revolving Advance Amount or (ii)
the Formula Amount. The Maximum Undrawn Amount of all Letters of Credit shall
not exceed in the aggregate at any time the Letter of Credit Sublimit. All
disbursements or payments related to Letters of Credit shall be deemed to be
Domestic Rate Loans consisting of Revolving Advances and shall bear interest at
the Revolving Interest Rate for Domestic Rate Loans; Letters of Credit that have
not been drawn upon shall not bear interest.

 

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2.10.         Issuance of Letters of Credit.

 

(a)          Borrowing Agent, on behalf of Borrowers, may request Agent to issue
or cause the issuance of a Letter of Credit by delivering to Agent at the
Payment Office, prior to 12:00 Noon at least five (5) Business Days’ prior to
the proposed date of issuance, Agent’s form of Letter of Credit Application (the
“Letter of Credit Application”) completed to the satisfaction of Agent; and,
such other certificates, documents and other papers and information as Agent may
reasonably request. Borrowing Agent, on behalf of Borrowers, also has the right
to give instructions and make agreements with respect to any application, any
applicable letter of credit and security agreement, any applicable letter of
credit reimbursement agreement and/or any other applicable agreement, any letter
of credit and the disposition of documents, disposition of any unutilized funds,
and to agree with Agent upon any amendment, extension or renewal of any Letter
of Credit.

 

(b)          Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts, other written demands for payment, or acceptances
of usance drafts when presented for honor thereunder in accordance with the
terms thereof and when accompanied by the documents described therein and (ii)
have an expiry date not later than twenty-four (24) months after such Letter of
Credit’s date of issuance and in no event later than the last day of the Term.
Each standby Letter of Credit shall be subject either to the Uniform Customs and
Practice for Documentary Credits as most recently published by the International
Chamber of Commerce at the time a Letter of Credit is issued (the “UCP”) or the
International Standby Practices (ISP98 International Chamber of Commerce
Publication Number 590), and any subsequent revision thereof at the time a
standby Letter of Credit is issued, as determined by Agent in its Permitted
Discretion, and each trade Letter of Credit shall be subject to the UCP.

 

(c)          Agent shall use its reasonable efforts to notify Lenders of the
request by Borrowing Agent for a Letter of Credit hereunder.

 

2.11.         Requirements For Issuance of Letters of Credit.

 

(a)          Borrowing Agent shall authorize and direct any Issuer to name the
applicable Borrower as the “Applicant” or “Account Party” of each Letter of
Credit. If Agent is not the Issuer of any Letter of Credit, Borrowing Agent
shall authorize and direct the Issuer to deliver to Agent all instruments,
documents, and other writings and property received by the Issuer pursuant to
the Letter of Credit and to accept and rely upon Agent’s instructions and
agreements with respect to all matters arising in connection with the Letter of
Credit, the application therefor or any acceptance therefor.

 

(b)          In connection with all Letters of Credit issued or caused to be
issued by Agent under this Agreement, each Borrower hereby appoints Agent, or
its designee, as its attorney, with full power and authority if an Event of
Default shall have occurred and be continuing, (i) to sign and/or endorse such
Borrower’s name upon any warehouse or other receipts, letter of credit
applications and acceptances, (ii) to sign such Borrower’s name on bills of
lading; (iii) to clear Inventory through the United States of America Customs
Department or the equivalent in Canada (“Customs”) in the name of such Borrower
or Agent or Agent’s designee, and to sign and deliver to Customs officials
powers of attorney in the name of such Borrower for such purpose; and (iv) to
complete in such Borrower’s name or Agent’s, or in the name of Agent’s designee,
any order, sale or transaction, obtain the necessary documents in connection
therewith, and collect the proceeds thereof. Neither Agent nor its attorneys
will be liable for any acts or omissions nor for any error of judgment or
mistakes of fact or law, except for Agent’s or its attorney’s willful
misconduct. This power, being coupled with an interest, is irrevocable as long
as any Letters of Credit remain outstanding.

 

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2.12.         Disbursements, Reimbursement.

 

(a)          Immediately upon the issuance of each Letter of Credit, each Lender
shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from Agent a participation in such Letter of Credit and each drawing
thereunder in an amount equal to such Lender’s Commitment Percentage of the
Maximum Face Amount of such Letter of Credit and the amount of such drawing,
respectively.

 

(b)          In the event of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, Agent will promptly notify Borrowing
Agent. Provided that Borrowing Agent shall have received such notice, the
Borrowers shall reimburse (such obligation to reimburse Agent shall sometimes be
referred to as a “Reimbursement Obligation”) Agent prior to 12:00 Noon on each
date that an amount is paid by Agent under any Letter of Credit (each such date,
a “Drawing Date”) in an amount equal to the amount so paid by Agent. In the
event Borrowers fail to reimburse Agent for the full amount of any drawing under
any Letter of Credit by 12:00 Noon, on the Drawing Date, Agent will promptly
notify each Lender thereof, and Borrowers shall be deemed to have requested that
a Revolving Advance maintained as a Domestic Rate Loan be made by the Lenders to
be disbursed on the Drawing Date under such Letter of Credit, subject to the
amount of the unutilized portion of the lesser of Maximum Revolving Advance
Amount or the Formula Amount and subject to Section 8.2. Any notice given by
Agent pursuant to this Section 2.12(b) may be oral if immediately confirmed in
writing; provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.

 

(c)          Each Lender shall upon any notice pursuant to Section 2.12(b) make
available to Agent an amount in immediately available funds equal to its
Commitment Percentage of the amount of the drawing, whereupon the participating
Lenders shall (subject to Section 2.12(d)) each be deemed to have made a
Revolving Advance maintained as a Domestic Rate Loan to Borrowers in that
amount. If any Lender so notified fails to make available to Agent the amount of
such Lender’s Commitment Percentage of such amount by no later than 2:00 p.m. on
the Drawing Date, then interest shall accrue on such Lender’s obligation to make
such payment, from the Drawing Date to the date on which such Lender makes such
payment (i) at a rate per annum equal to the Federal Funds Effective Rate during
the first three days following the Drawing Date and (ii) at a rate per annum
equal to the rate applicable to Revolving Advances maintained as a Domestic Rate
Loans on and after the fourth day following the Drawing Date. Agent will
promptly give notice of the occurrence of the Drawing Date, but failure of Agent
to give any such notice on the Drawing Date or in sufficient time to enable any
Lender to effect such payment on such date shall not relieve such Lender from
its obligation under this Section 2.12(c), provided that such Lender shall not
be obligated to pay interest as provided in Section 2.12(c) (i) and (ii) until
and commencing from the date of receipt of notice from Agent of a drawing.

 

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(d)          With respect to any unreimbursed drawing that is not converted into
a Revolving Advance maintained as a Domestic Rate Loan to Borrowers in whole or
in part as contemplated by Section 2.12(b), because of Borrowers’ failure to
satisfy the conditions set forth in Section 8.2 (other than any notice
requirements) or for any other reason, Borrowers shall be deemed to have
incurred from Agent a borrowing (each a “Letter of Credit Borrowing”) in the
amount of such drawing. Such Letter of Credit Borrowing shall be due and payable
on demand (together with interest) and shall bear interest at the rate per annum
applicable to a Revolving Advance maintained as a Domestic Rate Loan. Each
Lender’s payment to Agent pursuant to Section 2.12(c) shall be deemed to be a
payment in respect of its participation in such Letter of Credit Borrowing and
shall constitute a “Participation Advance” from such Lender in satisfaction of
its Participation Commitment under this Section 2.12.

 

(e)          Each Lender’s Participation Commitment shall continue until the
last to occur of any of the following events: (i) Agent ceases to be obligated
to issue or cause to be issued Letters of Credit hereunder; (ii) no Letter of
Credit issued or created hereunder remains outstanding and uncancelled and (iii)
all Persons (other than the Borrowers) have been fully reimbursed for all
payments made under or relating to Letters of Credit.

 

2.13.         Repayment of Participation Advances.

 

(a)          Upon (and only upon) receipt by Agent for its account of
immediately available funds from Borrowers (i) in reimbursement of any payment
made by the Agent under the Letter of Credit with respect to which any Lender
has made a Participation Advance to Agent, or (ii) in payment of interest on
such a payment made by Agent under such a Letter of Credit, Agent will pay to
each Lender, in the same funds as those received by Agent, the amount of such
Lender’s Commitment Percentage of such funds, except Agent shall retain the
amount of the Commitment Percentage of such funds of any Lender that did not
make a Participation Advance in respect of such payment by Agent.

 

(b)          If Agent is required at any time to return to any Borrower, or to a
trustee, receiver, liquidator, custodian, or any official in any Insolvency
Proceeding, any portion of the payments made by Borrowers to Agent pursuant to
Section 2.13(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Lender shall, on demand of Agent, forthwith return
to Agent the amount of its Commitment Percentage of any amounts so returned by
Agent plus interest at the Federal Funds Effective Rate.

 

2.14.         Documentation. Each Borrower agrees to be bound by the terms of
the Letter of Credit Application and by Agent’s interpretations of any Letter of
Credit issued on behalf of such Borrower and by Agent’s written regulations and
customary practices relating to letters of credit, though Agent’s
interpretations may be different from such Borrower’s own. In the event of a
conflict between the Letter of Credit Application and this Agreement, this
Agreement shall govern. Except in the case of gross negligence or willful
misconduct (as determined by a court of competent jurisdiction in a final
non-appealable judgment), Agent shall not be liable for any error, negligence
and/or mistakes, whether of omission or commission, in following the Borrowing
Agent’s or any Borrower’s instructions or those contained in the Letters of
Credit or any modifications, amendments or supplements thereto.

 

2.15.         Determination to Honor Drawing Request. In determining whether to
honor any request for drawing under any Letter of Credit by the beneficiary
thereof, Agent shall be responsible only to determine that the documents and
certificates required to be delivered under such Letter of Credit have been
delivered and that they comply on their face with the requirements of such
Letter of Credit and that any other drawing condition appearing on the face of
such Letter of Credit has been satisfied in the manner so set forth.

 

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2.16.         Nature of Participation and Reimbursement Obligations. Each
Lender’s obligation in accordance with this Agreement to make the Revolving
Advances or Participation Advances as a result of a drawing under a Letter of
Credit, and the obligations of Borrowers to reimburse Agent upon a draw under a
Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Section 2.16 under all
circumstances, including the following circumstances:

 

(i)          any set-off, counterclaim, recoupment, defense or other right which
such Lender may have against Agent, any Borrower or any other Person for any
reason whatsoever;

 

(ii)         the failure of any Borrower or any other Person to comply, in
connection with a Letter of Credit Borrowing, with the conditions set forth in
this Agreement for the making of a Revolving Advance, it being acknowledged that
such conditions are not required for the making of a Letter of Credit Borrowing
and the obligation of the Lenders to make Participation Advances under Section
2.12;

 

(iii)        any lack of validity or enforceability of any Letter of Credit;

 

(iv)        any claim of breach of warranty that might be made by Borrower or
any Lender against the beneficiary of a Letter of Credit, or the existence of
any claim, set-off, recoupment, counterclaim, cross-claim, defense or other
right which any Borrower or any Lender may have at any time against a
beneficiary, any successor beneficiary or any transferee of any Letter of Credit
or the proceeds thereof (or any Persons for whom any such transferee may be
acting), Agent or any Lender or any other Person, whether in connection with
this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between any Borrower or any
Subsidiaries of such Borrower and the beneficiary for which any Letter of Credit
was procured);

 

(v)         the lack of power or authority of any signer of (or any defect in or
forgery of any signature or endorsement on) or the form of or lack of validity,
sufficiency, accuracy, enforceability or genuineness of any draft, demand,
instrument, certificate or other document presented under or in connection with
any Letter of Credit, or any fraud or alleged fraud in connection with any
Letter of Credit, or the transport of any property or provisions of services
relating to a Letter of Credit, in each case even if Agent or any of Agent’s
Affiliates has been notified thereof;

 

(vi)        payment by Agent under any Letter of Credit against presentation of
a demand, draft or certificate or other document which does not comply with the
terms of such Letter of Credit;

 

(vii)       the solvency of, or any acts or omissions by, any beneficiary of any
Letter of Credit, or any other Person having a role in any transaction or
obligation relating to a Letter of Credit, or the existence, nature, quality,
quantity, condition, value or other characteristic of any property or services
relating to a Letter of Credit;

 

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(viii)      any failure by the Agent or any of Agent’s Affiliates to issue any
Letter of Credit in the form requested by Borrowing Agent, unless the Agent has
received written notice from Borrowing Agent of such failure within three (3)
Business Days after the Agent shall have furnished Borrowing Agent a copy of
such Letter of Credit and such error is material and no drawing has been made
thereon prior to receipt of such notice;

 

(ix)         any Material Adverse Effect;

 

(x)          any breach of this Agreement or any Other Document by any party
thereto;

 

(xi)         the occurrence or continuance of an Insolvency Proceeding with
respect to any Borrower, Guarantor, or any of their respective Subsidiaries;

 

(xii)        the fact that a Default or Event of Default shall have occurred and
be continuing;

 

(xiii)       the fact that the Term shall have expired or this Agreement or the
Obligations hereunder shall have been terminated; and

 

(xiv)      any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.

 

2.17.         Indemnity. In addition to amounts payable as provided in Section
16.5, each Borrower hereby agrees to protect, indemnify, pay and save harmless
Agent from and against any and all claims, demands, liabilities, damages, taxes,
penalties, interest, judgments, losses, costs, charges and expenses (including
reasonable fees, expenses and disbursements of counsel and allocated costs of
internal counsel) which the Agent may incur or be subject to as a consequence,
direct or indirect, of the issuance of any Letter of Credit, other than as a
result of (a) the gross negligence or willful misconduct of the Agent as
determined by a final and non-appealable judgment of a court of competent
jurisdiction or (b) the wrongful dishonor by the Agent of a proper demand for
payment made under any Letter of Credit, except if such dishonor resulted from
any act or omission, whether rightful or wrongful, of any present or future de
jure or de facto Governmental Body (all such acts or omissions herein called
“Governmental Acts”).

 

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2.18.         Liability for Acts and Omissions. As between Borrowers and Agent
and Lenders, each Borrower assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit by, the respective beneficiaries of such Letters
of Credit. In furtherance and not in limitation of the respective foregoing,
Agent shall not be responsible for: (i) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any party in
connection with the application for an issuance of any such Letter of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged (even if Agent shall have been
notified thereof); (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (iii) the
failure of the beneficiary of any such Letter of Credit, or any other party to
which such Letter of Credit may be transferred, to comply fully with any
conditions required in order to draw upon such Letter of Credit or any other
claim of any Borrower against any beneficiary of such Letter of Credit, or any
such transferee, or any dispute between or among any Borrower and any
beneficiary of any Letter of Credit or any such transferee; (iv) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, facsimile, telex or otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of Agent, including any Governmental Acts, and
none of the above shall affect or impair, or prevent the vesting of, any of
Agent’s rights or powers hereunder. Nothing in the preceding sentence shall
relieve Agent from liability for Agent’s gross negligence or willful misconduct
(as determined by a court of competent jurisdiction in a final non-appealable
judgment) in connection with actions or omissions described in such clauses (i)
through (viii) of such sentence. In no event shall Agent be liable to any
Borrower for any indirect, consequential, incidental, punitive, exemplary or
special damages or expenses (including without limitation attorneys’ fees), or
for any damages resulting from any change in the value of any property relating
to a Letter of Credit.

 

Without limiting the generality of the foregoing, Agent (i) may rely on any oral
or other communication believed in good faith by Agent or such Affiliate to have
been authorized or given by or on behalf of the applicant for a Letter of
Credit, (ii) may honor any presentation if the documents presented appear on
their face substantially to comply with the terms and conditions of the relevant
Letter of Credit; (iii) may honor a previously dishonored presentation under a
Letter of Credit, whether such dishonor was pursuant to a court order, to settle
or compromise any claim of wrongful dishonor, or otherwise, and shall be
entitled to reimbursement to the same extent as if such presentation had
initially been honored, together with any interest paid by Agent; (iv) may honor
any drawing that is payable upon presentation of a statement advising
negotiation or payment, upon receipt of such statement (even if such statement
indicates that a draft or other document is being delivered separately), and
shall not be liable for any failure of any such draft or other document to
arrive, or to conform in any way with the relevant Letter of Credit; (v) may pay
any paying or negotiating bank claiming that it rightfully honored under the
laws or practices of the place where such bank is located; and (vi) may settle
or adjust any claim or demand made on Agent in any way related to any order
issued at the applicant’s request to an air carrier, a letter of guarantee or of
indemnity issued to a carrier or any similar document (each an “Order”) and
honor any drawing in connection with any Letter of Credit that is the subject of
such Order, notwithstanding that any drafts or other documents presented in
connection with such Letter of Credit fail to conform in any way with such
Letter of Credit.

 

In furtherance and extension and not in limitation of the specific provisions
set forth above, any action taken or omitted by Agent under or in connection
with the Letters of Credit issued by it or any documents and certificates
delivered thereunder, if taken or omitted in good faith and without gross
negligence (as determined by a court of competent jurisdiction in a final
non-appealable judgment), shall not put Agent under any resulting liability to
any Borrower or any Lender.

 

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2.19.         Cash Collateral. On demand, following the occurrence of an Event
of Default, Borrowers will cause cash to be deposited and maintained in an
account with Agent, as cash collateral, in an amount equal to one hundred and
five percent (105%) of the Maximum Undrawn Amount of all Letters of Credit, and
each Borrower hereby irrevocably authorizes Agent, in its discretion, on such
Borrower’s behalf and in such Borrower’s name, to open such an account and to
make and maintain deposits therein, or in an account opened by such Borrower, in
the amounts required to be made by such Borrower, out of the proceeds of
Receivables or other Collateral or out of any other funds of such Borrower
coming into any Lender’s possession at any time. Agent will invest such cash
collateral (less applicable reserves) in such short-term money-market items as
to which Agent and such Borrower mutually agree and the net return on such
investments shall be credited to such account and constitute additional cash
collateral. No Borrower may withdraw amounts credited to any such account except
upon the cure of such Event of Default or the occurrence of all of the
following: (a) payment and performance in full of all Obligations, (b)
expiration of all Letters of Credit and (c) termination of this Agreement.

 

2.20.         Additional Payments. Any sums expended by Agent or any Lender due
to any Borrower’s failure to perform or comply with its obligations under this
Agreement or any Other Document including any Borrower’s obligations under
Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1, may be charged to Borrowers’
Account as a Revolving Advance and added to the Obligations.

 

2.21.         Manner of Borrowing and Payment.

 

(a)          Each borrowing of Revolving Advances and the Term Loans shall be
advanced according to the applicable Commitment Percentages of Lenders.

 

(b)          Each payment (including each prepayment) by any Borrower on account
of the principal of and interest on the Revolving Advances, shall be applied to
the Revolving Advances pro rata according to the applicable Commitment
Percentages of Lenders. Each payment (including each prepayment) by Borrower on
account of the principal of and interest on the Term Notes, shall be made from
or to, or applied to that portion of the Term Loans evidenced by the Term Notes
pro rata according to the Commitment Percentages of Lenders. Except as expressly
provided herein, all payments (including prepayments) to be made by any Borrower
on account of principal, interest and fees shall be made without set off or
counterclaim and shall be made to Agent on behalf of the Lenders to the Payment
Office, in each case on or prior to 1:00 P.M. in Dollars and in immediately
available funds.

 

(c)          (i)          Notwithstanding anything to the contrary contained in
Sections 2.21(a) and (b), commencing with the first Business Day following the
Restatement Date, each borrowing of Revolving Advances shall be advanced by
Agent and each payment by any Borrower on account of Revolving Advances shall be
applied first to those Revolving Advances advanced by Agent. On or before 1:00
P.M. on each Settlement Date commencing with the first Settlement Date following
the Restatement Date, Agent and Lenders shall make certain payments as follows:
(I) if the aggregate amount of new Revolving Advances made by Agent during the
preceding Week (if any) exceeds the aggregate amount of repayments applied to
outstanding Revolving Advances during such preceding Week, then each Lender
shall provide Agent with funds in an amount equal to its applicable Commitment
Percentage of the difference between (w) such Revolving Advances and (x) such
repayments and (II) if the aggregate amount of repayments applied to outstanding
Revolving Advances during such Week exceeds the aggregate amount of new
Revolving Advances made during such Week, then Agent shall provide each Lender
with funds in an amount equal to its applicable Commitment Percentage of the
difference between (y) such repayments and (z) such Revolving Advances.

 

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(i)          Each Lender shall be entitled to earn interest at the applicable
Contract Rate on outstanding Revolving Advances or Term Loans which it has
funded.

 

(ii)         Promptly following each Settlement Date, Agent shall submit to each
Lender a certificate with respect to payments received and Revolving Advances
made during the Week immediately preceding such Settlement Date. Such
certificate of Agent shall be conclusive in the absence of manifest error.

 

(d)          If any Lender or Participant (a “Benefited Lender”) shall at any
time receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender’s
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such Benefited Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other Lender’s Advances, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such Benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the other Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender’s Advances may exercise all rights of payment (including rights of
set-off) with respect to such portion as fully as if such Lender were the direct
holder of such portion.

 

(e)          Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Revolving Advances
available to Agent, Agent may (but shall not be obligated to) assume that such
Lender shall make such amount available to Agent on the next Settlement Date
and, in reliance upon such assumption, make available to Borrowers a
corresponding amount. Agent will promptly notify Borrowing Agent of its receipt
of any such notice from a Lender. If such amount is made available to Agent on a
date after such next Settlement Date, such Lender shall pay to Agent on demand
an amount equal to the product of (i) the daily average Federal Funds Rate
(computed on the basis of a year of 360 days) during such period as quoted by
Agent, times (ii) such amount, times (iii) the number of days from and including
such Settlement Date to the date on which such amount becomes immediately
available to Agent. A certificate of Agent submitted to any Lender with respect
to any amounts owing under this paragraph (e) shall be conclusive, in the
absence of manifest error. If such amount is not in fact made available to Agent
by such Lender within three (3) Business Days after such Settlement Date, Agent
shall be entitled to recover such an amount, with interest thereon at the rate
per annum then applicable to such Revolving Advances hereunder, on demand from
Borrowers; provided, however, that Agent’s right to such recovery shall not
prejudice or otherwise adversely affect Borrowers’ rights (if any) against such
Lender.

 

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2.22.         Mandatory Prepayments. Subject to Section 4.3, when any Borrower
sells or otherwise disposes of any Collateral other than Inventory in the
Ordinary Course of Business, Borrowers shall repay the Advances in an amount
equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable
costs of such sales or other dispositions), such repayments to be made promptly
but in no event more than one (1) Business Day following receipt of such net
proceeds, and until the date of payment, such proceeds shall be held in trust
for Agent. The foregoing shall not be deemed to be implied consent to any such
sale otherwise prohibited by the terms and conditions hereof. Such repayments
shall be applied (i) if the Collateral disposed of is Equipment the purchase of
which was financed by an Equipment Loan, (x) first, to the outstanding principal
installments of the Equipment Loan in the inverse order of the maturities
thereof, and (y) second, to the Revolving Advances or other remaining Advances
in such order as Agent may determine, subject to Borrower’s ability to reborrow
Revolving Advances in accordance with the terms hereof, or (ii) if the
Collateral disposed of is an asset other than as set forth in (i) above, to the
Revolving Advances or other remaining Advances in such order as Agent may
determine, subject to Borrower’s ability to reborrow Revolving Advances in
accordance with the terms hereof.

 

2.23.         Use of Proceeds. Borrowers shall apply the proceeds of Advances to
(a) partially fund permitted Capital Expenditures, (b) fund Permitted
Acquisitions and dividends permitted hereunder, (c) issue Letters of Credit, (d)
pay the fees and expenses associated with this transaction at closing, and (e)
provide for working capital needs and reimburse drawings under Letters of
Credit, and (f) for other lawful purposes of Parent and its Subsidiaries
permitted under the Agreement.

 

2.24.         Defaulting Lender.

 

(a)          Notwithstanding anything to the contrary contained herein, in the
event any Lender has failed, within two (2) Business Days of the date required
hereunder (and such failure constitutes a breach by such Lender of its
obligations under this Agreement) to make available its portion of any Advance,
its participation in any Letter of Credit, or any payment due on a Settlement
Date, or (x) notifies either Agent or Borrowing Agent that it does not intend to
make available its portion of any Advance or any such participation or payment
or (y) has otherwise failed to pay over to Agent or any other Lender any other
amount required to be paid by it hereunder within two (2) Business Days of the
date when due, or (z) has since the date of this Agreement been deemed insolvent
by a Governmental Body or become the subject of a bankruptcy, receivership,
monitorship, conservatorship or Insolvency Proceeding, or has a parent company
that since the date of this Agreement been deemed insolvent by a Governmental
Body or become the subject of a bankruptcy, receivership, monitorship,
conservatorship or Insolvency Proceeding (each, a “Lender Default”), all rights
and obligations hereunder of such Lender (a “Defaulting Lender”) as to which a
Lender Default is in effect and of the other parties hereto shall be modified to
the extent of the express provisions of this Section 2.24 while such Lender
Default remains in effect.

 

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(b)          Advances shall be incurred pro rata from Lenders which are not
Defaulting Lenders based on their respective Commitment Percentages, and no
Commitment Percentage of any Lender or any pro rata share of any Advances
required to be advanced by any Lender shall be increased as a result of such
Lender Default. Amounts received in respect of principal of any type of Advances
shall be applied to reduce the applicable Advances of each Lender (other than
any Defaulting Lender) pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, Agent shall not be obligated to transfer to a Defaulting Lender any
payments received by Agent for the Defaulting Lender’s benefit, nor shall a
Defaulting Lender be entitled to the sharing of any payments hereunder
(including any principal, interest or fees). Amounts payable to a Defaulting
Lender shall instead be paid to or retained by Agent. Agent may hold and, in its
discretion, re-lend to a Borrower the amount of such payments received or
retained by it for the account of such Defaulting Lender.

 

(c)          A Defaulting Lender shall not be entitled to give instructions to
Agent or to approve, disapprove, consent to or vote on any matters relating to
this Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of “Required
Lenders”, a Defaulting Lender shall be deemed not to be a Lender and not to have
either Advances outstanding or a Commitment Percentage.

 

(d)          Other than as expressly set forth in this Section 2.24, the rights
and obligations of a Defaulting Lender (including the obligation to indemnify
Agent) and the other parties hereto shall remain unchanged. Nothing in this
Section 2.24 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.

 

(e)          In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.

 

2.25.         Increase of the Maximum Revolving Advance Amount. Borrowers shall
have the option, upon at least thirty (30) days' prior written notice to Agent,
to increase the Maximum Revolving Advance Amount by up to $20,000,000, subject
to the following conditions precedent:

 

(a)          no Default or Event of Default shall have occurred and be
continuing on the date of such notice or on the date which such increase is to
become effective;

 

(b)          the representations and warranties set forth in Article V shall be
true and correct on and as of the date on which such increase is to become
effective, 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;

 

(c)          such increase shall be in a minimum amount of $5,000,000 and in
integral multiples of $1,000,000 in excess thereof;

 

(d)          Borrowers shall have solicited and obtained additional lenders to
join in this Agreement and provide the additional commitments necessary to fund
the increase in the Maximum Revolving Advance Amount, which additional lenders
must not be Affiliates of any Borrower and must be acceptable to the Agent and
Lenders in their reasonable discretion; provided that any then-existing Lender
shall be acceptable;

 

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(e)          Agent shall have received all documents (including appropriate
authorizing resolutions) it may reasonably request relating to the corporate or
other necessary authority for such increase, and any other matters relevant
thereto, all in form and substance reasonably satisfactory to Agent;

 

(f)          the Quarterly Liquidity threshold amounts set forth in the pricing
table in the definition of Applicable Rate shall be increased by the same
percentage increase in the Maximum Revolving Advance Amount; and

 

(g)          all costs and expenses of Agent and Lenders incurred in connection
with any such increase or requested increase, including reasonable attorneys’
fees and expenses shall be paid by Borrowers.

 

The foregoing option may be exercised once during the Term and such increase
shall apply to the Maximum Revolving Advance Amount in effect at the time of the
Borrowers’ notice to Agent. Promptly following receipt of a notice under this
Section, the Agent shall advise the Lenders thereof. Each notice delivered by
the Borrowers pursuant to this Section shall be irrevocable. An increase to the
Maximum Revolving Advance Amount shall not require or cause a change in the
commitment of any existing Lender in effect at such time, unless such existing
Lender chooses, in its sole discretion, to fund in whole or in part, the
increase in the Maximum Revolving Advance Amount. Agent shall not be obligated
to solicit or obtain lenders to provide the additional commitments necessary for
such increase.

 

2.26.         Reduction of the Maximum Revolving Advance Amount. Borrowers shall
have the option, upon at least thirty (30) days' prior written notice to Agent,
to reduce the Maximum Revolving Advance Amount to no less than $60,000,000,
subject to the following conditions precedent:

 

(a)          no Default or Event of Default shall have occurred and be
continuing on the date of such notice or on the date which such reduction is to
become effective;

 

(b)          such reduction shall be in a minimum amount of $1,000,000 and in
integral multiples of $1,000,000 in excess thereof; and

 

(c)          after giving effect to any concurrent prepayment of the Advances,
the sum of the outstanding Revolving Advances shall not exceed the lesser of:
(i) the Maximum Revolving Advance Amount minus the Maximum Undrawn Amount of all
Letters of Credit, and (ii) the Formula Amount.

 

The foregoing option may be exercised three (3) times during the Term and such
reduction shall apply to the Maximum Revolving Advance Amount in effect at the
time of the Borrowers’ notice to Agent; provided, however, nothing contained
herein shall limit the Borrowers’ ability to pay in full all Obligations and
terminate this Agreement at any time in accordance with Section 13.1. Promptly
following receipt of a notice under this Section, the Agent shall advise the
Lenders thereof. Each notice delivered by the Borrowers pursuant to this Section
shall be irrevocable. Any reduction of the Maximum Revolving Advance Amount
shall be permanent subject only to an increase in accordance with Section 2.25.
Each reduction shall be made ratably among the Lenders in accordance with their
Commitment Percentages.

