Exhibit 10.1
 
 

 

 
 
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
 
 
dated as of
 
 
May 27, 2010
 
 
among
 
DECKERS OUTDOOR CORPORATION
and
TSUBO, LLC

 
as Borrowers,
and
 
COMERICA BANK,
as Bank
 
 
$20,000,000
 
 
 

 

 
 
 
 

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TABLE OF CONTENTS
 
 

    Page      
ARTICLE I DEFINITIONS AND INTERPRETATIONS
1
1.1
Definitions
1
1.2
Accounting Terms and Determinations
14
1.3
Computation of Time Periods
14
1.4
Construction
14
1.5
Exhibits and Schedules
14
1.6
No Presumption Against Any Party
14
1.7
Independence of Provisions
15
ARTICLE II TERMS OF THE CREDIT
15
2.1
Revolving Loans
15
2.2
Foreign Exchange Forward  Contracts
15
2.3
Intentionally omitted.
16
2.4
Interest Rates; Payments of Interest.
16
2.5
Request for Advance Requirements.
17
2.6
Conversion or Continuation Requirements.
17
2.7
Additional Costs.
18
2.8
Illegality; Impossibility
19
2.9
Disaster
20
2.10
Increased Risk-Based Capital Cost
20
2.11
Statements of Obligations
20
2.12
Holidays
21
2.13
Time and Place of Payments.
21
2.14
Mandatory Principal Reductions
21
2.15
Fees.
22
ARTICLE III LETTERS OF CREDIT
22
3.1
Letters of Credit.
22
3.2
Procedure for Issuance of Letters of Credit
23
3.3
Fees, Commissions and Other Charges.
23
3.4
Reimbursement Obligations.
24

 
 
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     Page      
3.5
Obligations Absolute.
24
3.6
Letter of Credit Payments
25
3.7
Outstanding Letters of Credit Following Event of Default
25
3.8
Letter of Credit Applications
26
ARTICLE IV CONDITIONS PRECEDENT
26
4.1
Conditions to Initial Loans or Letter(s) of Credit
26
4.2
Conditions to all Loans and Letters of Credit
27
ARTICLE V REPRESENTATIONS AND WARRANTIES
27
5.1
Legal Status
27
5.2
No Violation; Compliance.
28
5.3
Authorization; Enforceability.
28
5.4
Approvals; Consents
29
5.5
Liens
29
5.6
Debt
29
5.7
Litigation
29
5.8
No Default
29
5.9
Subsidiaries
29
5.10
Taxes
29
5.11
Correctness of Financial Statements
30
5.12
ERISA
30
5.13
Other Obligations
30
5.14
Public Utility Holding Company Act
30
5.15
Investment Company Act
30
5.16
Patents, Trademarks, Copyrights, and Intellectual Property, etc.
30
5.17
Environmental Condition
31
5.18
Solvency
31
5.19
Intentionally omitted.
31
5.20
Intentionally omitted.
31
5.21
Intentionally omitted.
31

 
 
 
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TABLE OF CONTENTS
 
 

   Page    
ARTICLE VI AFFIRMATIVE COVENANTS
32
6.1
Punctual Payments
32
6.2
Books and Records; Collateral Audits
32
6.3
Collateral Reporting and Financial Statements
32
6.4
Existence; Preservation of Licenses; Compliance with Law
33
6.5
Insurance
33
6.6
Assets
34
6.7
Taxes and Other Liabilities
34
6.8
Notice to Bank
34
6.9
Employee Benefits.
35
6.10
Further Assurances
35
6.11
Bank Accounts
35
6.12
Environment
36
6.13
Additional Collateral.
36
6.14
Guarantors
37
6.15
Returns
37
ARTICLE VII NEGATIVE COVENANTS
37
7.1
Use of Funds; Margin Regulation.
37
7.2
Debt
37
7.3
Liens
37
7.4
Merger, Consolidation, Transfer of Assets
38
7.5
Intentionally omitted.
38
7.6
Sales and Leasebacks
38
7.7
Asset Sales
38
7.8
Investments.
38
7.9
Character of Business
39
7.10
Distributions.
39
7.