 

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III           INTEREST AND FEES.

 

3.1.          Interest.

 

(a)          Payment. Interest on Advances shall be payable in arrears on the
first day of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar Rate Loans, at the end of each Interest Period or, for Eurodollar
Rate Loans with an Interest Period in excess of three months, at the earlier of
(a) each three months from the commencement of such Eurodollar Rate Loan or (b)
the end of the Interest Period.

 

(b)          Rate Changes. Interest charges shall be computed on the actual
principal amount of Advances outstanding during the month at a rate per annum
equal to (i) with respect to Revolving Advances, the applicable Revolving
Interest Rate, and (ii) with respect to the Term Loans, the applicable Term Loan
Rate (as applicable, the “Contract Rate”). Whenever, subsequent to the date of
this Agreement, the Alternate Base Rate is increased or decreased, the
applicable Contract Rate for Domestic Rate Loans shall be similarly changed
without notice or demand of any kind by an amount equal to the amount of such
change in the Alternate Base Rate during the time such change or changes remain
in effect. The Eurodollar Rate shall be adjusted with respect to Eurodollar Rate
Loans without notice or demand of any kind on the effective date of any change
in the Reserve Percentage as of such effective date.

 

(c)          Default Rate. Upon and after the occurrence of an Event of Default,
and during the continuation thereof, (i) at the option of Agent or at the
direction of Required Lenders, the Obligations shall bear interest at the
highest Contract Rate payable under this Agreement plus two (2%) percent per
annum (as applicable, the “Default Rate”).

 

3.2.          Letter of Credit Fees. Borrowers shall pay (x) to Agent, for the
ratable benefit of Lenders, fees for each Letter of Credit for the period from
and excluding the date of issuance of same to and including the date of
expiration or termination, equal to the average daily face amount of each
outstanding Letter of Credit multiplied by the Applicable Rate for Eurodollar
Rate Loans consisting of Revolving Advances then in effect per annum, such fees
to be calculated on the basis of a 360-day year for the actual number of days
elapsed and to be payable quarterly in arrears on the first day of each quarter
and on the last day of the Term, and (y) to the Issuer, a fronting fee of one
quarter of one percent (0.25%) per annum, together with any and all
administrative, issuance, amendment, payment and negotiation charges with
respect to Letters of Credit and all fees and expenses as agreed upon by the
Issuer and the Borrowing Agent in connection with any Letter of Credit,
including in connection with the opening, amendment or renewal of any such
Letter of Credit and any acceptances created thereunder and shall reimburse
Agent for any and all fees and expenses, if any, paid by Agent to the Issuer
(all of the foregoing fees, the “Letter of Credit Fees”). All such charges shall
be deemed earned in full on the date when the same are due and payable hereunder
and shall not be subject to rebate or pro-ration upon the termination of this
Agreement for any reason. Any such charge in effect at the time of a particular
transaction shall be the charge for that transaction, notwithstanding any
subsequent change in the Issuer’s prevailing charges for that type of
transaction. All Letter of Credit Fees and Acceptance Fees payable hereunder
shall be deemed earned in full on the date when the same are due and payable
hereunder and shall not be subject to rebate or pro-ration upon the termination
of this Agreement for any reason. Upon and after the occurrence of an Event of
Default, and during the continuation thereof, at the option of Agent or at the
direction of Required Lenders, the Letter of Credit Fees described in clause (x)
of this Section 3.2 shall be increased by an additional two percent (2%) per
annum.

 

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3.3.          Facility Fee. If, for any calendar quarter during the Term, the
average daily unpaid balance of the Revolving Advances and the Maximum Undrawn
Amount of all Letters of Credit for each day of such calendar quarter does not
equal the Maximum Revolving Advance Amount, then Borrowers shall pay to Agent
for the ratable benefit of Lenders a facility fee at a rate equal to the
Applicable Rate (under the column entitled “Applicable Rates for Facility Fee”)
per annum on the amount by which the Maximum Revolving Advance Amount exceeds
such average daily unpaid balance (the “Facility Fee”). The Facility Fee shall
be calculated on the basis of a 360 day year using the actual number of days
elapsed and will be payable to Agent in arrears on the first day of each
calendar quarter with respect to the previous calendar quarter.

 

3.4.          Other Fees and Charges.

 

(a)          Borrowers shall pay to Agent, for the benefit of Agent, an annual
agency fee in the amount of $7,500. Such fee shall be payable on each
anniversary of the Initial Closing Date during the Term.

 

(b)          Borrowers shall pay to Agent, for the benefit of Agent, on the
first day of each month following any month in which Agent performs any field
examination, the need for which is to be determined by Agent and which field
examination is undertaken by Agent or for Agent’s benefit, a field examination
fee in an amount equal to $1,000 per day for each person employed to perform
such field examination, plus all costs and disbursements incurred by Agent in
the performance of such examination. Borrowers shall not be charged for more
than one (1) field examination during any fiscal year and the related charge for
such examination shall not exceed $25,000 each plus all out-of-pocket expenses,
provided however, field examinations conducted in connection with a Permitted
Acquisition, or during the continuance of a Default or an Event of Default shall
be charged to Borrowers and not subject to the foregoing limitation.

 

(c)          All fees and charges herein shall be deemed earned in full on the
date when the same are due and payable hereunder and shall not be subject to
rebate or pro-ration upon the termination of this Agreement for any reason.

 

3.5.          Computation of Interest and Fees.

 

(a)          Interest and fees hereunder shall be computed on the basis of a
year of 360 days and for the actual number of days elapsed. If any payment to be
made hereunder becomes due and payable on a day other than a Business Day, the
due date thereof shall be extended to the next succeeding Business Day and
interest thereon shall be payable at the applicable Contract Rate during such
extension.

 

(b)          Notwithstanding anything to the contrary contained in this
Agreement or in any Other Document:

 

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(i)          whenever interest payable by Rocky Canada is calculated on the
basis of a period which is less than the actual number of days in a calendar
year, each rate of interest determined pursuant to such calculation is, for the
purposes of the Interest Act (Canada), equivalent to such rate multiplied by the
actual number of days in the calendar year in which such rate is to be
ascertained and divided by the number of days used as the basis of such
calculation;

 

(ii)         in no event shall the aggregate “interest” (as defined in Section
347 of the Criminal Code, R.S.C. 1985, c. C-46, as the same shall be amended,
replaced or re-enacted from time to time) payable by Rocky Canada to the Agent
or any Lender under this Agreement or any Other Document exceed the effective
annual rate of interest on the “credit advanced” (as defined in that section)
under this Agreement or such Other Document lawfully permitted under that
section and, if any payment, collection or demand pursuant to this Agreement or
any Other Document in respect of “interest” (as defined in that section) is
determined to be contrary to the provisions of that section, such payment,
collection or demand shall be deemed to have been made by mutual mistake of the
Agent or the Lender and Rocky Canada and the amount of such payment or
collection shall be refunded by the Agent or such Lender to Rocky Canada. For
the purposes of this Agreement and each Other Document to which Rocky Canada is
a party, the effective annual rate of interest payable by Rocky Canada shall be
determined in accordance with generally accepted actuarial practices and
principles over the term of the loans on the basis of annual compounding for the
lawfully permitted rate of interest and, in the event of dispute, a certificate
of a Fellow of the Canadian Institute of Actuaries appointed by the Agent for
the account of Rocky Canada will be conclusive for the purpose of such
determination in the absence of evidence to the contrary; and

 

(iii)        all calculations of interest payable by Rocky Canada under this
Agreement or any Other Document are to be made on the basis of the nominal
interest rate described herein and therein and not on the basis of effective
yearly rates or on any other basis which gives effect to the principle of deemed
reinvestment of interest. The parties acknowledge that there is a material
difference between the stated nominal interest rates and the effective yearly
rates of interest and that they are capable of making the calculations required
to determine such effective yearly rates of interest.

 

3.6.          Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such excess amount shall be first applied
to any unpaid principal balance owed by Borrowers, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrowers and the provisions hereof
shall be deemed amended to provide for such permissible rate.

 

3.7.          Increased Costs. In the event that any Applicable Law or any
Change in Law, or compliance by any Lender (for purposes of this Section 3.7,
the term “Lender” shall include Agent or any Lender and any corporation or bank
controlling Agent or any Lender) and the office or branch where Agent or any
Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:

 

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(a)          subject Agent or any Lender to any tax of any kind whatsoever
(other than (i) Excluded Taxes, and (ii) Other Connection Taxes) with respect to
this Agreement or any Other Document or change the basis of taxation of payments
to Agent or any Lender of principal, fees, interest or any other amount payable
hereunder or under any Other Documents (except for changes in the rate of tax on
the overall net income of Agent or any Lender by the jurisdiction in which it
maintains its principal office);

 

(b)          impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
Agent or any Lender, including pursuant to Regulation D of the Board of
Governors of the Federal Reserve System; or

 

(c)          impose on Agent or any Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement or any Other Document;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrowers shall promptly pay Agent or such Lender, upon its demand,
such additional amount as will compensate Agent or such Lender for such
additional cost or such reduction, as the case may be. Agent or such Lender
shall certify the amount of such additional cost or reduced amount to Borrowing
Agent, and such certification shall be conclusive absent manifest error.

 

(d)          Failure or delay on the part of the Agent or any Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s right to demand such compensation; provided that no Borrower or
Guarantor shall be required to compensate a Lender pursuant to this Section for
any increased costs incurred or reductions suffered more than 180 days prior to
the date that such Lender or the Agent, as the case may be, notifies such
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 180-day period referred to above shall be extended to
include the period of retroactive effect thereof).

 

3.8.          Basis For Determining Interest Rate Inadequate or Unfair. In the
event that Agent or any Lender shall have determined in the exercise of
Permitted Discretion that:

 

(a)          reasonable means do not exist for ascertaining the Eurodollar Rate
applicable pursuant to Section 2.2 for any Interest Period; or

 

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(b)          Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,
then Agent shall give Borrowing Agent prompt written or telephonic of such
determination. If such notice is given, (i) any such requested Eurodollar Rate
Loan shall be made as a Domestic Rate Loan, unless Borrowing Agent shall notify
Agent no later than 12:00 Noon two (2) Business Days prior to the date of such
proposed borrowing, that its request for such borrowing shall be cancelled or
made as an unaffected type of Eurodollar Rate Loan, (ii) any Domestic Rate Loan
or Eurodollar Rate Loan which was to have been converted to an affected type of
Eurodollar Rate Loan shall be continued as or converted into a Domestic Rate
Loan, or, if Borrowing Agent shall notify Agent, no later than 12:00 Noon two
(2) Business Days prior to the proposed conversion, shall be maintained as an
unaffected type of Eurodollar Rate Loan, and (iii) any outstanding affected
Eurodollar Rate Loans shall be converted into a Domestic Rate Loan, or, if
Borrowing Agent shall notify Agent, no later than 12:00 Noon two (2) Business
Days prior to the last Business Day of the then current Interest Period
applicable to such affected Eurodollar Rate Loan, shall be converted into an
unaffected type of Eurodollar Rate Loan, on the last Business Day of the then
current Interest Period for such affected Eurodollar Rate Loans. Until such
notice has been withdrawn, Lenders shall have no obligation to make an affected
type of Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate
Loans and no Borrower shall have the right to convert a Domestic Rate Loan or an
unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate
Loan.

 

3.9.          Capital Adequacy.

 

(a)          In the event that Agent or any Lender shall have determined in the
exercise of Permitted Discretion that any Applicable Law or guideline regarding
capital adequacy, or any Change in Law or any change in the interpretation or
administration thereof by any Governmental Body, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Agent or any Lender (for purposes of this Section 3.9, the term “Lender”
shall include Agent or any Lender and any corporation or bank controlling Agent
or any Lender) and the office or branch where Agent or any Lender (as so
defined) makes or maintains any Eurodollar Rate Loans with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on Agent or any Lender’s capital as a
consequence of its obligations hereunder to a level below that which Agent or
such Lender could have achieved but for such adoption, change or compliance
(taking into consideration Agent’s and each Lender’s policies with respect to
capital adequacy) by an amount deemed by Agent or any Lender to be material,
then, from time to time, Borrowers shall pay upon demand to Agent or such Lender
such additional amount or amounts as will compensate Agent or such Lender for
such reduction. In determining such amount or amounts, Agent or such Lender may
use any reasonable averaging or attribution methods. The protection of this
Section 3.9 shall be available to Agent and each Lender regardless of any
possible contention of invalidity or inapplicability with respect to the
Applicable Law or condition.

 

(b)          A certificate of Agent or such Lender setting forth such amount or
amounts as shall be necessary to compensate Agent or such Lender with respect to
Section 3.9(a) when delivered to Borrowing Agent shall be conclusive absent
manifest error.

 

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3.10.         Taxes.

 

(a)          Any and all payments by or on account of any Obligations hereunder
or under any Other Document shall be made free and clear of and without
reduction or withholding for any Indemnified Taxes or Other Taxes; provided that
if a Borrower 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, Lender, Issuer or Participant, as the case may be, receives an amount
equal to the sum it would have received had no such deductions been made,
(ii) such Borrowers shall make such deduction, and (iii) such Borrower shall
timely pay the full amount deducted to the relevant Governmental Body in
accordance with Applicable Law.

 

(b)          Without limiting the provisions of Section 3.10(a) above, the
applicable Borrower shall timely pay any Other Taxes to the relevant
Governmental Body in accordance with Applicable Law.

 

(c)          Each Borrower shall indemnify Agent, each Lender, Issuer and any
Participant, 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 Agent, such Lender, Issuer, or such Participant, as the case may be, and
any penalties, interest and reasonable and documented 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 Body.
A certificate as to the amount of such payment or liability delivered to the
Borrowing Agent by any Lender, Participant, or the Issuer (with a copy to
Agent), or by Agent on its own behalf or on behalf of a Lender or the Issuer,
shall be conclusive absent manifest error.

 

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

 

(e)          Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which a
Borrower is resident for tax purposes, or under any treaty to which such
jurisdiction is a party, with respect to payments hereunder or under any Other
Document shall deliver to the Borrowing Agent (with a copy to Agent), at the
time or times prescribed by Applicable Law or reasonably requested by the
Borrowing Agent or 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. Notwithstanding the submission
of such documentation claiming a reduced rate of or exemption from U.S.
withholding tax, Agent shall be entitled to withhold United States federal
income taxes at the full statutory withholding rate if in its reasonable
judgment it is required to do so under the due diligence requirements imposed
upon a withholding agent under § 1.1441-7(b) of the United States Income Tax
Regulations or other Applicable Law. Further, Agent is indemnified under
§1.1461-1(e) of the United States Income Tax Regulations against any claims and
demands of any Lender, Issuer or assignee or participant of a Lender or Issuer
for the amount of any tax it deducts and withholds in accordance with
regulations under §1441 of the Code. In addition, any Lender, if requested by
the Borrowing Agent or Agent, shall deliver such other documentation prescribed
by Applicable Law or reasonably requested by the Borrowing Agent or Agent as
will enable the Borrowing Agent or 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 a Borrower is
resident for tax purposes in the United States of America, any Foreign Lender
(or other Lender) shall deliver to the Borrowing Agent and Agent (in such number
of copies specified below or as shall be requested by the recipient) on or prior
to the date on which such Foreign Lender (or other Lender) becomes a Lender
under this Agreement (and from time to time thereafter upon the request of the
Borrowing Agent or the Agent, but only if such Foreign Lender (or other Lender)
is legally entitled to do so), whichever of the following is applicable:

 

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(i)          two (2) duly completed valid originals of IRS Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States of
America is a party,

 

(ii)         two (2) duly completed valid originals of IRS 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 a Borrower 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) two duly completed valid originals of IRS Form W-8BEN,

 

(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 Borrowing Agent to determine the withholding or
deduction required to be made, or

 

(v)         to the extent that any Lender is not a Foreign Lender, such Lender
shall submit to Agent two (2) originals of an IRS Form W-9 or any other form
prescribed by Applicable Law demonstrating that such Lender is not a Foreign
Lender, or

 

(vi)        to the extent a Foreign Lender is not the beneficial owner, executed
originals of IRS Form W-81MY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a
U.S. Tax Compliance Certificate, IRS Form W-9, or other certification documents
from each beneficial owner, as applicable; provided that if the Foreign Lender
is a partnership and one or more direct or indirect partners of such Foreign
Lender are claiming the portfolio interest exemption, such Foreign Lender may
provide a U.S. Tax Compliance Certificate on behalf of each such direct and
indirect partner;

 

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Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify the Borrowing Agent and the Agent in
writing of its legal inability to do so.

 

(f)          If a payment made to a Lender, Participant, Issuer, or Agent under
this Agreement or any Other Document would be subject to U.S. Federal
withholding Tax imposed by FATCA if such Person fails to comply with the
applicable reporting requirements of FATCA (including those contained in Section
1471(b) or 1472(b) of the Code, as applicable), such Lender, Participant,
Issuer, or Agent shall deliver to the Agent (in the case of a Lender,
Participant or Issuer) and the Borrowing Agent (A) a certification signed by the
chief financial officer, principal accounting officer, treasurer or controller
of such Person, and (B) other documentation reasonably requested by the Agent or
Borrowing Agent sufficient for Agent and the Borrowers to comply with their
obligations under FATCA and to determine that such Lender, Participant, Issuer,
or Agent has complied with such applicable reporting requirements.

 

IV           COLLATERAL: GENERAL TERMS

 

4.1.          Security Interest in the Collateral.

 

(a)          Grant. To secure the prompt payment and performance to Agent and
each Lender of the Obligations, each Borrower hereby assigns, pledges and grants
to Agent for its benefit and for the ratable benefit of each Lender a continuing
security interest in and to and Lien on all of its Collateral, whether now owned
or existing or hereafter acquired or arising and wheresoever located.

 

(b)          Books and Records. Each Borrower shall mark its books and records
as may be necessary or appropriate to evidence, protect and perfect Agent’s
security interest and shall cause its financial statements to reflect such
security interest.

 

(c)          Commercial Tort Claims. Each Borrower other than Rocky Canada shall
promptly provide Agent with written notice of each commercial tort claim which
involves in excess of $500,000 in damages, such notice to contain the case title
together with the applicable court and a brief description of the claim(s). Upon
delivery of each such notice, such Borrower shall be deemed to hereby grant to
Agent a security interest and lien in and to such commercial tort claims and all
proceeds thereof.

 

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4.2.          Perfection of Security Interest. Each Borrower shall take all
action that may be necessary or desirable, or that Agent may reasonably request,
so as at all times to maintain the validity, perfection, enforceability and
priority of Agent’s security interest in and Lien on the Collateral or to enable
Agent to protect, exercise or enforce its rights hereunder and in the
Collateral, including, but not limited to, (i) immediately discharging all Liens
other than Permitted Encumbrances, (ii) obtaining Collateral Access Agreements
for Access Agreement Locations or locations not owned by a Borrower at which
material Inventory is located after the Restatement Date, including Inventory
which is in the possession, custody or control of a third-party, (iii)
delivering to Agent, endorsed or accompanied by such instruments of assignment
as Agent may specify, and stamping or marking, in such manner as Agent may
specify, any and all chattel paper, instruments, letters of credits and advices
thereof and documents evidencing or forming a part of the Collateral, (iv)
entering into warehousing, lockbox and other custodial arrangements reasonably
satisfactory to Agent, and (v) executing and delivering financing statements,
control agreements, instruments of pledge, mortgages, notices and assignments,
in each case in form and substance reasonably satisfactory to Agent, relating to
the creation, validity, perfection, maintenance or continuation of Agent’s
security interest and Lien under the Uniform Commercial Code, PPSA, or other
Applicable Law. By its signature hereto, each Borrower hereby authorizes Agent
to file against such Borrower, one or more financing, continuation or amendment
statements pursuant to the Uniform Commercial Code and the PPSA in form and
substance satisfactory to Agent (which statements may have a description of all
assets of the Borrowers and Guarantors, other than Excluded Property). All
charges, expenses and fees Agent may incur in doing any of the foregoing, and
any local taxes relating thereto, may be immediately charged to Borrowers’
Account as a Revolving Advance of a Domestic Rate Loan and added to the
Obligations, or, at Agent’s option, shall be paid to Agent for its benefit and
for the ratable benefit of Lenders within five (5) days after demand. Each such
charge to Borrowers’ Account or demand shall be accompanied by a reasonable
description of such charge to Borrowing Agent.

 

4.3.          Disposition of Property. Except for Permitted Dispositions, each
Borrower, Guarantor, and their respective Subsidiaries will safeguard and
protect all Collateral for Agent’s general account. Each Borrower, Guarantor,
and their respective Subsidiaries shall make no disposition of assets whether by
sale, lease or otherwise except the following (the “Permitted Dispositions”):
(a) the sale of Inventory in the Ordinary Course of Business; (b) the sale,
disposition or transfer of obsolete and worn-out Equipment in the Ordinary
Course of Business; (c) the sale, disposition or transfer of any assets outside
the Ordinary Course of Business during any fiscal year having an aggregate fair
market value of not more than $100,000 for Parent and its Subsidiaries on a
Consolidated Basis; (d) the sale, disposition or transfer of Excluded Property;
(e) assignments and licenses of Intellectual Property in the Ordinary Course of
Business; (f) the sale, disposition or transfer of property of any Borrower to
any other Borrower; and (g) subleases or leases of Real Property which, at the
time of such transaction, is then not currently being utilized in the business
of the Borrowers, Guarantors, or any of their respective Subsidiaries.

 

4.4.          Preservation of Collateral. Following the occurrence and during
the continuance of an Event of Default, in addition to the rights and remedies
set forth in Section 11.1, Agent: (a) may at any time take such steps as Agent
deems necessary to protect Agent’s interest in and to preserve the Collateral,
including the hiring of such security guards or the placing of other security
protection measures as Agent may deem appropriate; (b) may employ and maintain
at any of any Borrower’s premises a custodian who shall have full authority to
do all acts necessary to protect Agent’s interests in the Collateral; (c) may
lease warehouse facilities to which Agent may move all or part of the
Collateral; (d) may use any Borrower’s owned or leased lifts, hoists, trucks and
other facilities or equipment for handling or removing the Collateral; and (e)
shall have, and is hereby granted, a right of ingress and egress to the places
where the Collateral is located, and may proceed over and through any of
Borrower’s owned or leased property. Each Borrower shall cooperate fully with
all of Agent’s efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Agent may reasonably direct. All of Agent’s expenses
of preserving the Collateral, including any expenses relating to the bonding of
a custodian, may be immediately charged to Borrowers’ Account as a Revolving
Advance of a Domestic Rate Loan and added to the Obligations, or, at Agent’s
option, shall be paid to Agent for its benefit and for the ratable benefit of
Lenders within five (5) days after demand. Each such charge to Borrowers’
Account or demand shall be accompanied by a reasonable description of such
charge to Borrowing Agent.

 

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4.5.          Ownership of Collateral.

 

(a)          With respect to the Collateral, at the time the Collateral becomes
subject to Agent’s security interest: (i) each Borrower shall be the sole owner
of and fully authorized and able to sell, transfer, pledge and/or grant a first
priority security interest in each and every item of the its respective
Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall
be free and clear of all Liens and encumbrances whatsoever; (ii) each document
and agreement executed by each Borrower or delivered to Agent or any Lender in
connection with this Agreement shall be true and correct in all material
respects; (iii) all signatures and endorsements of each Borrower that appear on
such documents and agreements shall be genuine and each Borrower shall have full
capacity to execute same; and (iv) each Borrower’s Equipment and Inventory shall
be located as set forth on Schedule 4.5 and shall not be removed from such
location(s) without the prior written consent of Agent except to the extent
permitted in Section 4.3.

 

(b)           (i) There is no location at which any Borrower has any Inventory
(except for Inventory in transit, Inventory located on Lehigh vehicles, or
Inventory at other locations with a value of not in excess of $75,000 each)
other than those locations listed on Schedule 4.5, which may be updated from
time to time; (ii) Schedule 4.5 hereto contains a correct and complete list, as
of the Restatement Date, of the addresses of each warehouse at which Inventory
of any Borrower is stored; none of the receipts received by any Borrower from
any warehouse states that the goods covered thereby are to be delivered to
bearer or to the order of a named Person or to a named Person and such named
Person’s assigns; (iii) Schedule 4.5 hereto sets forth a correct and complete
list as of the Restatement Date of (A) each place of business of each Borrower
and (B) the chief executive office of each Borrower; and (iv) Schedule 4.5
hereto sets forth a correct and complete list as of the Restatement Date of the
location, by state or province and street address, of all Real Property owned or
leased by each Borrower.

 

4.6.          Defense of Agent’s and Lenders’ Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent’s interests in the Collateral shall continue in full force and
effect. During such period no Borrower shall, without Agent’s prior written
consent, pledge, sell (except to the extent permitted in Section 4.3), assign,
transfer, create or suffer to exist a Lien upon or encumber or allow or suffer
to be encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Each Borrower shall defend Agent’s interests in the Collateral
against any and all Persons whatsoever. At any time after the occurrence and
during the continuance of an Event of Default and following demand by Agent for
payment of all Obligations, (i) Agent shall have the right, to the extent
permitted by Applicable Law, to take possession of the indicia of the Collateral
and the Collateral in whatever physical form contained, including: labels,
stationery, documents, instruments and advertising materials; (ii) if Agent
exercises this right to take possession of the Collateral, Borrowers shall, upon
demand, assemble it in the best manner possible and make it available to Agent
at a place reasonably convenient to Agent; (iii) in addition, with respect to
all Collateral, Agent and Lenders shall be entitled to all of the rights and
remedies set forth herein and further provided by the Uniform Commercial Code,
the PPSA, or other Applicable Law; (iv) each Borrower shall, and Agent may, at
its option, instruct all suppliers, carriers, forwarders, warehousers or others
receiving or holding cash, checks, Inventory, documents or instruments in which
Agent holds a security interest to deliver same to Agent and/or subject to
Agent’s order and if they shall come into any Borrower’s possession, they, and
each of them, shall be held by such Borrower in trust as Agent’s trustee, and
such Borrower will immediately deliver them to Agent in their original form
together with any necessary endorsement.

 

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4.7.          Books and Records. Each Borrower shall (a) keep proper books of
record and account in which full, true and correct entries in all material
respects will be made of all dealings or transactions of or in relation to its
business and affairs; (b) set up on its books accruals with respect to all
taxes, assessments, charges, levies and claims; and (c) on a reasonably current
basis set up on its books, from its earnings, allowances against doubtful
Receivables, advances and investments and all other proper accruals (including
by reason of enumeration, accruals for premiums, if any, due on required
payments and accruals for depreciation, obsolescence, or amortization of
properties), which should be set aside from such earnings in connection with its
business. All determinations pursuant to this subsection shall be made in
accordance with, or as required by, GAAP consistently applied in the opinion of
such independent public accountant as shall then be regularly engaged by
Borrowers.

 

4.8.          Reserved.

 

4.9.          Compliance with Laws. Each Borrower shall comply in all material
respects with all Applicable Laws with respect to the Collateral or any part
thereof or to the operation of such Borrower’s business the non-compliance with
which could reasonably be expected to have a Material Adverse Effect. The assets
of Borrowers, Guarantors and their respective Subsidiaries at all times shall be
maintained in accordance with the requirements of all insurance carriers which
provide insurance with respect to the such assets so that such insurance shall
remain in full force and effect.

 

4.10.         Inspection of Premises. At all reasonable times (and if no Event
of Default is continuing reasonable prior notice shall be given), subject to the
terms of this Agreement, including confidentiality provisions, Agent and each
Lender shall have full access to and the right to audit, check, inspect and make
abstracts and copies from each Borrower’s books, records, audits, correspondence
and all other papers relating to the Collateral and the operation of each
Borrower’s business. Agent, any Lender and their agents may enter upon any
premises of any Borrower, at all reasonable times (and if no Event of Default is
continuing reasonable prior notice shall be given), and from time to time, for
the purpose of inspecting the Collateral and any and all records pertaining
thereto and the operation of such Borrower’s business; provided however, that
Agent may conduct only two (2) complete field examinations during each fiscal
year, provided further that, field examinations conducted prior in connection
with a Permitted Acquisition, or during the continuance of a Default or an Event
of Default shall not be subject to the foregoing limitation. Borrowers’
obligation to pay for such field examinations shall be subject to Section
3.4(b).

 

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4.11.         Insurance. Schedule 4.11 sets forth a list of all insurance
maintained by each Borrower, Guarantor, and their respective Subsidiaries on the
Restatement Date. The assets and properties of each Borrower at all times shall
be maintained in accordance with the requirements of all insurance carriers
which provide insurance with respect to the assets and properties of such
Borrower so that such insurance shall remain in full force and effect. Each
Borrower shall bear the full risk of any loss of any nature whatsoever with
respect to the Collateral. At each Borrower’s own cost and expense in amounts
and with carriers reasonably acceptable to Agent, each Borrower shall (a) keep
all its insurable properties (including all properties in which such Borrower
has an interest) insured against the hazards of fire, flood, sprinkler leakage,
those hazards covered by extended coverage insurance and such other hazards, and
for such amounts, as is customary in the case of companies engaged in businesses
similar to such Borrower’s including business interruption insurance; (b)
maintain a bond in such amounts as is customary in the case of companies engaged
in businesses similar to such Borrower insuring against larceny, embezzlement or
other criminal misappropriation of insured’s officers and employees who may
either singly or jointly with others at any time have access to the assets or
funds of such Borrower either directly or through authority to draw upon such
funds or to direct generally the disposition of such assets; (c) maintain public
and product liability insurance against claims for personal injury, death or
property damage suffered by others; (d) maintain all such worker’s compensation
or similar insurance required under the laws of any state or jurisdiction in
which such Borrower is engaged in business; (e) furnish Agent with (i) copies of
all policies upon request of Agent and evidence of the maintenance of such
policies by the renewal thereof at least two (2) Business Days before any
expiration date, and (ii) appropriate loss payable endorsements in form and
substance reasonably satisfactory to Agent, naming Agent as a co-insured and
loss payee as its interests may appear with respect to all insurance coverage on
properties in which such Borrower has an interest and all insurance coverage
referred to in clause (c) above, and providing (A) that all proceeds thereunder
shall be payable to Agent, (B) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such policy, and
(C) that such policy and loss payable clauses may not be cancelled, amended or
terminated unless at least thirty (30) days’ prior written notice is given to
Agent. In the event of any loss thereunder, the carriers named therein hereby
are directed by Agent and the applicable Borrower to make payment for such loss
to Agent and not to such Borrower and Agent jointly. If any insurance losses are
paid by check, draft or other instrument payable to any Borrower and Agent
jointly, Agent may endorse such Borrower’s name thereon and do such other things
as Agent may deem advisable to reduce the same to cash. If an Event of Default
has occurred and is continuing, Agent is hereby authorized to adjust and
compromise claims under insurance coverage referred to in clauses (a) and (b)
above. If an Event of Default has occurred and is continuing, all loss
recoveries received by Agent upon any such insurance may be applied to the
Obligations pursuant to Section 11.6. Any surplus shall be paid by Agent to
Borrowers or applied as may be otherwise required by law. Any deficiency thereon
shall be paid by Borrowers to Agent, on demand. Anything hereinabove to the
contrary notwithstanding, and subject to the fulfillment of the conditions set
forth below, Agent shall remit to Borrowing Agent insurance proceeds received by
Agent under insurance policies procured and maintained by Borrowers which insure
Borrowers’ insurable properties to the extent such insurance proceeds do not
exceed $1,000,000 per occurrence. In the event the amount of insurance proceeds
received by Agent for any occurrence exceeds $1,000,000, then Agent shall not be
obligated to remit the insurance proceeds to Borrowing Agent unless Borrowing
Agent shall provide Agent with evidence reasonably satisfactory to Agent that
the insurance proceeds will be used by Borrowers to repair, replace or restore
the insured property which was the subject of the insurable loss. The agreement
of Agent to remit insurance proceeds in the manner above provided shall be
subject in each instance to satisfaction of each of the following conditions:
(x) no Event of Default or Default shall then have occurred, and (y) Borrowers
shall use such insurance proceeds to repair, replace or restore the insurable
property which was the subject of the insurable loss and for no other purpose.

 

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4.12.         Failure to Pay Insurance. If any Borrower fails to obtain
insurance as hereinabove provided, or to keep the same in force, Agent, if Agent
so elects, may obtain such insurance and pay the premium therefor on behalf of
such Borrower, and charge Borrowers’ Account therefor as a Revolving Advance of
a Domestic Rate Loan and such expenses so paid shall be part of the Obligations.
Agent shall promptly provide Borrowing Agent copies of invoices for any such
expense.

 

4.13.         Payment of Taxes. Except for Properly Contested taxes, assessments
and other Charges, each Borrower will pay or remit, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon such Borrower or
any of the Collateral including real and personal property taxes, assessments
and charges and all franchise, income, employment, social security benefits,
withholding, and sales taxes. If any tax by any Governmental Body is or may be
imposed on or as a result of any transaction between any Borrower and Agent or
any Lender which Agent or any Lender may be required to withhold or pay or remit
or if any taxes, assessments, or other Charges remain unpaid after the date
fixed for their payment, or if any claim shall be made which, in Agent’s or any
Lender’s reasonable opinion, may possibly create a valid Lien on the Collateral,
Agent may upon notice to Borrowers pay the taxes, assessments or other Charges
and each Borrower hereby indemnifies and holds Agent and each Lender harmless in
respect thereof; provided, however, Agent will not pay any taxes, assessments or
Charges to the extent that any applicable Borrower has Properly Contested those
taxes, assessments or Charges. The amount of any payment by Agent under this
Section 4.13 shall be charged to Borrowers’ Account as a Revolving Advance
maintained as a Domestic Rate Loan and added to the Obligations and, until
Borrowers shall furnish Agent with an indemnity therefor (or supply Agent with
evidence reasonably satisfactory to Agent that due provision for the payment
thereof has been made), Agent may hold without interest any balance standing to
Borrowers’ credit and Agent shall retain its security interest in and Lien on
any and all Collateral held by Agent.

 

4.14.         Payment of Leasehold Obligations. Except for Properly Contested
payments, each Borrower shall at all times pay, when and as due, its rental
obligations under all leases under which it is a tenant, and shall otherwise
comply, in all material respects, with all other terms of such leases and keep
them in full force and effect and, at Agent’s request will provide evidence of
having done so.

 

4.15.         Receivables.

 

(a)          Nature of Receivables. Each of the Receivables shall be a bona fide
and valid account representing a bona fide indebtedness incurred by the Customer
therein named, for a fixed sum as set forth in the invoice relating thereto
(provided immaterial or unintentional invoice errors and customary discounts
shall not be deemed to be a breach hereof) with respect to an absolute sale or
lease and delivery of goods upon stated terms of a Borrower, or work, labor or
services theretofore rendered by a Borrower as of the date each Receivable is
created. Same shall be due and owing in accordance with the applicable
Borrower’s standard terms of sale without dispute, setoff or counterclaim except
as may be stated on the accounts receivable schedules delivered by Borrowers to
Agent.

 

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(b)          Solvency of Customers. Each Customer, to each Borrower’s actual
knowledge, as of the date each Receivable is created, is solvent and able to pay
all Receivables on which the Customer is obligated in full when due or with
respect to such Customers of any Borrower who are not solvent such Borrower has
set up on its books and in its financial records bad debt reserves adequate to
cover such Receivables.

 

(c)          Location of Borrowers. Each Borrower’s chief executive office and
each location where any Borrower, Guarantor, or their respective Subsidiaries
maintains assets in Canada is designated on Schedule 4.15(c). Until written
notice is given to Agent by Borrowing Agent of any other office at which any
Borrower keeps its records pertaining to Receivables, all such records shall be
kept at the address for such records designated on Schedule 4.15(c).

 

(d)          Collection of Receivables. Subject to Agent’s rights under Section
4.15(e), during a Cash Dominion Period, each Borrower will, at such Borrower’s
sole cost and expense, collect in trust for Agent all amounts received on
Receivables (other than Excluded Receivables), and shall not commingle such
collections with any Borrower’s funds or use the same except to pay Obligations.
Each Borrower shall deposit in the Blocked Accounts or Collection Accounts, or,
upon request by Agent, deliver to Agent, in original form and on the date of
receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and
other evidences of Indebtedness, other than those arising from Excluded
Receivables.

 

(e)          Notification of Assignment of Receivables. At any time following
the occurrence and during the continuance of an Event of Default, Agent shall
have the right to send notice of the assignment of, and Agent’s security
interest in and Lien on, the Receivables to any and all Customers or any third
party holding or otherwise concerned with any of the Collateral. Thereafter,
Agent shall have the sole right to collect the Receivables, take possession of
the Collateral, or both. Agent’s actual collection expenses, including, but not
limited to, stationery and postage, telephone and telegraph, secretarial and
clerical expenses and the salaries of any collection personnel used for
collection, may be charged to Borrowers’ Account and added to the Obligations,
and prompt notice and evidence thereof shall be sent to Borrowing Agent.

 

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(f)          Power of Agent to Act on Borrowers’ Behalf. Agent shall have the
right to receive, endorse, assign and/or deliver in the name of Agent or any
Borrower any and all checks, drafts and other instruments for the payment of
money relating to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Upon the
occurrence and during the continuance of an Event of Default, each Borrower
hereby constitutes Agent or Agent’s designee as such Borrower’s attorney with
power (i) to endorse such Borrower’s name upon any notes, acceptances, checks,
drafts, money orders or other evidences of payment or Collateral; (ii) to sign
such Borrower’s name on any invoice or bill of lading relating to any of the
Receivables, drafts against Customers, assignments and verifications of
Receivables; (iii) to send verifications of Receivables to any Customer; (iv) to
sign such Borrower’s name on all financing statements or any other documents or
instruments deemed necessary or appropriate by Agent to preserve, protect, or
perfect Agent’s interest in the Collateral and to file same; (v) to demand
payment of the Receivables; (vi) to enforce payment of the Receivables by legal
proceedings or otherwise; (vii) to exercise all of such Borrower’s rights and
remedies with respect to the collection of the Receivables and any other
Collateral; (viii) to settle, adjust, compromise, extend or renew the
Receivables; (ix) to settle, adjust or compromise any legal proceedings brought
to collect Receivables; (x) to prepare, file and sign such Borrower’s name on a
proof of claim in bankruptcy or similar document against any Customer; (xi) to
prepare, file and sign such Borrower’s name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Receivables; and
(xii) to do all other acts and things reasonably necessary to carry out this
Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake of fact or of
law, unless done maliciously, with willful misconduct or with gross (not mere)
negligence (as determined by a court of competent jurisdiction in a final
non-appealable judgment); this power being coupled with an interest is
irrevocable while any of the Obligations remain unpaid. Agent shall have the
right at any time following the occurrence of an Event of Default or Default, to
change the address for delivery of mail addressed to any Borrower to such
address as Agent may designate and to receive, open and dispose of all mail
addressed to any Borrower.

 

(g)          No Liability. Neither Agent nor any Lender shall, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables or any instrument received in payment thereof, or for
any damage resulting therefrom. Following the occurrence and during the
continuance of an Event of Default, Agent may, without notice or consent from
any Borrower, sue upon or otherwise collect, extend the time of payment of,
compromise or settle for cash, credit or upon any terms any of the Receivables
or any other securities, instruments or insurance applicable thereto and/or
release any obligor thereof. Agent is authorized and empowered to accept
following the occurrence and during the continuance of an Event of Default the
return of the goods represented by any of the Receivables, without notice to or
consent by any Borrower, all without discharging or in any way affecting any
Borrower’s liability hereunder.

 

(h)          Establishment of a Lockbox Account, Dominion Account.

 

(i)          All cash, Cash Equivalents, and the proceeds of all Collateral
shall be deposited directly into either (a) a lockbox account, dominion account
or such other “blocked account” (“Blocked Accounts”) established at a bank or
banks (each such bank, a “Blocked Account Bank”) pursuant to an arrangement with
such Blocked Account Bank as may be selected by Borrowing Agent and be
reasonably acceptable to Agent (which arrangement shall permit Borrowers to
access accounts absent a Cash Dominion Period), or (b) separate lockbox
depository accounts (“Collection Accounts”) established at the Agent for the
deposit of such cash, Cash Equivalents, and proceeds. Collection Accounts shall
be used solely for collections. All disbursements shall be made from separate
disbursement accounts established with Agent.

 

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(ii)         Each applicable Borrower, Agent and each Blocked Account Bank shall
enter into a deposit account control agreement in form and substance reasonably
satisfactory to Agent (each, a “Blocked Account Agreement”) granting Agent
exclusive control over the Blocked Accounts and directing such Blocked Account
Bank to transfer such funds deposited therein to Agent without offset or
deduction upon written notice from Agent (each an “Account Control Notice”),
either to any account maintained by Agent at said Blocked Account Bank or by
wire transfer to appropriate account(s) of Agent. Neither Agent nor any Lender
assumes any responsibility for such blocked account arrangement, including any
claim of accord and satisfaction or release with respect to deposits accepted by
any Blocked Account Bank thereunder. Each Blocked Account Agreement shall
require that the applicable Blocked Account Bank provide account statements and
such other account information as is reasonably requested by Agent from time to
time.

 

(iii)        Agent shall only be entitled to give an Account Control Notice to
each Blocked Account Bank and to exercise exclusive control over all Blocked
Accounts and Collection Accounts during a Cash Dominion Period. Upon the
issuance of an Account Control Notice by Agent during a Cash Dominion Period,
all funds then held and thereafter deposited in Blocked Accounts and Collection
Accounts shall immediately become subject to the exclusive control of Agent and
property of Agent and applied to the Obligations in accordance with the terms
hereof except to the extent set forth in Section 4.15(h)(v). Agent may maintain
the foregoing in effect notwithstanding the waiver or cure of the event or
circumstance which caused the Triggering Event; provided that, upon a
Satisfaction Event, Agent shall, at the request of any Borrowing Agent, promptly
rescind each Account Control Notice, permit Borrowers access to funds on deposit
in the Blocked Accounts and Collection Accounts, and cease the daily application
of collections to the Obligations until a subsequent Triggering Event occurs.

 

(iv)        As of the Restatement Date, set forth on Schedule 4.15(h) are all of
the deposit accounts and securities accounts of each Borrower, Guarantor and
their respective Subsidiaries, including, with respect to each bank or
securities intermediary (i) the name and address of such Person, and (ii) the
account numbers of the deposit accounts and securities accounts maintained with
such Person. Borrowing Agent shall update Schedule 4.15(h) from time to time to
disclose any additional account maintained under Section 4.15(h)(v)(A) which
contains a collected balance in excess of $50,000.

 

(v)         So long as no Event of Default has occurred and is continuing: (A)
notwithstanding the requirements of Section 4.15(h)(i) or a pending Cash
Dominion Period, Borrowers may deposit the proceeds of cash sales to retail
Customers into depository accounts that are neither Collection Accounts nor
subject to Blocked Account Agreements, provided that if the aggregate amount
deposited in such accounts exceeds $200,000 on the last Business Day of any
calendar week, such excess shall be immediately transferred to a Collection
Account, and Borrowers shall use commercially reasonable efforts to substitute
Agent as the depository bank for such accounts, (B) notwithstanding the
requirements of Section 4.15(h)(iii) or a pending Cash Dominion Period,
Borrowers may continue to maintain balances in Blocked Accounts located in
Canada, provided that on the last Business Day of each calendar month, Borrowers
shall cause the aggregate amount on deposit in such accounts in excess of
CDN$100,000 to be transferred to a Collection Account, and (C) notwithstanding
the requirements of Section 4.15(h)(iii) or a pending Cash Dominion Period,
Borrowers may continue to maintain disbursement account balances in Blocked
Accounts located in Puerto Rico, provided that on the last Business Day of each
calendar month, Borrowers shall cause the aggregate amount on deposit in such
accounts in excess of $1,000,000 to be transferred to a Collection Account.

 

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(i)          Adjustments. No Borrower will, without Agent’s consent, compromise
or adjust any material amount of the Receivables (or extend the time for payment
thereof) or accept any material returns of merchandise or grant any additional
discounts, allowances or credits thereon except for those compromises,
adjustments, returns, discounts, credits and allowances as have been heretofore
customary in the business of such Borrower.

 

(j)          United States Government Receivables.

 

(i)          Existing Contracts. As of the Restatement Date, all contracts of a
Borrower with the United States or Canada, or any department, agency or
instrumentality of any of them, copies of which have been delivered to Agent,
are set forth on Schedule 4.15(j). None of such existing contracts have been
assigned in whole or part to any Person. None of such existing contracts nor
future contracts with the United States or Canada, or any department, agency or
instrumentality of any of them, nor, in any case, the right to the payment of
money thereunder, shall be assigned in whole or part to any Person other than
Agent.

 

(ii)          Contract Assignments. Borrower shall deliver to Agent (A) on or
before the Restatement Date, a copy of each contract set forth on Schedule
4.15(j), and (B) after the Restatement Date, each material amendment to or
extension of a contract on Schedule 4.15(j) and, in the event Borrowing Agent
requests that any amounts payable under any contract with the United States, or
any department, agency or instrumentality of it, constitute Eligible
Governmental Receivables, the applicable Borrower shall deliver a copy of such
contract, together with an assignment thereof executed by the applicable
Borrower in the form attached hereto as Exhibit 4.15(j) (the “US Assignment”),
which will assign the right to payment of any Receivable thereunder to Agent and
will include the identity of the contracting officer related thereto. Agent may,
at any time in its sole discretion, upon notice to Borrowing Agent, (A) elect to
complete such assignment and deliver it to the applicable contracting officer
for acknowledgment and acceptance by such contracting officer and any other
Person necessary to comply with the Federal Assignment of Claims Act, and (B)
take such other actions as may be required under the Federal Assignment of
Claims Act to effect the assignment of such Receivable in accordance with the
Federal Assignment of Claims Act. In such event, Agent may, at any time upon
notice to Borrowing Agent, change the payment instructions for all such
Receivables assigned to Agent from any Borrower to Agent.

 

(iii)        Further Assurances. Upon the request of Agent, made in the
Permitted Discretion of Agent, Borrowers shall take all reasonable steps
necessary to protect Agent’s interest in any Eligible Government Receivable
under the Federal Assignment of Claims Act and all other applicable state or
local statutes or ordinances and deliver to Agent appropriately endorsed, any
instrument or chattel paper connected with any Receivable arising out of
contracts between any Borrower and the United States, or any department, agency
or instrumentality of it. Each Borrower irrevocably designates and appoints
Agent (and all persons designated by Agent) as such Borrower’s true and lawful
attorney in fact to (A) take any action as may be necessary or desirable to
complete any such US Assignment on behalf of such Borrower and to direct the
payment of the proceeds thereof; and (B) to execute and deliver the US
Assignment on behalf of such Borrower.

 

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(iv)        Central Contractor Registration. No Borrower shall change its
registration in the United States Central Contractor Registration database or
any replacement registration system established by the United States for the
purpose of registering government contractors and accepting payment instructions
with respect to Receivables due from the United States, or any department,
agency or instrumentality of it (the “CCR”). Each registered Borrower shall
annually update its registration in the CCR and take all other steps necessary
to maintain an effective registration with payment instructions for all such
Receivables to the Collection Accounts only. In the event any Borrower changes
its registration such that such Receivables are not paid directly and solely to
the Collection Accounts, Agent may exercise the power of attorney granted
pursuant to Section 4.15(f) to alter such Borrower’s registration as Agent deems
appropriate in its sole discretion.

 

4.16.         Inventory. To the extent Inventory held for sale or lease has been
produced by any Borrower, it has been and will be produced by such Borrower in
accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders thereunder.

 

4.17.         Maintenance of Equipment. The Equipment shall be maintained in
good operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved
(reasonable wear and tear excepted). Each Borrower shall have the right to sell
Equipment to the extent set forth in Section 4.3.

 

4.18.         Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Lender as any Borrower’s agent for any
purpose whatsoever, nor shall Agent or any Lender be responsible or liable for
any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause thereof,
except to the extent caused by Agent’s or such Lender’s gross negligence or
willful misconduct. Neither Agent nor any Lender, whether by anything herein or
in any assignment or otherwise, will assume any of any Borrower’s obligations
under any contract or agreement assigned to Agent or such Lender, and neither
Agent nor any Lender shall be responsible in any way for the performance by any
Borrower of any of the terms and conditions thereof.

 

4.19.         Environmental Matters.

 

(a)          Borrowers shall ensure that the Real Property and all operations
and businesses conducted thereon remains in compliance with all Environmental
Laws, and they shall not place or permit to be placed any Hazardous Substances
on any Real Property except as permitted by Applicable Law or appropriate
Governmental Bodies and except to the extent that any noncompliance or failure
is not reasonably likely to have a Material Adverse Effect.

 

(b)          Borrowers shall establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws which system
shall include periodic reviews of such compliance, except to the extent that any
noncompliance or failure is not reasonably likely to have a Material Adverse
Effect.

 

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(c)          Borrowers shall (i) employ in connection with the use of the Real
Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall comply with all Applicable Law in connection with the transport
or disposal of any Hazardous Waste generated at the Real Property.

 

(d)          In the event any Borrower obtains, gives or receives notice of any
Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a “Hazardous Discharge”) or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or any
Borrower’s interest therein (any of the foregoing is referred to herein as an
“Environmental Complaint”) from any Person, including any governmental agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located (any such person or entity hereinafter the
“Authority”), in each instance which is reasonably likely to have a Material
Adverse Effect, then Borrowing Agent shall, within five (5) Business Days, give
written notice of same to Agent detailing facts and circumstances of which any
Borrower is aware giving rise to the Hazardous Discharge or Environmental
Complaint. Such information is to be provided to allow Agent to protect its
security interest in and Lien on the Real Property and the Collateral and is not
intended to create nor shall it create any obligation upon Agent or any Lender
with respect thereto.

 

(e)          [reserved].

 

(f)          Borrowers shall respond promptly to any such Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or Real Property to
any Lien. If any Borrower shall fail to respond promptly to any such Hazardous
Discharge or Environmental Complaint or any Borrower shall fail to comply with
any of the requirements of any Environmental Laws, and Agent shall determine
that any such failure could have a Material Adverse Effect, Agent on behalf of
Lenders may, but without the obligation to do so, for the sole purpose of
protecting Agent’s interest in the Collateral: (A) give such notices or (B)
enter onto the Real Property (or authorize third parties to enter onto the Real
Property) and take such actions as Agent (or such third parties as directed by
Agent) deem reasonably necessary or advisable, to clean up, remove, or mitigate
any such Hazardous Discharge or Environmental Complaint. All reasonable costs
and expenses incurred by Agent and Lenders (or such third parties) in the
exercise of any such rights, including any sums paid in connection with any
judicial or administrative investigation or proceedings, fines and penalties,
together with interest thereon from the date expended at the Default Rate for
Domestic Rate Loans constituting Revolving Advances shall be paid upon demand by
Borrowers, and until paid shall be added to and become a part of the Obligations
secured by the Liens created by the terms of this Agreement or any other
agreement between Agent, any Lender and any Borrower. Evidence of any such
expense shall be submitted promptly to Borrowing Agent.

 

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(g)          Promptly upon the written reasonable request of Agent from time to
time, Borrowers shall provide Agent, at Borrowers’ expense, with an
environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Agent, to
assess the existence of a Hazardous Discharge and the potential costs in
connection with abatement, cleanup and removal of any Hazardous Substances found
on, under, at or within the Real Property. Any report or investigation of such
Hazardous Discharge proposed and acceptable to an appropriate Authority that is
charged to oversee the clean-up of such Hazardous Discharge shall be acceptable
to Agent. If such estimates, individually or in the aggregate, exceed
$1,000,000, Agent shall have the right to require Borrowers to post a bond,
letter of credit or other security reasonably satisfactory to Agent to secure
payment of these costs and expenses.

 

(h)          Borrowers shall defend and indemnify Agent and Lenders and hold
Agent, Lenders and their respective employees, agents, directors and officers
harmless from and against all loss, liability, damage and expense, claims,
costs, fines and penalties, including attorney’s fees, suffered or incurred by
Agent or Lenders under or on account of any Environmental Laws, including the
assertion of any Lien thereunder, with respect to any Hazardous Discharge, the
presence of any Hazardous Substances affecting the Real Property, whether or not
the same originates or emerges from the Real Property or any contiguous real
estate, including any loss of value of the Real Property as a result of the
foregoing except to the extent such loss, liability, damage and expense is
attributable to any Hazardous Discharge resulting from actions on the part of
Agent or any Lender. Borrowers’ obligations under this Section 4.19 shall arise
upon the discovery of the presence of any Hazardous Substances at the Real
Property, whether or not any federal, state, provincial, or local environmental
agency has taken or threatened any action in connection with the presence of any
Hazardous Substances. Borrowers’ obligation and the indemnifications hereunder
shall survive the termination of this Agreement.

 

(i)          For purposes of Section 4.19 and 5.7, all references to Real
Property shall be deemed to include all of each Borrower’s right, title and
interest in and to its owned and leased premises.

 

4.20.         Financing Statements. Except as respects the financing statements
filed by Agent and the financing statements described on Schedule 1.2(a) and
Permitted Encumbrances, no financing statement covering any of the Collateral or
any proceeds thereof is on file in any public office.

 

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V            REPRESENTATIONS AND WARRANTIES.

 

Each Borrower represents and warrants as follows:

 

5.1.          Authority. Each Borrower has full power, authority and legal right
to enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. This Agreement and the Other
Documents have been duly executed and delivered by each Borrower, and this
Agreement and the Other Documents constitute the legal, valid and binding
obligation of such Borrower enforceable in accordance with their terms, except
as such enforceability may be limited by any applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors’ rights generally. The execution,
delivery and performance of this Agreement and of the Other Documents (a) are
within such Borrower’s corporate or limited liability company powers, have been
duly authorized by all necessary corporate or company action, are not in
contravention of law or the terms of such Borrower’s by-laws or certificate or
articles of incorporation, or operating agreement or certificate of formation,
or other applicable documents relating to such Borrower’s formation or to the
conduct of such Borrower’s business or of any material agreement or undertaking
to which such Borrower is a party or by which such Borrower is bound, (b) will
not conflict with or violate any law or regulation, or any judgment, order or
decree of any Governmental Body, (c) will not require the Consent of any
Governmental Body or any other Person, except those Consents set forth on
Schedule 5.1 hereto, all of which will have been duly obtained, made or compiled
prior to the Restatement Date and which are in full force and effect and (d)
will not conflict with, nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of such Borrower under the provisions of
any agreement, charter document, instrument, by-law, operating agreement, or
other instrument to which such Borrower is a party or by which it or its
property is a party or by which it may be bound.

 

5.2.          Formation, Qualification, Equity Interests, Subsidiaries.

 

(a)          Each Borrower is duly incorporated or organized and in good
standing under the laws of the jurisdiction listed on Schedule 5.2(a) and is
qualified to do business and is in good standing in the jurisdictions listed on
Schedule 5.2(a) which constitute all jurisdictions in which qualification and
good standing are necessary for such Borrower to conduct its business and own
its property and where the failure to so qualify could reasonably be expected to
have a Material Adverse Effect on such Borrower. Each Borrower has delivered to
Agent true and complete copies of its certificate of incorporation and by-laws
or certificate of formation and operating agreement and will promptly notify
Agent of any material amendment or changes thereto.

 

(b)          Set forth on Schedule 5.2(b), is a complete and accurate
description, as of the Restatement Date, of the authorized Equity Interests of
each Borrower (other than the Parent) and their respective Subsidiaries, by
class, and, as of the Restatement Date, a description of the number of shares of
each such class that are issued and outstanding. Other than as described on
Schedule 5.2(b), there are no subscriptions, options, warrants, or calls
relating to any Equity Interests of each Borrower or any of their respective
Subsidiaries, including any right of conversion or exchange under any
outstanding security or other instrument. Other than as described on Schedule
5.2(b), as of the Restatement Date, no Borrower is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
Equity Interest or any security convertible into or exchangeable for any of its
Equity Interests.

 

(c)          As of the Restatement Date, the only Subsidiaries of each Borrower
are listed on Schedule 5.2(b).

 

5.3.          Survival of Representations and Warranties. All representations
and warranties of such Borrower contained in this Agreement and the Other
Documents shall be true in all material respects at the time of such Borrower’s
execution of this Agreement and the Other Documents, and shall survive the
execution, delivery and acceptance thereof by the parties thereto and the
closing of the transactions described therein or related thereto.

 

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5.4.          Tax Returns. Each Borrower’s federal tax identification number or
federal business number, as applicable, is set forth on Schedule 5.4. Each
Borrower has filed all federal (including the federal government of Canada),
state, provincial, and material local tax returns and other reports each is
required by law to file and has paid all material taxes, assessments, fees and
other governmental charges that are due and payable, except to the extent
Properly Contested. The provision for taxes on the books of each Borrower is
adequate for all years not closed by applicable statutes, and for its current
fiscal year, and no Borrower has any knowledge of any material deficiency or
additional material assessment in connection therewith not provided for on its
books.

 

5.5.          Financial Statements.

 

(a)          Reserved.

 

(b)          The consolidated balance sheets of Parent and its Subsidiaries as
of December 31, 2013, and the related consolidated statement of income, changes
in stockholder’s equity, and changes in cash flow for the period ended on such
date, all accompanied by reports thereon containing opinions without
qualification by independent certified public or chartered accountants, copies
of which have been delivered to Agent, have been prepared in accordance with
GAAP, consistently applied (except for changes in application in which such
accountants concur) and present fairly the financial position of Parent and its
Subsidiaries on a consolidated basis at such date and the results of their
operations for such period. Since December 31, 2013, there has been no change in
the condition, financial or otherwise, of Parent or its Subsidiaries as shown on
the consolidated balance sheet as of such date and no change in the aggregate
value of machinery, equipment and Real Property owned by Parent or its
Subsidiaries, in each instance, which individually or in the aggregate has had a
Material Adverse Effect.

 

5.6.          Entity Names. Except as set forth on Schedule 5.6, no Borrower,
Guarantor or any of their respective Subsidiaries has been known by any other
corporate name after December 31, 2009 and does not sell Inventory under any
other name, nor has any of them been the surviving or continuing corporation or
company of a merger , amalgamation, or consolidation or acquired all or
substantially all of the assets of any Person after December 31, 2006.

 

5.7.          O.S.H.A. and Environmental Compliance.

 

(a)          Except as set forth on Schedule 5.7, and for noncompliance that is
not reasonably likely to have a Material Adverse Effect, each Borrower has duly
complied with, and its facilities, business, assets, property, leaseholds, Real
Property and Equipment are in compliance in all material respects with, the
provisions of the Federal Occupational Safety and Health Act, the analogous
Canadian statutes, and all other Environmental Laws. Except as set forth on
Schedule 5.7, there have been no outstanding citations, notices or orders of
non-compliance issued to any Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations and
for noncompliance that is not reasonably likely to have a Material Adverse
Effect.

 

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(b)          Each Borrower has been issued all required federal, state,
provincial, and local licenses, certificates or permits relating to all
applicable Environmental Laws except where the failure to obtain the same is not
reasonably likely to have a Material Adverse Effect.

 

(c)          Except as set forth on Schedule 5.7, and except for any of the
listed items which are not reasonably likely to have a Material Adverse Effect,
(i) there are no visible signs of releases, spills, discharges, leaks or
disposal (collectively referred to as “Releases”) of Hazardous Substances at,
upon, under or within any Real Property; (ii) there are no underground storage
tanks or polychlorinated biphenyls on the Real Property; (iii) the Real Property
has never been used as a treatment, storage or disposal facility of Hazardous
Waste; and (iv) no Hazardous Substances are present on the Real Property or any
premises leased by any Borrower, excepting such quantities as are managed in
accordance with all applicable manufacturer’s instructions and governmental
regulations and as are necessary for the operation of the commercial business of
any Borrower or of its tenants, and naturally occurring Hazardous Substances.

 

5.8.          Solvency; No Litigation, Violation, Indebtedness or Default.

 

(a)          Parent and its Subsidiaries on a consolidated basis are Solvent.

 

(b)          No Borrower has (i) any pending or threatened litigation,
arbitration, actions or proceedings that individually or in the aggregate is
reasonably likely to have a Material Adverse Effect, or (ii) any liabilities or
indebtedness for borrowed money other than the Obligations and any Indebtedness
permitted under this Agreement.

 

(c)          No Borrower is in violation of any applicable statute, law, rule,
regulation or ordinance which violation could reasonably be expected to have a
Material Adverse Effect, nor is any Borrower in material violation of any order
of any court, Governmental Body or arbitration board or tribunal.

 

(d)          No Borrower nor any member of the Controlled Group maintains or
contributes to any Pension Benefit Plan other than those listed on Schedule
5.8(d). Except to the extent that any of the following are not reasonably likely
to have a Material Adverse Effect, no Pension Benefit Plan has incurred any
“accumulated funding deficiency,” as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and each Borrower and each
member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA and under Canadian Employee Benefit Laws
in respect of each Plan to which it is obligated to contribute. No Termination
Event has occurred nor has any other event occurred that is likely to result in
a Termination Event, except to the extent that such Termination Event is not
reasonably likely to have a Material Adverse Effect. Except as set forth on
Schedule 5.8(d), none of the Borrowers or any of the Controlled Group is
required to provide security to any Pension Benefit Plan under Section 436(f) of
the Code or under Canadian Employee Benefit Laws. As of the Restatement Date,
Rocky Canada is not and has never been required to contribute to a Canadian
Union Plan.

 

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5.9.          Patents, Trademarks, Copyrights and Licenses. Except for
immaterial items of Intellectual Property, all active registered patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, trade names,
owned or utilized by any Borrower are set forth on Schedule 5.9 (as of the
Restatement Date and as such schedule is updated from time to time upon request
by Agent), are valid and have been duly registered or filed with all appropriate
Governmental Bodies and constitute all of the intellectual property rights which
are necessary for the operation of its business. There is no objection to or
pending challenge to the validity of any such registered patent, trademark,
copyright, design rights, trade name and no Borrower is aware of any grounds for
any challenge, except as set forth in Schedule 5.9 hereto that is reasonably
likely to have a Material Adverse Effect. Except for immaterial items of
Intellectual Property, each patent, patent application, patent license,
trademark, trademark application, trademark license, service mark, service mark
application, service mark license, design rights, copyright, copyright
application and copyright license owned or held by any Borrower and all trade
secrets used by any Borrower consist of original material or property developed
by such Borrower or was lawfully acquired by such Borrower from the proper and
lawful owner thereof. Borrowers have used commercially reasonable efforts to
maintain each of such items used in their business. With respect to all software
used by any Borrower, such Borrower is in possession of all source and object
codes related to each piece of software or is the beneficiary of a source code
escrow agreement, each such source code escrow agreement being listed on
Schedule 5.9 hereto, except where the failure to have such possession would not
reasonably be expected to have a Material Adverse Effect.

 

5.10.         Licenses and Permits. Except as set forth in Schedule 5.10, each
Borrower (a) is in compliance with, and (b) has procured and is now in
possession of, all material licenses or permits required by any applicable
federal, state, provincial or local law, rule or regulation for the operation of
its business in each jurisdiction wherein it is now conducting or proposes to
conduct business and where the failure to procure such licenses or permits is
reasonably likely to have a Material Adverse Effect.

 

5.11.         Default of Indebtedness. No Borrower is in default in the payment
of the principal of or interest on any Indebtedness in excess of $500,000 or
under any instrument or agreement under or subject to which such Indebtedness
has been issued and no event has occurred under the provisions of any such
instrument or agreement which with or without the lapse of time or the giving of
notice, or both, constitutes or would constitute an event of default thereunder.

 

5.12.         No Default. No Event of Default or Default exists on the
Restatement Date. No Borrower is in default in the payment or performance of any
of Material Contract. All Material Contracts are listed on Schedule 5.12 (as it
may be updated from time to time), are in full force and effect and no notice of
default or termination has been delivered or threatened with respect thereto.

 

5.13.         No Burdensome Restrictions. No Borrower is party to any contract
or agreement the performance of which could have a Material Adverse Effect. As
of the Restatement Date each Borrower has heretofore delivered to Agent true and
complete copies of all Material Contracts to which it is a party or to which it
or any of its properties is subject. No Borrower has agreed or consented to
cause or permit in the future (upon the happening of a contingency or otherwise)
any of its property, whether now owned or hereafter acquired, to be subject to a
Lien which is not a Permitted Encumbrance.

 

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5.14.         No Labor Disputes. No Borrower is involved in any labor dispute;
there are no strikes or walkouts or union organization of any Borrower’s
employees threatened or in existence and no labor contract is scheduled to
expire during the Term other than as set forth on Schedule 5.14 hereto; except
where any of the same are not reasonably likely to have a Material Adverse
Effect.

 

5.15.         Margin Regulations. No Borrower is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of “purchasing” or “carrying” any “margin stock” within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of any Advance will be used for
“purchasing” or “carrying” “margin stock” as defined in Regulation U of such
Board of Governors.

 

5.16.         Investment Company Act. No Borrower is an “investment company”
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.

 

5.17.         Disclosure. No representation or warranty made by any Borrower in
this Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to any
Borrower or which reasonably should be known to such Borrower which such
Borrower has not disclosed to Agent in writing with respect to the transactions
contemplated by this Agreement which could reasonably be expected to have a
Material Adverse Effect.

 

5.18.         Reserved.

 

5.19.         Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on any Borrower or
affecting the Collateral conflicts with, or requires any Consent which has not
already been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.

 

5.20.         Application of Certain Laws and Regulations. No Borrower nor any
Subsidiary is subject to any law, statute, rule or regulation which regulates
the incurrence of any Indebtedness, including laws, statutes, rules or
regulations relative to common or interstate carriers or to the sale of
electricity, gas, steam, water, telephone, telegraph or other public utility
services.

 

5.21.         Business and Property of Borrowers. Upon and after the Restatement
Date, Borrowers do not propose to engage in any business other than the
manufacture, import, export, distribution, and sale of branded footwear and
apparel, and related products, and activities necessary to conduct the foregoing
and any business reasonably incidental thereto. On the Restatement Date, each
Borrower will own all the property and possess all of the rights and Consents
necessary for the conduct of the business of such Borrower.

 

5.22.         Section 20 Subsidiaries. Borrowers do not intend to use and shall
not use any portion of the proceeds of the Advances, directly or indirectly, to
purchase during the underwriting period, or for 30 days thereafter, Ineligible
Securities being underwritten by a Section 20 Subsidiary.

 

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5.23.         Reserved.

 

5.24.         Reserved.

 

5.25.         Reserved.

 

5.26.         Withholdings and Remittances. Each Borrower has withheld from each
payment made to any of its present or former employees, officers and directors,
and to all persons who are non-residents of Canada for the purposes of the
Canadian Income Tax Act and provincial tax legislation all amounts required by
Applicable Law to be withheld, including all payroll deductions required to be
withheld, and furthermore, has remitted such withheld amounts within the
prescribed periods to the appropriate Governmental Body. Each Borrower has
remitted all Benefit Plan normal or regular contributions, provincial pension
plan contributions, all contributions required under the Canada Pension Plan Act
(Canada), employment insurance premiums, employer health taxes and other taxes
payable by it in respect of its employees and has remitted such amounts to the
proper Governmental Body within the time required under Applicable Law.

 

VIAFFIRMATIVE COVENANTS.

 

Each Borrower shall, and shall cause Guarantor, and each of their respective
Domestic Subsidiaries to, until payment in full of the Obligations and
termination of this Agreement:

 

6.1.          Payment of Fees. Pay to Agent on demand all usual and customary
fees and expenses which Agent incurs in connection with (a) the forwarding of
Advance proceeds and (b) the establishment and maintenance of any Blocked
Accounts or Collection Accounts as provided for in Section 4.15(h). Agent may,
without making demand, charge Borrowers’ Account for all such fees and expenses.

 

6.2.          Conduct of Business and Maintenance of Existence and Assets. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including all licenses, patents, copyrights, design rights,
tradenames, trade secrets and trademarks and take all actions necessary to
enforce and protect the validity of any intellectual property right or other
right included in the Collateral except where the failure to do so could
reasonably be expected to have a Material Adverse Effect; (b) keep in full force
and effect its existence and comply in all material respects with Applicable Law
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect; and (c) make all such
reports and pay all such franchise and other taxes and license fees and do all
such other acts and things as may be lawfully required to maintain its rights,
licenses, leases, powers and franchises under the laws of the United States or
Canada or any political subdivision thereof where the failure to do so could
reasonably be expected to have a Material Adverse Effect.

 

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6.3.          Reserved.

 

6.4.          Government Receivables. Take all steps necessary to protect
Agent’s interest in any Eligible Government Receivable under the Federal
Assignment of Claims Act, the Uniform Commercial Code, the PPSA, and all other
Applicable Law and deliver to Agent appropriately endorsed, any instrument or
chattel paper connected with any such Receivable arising out of contracts
between any Borrower and the United States, any state or any department, agency
or instrumentality of any of them.

 

6.5.          Fixed Charge Coverage Ratio. Cause to be maintained for Parent and
its Subsidiaries on a consolidated basis, a Fixed Charge Coverage Ratio of not
less than 1.10 to 1.00; provided that testing of compliance with the foregoing
Fixed Charge Coverage Ratio requirement shall not occur until a Triggering
Event. Upon a Triggering Event, the Fixed Charge Coverage Ratio shall be
calculated and tested for the twelve (12) months preceding the calendar month in
which the Triggering Event occurs. Testing shall continue as of each fiscal
quarter end thereafter on a historical rolling four (4) quarters basis until a
Satisfaction Event occurs.

 

6.6.          Execution of Supplemental Instruments. Execute and deliver to
Agent from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may reasonably request, in order
that the full intent of this Agreement may be carried into effect.

 

6.7.          Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and
matters which may be Properly Contested in accordance with this Agreement, and,
in the case of the trade payables, to normal payment practices) all its
obligations and liabilities of whatever nature, except when the failure to do so
could not reasonably be expected to have a Material Adverse Effect or when the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings and each Borrower shall have provided for such reserves
as Agent may reasonably deem proper and necessary, subject at all times to any
applicable subordination arrangement in favor of Lenders.

 

6.8.          Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12 and 9.13 as to which
GAAP is applicable to be complete and correct in all material respects (subject,
in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).

 

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6.9.          Keepwell. If it is a Qualified ECP Loan Party, then jointly and
severally, together with each other Qualified ECP Loan Party, hereby absolutely
unconditionally and irrevocably (a) guarantees the prompt payment and
performance of all Swap Obligations owing by each Non-Qualifying Party (it being
understood and agreed that this guarantee is a guaranty of payment and not of
collection), and (b) undertakes to provide such funds or other support as may be
needed from time to time by any Non-Qualifying Party to honor all of such
Non-Qualifying Party’s obligations under this Agreement or any Other Document in
respect of Swap Obligations (provided, however, that each Qualified ECP Loan
Party shall only be liable under this Section 6.9 for the maximum amount of such
liability that can be hereby incurred without rendering its obligations under
this Section 6.9, or otherwise under this Agreement or any Other Document,
voidable under Applicable Law, including Applicable Law relating to fraudulent
conveyance or fraudulent transfer, and not for any greater amount). The
obligations of each Qualified ECP Loan Party under this Section 6.9 shall remain
in full force and effect until payment in full of the Obligations and
termination of this Agreement and the Other Documents. Each Qualified ECP Loan
Party intends that this Section 6.9 constitute, and this Section 6.9 shall be
deemed to constitute, a guarantee of the obligations of, and a “keepwell,
support, or other agreement” for the benefit of each other Borrower and
Guarantor for all purposes of Section 1a(18)(A)(v)(II) of the CEA.

 

VIINEGATIVE COVENANTS.

 

No Borrower, Guarantor, nor any of their respective Subsidiaries shall, until
satisfaction in full of the Obligations and termination of this Agreement:

 

7.1.          Merger, Consolidation, Acquisition and Sale of Assets.

 

(a)          Other than a Permitted Acquisition, and any merger, consolidation,
amalgamation, or other reorganization of a Borrower into another Borrower, enter
into any merger, consolidation, amalgamation, or other reorganization with or
into any other Person or permit any other Person to consolidate with or merge or
amalgamate with it.

 

(b)          Other than a Permitted Acquisition, any Permitted Investment and
any acquisition, transfer or contribution of assets of a Borrower to another
Borrower, acquire: (i) all or substantially all of the assets of any business,
or any operating unit or division of any Person, whether through the purchase of
assets, merger, combination, amalgamation or otherwise, or (ii) acquire a
majority (by number of share or voting power) of the voting interests or other
Equity Interests of any Person.

 

(c)          Sell, lease, transfer or otherwise dispose of any of its properties
or assets, except Permitted Dispositions; it being understood that nothing in
this clause (c) is intended to restrict advances and payment of customer
deposits, trade payables and other accrued expenses and liabilities incurred in
the Ordinary Course of Business of Borrowers and Guarantors.

 

7.2.          Creation of Liens. Create or suffer to exist any Lien or transfer
upon or against any of its property or assets now owned or hereafter acquired,
except Permitted Encumbrances.

 

7.3.          Guarantees. Become liable upon the obligations or liabilities of
any Person by assumption, endorsement or guaranty thereof or otherwise (other
than to Agent or Lenders) except (a) as disclosed on Schedule 7.3, (b)
guarantees made in the Ordinary Course of Business up to an aggregate amount of
$100,000 outstanding for Parent and its Subsidiaries on a Consolidated Basis,
(c) the endorsement of checks in the Ordinary Course of Business, and (d)
Permitted Guarantees.

 

7.4.          Investments. Purchase or acquire obligations or Equity Interests
of, or any other interest in, any Person, except Permitted Investments.

 

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7.5.          Loans. Make advances, loans or extensions of credit to any Person,
including any Affiliate except for Permitted Advances.

 

7.6.          Reserved.

 

7.7.          Dividends. Declare, pay or make any dividend or distribution on
any shares of the Equity Interests of Parent (other than dividends or
distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any Equity Interests, or of any options to purchase or
acquire any such Equity Interests of Parent, except that Parent shall be
permitted to pay dividends to its shareholders or pay for any such purchase,
redemption, retirement or acquisition each fiscal quarter, provided that (a)
after giving effect to the payment there is no Event of Default or Default, (b)
no notice of termination with regard to this Agreement is outstanding, and (c)
either of the following described in clause (i) or (ii) below (each a “Payment
Condition”) is true: (i) Average Availability and the sum of Undrawn
Availability plus Qualified Cash are greater than the lesser of: (A) 20.00% of
the Formula Amount, or (B) 20.00% of the Maximum Revolving Advance Amount, but
in no event shall such amount be less than $15,000,000, immediately prior to and
after giving effect to such payment and the Revolving Advances to be funded in
connection therewith; or (ii) Average Availability and the sum of Undrawn
Availability plus Qualified Cash are greater than the lesser of: (A) 13.33% of
the Formula Amount, or (B) 13.33% of the Maximum Revolving Advance Amount, but
in no event shall such amount be less than $10,000,000, immediately prior to and
after giving effect to such payment and the Revolving Advances to be funded in
connection therewith, and the Fixed Charge Coverage Ratio calculated on a
proforma basis will be at least 1.10 to 1.00 for the twelve (12) month period
ending on the last day of the fiscal quarter immediately prior to the fiscal
quarter of the proposed payment, after giving effect to such payment and the
Revolving Advances to be funded in connection therewith, as evidenced by a
proforma Compliance Certificate delivered by the Borrowing Agent, and (d) each
such payment may be made only after Agent shall have received a Compliance
Certificate for such immediately prior fiscal quarter.

 

7.8.          Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness except in respect of (a) Indebtedness to Lenders; (b) Indebtedness
incurred for Capital Expenditures in an amount not in excess of $5,000,000
outstanding at any time for Parent and its Subsidiaries on a Consolidated Basis;
(c) Indebtedness included within the Purchase Price for a Permitted Acquisition,
provided such Indebtedness is subject to a subordination agreement acceptable to
Agent in its sole discretion; (d) intercompany Indebtedness (which, for
clarification, does not include trade payables incurred in the Ordinary Course
of Business) between any Borrowers, or between Parent and its Subsidiaries,
provided that the aggregate outstanding amount of any such intercompany
Indebtedness owing at any time by Subsidiaries that are not Borrowers to
Borrowers shall not exceed $10,000,000 outstanding; (e) Indebtedness to
shareholders of Parent from share repurchases and redemptions under the
stockholders agreements not to exceed $500,000 in the aggregate incurred in any
Fiscal Year for Parent and its Subsidiaries on a Consolidated Basis; (f) other
Indebtedness in the aggregate at any time outstanding of $1,000,000 for Parent
and its Subsidiaries on a Consolidated Basis; (g) Indebtedness of any Borrower
listed on Schedule 7.8; (h) Indebtedness incurred in connection with the
financing of Borrowers’ insurance premiums; (i) Indebtedness incurred in
connection with Hedge Agreements, in all cases not for speculative purposes, not
to exceed in the aggregate a maximum liability for the termination of such any
and all such agreements of $7,500,000 at any time outstanding for Parent and its
Subsidiaries on a Consolidated Basis; (j) obligations under any lease which is
accounted for by the lessee as an operating lease and under which the lessee is
intended to be the “owner” of the leased property for Federal income tax
purposes; and (k) Indebtedness permitted by Section 7.3.

 

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7.9.          Nature of Business. (a) Substantially change the nature of the
businesses in which it is presently engaged, or (b) fail to promptly notify
Agent in the event that any Foreign Subsidiary that is not a Borrower or
Guarantor, sells goods or services to any Person other than an Affiliate.

 

7.10.         Transactions with Affiliates. Other than any transaction by and
between, or among, Parent, Borrowers and their respective Subsidiaries, in each
such case in a manner that is not materially economically detrimental to any
Borrower, no Borrower or Guarantor shall directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise enter into any transaction or deal with, any Affiliate, except to
the extent otherwise expressly permitted hereby or pursuant to the reasonable
requirements of the Borrowers' businesses and upon fair and reasonable terms no
less favorable to Borrowers than would be obtained in a comparable arm's-length
transaction with a Person other than an Affiliate.

 

7.11.         Reserved.

 

7.12.         Subsidiaries. Except for Creative Retail and Creative
International which are joined hereby, form any Subsidiary unless (a) (i) in the
case of a Domestic Subsidiary, it expressly joins in this Agreement as a
borrower or guarantor, as determined by Agent, and becomes jointly and severally
liable for the Obligations, provided, however, if (A) the formation of a
Subsidiary is solely for the purpose of consummating a Permitted Acquisition,
and (B) no Event of Default is continuing and no notice of termination with
regard to this Agreement is outstanding, then such joinder may occur at any time
prior to fifteen (15) days after the date of closing of such Permitted
Acquisition, or (ii) in the case of a Foreign Subsidiary, 65% of the Equity
Interests of such Foreign Subsidiary are pledged as Collateral, and (b) Agent
shall have received all documents, including legal opinions, it may reasonably
require to establish compliance with each of the foregoing conditions.

 

7.13.         Fiscal Year and Accounting Changes. Change its fiscal year from
December 31 or make any significant change (a) in accounting treatment and
reporting practices except as required by GAAP or (b) in tax reporting treatment
except as required by law.

 

7.14.         Pledge of Credit. Now or hereafter pledge Agent’s or any Lender’s
credit on any purchases or for any purpose whatsoever or use any Advances in or
for any business other than Borrowers’ or otherwise in accordance with this
Agreement.

 

7.15.         Amendment of Articles of Incorporation, By-Laws, Certificate of
Formation, Operating Agreement; Change of Name.

 

(a)          Amend, modify or waive any term or material provision of its
Articles of Incorporation, By-Laws, Certificate of Formation, or Operating
Agreement unless required by law but subject to Section 7.15(b).

 

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(b)          Change its name, FEIN, organizational identification number,
business number assigned by the Canada Revenue Agency, company number,
jurisdiction of organization, or organizational identity or status; provided,
however, that a Borrower may change its name and Rocky Canada may continue into
another jurisdiction other than Nova Scotia upon at least 15 days’ prior written
notice by the applicable Borrower to Agent of such change or continuation and so
long as, at the time of such written notification, such Borrower provides any
financing or registration statements necessary to perfect and continue perfected
Agent’s Liens.

 

7.16.         Compliance with ERISA. (a) Become obligated, or permit a member of
the Controlled Group to become obligated, to contribute to a Benefit Plan except
the Rocky Brands, Inc. Retirement Plan or as required pursuant to collective
bargaining, or (b) fail to comply, or permit a member of the Controlled Group to
fail to comply, with the requirements of ERISA or the Code with respect to any
Benefit Plans in a manner reasonably likely to have a Material Adverse Effect.

 

7.17.         Prepayment of Indebtedness. Except to the extent that (a) after
giving effect to such payment there is no Event of Default or Default, (b) no
notice of termination with regard to this Agreement is outstanding, (c) a
Payment Condition is satisfied prior to and immediately after giving effect to
any such payment, and (d) Agent shall have received a Compliance Certificate for
the immediately prior fiscal quarter, at any time, directly or indirectly,
prepay any Indebtedness in an amount exceeding $500,000 (other than to Lenders),
or repurchase, redeem, retire or otherwise acquire any Indebtedness of any
Borrower.

 

7.18.         Membership/Partnership Interests. Elect to treat or permit any of
its Subsidiaries to (a) treat its limited liability company membership interests
or partnership interests, as the case may be, as securities as contemplated by
the definition of “security” in Section 8-102(15) and by Section 8-103 of
Article 8 of Uniform Commercial Code or by the Securities Transfer Act of any
Canadian jurisdiction, or (b) certificate its limited liability company
membership interests or partnership interests, as the case may be.

 

7.19.         Rocky Canada. Fail to deliver to Agent in form and substance
reasonably acceptable to Agent and within thirty (30) days after the Restatement
Date (or such longer period as Agent shall determine in its sole discretion),
the following with respect to Rocky Canada: (a) evidence of its continuation in
Nova Scotia and a certificate of status from Nova Scotia, (b) a completed and
executed closing certificate substantially in the form previously delivered to
Agent, and (c) a PPSA filing in favor of Agent in Nova Scotia and evidence of an
amendment to Agent’s PPSA filing in Ontario to change the name of Rocky Canada
to Rocky Brands Canada, Inc.

 

VIIICONDITIONS PRECEDENT.

 

8.1.          Conditions to Advances. Except for those matters to be delivered
after the Restatement Date in accordance with Section 7.19, the agreement of
Lenders to make the Advances is subject to the satisfaction, or waiver by Agent,
immediately prior to or concurrently with the making of such Advances, of the
following conditions precedent:

 

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(a)          Note. Agent shall have received the Equipment Note and the amended
and restated Revolving Credit Note duly executed and delivered by an authorized
officer of each Borrower;

 

(b)          Filings, Registrations and Recordings. Each document (including any
Uniform Commercial Code or PPSA financing statement) required by this Agreement,
any related agreement or under law or reasonably requested by the Agent to be
filed, registered or recorded in order to create, in favor of Agent, a perfected
security interest in or Lien upon the Collateral shall have been properly filed,
registered or recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and Agent shall have received
an acknowledgment copy, or other evidence reasonably satisfactory to it, of each
such filing, registration or recordation and reasonably satisfactory evidence of
the payment of any necessary fee, tax or expense relating thereto;

 

(c)          Corporate Proceedings of Borrowers. Agent shall have received a
copy of the resolutions in form and substance reasonably satisfactory to Agent,
of the board of directors or managers of each Borrower authorizing (i) the
execution, delivery and performance of this Agreement and the Other Documents
and (ii) the granting by each Borrower of the security interests in and liens
upon the Collateral in each case certified by the Secretary or an Assistant
Secretary of each Borrower as of the Restatement Date; and, such certificate
shall state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded as of the date of such certificate;

 

(d)          Incumbency Certificates of Borrowers. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of each Borrower, dated
the Restatement Date, as to the incumbency and signature of the officers of each
Borrower executing this Agreement, the Other Documents, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;

 

(e)          Certificates. Agent shall have received a copy of the Articles or
Certificate of Incorporation or Formation of each Borrower, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation (or in the case of Rocky Canada, certified by
the Secretary of Rocky Canada) or formation, as applicable, together with copies
of the By-Laws (or equivalent governing document) of each Borrower certified as
accurate and complete by the Secretary or Assistant Secretary of each such
Borrower;

 

(f)          Good Standing Certificates. Agent shall have received good standing
certificates for each domestic Borrower dated not more than thirty (30) days
prior to the Restatement Date, issued by the Secretary of State or other
appropriate official of the jurisdiction of incorporation or formation, as
applicable, of each such Borrower;

 

(g)          Legal Opinions. Agent shall have received the executed legal
opinions of the Borrowers’ U.S. counsel in form and substance reasonably
satisfactory to Agent which shall cover such matters incident to the
transactions contemplated by this Agreement and the Other Documents, and each
Borrower hereby authorizes and directs such counsel to deliver such opinions to
Agent and Lenders;

 

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(h)          No Litigation. (i) No litigation, investigation or proceeding
before or by any arbitrator or Governmental Body shall be continuing or
threatened against any Borrower or against the officers or directors of any
Borrower (A) in connection with this Agreement, the Other Documents or any of
the transactions contemplated thereby and which, in the reasonable opinion of
Agent, is deemed material or (B) which could, in the reasonable opinion of
Agent, have a Material Adverse Effect; and (ii) no injunction, writ, restraining
order or other order of any nature materially adverse to any Borrower or the
conduct of its business or inconsistent with the due consummation of the
Transactions shall have been issued by any Governmental Body;

 

(i)          Insurance. With respect to Creative, Creative Retail and Creative
International, Agent shall have received in form and substance satisfactory to
Agent, a certificate of property insurance naming Agent as lender loss payee and
a certificate of liability insurance naming Agent as an additional insured;

 

(j)          Reserved.

 

(k)          Consents. Agent shall have received any and all Consents necessary
to permit the effectuation of the transactions contemplated by this Agreement
and the Other Documents; and, Agent shall have received such Consents and
waivers of such third parties as might assert claims with respect to the
Collateral;

 

(l)          No Adverse Material Change. (i) since December 31, 2013 there shall
not have occurred any event, condition or state of facts which could reasonably
be expected to have a Material Adverse Effect and (ii) no representations made
or information supplied to Agent or Lenders shall have been proven to be
inaccurate or misleading in any material respect;

 

(m)          Other Documents. Agent shall have received the executed Other
Documents, all in form and substance satisfactory to Agent;

 

(n)          Compliance with Laws. Agent shall be reasonably satisfied that each
Borrower is in compliance with all Applicable Law, including those with respect
to the Federal Occupational Safety and Health Act, the Environmental Protection
Act, ERISA and Anti-Terrorism Laws; and

 

(o)          Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the Transactions shall be
satisfactory in form and substance to Agent and its counsel.

 

8.2.          Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including the initial Advance), is
subject to the satisfaction of the following conditions precedent as of the date
such Advance is made:

 

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(a)          Representations and Warranties. Each of the representations and
warranties made by any Borrower in or pursuant to this Agreement, the Other
Documents and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement, the Other Documents or any related agreement shall be true and
correct in all material respects on and as of such date as if made on and as of
such date, except to the extent that any such representation or warranty relates
to a specified date, in which each such representation and warranty shall be
true and correct in all material respects on and as of such specified date;

 

(b)          No Default. No Event of Default or Default shall have occurred and
be continuing on such date, or would exist after giving effect to the Advances
requested to be made, on such date; provided, however that Agent, in its sole
discretion, may (subject to the provisions in Section 16.2(b)) continue to make
Advances notwithstanding the existence of an Event of Default or Default and
that any Advances so made shall not be deemed a waiver of any such Event of
Default or Default; and

 

(c)          Maximum Advances. In the case of any type of Advance requested to
be made, after giving effect thereto, the aggregate amount of such type of
Advance shall not exceed the maximum amount of such type of Advance permitted
under this Agreement.

 

8.3.          Conditions to Each Equipment Loan. The agreement of Lenders to
make any Advance consisting of an Equipment Loan is also subject to satisfaction
of the following conditions precedent: (a) receipt by Agent of (i) a copy of the
invoice relating to the Equipment being purchased, (ii) evidence that such
Equipment has been shipped to Borrower, (iii) evidence that the requested
Equipment Loan does not exceed eighty percent (80%) of the net invoice cost of
such Equipment purchased by Borrower (which shall be exclusive of shipping,
delivery, handling, taxes, overhead, installation and all other “soft” costs),
and (iv) such other documentation and evidence that Agent may reasonably
request; and (b) after giving effect thereto, the aggregate outstanding
principal amount of Equipment Loans shall not exceed the Maximum Equipment Loan
Amount.

 

Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.

 

IXINFORMATION AS TO BORROWERS.

 

Each Borrower shall, or (except with respect to Section 9.11) shall cause
Borrowing Agent on its behalf to, until satisfaction in full of the Obligations
and the termination of this Agreement:

 

9.1.          Disclosure of Material Matters. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectability of any material portion of the Collateral, including any
Borrower’s reclamation or repossession of, or the return to any Borrower of, a
material amount of goods or claims or disputes asserted by any Customer or other
obligor.

 

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9.2.          Schedules. Deliver to Agent on or before the fifteenth (15th) day
of each month as and for the prior month (a) Receivables aging inclusive of
reconciliations to the general ledger, (b) accounts payable schedules inclusive
of reconciliations to the general ledger, (c) a report of sales, credits, cash,
and collections, (d) Inventory reports, and (e) a Borrowing Base Certificate in
form and substance satisfactory to Agent (which shall be calculated as of the
last day of the prior month and which shall not be binding upon Agent or
restrictive of Agent’s rights under this Agreement); provided that, the
Borrowers may, but shall not be obligated to (except as set forth in the
following sentence), deliver the foregoing more frequently than once per month.
Commencing upon the sum of Undrawn Availability plus Qualified Cash being less
than the lesser of: (i) 13.33% of the Formula Amount, or (ii) 13.33% of the
Maximum Revolving Advance Amount, but in no event shall such amount be less than
$10,000,000, for a period in excess of five (5) consecutive days, unless waived
by Agent in its sole discretion or until such time as the sum of Undrawn
Availability plus Qualified Cash is greater than the lesser of: (i) 16.67% of
the Formula Amount, or (ii) 16.67% of the Maximum Revolving Advance Amount, but
in no event shall such amount be less than $12,500,000, for a period in excess
of ten (10) consecutive days thereafter, deliver to Agent on or before the
second (2nd) Business Day of each week as and for the prior week, a report of
sales, credits, and collections (which shall be calculated as of the last day of
the prior week and which shall not be binding upon Agent or restrictive of
Agent’s rights under this Agreement). In addition, each Borrower will deliver to
Agent at such intervals as Agent may require in its Permitted Discretion: (A)
confirmatory assignment schedules, (B) copies of Customer’s invoices, (C)
evidence of shipment or delivery, (D) reports on Priority Payables, and (E) such
further schedules, documents and/or information regarding the Collateral as
Agent may reasonably require including trial balances and test verifications.
Agent shall have the right to confirm and verify all Receivables by any manner
and through any medium it considers advisable and do whatever it may deem
reasonably necessary to protect its interests hereunder. The items to be
provided under this Section are to be in form reasonably satisfactory to Agent
and executed by Borrowing Agent and delivered to Agent from time to time solely
for Agent’s convenience in maintaining records of the Collateral, and any
Borrower’s failure to deliver any of such items to Agent shall not affect,
terminate, modify or otherwise limit Agent’s Lien with respect to the
Collateral.

 

9.3.          Environmental Reports. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.9, with a
Compliance Certificate stating, to his actual knowledge, that each Borrower,
Guarantor and each of their respective Subsidiaries is in compliance in all
material respects with all federal, state, provincial and local Environmental
Laws. To the extent any Borrower, Guarantor or any of their respective
Subsidiaries is not in compliance with the foregoing laws, the certificate shall
set forth with specificity all areas of non-compliance and the proposed action
it will implement in order to achieve full compliance. In each case where
potential liability or responsibility is reasonably likely to be in excess of
$500,000, Borrowing Agent shall also promptly forward to Agent copies of any
request for information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any site owned, operated or used by Borrower,
Guarantor or any of their respective Subsidiaries to dispose of Hazardous
Substances and shall continue to forward copies of material correspondence
between it and the Authority regarding such claims to Agent until the claim is
settled. Borrowing Agent shall promptly forward to Agent copies of all documents
and reports concerning a Hazardous Discharge at the Real Property that any
Borrower is required to file under any Environmental Laws. Such information is
to be provided solely to allow Agent to protect Agent’s security interest in and
Lien on the Collateral.

 

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9.4.          Litigation. Promptly notify Agent in writing of any claim,
litigation, suit or administrative proceeding affecting any Borrower, Guarantor
or any of their respective Subsidiaries which involves an amount in excess of
$500,000.

 

9.5.          Material Occurrences. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any
Borrower as of the date of such statements; (c) any accumulated retirement plan
funding deficiency which, if such deficiency continued for two plan years and
was not corrected as provided in Section 4971 of the Code, could subject any
Borrower to a tax imposed by Section 4971 of the Code; (d) each and every
default by any Borrower which might result in the acceleration of the maturity
of any Indebtedness in the amount of $500,000 or more, including the names and
addresses of the holders of such Indebtedness with respect to which there is a
default existing or with respect to which the maturity has been or could be
accelerated, and the amount of such Indebtedness; and (e) any other development
in the business or affairs of any Borrower, Guarantor or any of their respective
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect; in each case describing the nature thereof and the action Borrowers
propose to take with respect thereto.

 

9.6.          Government Receivables. Furnish Agent with any material
correspondence or amendments related to any contracts between Borrower and any
Governmental Body.

 

9.7.          Annual Financial Statements. Furnish Agent within ninety (90) days
after the end of each fiscal year, financial statements of Parent and its
Subsidiaries on a consolidated basis including, but not limited to, statements
of income and stockholders’ equity and cash flow from the beginning of the
current fiscal year to the end of such fiscal year and the balance sheet as at
the end of such fiscal year, all prepared in accordance with GAAP applied on a
basis consistent with prior practices, and in reasonable detail and reported
upon without qualification by an independent certified public accounting firm
selected by Borrowers. The reports shall be accompanied by a Compliance
Certificate with a calculation of the Fixed Charge Coverage Ratio for the
applicable fiscal year.

 

9.8.          Reserved.

 

9.9.          Monthly Financial Statements. Furnish Agent within thirty (30)
days after the end of each month (other than the months of March, June and
September, which shall be furnished within forty-five (45) days after the end of
each such month and ninety (90) days after the end of December) for Parent and
its Subsidiaries on a consolidated basis, an unaudited balance sheet and
unaudited statements of income and cash flow reflecting results of operations
from the beginning of the fiscal year to the end of such month and for such
month, prepared on a basis consistent with prior practices and complete and
correct in all material respects, subject to normal and recurring year-end
adjustments. The reports shall be accompanied by a Compliance Certificate, and
each Compliance Certificate corresponding with a quarter-end shall include a
calculation of the Fixed Charge Coverage Ratio for the most recent four (4)
quarters.

 

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9.10.         Other Reports. Except to the extent the following are made
available to the public generally and can be obtained by Agent without cost or
expense on a timely basis, furnish Agent as soon as available, but in any event
within ten (10) days after the issuance thereof, with copies of (i) such
financial statements, reports and returns as each Borrower shall send to its
stockholders, (ii) all press releases and all statements concerning material
changes or developments in the business of any Borrower, Guarantor or their
respective Subsidiaries made available by the Borrower, Guarantor and each of
their respective Subsidiaries to the public or any other creditor, and (iii)
copies of all reports and registration statements filed with the SEC or any
national or foreign securities exchange or the National Association of
Securities Dealers, Inc.

 

9.11.         Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Note have been complied with by Borrowers including, without
the necessity of any request by Agent, (a) copies of all environmental audits
and reviews, (b) at least thirty (30) days prior thereto, notice of any
Borrower’s opening of any new office or place of business or any Borrower’s
closing of any existing office or place of business, and (c) promptly upon any
Borrower’s learning thereof, notice of any labor dispute to which any Borrower
may become a party, any strikes or walkouts relating to any of its plants or
other facilities, and the expiration of any labor contract to which any Borrower
is a party or by which any Borrower is bound.

 

9.12.         Projected Operating Budget. Furnish Agent, no later than thirty
(30) days after the beginning of each Borrower’s fiscal year commencing with
fiscal year 2011, for Parent and its Subsidiaries on a consolidated basis, a
month by month projected income statement, cash flow and balance sheet for such
fiscal year.

 

9.13.         Variances From Operating Budget. Borrowing Agent shall provide to
Agent, upon request, a written analysis of specified material variances from the
budget described in Section 9.12.

 

9.14.         Notice of Suits, Adverse Events. Furnish Agent with prompt written
notice of (i) any lapse or other termination of any Consent issued to any
Borrower by any Governmental Body or any other Person that is reasonably likely
to have a Material Adverse Effect, and (ii) any refusal by any Governmental Body
or any other Person to renew or extend any such Consent.

 

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9.15.         ERISA Notices and Requests. Furnish Agent with written notice
promptly and in any event within fifteen (15) days after any Borrower or any
member of the Controlled Group thereof knows or has reason to know, of the
following described events which individually or in the aggregate are reasonably
likely to have a Material Adverse Effect: (i) (A) any Termination Event with
respect to any Pension Benefit Plan or Canadian Pension Plan (if applicable) has
occurred, or (B) an accumulated funding deficiency has been incurred or an
application has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including installment payments) or
an extension of any amortization period under Section 412 of the Code or the
equivalent provision under any federal, state, provincial, local or foreign
counterparts or equivalents thereof (other than any Canadian Employee Benefit
Laws) with respect to a Pension Benefit Plan, a statement of an officer of
Borrowing Agent setting forth the details of such occurrence and the action, if
any, which Borrowers or such member of the Controlled Group proposes to take
with respect thereto, (ii) receipt thereof by any Borrower or any member of the
Controlled Group thereof from the PBGC, copies of each notice received by any
Borrower or any member of the Controlled Group thereof of the PBGC’s intention
to terminate any Pension Benefit Plan or to have a trustee appointed to
administer any Pension Benefit Plan, (iii) if requested by Agent, copies of each
Schedule B (Actuarial Information) or the federal, state, provincial, local or
foreign equivalent thereof to the annual report (Form 5500 Series) or the
federal, state, local or foreign equivalent thereof with respect to each
Canadian Pension Plan, Pension Benefit Plan and Multiemployer Plan, (iv) any
required installment within the meaning of Section 412 of the Code or the
equivalent provision under any federal, state, provincial, local or foreign
counterparts or equivalents thereof has not been made when due with respect to a
Pension Benefit Plan or Canadian Pension Plan, (v) receipt thereof by any
Borrower or any member of the Controlled Group thereof from a sponsor of a
Multiemployer Plan or from the PBGC, a copy of each notice received by any
Borrower or any member of the Controlled Group thereof concerning the imposition
or amount of withdrawal liability under Section 4202 of ERISA or the equivalent
provision under any federal, state, provincial, local or foreign counterparts or
equivalents thereof (other than any other than any Canadian Employee Benefit
Laws) or indicating that such Multiemployer Plan may enter reorganization status
under Section 4241 of ERISA or the equivalent provision under any federal,
state, provincial, local or foreign counterparts or equivalents thereof (other
than any other than any Canadian Employee Benefit Laws), and (vi) copies of each
notice of a plant closing or mass layoff (as defined in WARN) to employees sent
by any Borrower or any member of the Controlled Group thereof. Borrowing Agent
shall furnish Agent written notice if any Borrower is ever required to
contribute to a Canadian Union Plan.

 

9.16.         Additional Documents. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.

 

9.17.         Cash Reporting; Liquidity Calculation.

 

(a)          Furnish Agent, no later than the second (2nd) Business Day of each
week, a schedule of Qualified Cash by account and Undrawn Availability, each as
of the end of each Business Day during the prior week; provided however,
notwithstanding such daily calculation of total Undrawn Availability, the trade
payable component of Undrawn Availability shall only be updated and adjusted for
the purpose of this Section on the fifteenth (15th) and thirtieth (30th) day of
each calendar month (or the next following Business Day if not a Business Day).

 

(b)          Furnish Agent, no later than the fifth (5th) Business Day of each
fiscal quarter, a Liquidity Calculation for the prior fiscal quarter.

 

XEVENTS OF DEFAULT.

 

The occurrence of any one or more of the following events shall constitute an
“Event of Default”:

 

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10.1.          Nonpayment. (a) Failure to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment, or (b) failure to pay any other liabilities or make any
other payment, fee or charge provided for herein when due or in any Other
Document within three (3) Business Days after the same shall become due,
provided however that such three (3) Business Day cure period shall only be
applicable in the event that Agent fails to charge such amounts to the
Borrowers’ Account and such failure by Agent is not the result of any condition
set forth in Section 8.2 being unsatisfied;

 

10.2.          Breach of Representation. Any representation or warranty made or
deemed made in this Agreement, any Other Document or any related agreement or in
any certificate, document or financial or other statement furnished at any time
in connection herewith or therewith shall prove to have been misleading in any
material respect on the date when made or deemed to have been made;

 

10.3.          Financial Information. Failure by any Borrower, Guarantor or
their respective Subsidiaries to (a) furnish financial information, (i) required
to be furnished on or before a certain date or within a specified period in
accordance with this Agreement, which is not cured within two (2) Business Days
from the earlier of notice of such failure from the Agent to the Borrowing Agent
or the time the Chief Executive Officer or Chief Financial Officer of the
Borrowing Agent first becomes aware of such failure, or (ii) when requested in
writing which is unremedied for a period of five (5) Business Days after such
request, or (b) permit the inspection of its books or records in accordance with
this Agreement, which is not cured within two (2) Business Days from the earlier
of notice of such failure from the Agent to the Borrowing Agent or the time the
Chief Executive Officer or Chief Financial Officer of the Borrowing Agent first
becomes aware of such failure;

 

10.4.          Judicial Actions. Issuance by the United States of America or any
department or instrumentality thereof or by any state or other governmental
agency of a notice of Lien, levy, assessment, injunction or attachment (other
than a Permitted Lien) in excess of $500,000 against any Collateral which is not
stayed, discharged, or lifted within thirty (30) days;

 

10.5.          Noncompliance. Except as otherwise provided for in Sections 10.1
and 10.3, failure or neglect of any Borrower, Guarantor, or any of their
respective Subsidiaries to perform, keep or observe any term, provision,
condition, covenant contained in this Agreement, any Other Document, or any
other agreement, now or hereafter entered into between Borrower, Guarantor, or
any of their respective Subsidiaries, and Agent or any Lender and the failure or
inability of it to cure within fifteen (15) days after notice thereof from
Agent; provided that such notice and cure period will not apply to any such
failure or neglect: (i) which Agent determines cannot be cured during such
period, (ii) which has previously occurred two (2) times or more during the
Term, (iii) which is with respect to any negative covenant in Article VII
herein, (iv) which is with respect to any of Sections 2.5, 4.10, 4.11, 4.13,
4.14, 4.15(d), (h) or (j), or 6.5 herein, or (v) which is with respect to any
Lender-Provided Hedge;

 

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10.6.          Judgments. Any judgment or judgments for the payment of money
shall be rendered against any Borrower, Guarantor, or any of their respective
Subsidiaries unless: (a) (i) such judgment or judgments are less than $1,500,000
in the aggregate, (ii) enforcement of each such judgment is stayed, (iii) each
such judgment is being contested in good faith, and (iv) reserves satisfactory
to Agent are established by Borrowers or each such judgment is covered by valid
insurance satisfactory to Agent, or (b) such judgment or judgments are less than
$1,500,000 in the aggregate and are satisfied within 14 days after entry
thereof;

 

10.7.          Bankruptcy. Any Borrower, Guarantor, or any of their respective
Subsidiaries shall (i) apply for, consent to or suffer the appointment of, or
the taking of possession by, a receiver, custodian, trustee, liquidator or
similar fiduciary of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state, provincial or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief or
reorganization of debtors, (vi) acquiesce to, or fail to have dismissed, within
sixty (60) days, any petition filed against it in any involuntary case under
such bankruptcy laws, or (vii) take any action for the purpose of effecting any
of the foregoing;

 

10.8.          Inability to Pay. Any Borrower, Guarantor, or any of their
respective Subsidiaries shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business unless such ceased operations are assumed by another Borrower,
Guarantor, or their respective Subsidiaries;

 

10.9.          [Reserved].

 

10.10.         Lien Priority. Any Lien created hereunder or provided for hereby
or under any Other Document for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest, subject to Permitted
Encumbrances and except as otherwise permitted under this Agreement, in each
instance other than as a direct result of the failure of Agent or any Lender to
take any action within its control;

 

10.11.         Cross Default. A failure of any Borrower, Guarantor, or any of
their respective Subsidiaries to pay when due any principal or interest on any
Indebtedness (other than the Obligations) in the individual principal amount in
excess of $750,000 or having an aggregate principal amount in excess of
$1,500,000 under any agreement for borrowed money or default by any Borrower,
Guarantor, or any of their respective Subsidiaries in any agreement evidencing
any such Indebtedness, if such breach causes the holder of such Indebtedness to
accelerate the maturity thereof or declare such Indebtedness due prior to its
stated maturity;

 

10.12.         Breach of Guaranty. Termination or breach of any Guaranty or
Guaranty Security Agreement executed and delivered to Agent in connection with
the Obligations of any Borrower, or if any Guarantor attempts to terminate,
challenges the validity of, or its liability under, any such Guaranty or
Guaranty Security Agreement;

 

10.13.         Change of Control. Any Change of Control shall occur;

 

10.14.         Invalidity. Any material provision of this Agreement or of any
material Other Document shall, for any reason, ceases to be valid and binding on
any Borrower or Guarantor, or any Borrower or Guarantor shall so claim in
writing to Agent or any Lender;

 

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10.15.         Licenses. (i) Any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent trademark or tradename
of any Borrower, Guarantor, or any of their respective Subsidiaries, the
continuation of which is material to the continuation of any of their
businesses, or (B) commence proceedings to suspend, revoke, terminate or
adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(C) schedule or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of any Borrower’s,
Guarantor’s, or any of their respective Subsidiaries’ business and the staff of
such Governmental Body issues a report recommending the termination, revocation,
suspension or material, adverse modification of such license, permit, trademark,
tradename or patent, and such revocation, termination, suspension, proceeding or
recommendation is reasonably likely to have a Material Adverse Effect; (ii) any
agreement which is necessary or material to the operation of any Borrower’s,
Guarantor’s, or any of their respective Subsidiaries’ business shall be revoked
or terminated and not replaced by a substitute acceptable to Agent within thirty
(30) days after the date of such revocation or termination, and such revocation
or termination and non-replacement would reasonably be expected to have a
Material Adverse Effect;

 

10.16.         Seizures. A portion of the Collateral with a value in excess of
$1,000,000 shall be seized or taken by a Governmental Body, or any Borrower,
Guarantor, or any of their respective Subsidiaries or the title and rights of
any Borrower, Guarantor, or any of their respective Subsidiaries shall have
become the subject matter of a claim, litigation, suit or other proceeding which
Agent has determined in the exercise of its Permitted Discretion, upon final
determination, is reasonably likely result in impairment or loss of the security
provided by this Agreement or the Other Documents;

 

10.17.         Operations. The operations of any Borrower’s, Guarantor’s, or any
of their respective Subsidiaries’ manufacturing facility are interrupted at any
time for more than thirty (30) consecutive days, unless such Borrower, Guarantor
or Subsidiary shall (i) be entitled to receive for such period of interruption,
proceeds of business interruption insurance sufficient to assure that its per
diem cash needs during such period is at least equal to its average per diem
cash needs for the consecutive three (3) month period immediately preceding the
initial date of interruption and (ii) receive such proceeds in the amount
described in clause (i) preceding not later than thirty (30) days following the
initial date of any such interruption; provided, however, that notwithstanding
the provisions of clauses (i) and (ii) of this Section, an Event of Default
shall be deemed to have occurred if such Borrower, Guarantor or Subsidiary shall
be receiving the proceeds of business interruption insurance for a period of six
(6) months; or

 

10.18.         Anti-Money Laundering/International Trade Law Compliance. Any
representation or warranty contained in Section 16.20 is or becomes false or
misleading at any time or any covenant therein is violated.

 

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XILENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.

 

11.1.          Rights and Remedies.

 

(a)          Upon the occurrence and during the continuance of (i) an Event of
Default pursuant to Section 10.7, all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated; and, (ii) any of the other Events of Default and at any
time thereafter, at the option of Required Lenders, all Obligations shall be
immediately due and payable and Lenders shall have the right to terminate this
Agreement and to terminate the obligation of Lenders to make Advances. Upon the
occurrence and during the continuance of any Event of Default, Agent shall have
the right to exercise any and all rights and remedies provided for herein, under
the Other Documents, under the Uniform Commercial Code and PPSA and at law or
equity generally, including the right to foreclose the security interests
granted herein and to realize upon any Collateral by any available judicial
procedure and/or to take possession of and sell any or all of the Collateral
with or without judicial process. In compliance with Applicable Law, Agent may
enter any of any Borrower’s premises or other premises without legal process and
without incurring liability to any Borrower therefor, and Agent may thereupon,
or at any time thereafter, in its discretion without notice or demand, take the
Collateral and remove the same to such place as Agent may deem advisable and
Agent may require Borrowers to make the Collateral available to Agent at a
convenient place. With or without having the Collateral at the time or place of
sale, Agent may sell the Collateral, or any part thereof, at public or private
sale, at any time or place, in one or more sales, at such price or prices, and
upon such terms, either for cash, credit or future delivery, as Agent may elect.
Except as to that part of the Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Agent shall give Borrowers reasonable notification of such sale or
sales, it being agreed that in all events written notice mailed to Borrowing
Agent at least ten (10) Business Days prior to such sale or sales is reasonable
notification. At any public sale Agent or any Lender may bid for and become the
purchaser, and Agent, any Lender or any other purchaser at any such sale
thereafter shall hold the Collateral sold absolutely free from any claim or
right of whatsoever kind, including any equity of redemption and all such
claims, rights and equities are hereby expressly waived and released by each
Borrower. Each Borrower waives any right to require a marshalling of assets. The
cash proceeds realized from the sale of any Collateral shall be applied to the
Obligations in the order set forth in Section 11.6. Noncash proceeds will only
be applied to the Obligations as they are converted into cash. If any deficiency
shall arise, Borrowers shall remain liable to Agent and Lenders therefor.

 

(b)          Upon the occurrence and during the continuance of an Event of
Default, in connection with the exercise of the foregoing remedies, including
the sale of Inventory, Agent is granted a perpetual irrevocable, royalty free,
nonexclusive license and Agent is granted permission to use all of each
Borrower’s (i) trademarks, trademark applications, trade styles, trade names,
patents, patent applications, copyrights, service marks, licenses, franchises
and other proprietary rights which are used or useful in connection with
Inventory for the purpose of marketing, advertising for sale and selling or
otherwise disposing of such Inventory, and (ii) Equipment for the purpose of
completing the manufacture of unfinished goods.

 

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(c)          Upon the occurrence and during the continuance of an Event of
Default, to the extent that Applicable Law imposes duties on the Agent to
exercise remedies in a commercially reasonable manner, each Borrower
acknowledges and agrees that it is not commercially unreasonable for the Agent
(i) to fail to incur expenses reasonably deemed significant by the Agent to
prepare Collateral for disposition or otherwise to complete raw material or work
in process into finished goods or other finished products for disposition, (ii)
to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against Customers or other Persons obligated on Collateral or to remove
Liens on or any adverse claims against Collateral, (iv) to exercise collection
remedies against Customers and other Persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other Persons, whether or not in the same business as any Borrower, for
expressions of interest in acquiring all or any portion of such Collateral,
(vii) to hire one or more professional auctioneers to assist in the disposition
of Collateral, whether or not the Collateral is of a specialized nature, (viii)
to dispose of Collateral by utilizing internet sites that provide for the
auction of assets of the types included in the Collateral or that have the
reasonable capacity of doing so, or that match buyers and sellers of assets,
(ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, such as title, possession or quiet enjoyment,
(xi) to purchase insurance or credit enhancements to insure the Agent against
risks of loss, collection or disposition of Collateral or to provide to the
Agent a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by the Agent, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the Agent in the collection or disposition of any of the Collateral. Each
Borrower acknowledges that the purpose of this Section 11.1(b) is to provide
non-exhaustive indications of what actions or omissions by the Agent would not
be commercially unreasonable in the Agent’s exercise of remedies against the
Collateral and that other actions or omissions by the Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section 11.1(b). Without limitation upon the foregoing, nothing contained in
this Section11.1(b) shall be construed to grant any rights to any Borrower or to
impose any duties on Agent that would not have been granted or imposed by this
Agreement or by Applicable Law in the absence of this Section 11.1(b).

 

11.2.          Agent’s Discretion. Agent shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent’s or Lenders’ rights hereunder.

 

11.3.          Setoff. Subject to Section 14.12, in addition to any other rights
which Agent or any Lender may have under Applicable Law, upon the occurrence and
during the continuance of an Event of Default hereunder, Agent and such Lender
shall have a right, immediately and without notice of any kind, to apply any
Borrower’s property held by Agent and such Lender to reduce the Obligations.

 

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11.4.          Appointment of Receiver.

 

(a)          Upon the occurrence and during the continuation of an Event of
Default, Agent shall be entitled to the immediate appointment of a receiver for
all or part of the Collateral, whether such receivership is incidental to a
proposed sale of the Collateral or otherwise. In such event, Agent may take
proceedings in any court of competent jurisdiction for the appointment of a
receiver of the Collateral or of any part thereof or may, to the extent
permitted by Applicable Law, by instrument in writing appoint any Person to be a
receiver of the Collateral or of any part thereof and may remove any receiver so
appointed by Agent and appoint another in that Person's stead. Any such receiver
appointed by instrument in writing shall, to the extent permitted by Applicable
Law, have all of the rights, remedies, benefits and powers of Agent under this
Agreement or under the PPSA or otherwise and, without limiting the generality of
the foregoing, any such receiver (or Agent) shall have the power to, to the full
extent permitted by Applicable Law:

 

(i)          take possession of the Collateral or any part thereof;

 

(ii)         carry on or concur in carrying on all or any part or parts of the
business of the Borrowers relating to the Collateral;

 

(iii)        file such proofs of claim and other documents as may be necessary
or advisable in order to have such receiver's claim lodged in any bankruptcy,
winding-up or other judicial proceedings relative to the Borrowers or
Guarantors;

 

(iv)        borrow money required for the seizure, repossession, retaking,
repair, insurance, maintenance, preservation, protection, collection,
preparation for disposition, disposition or realization of the Collateral or any
part thereof and for the enforcement of this Agreement or for the carrying on of
the business of the Borrowers or Guarantors on the security of the Collateral in
priority to the security interest created under this Agreement; and

 

(v)         sell, lease or otherwise dispose of, or concur in the sale, lease or
other disposition of, the whole or any part of the Collateral at public auction,
by public tender or by private sale, lease or other disposition, either for cash
or upon credit, at such time and upon such terms and conditions as the receiver
may determine.

 

Any such receiver shall for all purposes be deemed to be the agent of the
Borrowers and Guarantors. Agent may from time to time fix a commercially
reasonable remuneration of such receiver. Agent shall not in any way be
responsible for any misconduct or negligence of any such receiver. Each Borrower
hereby consents to the appointment of any such a receiver without bond, to the
full extent permitted by Applicable Law.

 

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(b)          Without limiting the generality of the foregoing, upon the
occurrence and during the continuance of an Event of Default, with respect to
any Collateral located in Canada, Agent is hereby specifically authorized to
seek the appointment of a receiver or a receiver-manager under the laws of
Canada or any Province thereof (a “Canadian Receiver”) upon or during the
continuation of an Event of Default, to take possession of all or any portion of
the Collateral or to operate same and, to the maximum extent permitted by
Applicable Law, may seek the appointment of such a Canadian Receiver without the
requirement of prior notice or a hearing.  Any such Canadian Receiver shall, so
far as concerns responsibility for his/her acts, be deemed agent of Borrowers
and Guarantors and not Agent or the Lenders. Agent shall not incur any liability
to the Canadian Receiver, the Borrowers or Guarantor or otherwise and shall not
in any way be responsible for any misconduct or negligence of any such Canadian
Receiver. Subject to the provisions of the instrument appointing him/her, to the
extent by Applicable Law, any such Canadian Receiver shall have power to take
possession of Collateral, to preserve Collateral or its value, to carry on or
concur in carrying on all or any part of the business of the Borrowers and
Guarantors and to sell, lease, license or otherwise dispose of or concur in
selling, leasing, licensing or otherwise disposing of Collateral.  To facilitate
the foregoing powers, any such Canadian Receiver may, to the exclusion of all
others, including the Borrowers and Guarantors, to the extent permitted by
Applicable Law, enter upon, use and occupy all premises owned or occupied by the
Borrowers or Guarantors wherein Collateral may be situated, maintain Collateral
upon such premises, borrow money on a secured or unsecured basis and use
Collateral of the Borrowers and Guarantors directly in carrying on their
business or as security for loans or advances to enable the Canadian Receiver to
carry on the their business or otherwise, as such Canadian Receiver shall, in
its discretion, determine.  Except as may be otherwise directed by Agent, all
money received from time to time by such Canadian Receiver in carrying out
his/her appointment shall be received in trust for and paid over to Agent. 
Every such Canadian Receiver may, in the discretion of Agent, be vested with all
or any of the rights and powers of Agent and Lenders.  Agent may, either
directly or through its nominees, exercise any or all powers and rights given to
a Canadian Receiver by virtue of the foregoing provisions of this Section.

 

11.5.          Rights and Remedies not Exclusive. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any rights or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.

 

11.6.          Allocation of Payments After Event of Default. Notwithstanding
any other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Agent on account of the Obligations or any other amounts outstanding
under any of the Other Documents or in respect of the Collateral may, at Agent’s
discretion, be paid over or delivered as follows:

 

FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of the Agent in connection with enforcing
its rights and the rights of the Lenders under this Agreement and the Other
Documents and any protective advances made by the Agent with respect to the
Collateral under or pursuant to the terms of this Agreement;

 

SECOND, to payment of any fees owed to the Agent;

 

THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of each of the Lenders to the extent
owing to such Lender pursuant to the terms of this Agreement;

 

FOURTH, to the payment of all of the Obligations consisting of accrued fees and
interest;

 

FIFTH, to the payment of the outstanding principal amount of the Obligations
(including the payment or cash collateralization of any outstanding Letters of
Credit, Bank Products Obligations and Hedge Liabilities);

 

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SIXTH, to all other Obligations which shall have become due and payable under
the Other Documents or otherwise and not repaid pursuant to clauses “FIRST”
through “FIFTH” above; and

 

SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.

 

In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses “FOURTH”, “FIFTH” and “SIXTH” above and Agent may convert any amounts
to Dollars or Canadian Dollars as necessary to make such application; (iii)
notwithstanding anything to the contrary in this Section 11.6, no Swap
Obligations of any Non-Qualifying Party shall be paid with amounts received from
such Non-Qualifying Party under its Guaranty (including sums received as a
result of the exercise of remedies with respect to such Guaranty) or from the
proceeds of such Non-Qualifying Party’s Collateral if such Swap Obligations
would constitute Excluded Hedge Liabilities, provided, however, that to the
extent possible appropriate adjustments shall be made with respect to payments
and/or the proceeds of Collateral from other Borrowers and/or Guarantors that
are Eligible Contract Participants with respect to such Swap Obligations to
preserve the allocation to Obligations otherwise set forth above in this Section
11.6; and (iv) to the extent that any amounts available for distribution
pursuant to clause “FIFTH” above are attributable to the issued but undrawn
amount of outstanding Letters of Credit, such amounts shall be held by the Agent
in a cash collateral account and applied (A) first, to reimburse the Issuer from
time to time for any drawings under such Letters of Credit and (B) then,
following the expiration of all Letters of Credit, to all other obligations of
the types described in clauses “FIFTH” and “SIXTH” above in the manner provided
in this Section 11.6.

 

XIIWAIVERS AND JUDICIAL PROCEEDINGS.

 

12.1.          Waiver of Notice. Each Borrower hereby waives notice of
non-payment of any of the Receivables, demand, presentment, protest and notice
thereof with respect to any and all instruments, notice of acceptance hereof,
notice of loans or advances made, credit extended, Collateral received or
delivered, or any other action taken in reliance hereon, and all other demands
and notices of any description, except such as are expressly provided for
herein.

 

12.2.          Delay. No delay or omission on Agent’s or any Lender’s part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any Default or Event of Default.

 

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12.3.          Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT, OR (B) IN ANY WAY CONNECTED
WITH OR RELATED TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

XIIIEFFECTIVE DATE AND TERMINATION.

 

13.1.          Term. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each
Borrower, Agent and each Lender, shall become effective on the Restatement Date
and shall continue in full force and effect until November 30, 2019 (the “Term”)
unless sooner terminated as herein provided. Borrowers may terminate this
Agreement at any time upon ten (10) days’ prior written notice and payment in
full of the Obligations. Such notice shall be irrevocable.

 

13.2.          Termination.

 

(a) The termination of the Agreement shall not affect any Borrower’s, Agent’s or
any Lender’s rights, or any of the Obligations having their inception prior to
the effective date of such termination, and the provisions hereof shall continue
to be fully operative until all transactions entered into, rights or interests
created or Obligations have been fully and indefeasibly paid, disposed of,
concluded or liquidated. Until such event, the security interests, Liens and
rights granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrowers’ Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of each Borrower have been indefeasibly paid and performed in full
after the termination of this Agreement or each Borrower has furnished Agent and
Lenders with an indemnification reasonably satisfactory to Agent and Lenders
with respect thereto. Accordingly, in such event, each Borrower waives any
rights which it may have under the Uniform Commercial Code, the PPSA, or other
Applicable Law, to demand the filing of termination statements (or the
equivalent) with respect to the Collateral, and Agent shall not be required to
send such termination statements (or the equivalent) to each Borrower, or to
file them with any filing office, unless and until this Agreement shall have
been terminated in accordance with its terms and all Obligations have been
indefeasibly paid in full in immediately available funds. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until all Obligations are indefeasibly paid and performed in
full.

 

(b) Upon termination of this Agreement and full and indefeasible payment of the
Obligations to Agent and Lender (other than any Obligations which expressly
survive the termination of this Agreement) in accordance with Section 13.2(a),
(i) all rights and remedies of each Borrower, Agent and each Lender hereunder
shall cease, other than those which survive termination, and (ii) Agent and each
Lender agrees to execute and deliver, as applicable, to Borrowing Agent or a
designated agent: (A) all property pledged and delivered to Agent or any Lender
(including without limitation stock or other certificates, notes receivable,
certificates of title, direct pay notices to account debtors, change of address
forms and other instruments, together with accompanying stock powers and
allonges) in the forms delivered to Agent or any Lender; (B) the original
promissory notes executed in connection with the Obligations marked “CANCELLED”;
(C) all guaranty agreements, indemnification agreements and other accommodation
agreement executed by any Guarantor, marked “CANCELLED”; (D) mortgage or deed of
trust releases against any Real Property of any Borrower or Guarantor, releases
of any liens or encumbrances filed against any Intellectual Property or property
subject to any title laws and other like releases, and (E) UCC-3 termination
statements with respect to the Uniform Commercial Code and PPSA filings made by
Agent in respect of each Borrower or Guarantor, as applicable.

 

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XIVREGARDING AGENT.

 

14.1.          Appointment. Each Lender hereby designates PNC to act as Agent
for such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Section
3.4 or otherwise specifically stated to be for the benefit of Agent or Issuer),
charges and collections (without giving effect to any collection days) received
pursuant to this Agreement, for the ratable benefit of Lenders. Agent may
perform any of its duties hereunder by or through its agents or employees. As to
any matters not expressly provided for by this Agreement (including collection
of the Note) Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding; provided, however,
that Agent shall not be required to take any action which exposes Agent to
liability or which is contrary to this Agreement or the Other Documents or
Applicable Law unless Agent is furnished with an indemnification reasonably
satisfactory to Agent with respect thereto.

 

14.2.          Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final non-appealable judgment), or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by any Borrower or any
officer thereof contained in this Agreement, or in any of the Other Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by Agent under or in connection with, this Agreement or any
of the Other Documents or for the value, validity, effectiveness, genuineness,
due execution, enforceability or sufficiency of this Agreement, or any of the
Other Documents or for any failure of any Borrower to perform its obligations
hereunder. Agent shall not be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any of the Other Documents, or
to inspect the properties, books or records of any Borrower. The duties of Agent
as respects the Advances to Borrowers shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon Agent any
obligations in respect of this Agreement except as expressly set forth herein.

 

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14.3.          Lack of Reliance on Agent and Resignation. Independently and
without reliance upon Agent or any other Lender, each Lender has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of each Borrower and each Guarantor in connection with the
making and the continuance of the Advances hereunder and the taking or not
taking of any action in connection herewith, and (ii) its own appraisal of the
creditworthiness of each Borrower and each Guarantor. Agent shall have no duty
or responsibility, either initially or on a continuing basis, to provide any
Lender with any credit or other information with respect thereto, whether coming
into its possession before making of the Advances or at any time or times
thereafter except as shall be provided by any Borrower pursuant to the terms
hereof. Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or
for the execution, effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of this Agreement or any Other Document, or of the
financial condition of any Borrower or any Guarantor, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, the Note, the Other Documents or the
financial condition of any Borrower, or the existence of any Event of Default or
any Default.

 

Agent may resign on sixty (60) days’ written notice to each of Lenders and
Borrowing Agent and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrowers.

 

Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term “Agent” shall mean such successor agent effective upon its
appointment, and the former Agent’s rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent’s resignation as Agent, the provisions of this Article
XIV shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.

 

14.4.          Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.

 

14.5.          Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.

 

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14.6.          Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or Borrowing
Agent referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a “notice of
default”. In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided, that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.

 

14.7.          Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent’s gross
(not mere) negligence or willful misconduct (as determined by a court of
competent jurisdiction in a final non-appealable judgment).

 

14.8.          Agent in its Individual Capacity. With respect to the obligation
of Agent to lend under this Agreement, the Advances made by it shall have the
same rights and powers hereunder as any other Lender and as if it were not
performing the duties as Agent specified herein; and the term “Lender” or any
similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
any Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.

 

14.9.          Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 or Borrowing
Base Certificates from any Borrower pursuant to the terms of this Agreement
which any Borrower is not obligated to deliver to each Lender, Agent will
promptly furnish such documents and information to Lenders.

 

14.10.         Borrowers’ Undertaking to Agent. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Borrower’s obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.

 

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14.11.         No Reliance on Agent’s Customer Identification Program. Each
Lender acknowledges and agrees that neither such Lender, nor any of its
Affiliates, participants or assignees, may rely on the Agent to carry out such
Lender’s, Affiliate’s, participant’s or assignee’s customer identification
program, or other obligations required or imposed under or pursuant to the USA
PATRIOT Act or the regulations thereunder, including the regulations contained
in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or
any other Anti-Terrorism Law, including any programs involving any of the
following items relating to or in connection with any Borrower, its Affiliates
or its agents, this Agreement, the Other Documents or the transactions hereunder
or contemplated hereby: (1) any identity verification procedures, (2) any
record-keeping, (3) comparisons with government lists, (4) customer notices or
(5) other procedures required under the CIP Regulations or such other laws.

 

14.12.         Other Agreements. Each of the Lenders agrees that it shall not,
without the express consent of Agent, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of Agent, set off against the
Obligations, any amounts owing by such Lender to any Borrower or any deposit
accounts of any Borrower now or hereafter maintained with such Lender. Anything
in this Agreement to the contrary notwithstanding, each of the Lenders further
agrees that it shall not, unless specifically requested to do so by Agent, take
any action to protect or enforce its rights arising out of this Agreement or the
Other Documents, it being the intent of Lenders that any such action to protect
or enforce rights under this Agreement and the Other Documents shall be taken in
concert and at the direction or with the consent of Agent or Required Lenders.

 

14.13.         Delegation. The Agent may execute any of its duties under this
Agreement and the Other Documents by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties.  The Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.  The Agent
reserves the right to execute any of its duties under this Agreement or any
Other Document by or through agents, including a separate Canadian agent, to
hold or realize on the Collateral or enforce this Agreement or any Other
Document.

 

XVBORROWING AGENCY.

 

15.1.          Borrowing Agency Provisions.

 

(a)          Each Borrower hereby irrevocably designates Borrowing Agent to be
its attorney and agent and in such capacity to borrow, sign and endorse notes,
and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of such Borrower or
Borrowers, and hereby authorizes Agent to pay over or credit all loan proceeds
hereunder in accordance with the request of Borrowing Agent.

 

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(b)          The handling of this credit facility as a co-borrowing facility
with a borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Borrowers and at their request. Neither Agent nor any Lender
shall incur liability to Borrowers as a result thereof. To induce Agent and
Lenders to do so and in consideration thereof, each Borrower hereby indemnifies
Agent and each Lender and holds Agent and each Lender harmless from and against
any and all liabilities, expenses, losses, damages and claims of damage or
injury asserted against Agent or any Lender by any Person arising from or
incurred by reason of the handling of the financing arrangements of Borrowers as
provided herein, reliance by Agent or any Lender on any request or instruction
from Borrowing Agent or any other action taken by Agent or any Lender with
respect to this Section 15.1 except due to willful misconduct or gross (not
mere) negligence by the indemnified party (as determined by a court of competent
jurisdiction in a final and non-appealable judgment).

 

(c)          All Obligations shall be joint and several, and each Borrower shall
make payment upon the maturity of the Obligations by acceleration or otherwise,
and such obligation and liability on the part of each Borrower shall in no way
be affected by any extensions, renewals and forbearance granted to Agent or any
Lender to any Borrower, failure of Agent or any Lender to give any Borrower
notice of borrowing or any other notice, any failure of Agent or any Lender to
pursue or preserve its rights against any Borrower, the release by Agent or any
Lender of any Collateral now or thereafter acquired from any Borrower, and such
agreement by each Borrower to pay upon any notice issued pursuant thereto is
unconditional and unaffected by prior recourse by Agent or any Lender to the
other Borrowers or any Collateral for such Borrower’s Obligations or the lack
thereof. Each Borrower waives all suretyship defenses.

 

15.2.          Waiver of Subrogation. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Borrowers’ property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the Obligations.

 

15.3.          Cross Guaranty. Without limiting the joint and several nature of
the Obligations, each Borrower hereby unconditionally guaranties the full and
prompt payment and performance when due, whether by acceleration or otherwise,
and at all times thereafter, of any and all present and future Obligations of
each other Borrower. This guaranty shall in all respects be a continuing,
absolute and unconditional guaranty of payment and performance (and not of
collection), and shall remain in full force and effect (notwithstanding, without
limitation, the dissolution of any Borrower). Each Borrower hereby absolutely,
unconditionally and irrevocably waives and agrees not to assert or take
advantage of any defense based upon an election of remedies by Agent or any
Lender, including an election to proceed by non-judicial rather than judicial
foreclosure, which destroys or impairs any right of subrogation or the right of
a Borrower to proceed against any Person for reimbursement or both.

 

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15.4.Subordination.

 

(a)          Each Borrower hereby covenants and agrees that, as provided herein,
all indebtedness, intercompany charges and other sums owing and claims of any
nature whatsoever owed (other than payments or remittances of employee
withholding, wages, pension payments, tax payments, trust funds and similar
items) to such Borrower by any other Borrower, Guarantor or any of their
respective Subsidiaries (“Intercompany Obligations”), the payment of the
principal of and interest thereon and any lien or security interest therefor are
hereby expressly made subordinate and subject in right of payment to this
Agreement or the prior payment in full of: (a) all Obligations now or hereafter
incurred by any Borrower under this Agreement or any of the Other Documents, (b)
interest thereon (including any such interest accruing subsequent to the filing
by or against any Borrower of any proceeding brought under the Bankruptcy Code,
whether or not such interest is allowed as a claim pursuant to the provisions of
the Bankruptcy Code), and (c) all fees, expenses, indemnities and other amounts
now or hereafter payable pursuant to or in connection with this Agreement and
all Other Documents (collectively the “Senior Obligations”), and any lien on any
property or asset securing the Senior Obligations. No payment or prepayment of
any Intercompany Obligations (whether of principal, interest or otherwise) shall
be made at any time prior to the payment in full, in cash, of the Senior
Obligations, provided that the Borrowers may make payments (but not prepayments)
of Intercompany Obligations in the Ordinary Course of Business to the extent
that such payments are not otherwise prohibited by this Agreement and at the
time of, and immediately after giving effect to, any such payment, no Event of
Default exists and is continuing. If any default occurs under the Intercompany
Obligations, no Borrower will demand, accelerate, declare a default under, sue
for, set off, accept, take or receive, directly or indirectly, in cash or other
property or in any other manner, any payment of all or any part of the
Intercompany Obligations without Agent’s prior written consent, which consent
shall not be unreasonably withheld or delayed.

 

(b)          Each Borrower agrees that any right of possession it has to any
Real Property (pursuant to a written lease or otherwise) shall be subject and
subordinate to the rights of Agent hereunder. Each Borrower which holds title to
any of the Real Property hereby waives any Lien it holds on the Collateral of
any other Borrower located at such Real Property and shall grant access to Agent
to such Real Property and Collateral in accordance with this Agreement
notwithstanding the terms of any lease or other occupancy agreement to the
contrary.

 

15.5.          No Disposition. No Borrower will sell, assign, pledge, encumber
or otherwise dispose of any of the Intercompany Obligations owed to it unless
permitted by the terms of this Agreement or Other Documents.

 

XVIMISCELLANEOUS

 

16.1.          Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio applied to contracts to be
performed wholly within the State of Ohio. Any judicial proceeding brought by or
against any Borrower with respect to any of the Obligations, this Agreement, the
Other Documents or any related agreement may be brought in any court of
competent jurisdiction in the State of Ohio, United States of America, and, by
execution and delivery of this Agreement, each Borrower accepts for itself and
in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower waives any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or
venue or based upon forum non conveniens. Each Borrower waives the right to
remove any judicial proceeding brought against such Borrower in any state court
to any federal court. Any judicial proceeding by any Borrower against Agent or
any Lender involving, directly or indirectly, any matter or claim in any way
arising out of, related to or connected with this Agreement or any related
agreement, shall be brought only in a federal or state court located in the
State of Ohio.

 

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16.2.Entire Understanding.

 

(a)          This Agreement and the documents executed concurrently herewith
contain the entire understanding between each Borrower, Agent and each Lender
and supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. Any promises, representations, warranties or guarantees
not herein contained and hereinafter made shall have no force and effect unless
in writing, signed by each Borrower’s, Agent’s and each Lender’s respective
officers. Neither this Agreement nor any portion or provisions hereof may be
changed, modified, amended, waived, supplemented, discharged, cancelled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged. Each Borrower
acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement.

 

(b)          The Required Lenders, Agent with the consent in writing of the
Required Lenders, and Borrowers may, subject to the provisions of this Section
16.2 (b), from time to time enter into written supplemental agreements to this
Agreement or the Other Documents executed by Borrowers, for the purpose of
adding or deleting any provisions or otherwise changing, varying or waiving in
any manner the rights of Lenders, Agent or Borrowers thereunder or the
conditions, provisions or terms thereof or waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all Lenders:

 

(i)          increase the Commitment Percentage, the maximum dollar commitment
of any Lender or the Maximum Revolving Advance Amount.

 

(ii)         extend the maturity of any Note or the due date for any amount of
interest, fees, or principal payable hereunder (other than mandatory
prepayments), or decrease the rate of interest or reduce any fee payable by
Borrowers to Lenders pursuant to this Agreement.

 

(iii)        alter the definition of the term Required Lenders or alter, amend
or modify this Section 16.2.

 

(iv)        release any Collateral during any calendar year (other than in
accordance with the provisions of this Agreement) having an aggregate value in
excess of $250,000.

 

(v)         change the rights and duties of Agent.

 

(vi)        permit any Revolving Advance to be made if after giving effect
thereto the total of Revolving Advances outstanding hereunder would exceed the
Formula Amount for more than sixty (60) consecutive Business Days or exceed one
hundred and five percent (105%) of the Formula Amount.

 

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(vii)       increase the Advance Rates above the Advance Rates in effect on the
Restatement Date.

 

(viii)      release any Borrower or Guarantor (other than in accordance with the
provisions of this Agreement).

 

Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.

 

(c)          In the event that Agent requests the consent of a Lender pursuant
to Section 16.2(b) and such consent is denied, then PNC may, at its option,
require such Lender to assign its interest in the Advances to PNC or to another
Lender or to any other Person designated by the Agent (the “Designated Lender”),
for a price equal to (i) the then outstanding principal amount thereof plus (ii)
accrued and unpaid interest and fees due such Lender, which interest and fees
shall be paid when collected from Borrowers. In the event PNC elects to require
any Lender to assign its interest to PNC or to the Designated Lender, PNC will
so notify such Lender in writing within forty five (45) days following such
Lender’s denial, and such Lender will assign its interest to PNC or the
Designated Lender no later than five (5) days following receipt of such notice
pursuant to a Commitment Transfer Supplement executed by such Lender, PNC or the
Designated Lender, as appropriate, and Agent.

 

(d)          Notwithstanding (a) the existence of a Default or an Event of
Default, (b) that any of the other applicable conditions precedent set forth in
Section 8.2 hereof have not been satisfied or (c) any other provision of this
Agreement, Agent may at its discretion and without the consent of the Required
Lenders, voluntarily permit the outstanding Revolving Advances at any time to
exceed the Formula Amount by up to five percent (5%) of the Formula Amount for
up to sixty (60) consecutive days (the “Out-of-Formula Loans”). If Agent is
willing in its sole and absolute discretion to make such Out-of-Formula Loans,
such Out-of-Formula Loans shall be payable on demand and shall bear interest at
the Default Rate for Revolving Advances consisting of Domestic Rate Loans;
provided that, if Lenders do make Out-of-Formula Loans, neither Agent nor
Lenders shall be deemed thereby to have changed the limits of Section 2.1(a).
For purposes of this paragraph, the discretion granted to Agent hereunder shall
not preclude involuntary overadvances that may result from time to time due to
the fact that the Formula Amount was unintentionally exceeded for any reason,
including, but not limited to, Collateral previously deemed to be either
“Eligible Receivables” or “Eligible Inventory”, as applicable, becomes
ineligible, collections of Receivables applied to reduce outstanding Revolving
Advances are thereafter returned for insufficient funds or overadvances are made
to protect or preserve the Collateral. In the event Agent involuntarily permits
the outstanding Revolving Advances to exceed the Formula Amount by more than
five percent (5%), Agent shall use its efforts to have Borrowers decrease such
excess in as expeditious a manner as is practicable under the circumstances and
not inconsistent with the reason for such excess. Revolving Advances made after
Agent has determined the existence of involuntary overadvances shall be deemed
to be involuntary overadvances and shall be decreased in accordance with the
preceding sentence.

 

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(e)          In addition to (and not in substitution of) the discretionary
Revolving Advances permitted above in this Section 16.2, the Agent is hereby
authorized by Borrowers and the Lenders, from time to time in the Agent’s sole
discretion, (A) after the occurrence and during the continuation of a Default or
an Event of Default, or (B) at any time that any of the other applicable
conditions precedent set forth in Section 8.2 hereof have not been satisfied, to
make Revolving Advances to Borrowers on behalf of the Lenders which the Agent,
in its reasonable business judgment, deems necessary or desirable (a) to
preserve or protect the Collateral, or any portion thereof, (b) to enhance the
likelihood of, or maximize the amount of, repayment of the Advances and other
Obligations, or (c) to pay any other amount chargeable to Borrowers pursuant to
the terms of this Agreement; provided, that at any time after giving effect to
any such Revolving Advances the outstanding Revolving Advances do not exceed the
lesser of: (i) one hundred and five percent (105%) of the Formula Amount, and
(ii) the Maximum Revolving Advance Amount.

 

16.3.Successors and Assigns; Participations; New Lenders.

 

(a)          This Agreement shall be binding upon and inure to the benefit of
Borrowers, Agent, each Lender, all future holders of the Obligations and their
respective successors and permitted assigns, except that no Borrower may assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of Agent and each Lender.

 

(b)          Each Borrower acknowledges that in the regular course of commercial
banking business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other financial institutions (each
such transferee or purchaser of a participating interest, a “Participant”). Each
Participant may exercise all rights of payment (including rights of set-off)
with respect to the portion of such Advances held by it or other Obligations
payable hereunder as fully as if such Participant were the direct holder thereof
provided that Borrowers shall not be required to pay to any Participant more
than the amount which it would have been required to pay to Lender which granted
an interest in its Advances or other Obligations payable hereunder to such
Participant had such Lender retained such interest in the Advances hereunder or
other Obligations payable hereunder and in no event shall Borrowers be required
to pay any such amount arising from the same circumstances and with respect to
the same Advances or other Obligations payable hereunder to both such Lender and
such Participant. Each Borrower hereby grants to any Participant a continuing
security interest in any deposits, moneys or other property held by such
Participant as security for the Participant’s interest in the Advances.

 

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(c)          Any Lender, with the consent of Agent which shall not be
unreasonably withheld or delayed, may sell, assign or transfer all or any part
of its rights and obligations under or relating to Advances under this Agreement
and the Other Documents to one or more additional banks or financial
institutions and one or more additional banks or financial institutions may
commit to make Advances hereunder (each a “Purchasing Lender”), in minimum
amounts of not less than $5,000,000, pursuant to a Commitment Transfer
Supplement, executed by a Purchasing Lender, the transferor Lender, and Agent
and delivered to Agent for recording. Upon such execution, delivery, acceptance
and recording, from and after the transfer effective date determined pursuant to
such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a
party hereto and, to the extent provided in such Commitment Transfer Supplement,
have the rights and obligations of a Lender thereunder with a Commitment
Percentage as set forth therein, and (ii) the transferor Lender thereunder
shall, to the extent provided in such Commitment Transfer Supplement, be
released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose. Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Each Borrower
hereby consents to the addition of such Purchasing Lender and the resulting
adjustment of the Commitment Percentages arising from the purchase by such
Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Borrowers shall
execute and deliver such further documents and do such further acts and things
in order to effectuate the foregoing.

 

(d)          Any Lender, with the consent of Agent which shall not be
unreasonably withheld or delayed, may directly or indirectly sell, assign or
transfer all or any portion of its rights and obligations under or relating to
Advances under this Agreement and the Other Documents to an entity, whether a
corporation, partnership, trust, limited liability company or other entity that
(i) is engaged in making, purchasing, holding or otherwise investing in bank
loans and similar extensions of credit in the ordinary course of its business
and (ii) is administered, serviced or managed by the assigning Lender or an
Affiliate of such Lender (a “Purchasing CLO” and together with each Participant
and Purchasing Lender, each a “Transferee” and collectively the “Transferees”),
pursuant to a Commitment Transfer Supplement modified as appropriate to reflect
the interest being assigned (“Modified Commitment Transfer Supplement”),
executed by any intermediate purchaser, the Purchasing CLO, the transferor
Lender, and Agent as appropriate and delivered to Agent for recording. Upon such
execution and delivery, from and after the transfer effective date determined
pursuant to such Modified Commitment Transfer Supplement, (i) Purchasing CLO
thereunder shall be a party hereto and, to the extent provided in such Modified
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder and (ii) the transferor Lender thereunder shall, to the extent
provided in such Modified Commitment Transfer Supplement, be released from its
obligations under this Agreement, the Modified Commitment Transfer Supplement
creating a novation for that purpose. Such Modified Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing CLO. Each
Borrower hereby consents to the addition of such Purchasing CLO. Borrowers shall
execute and deliver such further documents and do such further acts and things
in order to effectuate the foregoing.

 

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(e)          Agent shall maintain at its address a copy of each Commitment
Transfer Supplement and Modified Commitment Transfer Supplement delivered to it
and a register (the “Register”) for the recordation of the names and addresses
of each Lender and the outstanding principal, accrued and unpaid interest and
other fees due hereunder. The entries in the Register shall be conclusive, in
the absence of manifest error, and each Borrower, Agent and Lenders may treat
each Person whose name is recorded in the Register as the owner of the Advance
recorded therein for the purposes of this Agreement. The Register shall be
available for inspection by Borrowing Agent or any Lender at any reasonable time
and from time to time upon reasonable prior notice. Agent shall receive a fee in
the amount of $3,500 payable by the applicable Purchasing Lender and/or
Purchasing CLO upon the effective date of each transfer or assignment (other
than to an intermediate purchaser) to such Purchasing Lender and/or Purchasing
CLO.

 

(f)          Subject to the provisions set forth in Section 16.15, each Borrower
authorizes each Lender to disclose to any Transferee and any prospective
Transferee any and all financial information in such Lender’s possession
concerning such Borrower which has been delivered to such Lender by or on behalf
of such Borrower pursuant to this Agreement or in connection with such Lender’s
credit evaluation of such Borrower.

 

(g)          Anything herein to the contrary notwithstanding, unless the
Obligations are then due in full or a notice of termination of this Agreement
has been issued, no Lender may assign or participate any of its interests
hereunder to a competitor of any Borrower. As used herein, the term “competitor”
means a Person which derives greater than 50% of its revenues from the same or a
similar line of business as any Borrower or any Affiliate of such Person.

 

(h)          Each Borrower shall be deemed to consent to the addition of a
Transferee (and, if applicable, the resulting adjustment of the Revolving
Percentages arising from the purchase by a Purchasing Lender of all or a portion
of the rights and obligations of such transferor Lender under this Agreement and
the Other Documents), to the extent such Transferee is Agent or a Lender, or an
Affiliate of Agent or any Lender, or to the extent such addition is made during
the continuance of any Default or Event of Default. If no Default or Event of
Default is continuing at the time which a Transferee is selected and such
Transferee is not Agent or a Lender, or an Affiliate of Agent or any Lender, the
transferor Lender shall provide Borrowing Agent with notice of the identity of
the proposed Transferee and a five (5) Business Day period to object the
identity of the proposed Transferee on any reasonable grounds. If Borrowing
Agent asserts no reasonable written objection to the identity of the proposed
Transferee during such period, Borrowers will be deemed to have consented to the
addition of such Transferee. U.S. Bank National Association is an approved
Transferee and shall not be subject to the foregoing notice and objection
period.

 

16.4.     Application of Payments. Agent shall have the continuing and exclusive
right to apply or reverse and re-apply any payment and any and all proceeds of
Collateral to any portion of the Obligations. To the extent that any Borrower
makes a payment or Agent or any Lender receives any payment or proceeds of the
Collateral for any Borrower’s benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.

 

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16.5.     Indemnity. Each Borrower shall indemnify Agent, each Lender and each
of their respective officers, directors, Affiliates, attorneys, employees and
agents from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including fees and disbursements of counsel) which
may be imposed on, incurred by, or asserted against Agent or any Lender in any
claim, litigation, proceeding or investigation instituted or conducted by any
Governmental Body or instrumentality or any other Person with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement or the Other Documents, whether or not Agent or any
Lender is a party thereto, except to the extent that any of the foregoing arises
out of the willful misconduct or gross negligence of the party being indemnified
(as determined by a court of competent jurisdiction in a final and
non-appealable judgment). Without limiting the generality of the foregoing, this
indemnity shall extend to any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including reasonable fees and disbursements of
counsel) asserted against or incurred by any of the indemnitees described above
in this Section 16.5 by any Person under any Environmental Laws or similar laws
by reason of any Borrower’s or any other Person’s failure to comply with laws
applicable to solid or hazardous waste materials, including Hazardous Substances
and Hazardous Waste, or other Toxic Substances. Additionally, if any taxes
(excluding taxes imposed upon or measured solely by the net income of Agent and
Lenders, but including any intangibles taxes, stamp tax, recording tax or
franchise tax) shall be payable by Agent, Lenders or Borrowers on account of the
execution or delivery of this Agreement, or the execution, delivery, issuance or
recording of any of the Other Documents, or the creation or repayment of any of
the Obligations hereunder, by reason of any Applicable Law now or hereafter in
effect, Borrowers will pay (or will promptly reimburse Agent and Lenders for
payment of) all such taxes, including interest and penalties thereon, and will
indemnify and hold the indemnitees described above in this Section 16.5 harmless
from and against all liability in connection therewith.

 

16.6.     Notice. Any notice or request hereunder may be given to Borrowing
Agent or any Borrower or to Agent or any Lender at their respective addresses
set forth below or at such other address as may hereafter be specified in a
notice designated as a notice of change of address under this Section. Any
notice, request, demand, direction or other communication (for purposes of this
Section 16.6 only, a “Notice”) to be given to or made upon any party hereto
under any provision of this Loan Agreement shall be given or made by telephone
or in writing (which includes by means of electronic transmission (i.e.,
“e-mail”) or facsimile transmission or by setting forth such Notice on a site on
the World Wide Web (a “Website Posting”) if Notice of such Website Posting
(including the information necessary to access such site) has previously been
delivered to the applicable parties hereto by another means set forth in this
Section 16.6) in accordance with this Section 16.6. Any such Notice must be
delivered to the applicable parties hereto at the addresses and numbers set
forth under their respective names on Section 16.6 or in accordance with any
subsequent unrevoked Notice from any such party that is given in accordance with
this Section 16.6. Any Notice shall be effective:

 

(a)          In the case of hand-delivery, when delivered;

 

(b)          If given by mail, four days after such Notice is deposited with the
United States Postal Service, with first-class postage prepaid, return receipt
requested;

 

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(c)          In the case of a telephonic Notice, when a party is contacted by
telephone, if delivery of such telephonic Notice is confirmed no later than the
next Business Day by hand delivery, a facsimile or electronic transmission, a
Website Posting or an overnight courier delivery of a confirmatory Notice
(received at or before noon on such next Business Day);

 

(d)          In the case of a facsimile transmission, when sent to the
applicable party’s facsimile machine’s telephone number, if the party sending
such Notice receives confirmation of the delivery thereof from its own facsimile
machine;

 

(e)          In the case of electronic transmission, when actually received;

 

(f)          In the case of a Website Posting, upon delivery of a Notice of such
posting (including the information necessary to access such site) by another
means set forth in this Section 16.6; and

 

(g)          If given by any other means (including by overnight courier), when
actually received.

 

Any Lender giving a Notice to Borrowing Agent or any Borrower shall concurrently
send a copy thereof to the Agent, and the Agent shall promptly notify the other
Lenders of its receipt of such Notice.

 

(A)         If to Agent or PNC at:

 

PNC Bank, National Association

909 Wright's Summit Parkway, Suite 310

Fort Wright, KY 41011

Attention:          Chris Tully

Telephone:        859-392-2892

Facsimile:         859-655-9071

 

with a copy to:

PNC Bank, National Association
PNC Agency Services
PNC Firstside Center
500 First Avenue, 4th Floor
Pittsburgh, Pennsylvania 15219
Attention:         Lisa Pierce
Telephone:       (412) 762-6442
Facsimile:         (412) 762-8672

 

with an additional copy to:

Frost Brown Todd LLC

3300 Great American Tower

301 East Fourth Street

Cincinnati, Ohio 45202

 

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Attention:        Michael J. O’Grady

Telephone:      (513) 651-6482

Facsimile:        (513) 651-6981

 

(B)         If to a Lender other than Agent, as specified on the signature pages
hereof, with a copy to Agent;

 

(C)         If to Borrowing Agent or any Borrower:

 

Rocky Brands, Inc.

39 East Canal Street

Nelsonville, Ohio 45764

Attention:         James E. McDonald

Telephone:       (740) 753-9100, ext. 2543

Facsimile:         (740) 753-5555

 

with a copy to:

 

Porter, Wright, Morris & Arthur LLP

41 South High Street

Columbus, Ohio 43215

Attention:        Timothy E. Grady

Telephone:       (614) 227-2105

Facsimile:        (614) 227-2100

 

16.7.   Survival. The obligations of Borrowers under Sections 2.2(f), 3.7, 3.8,
3.9, 4.19(h), and 16.5 and the obligations of Lenders under Section 14.7, shall
survive termination of this Agreement and the Other Documents and payment in
full of the Obligations.

 

16.8.   Severability. If any part of this Agreement is contrary to, prohibited
by, or deemed invalid under Applicable Laws, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.

 

16.9.   Expenses. All reasonable costs and expenses including reasonable
attorneys’ fees (including the allocated costs of in house counsel) and
disbursements incurred by Agent on its behalf or on behalf of Lenders, or by any
Lender on its own behalf: (a) in all efforts made to enforce payment of any
Obligation or effect collection of any Collateral, or (b) in connection with the
entering into, modification, amendment, administration and enforcement of this
Agreement or any consents or waivers hereunder and all related agreements,
documents and instruments, or (c) in instituting, maintaining, preserving,
enforcing and foreclosing on Agent’s security interest in or Lien on any of the
Collateral, or maintaining, preserving or enforcing any of Agent’s or any
Lender’s rights hereunder and under all related agreements, documents and
instruments, whether through judicial proceedings or otherwise, or (d) in
defending or prosecuting any actions or proceedings arising out of or relating
to Agent’s or any Lender’s transactions with any Borrower, Guarantor, or any of
their respective Subsidiaries, or (e) in connection with any advice given to
Agent or any Lender with respect to its rights and obligations under this
Agreement and all related agreements, documents and instruments, may be charged
to Borrowers’ Account and shall be part of the Obligations. In addition, Agent
may cause appraisals of the Real Property, Inventory and Equipment of Borrowers
to be conducted from time to time at Borrowers’ sole cost. Agent’s right to
conduct an Inventory appraisal shall be limited to one (1) such appraisal during
any fiscal year. Inventory appraisals conducted in connection with the
establishment of this Agreement, in connection with a Permitted Acquisition, or
during the continuance of an Event of Default shall be charged to Borrowers and
not be subject to the foregoing limitation.

 

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16.10.   Injunctive Relief. Each Borrower recognizes that, in the event any
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, or threatens to fail to perform, observe or
discharge such obligations or liabilities, any remedy at law may prove to be
inadequate relief to Lenders; therefore, Agent, if Agent so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.

 

16.11.   Consequential Damages. Neither Agent nor any Lender, nor any agent or
attorney for any of them, shall be liable to any Borrower or any Guarantor (or
any Affiliate of any such Person) for indirect, punitive, exemplary or
consequential damages arising from any breach of contract, tort or other wrong
relating to the establishment, administration or collection of the Obligations
or as a result of any transaction contemplated under this Agreement or any Other
Document.

 

16.12.   Captions. The captions at various places in this Agreement are intended
for convenience only and do not constitute and shall not be interpreted as part
of this Agreement.

 

16.13.   Counterparts; Facsimile Signatures. This Agreement may be executed in
any number of and by different parties hereto on separate counterparts, all of
which, when so executed, shall be deemed an original, but all such counterparts
shall constitute one and the same agreement. Any signature delivered by a party
by facsimile transmission shall be deemed to be an original signature hereto.

 

16.14.   Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.

 

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16.15.   Confidentiality; Sharing Information. Agent, each Lender and each
Transferee shall hold all non-public information obtained by Agent, such Lender
or such Transferee pursuant to the requirements of this Agreement in accordance
with Agent’s, such Lender’s and such Transferee’s customary procedures for
handling confidential information of this nature; provided, however, Agent, each
Lender and each Transferee may disclose such confidential information (a) to its
examiners, Affiliates, outside auditors, counsel and other professional
advisors, (b) to Agent, any Lender or to any prospective Transferees, and (c) as
required or requested by any Governmental Body or representative thereof or
pursuant to legal process; provided, further that (i) unless specifically
prohibited by Applicable Law, Agent, each Lender and each Transferee shall use
its reasonable best efforts prior to disclosure thereof, to notify the
applicable Borrower of the applicable request for disclosure of such non-public
information (A) by a Governmental Body or representative thereof (other than any
such request in connection with an examination of the financial condition of a
Lender or a Transferee by such Governmental Body) or (B) pursuant to legal
process and (ii) in no event shall Agent, any Lender or any Transferee be
obligated to return any materials furnished by any Borrower other than those
documents and instruments in possession of Agent or any Lender in order to
perfect its Lien on the Collateral once the Obligations have been paid in full
and this Agreement has been terminated. Each Borrower acknowledges that from
time to time financial advisory, investment banking and other services may be
offered or provided to such Borrower or one or more of its Affiliates (in
connection with this Agreement or otherwise) by any Lender or by one or more
Subsidiaries or Affiliates of such Lender and each Borrower hereby authorizes
each Lender to share any information delivered to such Lender by such Borrower
and its Subsidiaries pursuant to this Agreement, or in connection with the
decision of such Lender to enter into this Agreement, to any such Subsidiary or
Affiliate of such Lender, it being understood that any such Subsidiary or
Affiliate of any Lender receiving such information shall be bound by the
provisions of this Section 16.15 as if it were a Lender hereunder. Such
authorization shall survive the repayment of the other Obligations and the
termination of this Agreement.

 

16.16.   Publicity. Each Borrower and each Lender hereby authorizes Agent, with
the prior approval of Borrowing Agent, to make appropriate announcements of the
financial arrangement entered into among Borrowers, Agent and Lenders, including
announcements which are commonly known as tombstones, in such publications and
to such selected parties as Agent shall in its sole and absolute discretion deem
appropriate.

 

16.17.   Certifications From Banks and Participants; US PATRIOT Act. Each Lender
or assignee or participant of a Lender that is not incorporated under the Laws
of the United States of America or a state thereof (and is not excepted from the
certification requirement contained in Section 313 of the USA PATRIOT Act and
the applicable regulations because it is both (i) an affiliate of a depository
institution or foreign bank that maintains a physical presence in the United
States or foreign country, and (ii) subject to supervision by a banking
authority regulating such affiliated depository institution or foreign bank)
shall deliver to the Agent the certification, or, if applicable,
recertification, certifying that such Lender is not a “shell” and certifying to
other matters as required by Section 313 of the USA PATRIOT Act and the
applicable regulations: (1) within 10 days after the Restatement Date, and (2)
as such other times as are required under the USA PATRIOT Act.

 

16.18.   Language. The parties have requested that this Agreement and the Other
Documents be drawn up in the English language. Les parties ont requis que cette
convention ainsi que tous les documents qui y sont envisagés ou qui s'y
rapportent soient rédigés en langue anglaise.

 

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16.19.   Judgment Currency. If for the purpose of obtaining judgment in any
court it is necessary to convert an amount due hereunder in the currency in
which it is due (the "Original Currency") into another currency (the "Second
Currency"), the rate of exchange applied shall be that at which, in accordance
with normal banking procedures, Agent could purchase in the foreign exchange
market, the Original Currency with the Second Currency on the date two (2)
Business Days preceding that on which judgment is given. Each Borrower agrees
that its obligation in respect of any Original Currency due from it hereunder
shall, notwithstanding any judgment or payment in such other currency, be
discharged only to the extent that, on the Business Day following the date Agent
receives payment of any sum so adjudged to be due hereunder in the Second
Currency, Agent may, in accordance with normal banking procedures, purchase, in
the foreign exchange market, the Original Currency with the amount of the Second
Currency so paid; and if the amount of the Original Currency so purchased or
could have been so purchased is less than the amount originally due in the
Original Currency, each Borrower agrees as a separate obligation and
notwithstanding any such payment or judgment to indemnify Agent and the Lenders
against such loss.

 

16.20.     Anti-Terrorism Laws.

 

(a)          Each Borrower represents and warrants that (i) no Covered Entity is
a Sanctioned Person, and (ii) no Covered Entity, either in its own right or
through any third party, (A) has any of its assets in a Sanctioned Country or in
the possession, custody or control of a Sanctioned Person in violation of any
Anti-Terrorism Law; (B) does business in or with, or derives any of its income
from investments in or transactions with, any Sanctioned Country or Sanctioned
Person in violation of any Anti-Terrorism Law; or (C) engages in any dealings or
transactions prohibited by any Anti-Terrorism Law.

 

(b)          Each Borrower covenants and agrees that (i) no Covered Entity will
become a Sanctioned Person, (ii) no Covered Entity, either in its own right or
through any third party, will (A) have any of its assets in a Sanctioned Country
or in the possession, custody or control of a Sanctioned Person in violation of
any Anti-Terrorism Law; (B) do business in or with, or derive any of its income
from investments in or transactions with, any Sanctioned Country or Sanctioned
Person in violation of any Anti-Terrorism Law; (C) engage in any dealings or
transactions prohibited by any Anti-Terrorism Law; or (D) use the Advances to
fund any operations in, finance any investments or activities in, or, make any
payments to, a Sanctioned Country or Sanctioned Person in violation of any
Anti-Terrorism Law, (iii) the funds used to repay the Obligations will not be
derived from any unlawful activity, (iv) each Covered Entity shall comply with
all Anti-Terrorism Laws, and (v) Borrowers shall promptly notify the Agent in
writing upon the occurrence of a Reportable Compliance Event.

 

16.21.   No Claims. Each Borrower represents and warrants that, to its
knowledge, it has no claims, counterclaims, setoffs, actions or causes of
actions, damages or liabilities of any kind or nature whatsoever whether at law
or in equity, in contract or in tort, existing as of the date of the Restatement
Date, other than any reconciliations of manifest error in calculation
(collectively, “Claims”) against Agent or Lenders, their direct or indirect
parent corporations or any direct or indirect Affiliates of such parent
corporations, or the administrators, successors or assigns of any of them
(collectively, “Lender Parties”) that directly or indirectly arise out of, are
based upon or are in any manner connected with any Prior Related Event. As an
inducement to Agent and Lenders to enter into this Agreement, each Borrower on
behalf of itself, and all of its respective successors and assigns hereby
knowingly and voluntarily releases and discharges all Lender Parties from any
and all Claims, whether known or unknown in existence as of the Restatement
Date, that directly or indirectly arise out of, are based upon or are in any
manner connected with any Prior Related Event. As used herein, the term “Prior
Related Event” means any transaction, event, circumstance, action, failure to
act, occurrence of any sort or type, whether known or unknown, which occurred,
existed, was taken, permitted or begun at any time prior to the Restatement Date
or occurred, existed, was taken, was permitted or begun in accordance with,
pursuant to or by virtue of any of the terms of the Existing Loan Agreement or
the Other Documents or any documents executed in connection with the Existing
Loan Agreement or the Other Documents or which was related to or connected in
any manner, directly or indirectly to the extension of credit represented by the
Existing Credit Facility.

 

[Signature Pages Follow]

 

119

 

 

Each of the parties has signed this Amended and Restated Revolving Credit, Term
Loan, Guaranty, and Security Agreement as of the day and year first above
written.

 

  Rocky Brands, Inc.,   Lifestyle Footwear, Inc.,   Rocky Brands Wholesale LLC,
  Lehigh Outfitters, LLC,   Rocky Brands International, LLC,   Rocky Brands
Canada, Inc.,   Creative Recreation, LLC,   Creative Recreation Retail, LLC, and
  Creative Recreation International, LLC   as Borrowers

 

  By:     /s/ James E. McDonald     James E. McDonald    

Executive Vice President and

Chief Financial Officer of each

Borrower

 

120

 

 

Signature Page to Amended and Restated Revolving Credit, Term Loan, Guaranty,
and Security Agreement

 

  PNC Bank, National Association   as Agent and Lender         By: /s/
Christopher Tully     Christopher Tully     Vice President

 

  Address:       PNC Bank, National Association   909 Wright's Summit Parkway,
Suite 310   Fort Wright, KY 41011   Attention:       Chris Tully   Telephone:
    859-392-2892   Facsimile:       859-655-9071       Commitment
Percentage:  62.5%

 

121

 

 

Signature Page to Amended and Restated Revolving Credit, Term Loan, Guaranty,
and Security Agreement

 

  U.S. Bank National Association   as a Lender         By: /s/ Troy Bell    
Troy Bell     Vice President

 

  Address:       U.S. Bank Asset Based Finance   425 Walnut Street, 14th Floor  
Cincinnati, Ohio  45202   Attention:         Troy Bell  
Telephone:       513-562-3209   Facsimile:         513-632-2040       Commitment
Percentage:  37.5%

  

122

 

 

Exhibit 1.2

 

PNC Business Credit Revolving Credit, Term Loan and Security Agreement

Borrowing Base Certificate

 

[tlogo.jpg] 

Borrowers: Rocky Brands, Inc. Certificate #     Lehigh Outfitters, LLC Period
Ended xx/xx/20xx   Lifestyle Footwear, Inc.       Rocky Brands Wholesale, LLC  
    Rocky Brands International, LLC       Rocky Brands Canada, Inc.      
Creative Recreation, LLC       Creative Recreation Retail, LLC       Creative
Recreation International, LLC    

 

To induce PNC Bank, N. A. ("Agent") to make a loan advance pursuant to the
Amended and Restated Revolving Credit, Term Loan, Guaranty and Security
Agreement

dated as of December 14, 2014, as well as amendments between the undersigned and
Lender, we hereby certify as of the above date, the following:

 

         From    To                 Accounts Receivable  1  Previous Certificate
AR Balance   xx/xx/20xx             $-          2  Gross Sales Since Last
Certificate   xx/xx/20xx    xx/xx/20xx    +   $-          3  Collections Since
Last Certificate   xx/xx/20xx    xx/xx/20xx    -   $-          4  Credits Since
Last Certificate   xx/xx/20xx    xx/xx/20xx    -   $-          5  Other
Adjustments   xx/xx/20xx    xx/xx/20xx    +/-   $-          6  Total AR Now
Being Certified to Bank             $-          7  Ineligible AR Per Attached 
      xx/xx/20xx    -   $-          7.5  Government receivables included in
ineligible             $-          8  Net Eligible AR                 $-      
   9  AR Availability   85%                 $-                                  
Inventory  10  Gross Inventory As Of        xx/xx/20xx        $-          11 
Ineligible Inventory        xx/xx/20xx    -   $(0.00)         12  Net Eligible
Inventory                 $(0.00)         13  Inventory Availability:   Various
Adv Rates - See Inventory Report detail attached             $(0.00)    14 
Inventory Sub Limit                             15  Suppressed Inventory
Availability                       N/A      16  Adjusted Inventory
Availability                  $(0.00)                                     22 
Gross Combined Availability                      $(0.00)    23  Availability
Block                       0.00     24  Adjusted Availability Before Line
Limit                      $(0.00)    25  Revolver Limit                
$75,000,000.00          26  Supressed Line Availability                     
N/A     27  Net Loan Value                       (0.00)                        
         Loans & Advances  28  Revolver Loan Balance Per Previous Certificate  
               $-     29  Net AR Collections Since Last Certificate         -  
      0.00     30  Non-AR Collections Since Last Certificate         -       
       31  Advance Requested             +         0.00     32  Misc. Loan
Adjustment             +/-         0.00     33  New Loan Balance                
     $-     34  Reserves for Letters of Credit, BA's & Other         +    0.00  
       35  Rent Reserves                       0.00     36  Royalty Reserve 
           +         0.00     37  Revolver Loans & Reserves                     
$-     38  Loan Availability                      $(0.00)    39  Remaining
Revolver Availability                 $75,000,000.00      

 

The undersigned hereby certifies that the above representations are true and
correct and subject to all conditions of the Loan and Security Agreement.

We also represent that to the best of our knowledge, there does not exist a
condition which may precipitate a default under the terms of the Loan and
Security Agreement or any amendment thereto.

 

    EVP & CFO xx/xx/20xx   Authorized Signature, Title   Date                  
James E. McDonald       Name of Authorized Signer    

 

 For Bank Use Only

  

          Date of Advance   Amount

 

 

 

 

Exhibit 4.15(j)

 

ASSIGNMENT OF MONEYS DUE UNDER GOVERNMENT CONTRACT UNDER

ASSIGNMENT OF CLAIMS ACT OF 1940 AS AMENDED

 

FOR A VALUABLE CONSIDERATION Rocky Brands, Inc., a corporation organized under
the laws of the State of Ohio (the “Assignor”) hereby assigns absolutely to PNC
Bank, National Association, as agent for the Lenders under the Amended and
Restated Revolving Credit, Term Loan, Guaranty, and Security Agreement by and
among Assignor, and the Borrowers and Lenders thereunder, dated as of December
19, 2014 (as amended, restated or modified from time to time, the “Credit
Agreement”) whose address is 909 Wright's Summit Parkway, Suite 310, Fort
Wright, KY 41011, Attention: Christopher Tully, on behalf of itself, and its
successors and assigns (collectively referred to herein as the “Assignee”), as
assignee, all of the Receivables described below.

 

This absolute assignment is given to secure the payment and performance of
(collectively, the “Obligations”): any and all loans, advances, debts,
liabilities, obligations, covenants and duties owing by any Borrower to Lenders
or Assignee or to any other direct or indirect subsidiary or affiliate of
Assignee or any Lender of any kind or nature, present or future (including any
interest or other amounts accruing thereon after maturity, or after the filing
of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding relating to any Borrower, whether or not a
claim for post-filing or post-petition interest or other amounts is allowed in
such proceeding), whether or not evidenced by any note, guaranty or other
instrument, whether arising under any agreement, instrument or document,
(including the Credit Agreement and the Other Documents) whether or not for the
payment of money, whether arising by reason of an extension of credit, opening
of a letter of credit, loan, equipment lease or guarantee, under any interest or
currency swap, future, option or other similar agreement, or in any other
manner, whether arising out of overdrafts or deposit or other accounts or
electronic funds transfers (whether through automated clearing houses or
otherwise) or out of the Assignee’s or any Lenders non-receipt of or inability
to collect funds or otherwise not being made whole in connection with depository
transfer check or other similar arrangements, whether direct or indirect
(including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated, regardless of how
such indebtedness or liabilities arise or by what agreement or instrument they
may be evidenced or whether evidenced by any agreement or instrument, including,
but not limited to, any and all of any Borrower’s Indebtedness and/or
liabilities under the Credit Agreement, the Other Documents or under any other
agreement between Assignee or Lenders and any Borrower and any amendments,
extensions, renewals or increases and all costs and expenses of Assignee and any
Lender incurred in the documentation, negotiation, modification, enforcement,
collection or otherwise in connection with any of the foregoing, including but
not limited to reasonable attorneys’ fees and expenses and all obligations of
any Borrower to Assignee or Lenders to perform acts or refrain from taking any
action.

 

Capitalized terms used in this Assignment and not defined herein shall have the
meanings set forth in the Credit Agreement. This Assignment is an “Other
Document” as such term is defined in the Credit Agreement.

 

 

 

 

As used in this Assignment, the term “Receivables” means all moneys and claims
for money due or to become due to the Assignor from the United States of America
(the “Government”), under or arising out of the contract between the Assignor
and the Government, dated December 21, 2012, and designated as Contract No.:
SPM1C1-13-D-1017, together with any amendments and supplements thereto (the
“Contract”). The Assignee has or may hereafter, at its option, from time to time
enter into various loan, credit or banking transactions with the Assignor for
various sums to finance the Assignor’s performance of the Contract.

 

The Assignor specifically authorizes and directs the Government to make all
payments due under the Contract directly to the Assignee and irrevocably
appoints the Assignee as it attorney-in-fact to demand, receive, receipt and
give acquittance for such amounts which may be or become due or payable or
remain unpaid at any time to the Assignor by the Government under and pursuant
to the Contract, to endorse any checks, drafts or other orders for the payment
of money payable to the Assignor, and, in its discretion, to file any claims or
take any action or proceeding, either in its own name or in the name of the
Assignor or otherwise, which the Assignee may deem to be necessary or advisable.
It is expressly understood and agreed, however, that the Assignee shall not be
required or obligated in any manner to make any demand or to make any inquiry as
to the nature or the sufficiency of any payment received by it or to present or
file any claims or take any other action to collect or enforce the payment or
any amounts which may have been assigned to it or to which it may be entitled.
To the extent Assignee receives any payment in respect of any Receivable, it
agrees to apply such payment in accordance with the terms of the Credit
Agreement.

 

As and from the date of this Assignment, Assignor hereby agrees that it shall:
(a) take all reasonable steps to provide for payment by the Government of all
amounts payable under the Contract directly to Assignee, including, without
limitation: (i) executing and delivering the Notice of Assignment to the
applicable Government contracting officer; and (ii) returning a fully-executed
Notice of Assignment to Assignee; (b) take all reasonable steps to perform,
observe and permit the exercise and enforcement of the rights of Assignee
pursuant to this Assignment; (c) notify Assignee promptly in writing of any
breach of this Assignment or the Contract or of non-compliance with any term,
condition or covenant contained in this Assignment or the Contract or any other
instrument, document or agreement executed in connection herewith; (d) promptly
cure or cause to be cured, any defects in the execution and/or delivery of this
Assignment or any of the other agreements, instruments or documents executed
pursuant hereto or any defects in the validity or enforceability of this
Assignment or any other instrument or agreement in connection herewith, and at
its own expense, execute and deliver or cause to be executed or delivered, all
such instruments, agreements and other documents as Assignee may reasonably
require; and (e) to the extent any amount payable under the Contract is paid by
the Government to Assignor, hold such amount in trust for Assignee and
immediately pay such amount to Assignee or as Assignee may direct. Until such
time as such amount is provided to Assignee, it shall not be co-mingled with
funds of Assignor.

 

The Assignor represents and warrants to the Assignee that there is no provision
of the Contract which states that the Contract or Assignor’s interest therein is
not assignable, and that it has not transferred or assigned the Contract or any
right or interest in it and has acquired the release of any encumbrances on the
Contract or right or interest in it, and the Assignor agrees that at any time
and from time to time, upon the Assignee’s written request, the Assignor will
execute and deliver such instruments and documents and do such other acts and
things as the Assignee may request in order to further effect the purpose of
this Assignment. The Assignor covenants and agrees with the Assignee that it
will perform all of the terms of the Contract.

 

 

 

 

This Assignment has been delivered and accepted at and will be deemed to have
been made in Ohio and will be interpreted and the rights and liabilities of the
parties hereto determined in accordance with the laws of the State of Ohio,
without regard to conflicts of law principles. Assignor hereby irrevocably
agrees and submits to the exclusive jurisdiction of any state or federal court
located within Ohio, or, at the option of Assignee in its sole discretion, of
any state or federal court(s) located within any other county, state or
jurisdiction in which Assignee at any time or from time to time chooses in its
sole discretion to bring an action or otherwise exercise a right or remedy, and
Assignor waives any objection based on forum non conveniens and any objection to
venue of any such action or proceeding.

 

Executed as of the      day of December, 2014.           Witnesses:   Assignor:
          Rocky Brands, Inc.           By:                         James E.
McDonald                       Executive Vice President and    
                  Chief Financial Officer

 

ATTTEST:

 

Secretary  

 

STATE OF OHIO                )

ss.

COUNTY OF ___________ )

 

On this ___ day of December, 2014, acknowledged before me by James E. McDonald,
the duly authorized Executive Vice President and Chief Financial Officer of
Rocky Brands, Inc., an Ohio corporation, who executed the foregoing instrument
on behalf of said corporation.

 

  Notary Public

 

 

 

 

NOTICE OF ASSIGNMENT

 

To:         Date:                    

 

Re: Contract No.: SPM1C1-13-D-1017   Made by the United States of America

 

  Department       Division

 

With Rocky Brands, Inc.       (Name of Contractor   39 East Canal Street        
  Nelsonville, Ohio  45764       (Address of Contractor)

 

        dated  

 

PLEASE TAKE NOTICE that the moneys due or to become due under the contract
described above have been assigned to the undersigned pursuant to the provisions
of the Assignment of Claims Act of 1940, as amended, 31 U.S.C. 3727, 41 U.S.C.
15.

 

A true copy of the instrument of assignment is attached to this notice.

 

All payments due or to become due under such contract should be made to the
assignee.

 

Please return to the undersigned one enclosed copy of this notice with
appropriate notations showing the date and hour of receipt and duly signed by
the person acknowledging receipt on behalf of the addressee.

 

  Very truly yours,       PNC Bank, National Association, as Agent       By:    
Its:  

  (Name Printed)  

 

 

 

 

Receipt is hereby acknowledged of this notice and a copy of the instrument of
assignment.

 

These were received at                               a.m./p.m. on
                                     .

 

      (Signature)     On behalf of              

 

 

 

 

 

Exhibit 16.3

 

COMMITMENT TRANSFER SUPPLEMENT, dated as of , 20__, among PNC Bank, National
Association (the “Transferor Lender”), ______ (“Purchasing Lender”), and PNC
Bank, National Association, as agent for the Lenders under the Revolving Credit,
Guaranty, and Security Agreement described below (in such capacity, the
“Agent”).

 

WITNESSETH

 

WHEREAS, this Commitment Transfer Supplement is being executed and delivered in
accordance with Section 16.3 of that certain Amended and Restated Revolving
Credit, Term Loan, Guaranty, and Security Agreement dated as of December 19,
2014 among by and among Rocky Brands, Inc., an Ohio corporation (“Parent”),
Lehigh Outfitters, LLC, a Delaware limited liability company (“Lehigh”),
Lifestyle Footwear, Inc., a Delaware corporation (“Lifestyle”), Rocky Brands
Wholesale LLC, a Delaware limited liability company (“Rocky Wholesale”), Rocky
Brands International, LLC, an Ohio limited liability company (“Rocky
International”), Rocky Brands Canada, Inc., a corporation formed under the laws
of the Province of Nova Scotia and a continuation of a corporation formed under
the laws of the Province of Ontario (“Rocky Canada”), Creative Recreation, LLC,
an Ohio limited liability company (“Creative”), Creative Recreation Retail, LLC,
an Ohio limited liability company (“Creative Retail”), and Creative Recreation
International, LLC, an Ohio limited liability company (“Creative International”)
(Parent, Lehigh, Lifestyle, Rocky Wholesale, Rocky International, Rocky Canada,
Creative, Creative Retail, and Creative International, collectively, the
“Borrowers” and individually a “Borrower”), the financial institutions which are
now or which hereafter become a party thereto (collectively, the “Lenders” and
individually a “Lender”) and PNC Bank, National Association (“PNC”), as Agent
(as same has been or may be amended, supplemented or otherwise modified in
accordance with the terms thereof, the “Credit Agreement”);

 

WHEREAS, Purchasing Lender wishes to become a Lender party to the Credit
Agreement; and

 

WHEREAS, the Transferor Lender is selling and assigning to Purchasing Lender
rights, obligations and commitments under the Credit Agreement;

 

NOW, THEREFORE, the parties hereto hereby agree as follows:

 

1.          All capitalized terms used herein that are not defined shall have
the meanings given to them in the Credit Agreement.

 

 

 

 

2.          Upon receipt by the Agent of four counterparts of this Commitment
Transfer Supplement, to each of which is attached a fully completed Schedule I,
and each of which has been executed by the Transferor Lender and Agent, Agent
will transmit to Transferor Lender and Purchasing Lender a Transfer Effective
Notice, substantially in the form of Schedule II to this Commitment Transfer
Supplement (a “Transfer Effective Notice”). Such Transfer Effective Notice shall
set forth, inter alia, the date on which the transfer effected by this
Commitment Transfer Supplement shall become effective (the “Transfer Effective
Date”), which date unless otherwise noted therein, shall not be earlier than the
first Business Day following the date such Transfer Effective Notice is
received. From and after the Transfer Effective Date, Purchasing Lender shall be
a Lender party to the Credit Agreement for all purposes thereof.

 

3.          At or before 12:00 Noon (Eastern time) on the Transfer Effective
Date Purchasing Lender shall pay to Transferor Lender, in immediately available
funds, an amount equal to the purchase price, as agreed between Transferor
Lender and such Purchasing Lender (the “Purchase Price”), of the portion of the
Advances being purchased by such Purchasing Lender (such Purchasing Lender’s
“Purchased Percentage”) of the outstanding Advances and other amounts owing to
the Transferor Lender under the Credit Agreement, and the Note(s). Effective
upon receipt by Transferor Lender of the Purchase Price from a Purchasing
Lender, Transferor Lender hereby irrevocably sells, assigns and transfers to
such Purchasing Lender, without recourse, representation or warranty, and
Purchasing Lender hereby irrevocably purchases, takes and assumes from
Transferor Lender, such Purchasing Lender’s Purchased Percentage of the Advances
and other amounts owing to the Transferor Lender under the Credit Agreement and
the Note(s) together with all instruments, documents and collateral security
pertaining thereto.

 

4.          Transferor Lender has made arrangements with Purchasing Lender with
respect to (i) the portion, if any, to be paid, and the date or dates for
payment, by Transferor Lender to such Purchasing Lender of any fees heretofore
received by Transferor Lender pursuant to the Credit Agreement prior to the
Transfer Effective Date and (ii) the portion, if any, to be paid, and the date
or dates of payment, by such Purchasing Lender to Transferor Lender of fees or
interest received by such Purchasing Lender pursuant to the Credit Agreement
from and after the Transfer Effective Date.

 

5.          (a)          All principal payments that would otherwise be payable
from and after the Transfer Effective Date to or for the account of Transferor
Lender pursuant to the Credit Agreement and the Note(s) shall, instead, be
payable to or for the account of Transferor Lender and Purchasing Lender, as the
case may be, in accordance with their respective interests as reflected in this
Commitment Transfer Supplement.

 

      (b)          All interest, fees and other amounts that would otherwise
accrue for the account of Transferor Lender from and after the Transfer
Effective Date pursuant to the Credit Agreement and the Note(s) shall, instead,
accrue for the account of, and be payable to, Transferor Lender and Purchasing
Lender, as the case may be, in accordance with their respective interests as
reflected in this Commitment Transfer Supplement. In the event that any amount
of interest, fees or other amounts accruing prior to the Transfer Effective Date
was included in the Purchase Price paid by any Purchasing Lender, Transferor
Lender and Purchasing Lender will make appropriate arrangements for payment by
Transferor Lender to such Purchasing Lender of such amount upon receipt thereof
from Borrowers.

 

2

 

 

6.          Concurrently with the execution and delivery hereof, Transferor
Lender will provide to Purchasing Lender conformed copies of the Credit
Agreement and all related documents delivered to Transferor Lender.

 

7.          Each of the parties to this Commitment Transfer Supplement agrees
that at any time, and from time to time, upon the written request of any other
party, it will execute and deliver such further documents and do such further
acts and things as such other party may reasonably request in order to effect
the purposes of this Commitment Transfer Supplement.

 

8.          By executing and delivering this Commitment Transfer Supplement,
Transferor Lender and Purchasing Lender confirm to and agree with each other,
Agent and Lenders as follows: (i) other than the representation and warranty
that it is the legal and beneficial owner of the interest being assigned hereby
free and clear of any security interests, liens or adverse claim, Transferor
Lender makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made by Borrowers in or
in connection with the Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, the
Note(s) or any other instrument or document furnished pursuant thereto; (ii)
Transferor Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrowers or the
performance or observance by Borrowers of any of their Obligations under the
Credit Agreement, the Note(s) or any other instrument or document furnished
pursuant hereto; (iii) Purchasing Lender confirms that it has received a copy of
the Credit Agreement, together with copies of such financial statements and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Commitment Transfer Supplement;
(iv) Purchasing Lender will, independently and without reliance upon Agent,
Transferor Lender or any other Lenders 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 Credit Agreement; (v)
Purchasing Lender appoints and authorizes Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement as are
delegated to the Agent by the terms thereof; (vi) Purchasing Lender agrees that
it will perform all of its respective obligations as set forth in the Credit
Agreement to be performed by each as a Lender; and (vii) Purchasing Lender
represents and warrants to Transferor Lender, Lenders, Agent, and Borrowers that
it is either (x) entitled to the benefits of an income tax treaty with the
United States of America that provides for an exemption from the United States
withholding tax on interest and other payments made by Borrowers under the
Credit Agreement and Other Documents or (y) is engaged in trade or business
within the United States of America.

 

9.          Schedule I hereto sets forth the revised Commitment Percentages of
Transferor Lender and the Commitment Percentage of Purchasing Lender as well as
administrative information with respect to Purchasing Lender.

 

3

 

 

10.         This Commitment Transfer Supplement shall be governed by, and
construed in accordance with, the laws of the State of Ohio.

 

[SIGNATURES TO FOLLOW ON SEPARATE PAGE]

 

4

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer
Supplement to be executed by their respective duly authorized officers on the
date set forth above.

 

  PNC BANK, NATIONAL ASSOCIATION   as Transferor Lender       By:     Print
Name:     Title:               as Purchasing Lender       By:     Name:    
Title:         PNC BANK, NATIONAL ASSOCIATION   as Agent       By:     Print
Name:     Title:  

 

 

 

 

Signature Page to Commitment Transfer Supplement

 

SCHEDULE I TO COMMITMENT TRANSFER SUPPLEMENT

 

LIST OF OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS

 

PNC Bank, National Association

Revised Commitment Amount

 

Revised Commitment Percentage

$

 

%

                                                                 

 

Commitment Amount

 

Revolving Percentage

 

$

 

%

 

 

Addresses for Notices for                   Attention:     Telephone:  
Telecopier:       cc: Borrowing Agent        

 

2

 

 

SCHEDULE II TO COMMITMENT TRANSFER SUPPLEMENT

 

[Form of Transfer Effective Notice]

 

To:                        , as Transferor Lender
and                                    , as Purchasing Lender:

 

The undersigned, as Agent under the Amended and Restated Revolving Credit, Term
Loan, Guaranty, and Security Agreement dated as of December 19, 2014 among Rocky
Brands, Inc., an Ohio corporation (“Parent”), Lehigh Outfitters, LLC, a Delaware
limited liability company (“Lehigh”), Lifestyle Footwear, Inc., a Delaware
corporation (“Lifestyle”), Rocky Brands Wholesale LLC, a Delaware limited
liability company (“Rocky Wholesale”), Rocky Brands International, LLC, an Ohio
limited liability company (“Rocky International”), Rocky Brands Canada, Inc., a
corporation formed under the laws of the Province of Nova Scotia and a
continuation of a corporation formed under the laws of the Province of Ontario
(“Rocky Canada”), Creative Recreation, LLC, an Ohio limited liability company
(“Creative”), Creative Recreation Retail, LLC, an Ohio limited liability company
(“Creative Retail”), and Creative Recreation International, LLC, an Ohio limited
liability company (“Creative International”) (Parent, Lehigh, Lifestyle, Rocky
Wholesale, Rocky International, Rocky Canada, Creative, Creative Retail, and
Creative International, collectively, the “Borrowers” and individually a
“Borrower”), the financial institutions which are now or which hereafter become
a party thereto (collectively, the “Lenders” and individually a “Lender”) and
PNC Bank, National Association (“PNC”), as Agent (as same has been or may be
amended, supplemented or otherwise modified in accordance with the terms
thereof, the “Credit Agreement”), acknowledges receipt of four (4) executed
counterparts of a completed Commitment Transfer Supplement in the form attached
hereto. [Note: Attach copy of Commitment Transfer Supplement.] Terms defined in
such Commitment Transfer Supplement are used herein as therein defined.

 

Pursuant to such Commitment Transfer Supplement, you are advised that the
Transfer Effective Date will be [Insert date of Transfer Effective Notice].

 

 

PNC BANK, NATIONAL ASSOCIATION,

as Agent

      By:     Print Name:     Title:  

 

ACCEPTED FOR RECORDATION

IN REGISTER:

 

cc: Borrowing Agent

 

3

 

 

Transfer Effective Notice

 

To: PNC Bank, National Association, as Transferor Lender and , as Purchasing
Lender:

 

The undersigned, as Agent under the Amended and Restated Revolving Credit, Term
Loan, Guaranty, and Security Agreement dated as of December 19, 2014 among Rocky
Brands, Inc., an Ohio corporation (“Parent”), Lehigh Outfitters, LLC, a Delaware
limited liability company (“Lehigh”), Lifestyle Footwear, Inc., a Delaware
corporation (“Lifestyle”), Rocky Brands Wholesale LLC, a Delaware limited
liability company (“Rocky Wholesale”), Rocky Brands International, LLC, an Ohio
limited liability company (“Rocky International”), Rocky Brands Canada, Inc., a
corporation formed under the laws of the Province of Nova Scotia and a
continuation of a corporation formed under the laws of the Province of Ontario
(“Rocky Canada”), Creative Recreation, LLC, an Ohio limited liability company
(“Creative”), Creative Recreation Retail, LLC, an Ohio limited liability company
(“Creative Retail”), and Creative Recreation International, LLC, an Ohio limited
liability company (“Creative International”) (Parent, Lehigh, Lifestyle, Rocky
Wholesale, Rocky International, Rocky Canada, Creative, Creative Retail, and
Creative International, collectively, the “Borrowers” and individually a
“Borrower”), the financial institutions which are now or which hereafter become
a party thereto (collectively, the “Lenders” and individually a “Lender”) and
PNC Bank, National Association (“PNC”), as Agent (as same has been or may be
amended, supplemented or otherwise modified in accordance with the terms
thereof, the “Credit Agreement”), acknowledges receipt of four (4) executed
counterparts of a completed Commitment Transfer Supplement in the form attached
hereto.

 

Pursuant to such Commitment Transfer Supplement, you are advised that the
Transfer Effective Date will be ____________.

 

 

PNC BANK, NATIONAL ASSOCIATION,

as Agent

      By:     Print Name:     Title:  

 

ACCEPTED FOR RECORDATION IN REGISTER:

 

4

 

 

 

SCHEDULES TO AMENDED AND RESTATED

REVOLVING CREDIT, TERM LOAN, GUARANTY AND SECURITY AGREEMENT

 

Dated as of December 19, 2014

 

Introduction:

 

For purposes of this introduction, the term “Schedules” shall include the
following:

 

SCHEDULE 1.2(a) - Permitted Encumbrances SCHEDULE 4.5 - Real Property,
Equipment, Books and Records, and Inventory Locations SCHEDULE 4.11 - Insurance
SCHEDULE 4.15 (c) - Chief Executive Offices and Location of Books and Records
SCHEDULE 4.15 (h) - Deposit and Investment Accounts SCHEDULE 4.15 (j) -
Government Contracts SCHEDULE 5.1 - Consents SCHEDULE 5.2(a) - States of
Qualification and Good Standing SCHEDULE 5.2(b) - Equity Interests; Subsidiaries
SCHEDULE 5.4 - Federal Tax Identification Number SCHEDULE 5.5(a) - Financial
Projections SCHEDULE 5.6 - Prior Names SCHEDULE 5.7 - OSHA and Environmental
Compliance SCHEDULE 5.8(d) - ERISA Plans SCHEDULE 5.9 - Intellectual Property,
Source Code Escrow Agreements SCHEDULE 5.10 - Licenses and Permits SCHEDULE 5.12
- Material Contracts SCHEDULE 5.14 - Labor Disputes SCHEDULE 7.3 - Guarantees
SCHEDULE 7.8 - Existing Indebtedness

 

Unless otherwise defined in these Schedules, all capitalized terms used herein
shall have the meanings ascribed to them in the Amended and Restated Revolving
Credit, Term Loan, Guaranty and Security Agreement dated December 19, 2014 (the
“Agreement”) by, between and among Rocky Brands, Inc., Lifestyle Footwear, Inc.,
Rocky Brands Wholesale LLC, Lehigh Outfitters, LLC, Rocky Brands International,
LLC, Rocky Brands Canada, Inc. (f/k/a Rocky Canada, Inc.), Creative Recreation,
LLC, Creative Recreation Retail, LLC and Creative Recreation International, LLC
(collectively, the “Borrowers”), the Guarantors (as defined in the Agreement),
the Lenders (as defined in the Agreement), and PNC Bank, National Association,
in its capacity as agent for the Lenders (hereinafter referred to in such
capacity as the “Agent”).

 

Matters reflected in these Schedules are not necessarily limited to matters
required by the Agreement to be reflected in the Schedules. Such additional
matters are set forth for informational purposes and do not necessarily include
other matters of a similar nature. In no event shall the listing of such matters
in these Schedules be deemed or interpreted to broaden or otherwise amplify the
Borrowers’ representations, warranties, covenants or agreements contained in the
Agreement.

 

The headings contained in these Schedules are for reference purposes only and
shall not affect in any way the meaning or interpretation of the Agreement or
these Schedules. A disclosure with respect to any one matter contained herein
shall be deemed a disclosure with respect to all other matters.

 

1

 

 

Schedule 1.2(a)

Permitted Encumbrances

 

A.All Loan Parties

 

Liens on real estate in which a Loan Party is lessee.

 

Liens granted pursuant to the Existing Loan Agreement.

 

B.Rocky Brands, Inc.

 

Liens granted pursuant to the operating leases for the equipment described
below:

 

Secured Party   Collateral Model #   Quantity Xerox   5845APT   2     5855APT  
2     5865APT   2     D95CP-METER   1     W7835PT   2     W7855PT   2    
X570EFI   2     XC560   2 Pitney Bowes   Mail Machine NX01   1 WORTHEN   SRM   1

 

Secured Party   Collateral Crown Credit   Leased equipment (forklifts and
batteries) pursuant to Ohio UCC File No. OH00135740666

 

C.Lifestyle Footwear, Inc.

 

Liens granted pursuant to the operating leases for the equipment described
below:

 

Secured Party   Collateral Model #   Quantity Pitney Bowes   Postage Meter
10/5/12   1     Carr 125Km 3.8 Moca XX   1 W. L. Gore   BD0123   1     BTM 0309
  1     GCT-0222   1     GHA-6653   1 IFCO Recycle   Bin/baler for recycle   1

 

2

 

 

D.Rocky Brands Wholesale LLC

 

None additional.

 

E.Lehigh Outfitters, LLC

 

Liens granted pursuant to the operating leases for the equipment described
below:

 

Secured Party   Collateral Model #   Quantity Xerox   W7855PT   1

 

F.Rocky Brands International, LLC

 

None additional.

 

G.Rocky Brands Canada, Inc.

 

None additional.

 

H.Creative Recreation, LLC

 

Liens granted pursuant to the operating leases for the equipment described
below:

 

Secured Party   Collateral Model #   Quantity Toshiba   Model E-Studio 2330X
Printer   2     Model E-Studio IO35100C   1 Hasler/MailFinance   IM440 W. 10 lb.
scale   1

 

I.Creative Recreation Retail, LLC

 

None additional.

 

J.Creative Recreation International, LLC

 

None additional.

 

K.Five Star Enterprises Ltd.

 

Liens granted pursuant to the operating leases for the equipment described
below:

 

Secured Party   Collateral Model #   Quantity USM   High Speed Stitcher   1 W.
L. Gore   BD   3     BTMCEO   4     GCT   2     GHA   6     GSFTM   1

 

3

 

 

Schedule 4.5

Real Property, Equipment, Books and Records, and Inventory Locations

 

A.Rocky Brands, Inc.

 

1.Owned Real Property

 

39 East Canal Street

Nelsonville, OH 45764

(Chief Executive Office of Rocky Brands, Inc., Rocky Brands Wholesale LLC,
Lehigh Outfitters, LLC, Rocky Brands International, LLC, Rocky Brands Canada,
Inc., Creative Recreation, LLC, Creative Recreation Retail, LLC, and Creative
Recreation International, LLC)

 

29 Fayette St.

Nelsonville, OH 45764

 

2.Leased Real Property – None

 

 

B.Lifestyle Footwear, Inc.

 

1.Owned Real Property – None

 

2.Leased Real Property

 

Road 125 KM 3.8 BO Pueblo Industrial Park

Moca, PR 00676-0728

Landlord: Puerto Rico Industrial Development Company

                 Juan Ramos Aponte, PRIDCO Business Development Officer

                 P.O. Box 362350, San Juan, PR 00936-2350

Chief Executive Office

 

C.Rocky Brands Wholesale LLC

 

1.Owned Real Property

 

37601 Rocky Boots Way

Logan, OH 43138

(aka Rt. 33 & Rt. 595, Haydenville, OH)

 

2.Leased Real Property

 

Denver Merchandise Mart

451 East 58th Street

Denver, CO 80216

 

4

 

 

3.Other Locations

 

Jacobson Global Logistics (3rd party location)

18209 80th Ave. S. Ste A

Kent, WA 98032

 

Various inventory consignment locations with Raven Rock

Its principal office located at South Park Office Complex,

7610 McEwen Rd., Dayton, Ohio 45459

 

D.Lehigh Outfitters, LLC

 

1.Owned Real Property

 

42-45 East Canal Street

Nelsonville, OH 45764

 

2.Leased Real Property

 

1130 North Nimitz Highway, Suite A-122

Honolulu, HI 96817

 

3240 Peach Orchard Rd., Suite 6

Augusta, GA 30906

 

3.Other Locations

 

Jacobson Global Logistics (3rd party location)

18209 80th Ave. S. Ste A

Kent, WA 98032

 

E.Rocky Brands Canada, Inc.

 

1.Owned Real Property - None

 

2.Leased Real Property - None

 

3.Other Locations

 

Jacobson Global Logistics (3rd party location)

18209 80th Ave. S. Ste A

Kent, WA 98032

 

F.Lehigh Outfitters, LLC Storage (Shuttle) Locations:

 

New York Transit Shuttle Storage

426 Barretto

Bronx, New York 10474

 

G.Lehigh Outfitters, LLC Commissary Locations (stores in employer/customer
places of business):

 

Puget Sound Naval Shipyard, Store 5392

 

5

 

 

1400 Farragut Ave. Bremerton, WA 98314

 

Texas Instruments, Store 5395

13121 TI BLVD, Dallas, TX 75243

 

H.Creative Recreation, LLC

 

1.Owned Real Property - None

 

2.Leased Real Property

 

6420 Wilshire Boulevard, Suite 1800

Los Angeles, CA 90048

The Realty Associates Fund VIII, L.P., Landlord

 

Address of Landlord:

c/o TA Associates Realty

1301 Dove Street, Suite 860

Newport Beach, CA

Attn: Asset Manager/6420 Wilshire

 

and

 

c/o TA Associates Realty

28 State Street, Tenth Floor

Boston, MA 02109

Attn: Asset Manager/6420 Wilshire

 

3.Other Locations

 

Jacobson Global Logistics (3rd party location)

18209 80th Ave. S. Ste A

Kent, WA 98032

 

I.Creative Recreation Retail, LLC

 

1.Owned Real Property - None

 

2.Leased Real Property - None

 

3.Other Locations

 

Jacobson Global Logistics (3rd party location)

18209 80th Ave. S. Ste A

Kent, WA 98032

 

J.Creative Recreation International, LLC

 

1.Owned Real Property - None

 

2.Leased Real Property - None

 

6

 

 

3.Other Locations

 

Jacobson Global Logistics (3rd party location)

18209 80th Ave. S. Ste A

Kent, WA 98032

 

7

 

 

Schedule 4.11

Insurance

 

See Annex 4.11.

 

8

 

 

Schedule 4.15(c)

Chief Executive Offices and Location of Books and Records

 

Rocky Brands, Inc.

Rocky Brands Wholesale LLC

Lehigh Outfitters, LLC

Rocky Brands International, LLC

Rocky Brands Canada, Inc.

Creative Recreation, LLC

Creative Recreation Retail, LLC

Creative Recreation International, LLC

Chief Executive Office and Location of Books and Records:

39 East Canal Street

Nelsonville, OH 45764

 

Lifestyle Footwear, Inc.

Chief Executive Office:

Road 125 KM 3.8 BO

Pueblo Industrial Park

Moca, PR 00676-0728

 

Location of Books and Records:

39 East Canal Street

Nelsonville, OH 45764

 

Locations where any Borrower, Guarantor or their respective subsidiaries
maintain assets in Canada – See the locations set forth on Item E of Schedule
4.5.

 

9

 

 

Schedule 4.15(h)

Deposit and Investment Accounts

 

First National Bank

11 Public Square

Nelsonville, OH 45764

 

Name on Account: Rocky Brands, Inc. Type of Account: FNB Operating Account
Account Number:       Name on Account: Lehigh Outfitters, LLC Type of Account:
Business Checking – Ohio Hunting and Fishing License Sales Account Number:  

 

 

Banco Popular

P.O. Box 362708

San Juan, Puerto Rico 00936-2708

 

Name on Account: Lifestyle Footwear Inc. Type of Account: General Account
Account Number:       Name on Account: Lifestyle Footwear Inc. Type of Account:
Payroll Account Account Number:  

 

 

Lehigh Outfitters, LLC (formerly Rocky Brands Retail LLC; Lehigh Safety Shoe Co.
LLC) shoe center bank accounts:

 

(a)Bank of Hawaii Account #s

 

(b)Wells Fargo Bank Account #

 

PNC Bank, N.A.

Two Tower Center Blvd

East Brunswick, NJ 08816

 

Name on Account: Rocky Brands, Inc. Type of Account: Master Funding Account
Account Number:   Name on Account: Rocky Brands, Inc. Type of Account:
Disbursement Account Account Number:   Name on Account: Five Star Enterprises

 

10

 

 

Type of Account: Operating Account Account Number:   Name on Account: Rocky
Brands Wholesale LLC Type of Account: Disbursement Account Account Number:  
Name on Account: Lehigh Outfitters, LLC Type of Account: Disbursement Account
Account Number:   Name on Account: Creative Recreation, LLC Type of Account:
Disbursement Checking Account Account Number:   Name on Account: Creative
Recreation, LLC Type of Account: Collection Account Account Number:   Name on
Account: Rocky Brands Wholesale LLC Type of Account: Collection Account Account
Number:   Name on Account: Lehigh Outfitters LLC Type of Account: Collection
Account Account Number:

 

Bank of Montreal

Toronto M/O - First Canadian Place

Toronto, ON M5X1A3

 

Name on Account: Rocky Canada, Inc Type of Account: Operations Account Account
Number:   Name on Account: Rocky Canada, Inc Type of Account: Operations Account
Account Number:

 

11

 

 

Schedule 4.15(j)

Government Contracts

 

Solicitation/Contract/Order for Commercial Items issued by Defense Logistics
Agency Troop Support to Rocky Brands, Inc., Contract No. SPM1C1-13-D-1017,
awarded December 21, 2012 for Army Combat Boots, Hot Weather

 

12

 

 

Schedule 5.1

Consents

 

None

 

13

 

 

Schedule 5.2(a)

States of Qualification and Good Standing

 

A.Rocky Brands, Inc., an Ohio corporation

 

OH, VA

 

B.Lifestyle Footwear, Inc., a Delaware corporation

 

DE, Puerto Rico

 

C.Rocky Brands Wholesale LLC, a Delaware limited liability company

 

DE, AZ, GA, IA, LA, NY, OH, SC, TN, UT and WV

 

D.Lehigh Outfitters, LLC, a Delaware limited liability company

 

DE, AL, AZ, AR, CA, CO, CT, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA,
MI, MN, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN,
TX, UT, VT, VA, WA, WI, WV, WY, Puerto Rico

 

E.Rocky Brands International, LLC, an Ohio limited liability company

 

OH

 

F.Rocky Brands Canada, Inc., a Nova Scotia corporation

 

Ontario, Nova Scotia

 

G.Creative Recreation, LLC, an Ohio limited liability company

 

OH, CA

 

H.Creative Recreation Retail, LLC, an Ohio limited liability company

 

OH, CA

 

I.Creative Recreation International, LLC, an Ohio limited liability company

 

OH

 

14

 

 

Schedule 5.2(b)

Equity Interests; Subsidiaries

 

1. Subsidiaries of Rocky Brands, Inc., an Ohio Corporation, Charter Number
821674:

 

Name of Subsidiary/Jurisdiction
of Organization/Charter Number   Amount of
Equity Interest   Percentage of
Equity Interest

Lifestyle Footwear, Inc., a Delaware corporation, Charter Number 2109896

 

  2,000 shares of common stock   100%

Rocky Brands Wholesale LLC, a Delaware limited liability company, Charter Number
3182983

 

  100 Class A Common Units   100% Lehigh Outfitters, LLC, a Delaware limited
liability company, Charter Number 3182836   100 Class A Common Units   100%    
      Rocky Brands International, LLC, an Ohio limited liability company,
Charter Number 1776364   Ownership interests are not certificated   100%        
 

Five Star Enterprises Ltd., a Cayman Islands corporation, Charter Number 26239

 

  5,000 common shares   100% Rocky Brands Canada, Inc., a Nova Scotia
corporation   100 common shares   100%          

EJ Asia Limited, a Hong Kong corporation

(Inactive, in process of dissolution)

  9,999 ordinary shares   99.99%          

Creative Recreation, LLC, an Ohio limited liability company, Charter Number
2240222

 

  100%   100% Creative Recreation Retail, LLC, an Ohio limited liability
company, Charter No. 2273309   100%   100%           Creative Recreation
International, LLC, an Ohio limited liability company, Charter No. 2273306  
100%   100%

 

2. The above Subsidiaries of Rocky Brands, Inc. do not have any Subsidiaries.

 

3. Various promissory installment notes from time to time from customers that
are experiencing financial difficulties.

 

15

 

 

Schedule 5.4

Federal Tax Identification Number

 

A.Rocky Brands, Inc.:

 

B.Lifestyle Footwear, Inc.:

 

C.Rocky Brands Wholesale LLC:

 

D.Lehigh Outfitters, LLC (f/k/a Rocky Brands Retail LLC):

 

E.Rocky Brands International, LLC:

 

F.Rocky Brands Canada, Inc. (f/k/a Rocky Canada, Inc.):

 

G.Creative Recreation, LLC:

 

H.Creative Recreation Retail, LLC:

 

I.Creative Recreation International, LLC:

 

16

 

 

Schedule 5.6

Prior Names

 

CURRENT NAME

 

PREVIOUS NAMES

After December 31, 2009

Rocky Brands, Inc.

 

  None

Lifestyle Footwear, Inc.

 

  None

Rocky Brands Wholesale LLC

 

 

None

 

Lehigh Outfitters, LLC  

Rocky Brands Retail LLC

 

Rocky Brands International, LLC

 

  None

Rocky Brands Canada, Inc.

 

 

Rocky Canada, Inc., an Ontario corporation

 

Creative Recreation, LLC   Creative Recreation, LLC acquired substantially all
of the assets of Kommonwealth, Inc. and Creative Recreation International
Limited on December 13, 2013      

Creative Recreation Retail, LLC

 

  None

Creative Recreation International, LLC

 

  None

 

17

 

 

Schedule 5.7

OSHA and Environmental Compliance

 

None

 

18

 

 

Schedule 5.8(d)

ERISA Plans

 

1. 401(k) Savings Plan

 

2. Rocky Brands, Inc. Retirement Plan

 

19

 

 

Schedule 5.9

Intellectual Property, Source Code Escrow Agreements

 

A. See Annex 5.9.

 

B. Creative Recreation, LLC

 

1.Domain Names: www.cr8rec.com

 

2.Creative Recreation, LLC uses the trade name “Creative Recreation.”

 

3.Creative Recreation, LLC uses the trade name “Creative Recreation
International.”

 

4.Creative Recreation, LLC has unregistered copyrights in its website,
promotional materials, and publications.

 

5.Creative Recreation, LLC uses the following software (not owned by it):

 

a.EDI Software; and

 

b.NuOrder software.

 

8.Objections or pending challenges: None.

 

C. Creative Recreation Retail, LLC

 

None.

 

D. Creative Recreation International, LLC

 

None.

 

20

 

 

Schedule 5.10

Licenses and Permits

 

(a)Trademark License Agreement between W. L. Gore & Associates, Inc., W. L. Gore
& Associates GmbH, and Rocky Shoes & Boots, Inc. dated July 11, 2001

 

(b)Trademark License among W.L. Gore & Associates, Inc., W.L. Gore & Associates
GmbH, Japan Gore-Tex, Inc. and Georgia Boot LLC dated May 20, 2002

 

(c)License Agreement in Relation to Michelin Trademarks between Rocky Brands,
Inc. and Michelin Lifestyle Limited, dated January 1, 2013

 

(d)Agreement between Rocky Brands, Inc. and FLOW Formal Alliance LLC dated
September 1, 2007

 

(e)California State Board of Equalization Seller’s Permit for Creative
Recreation, LLC

 

(f)City of Los Angeles Business License for Creative Recreation, LLC

 

21

 

  

Schedule 5.12

Material Contracts

 

None

 

22

 

 

Schedule 5.14

Labor Disputes

 

None

 

23

 

 

Schedule 7.3

Guarantees

 

1.Indebtedness of Creative Recreation, LLC under the lease of real property set
forth on Item H. 2. of Schedule 4.5.

 

24

 

 

Schedule 7.8

Existing Indebtedness

 

1.Indebtedness to Lenders under the Existing Loan Agreement.

 

2.Capital Lease Obligations

 

None

 

3.Androscoggin Savings Bank and Pamco Machine

 

4.Indebtedness of Creative Recreation, LLC under the lease of real property set
forth on Item H. 2. of Schedule 4.5.

 

25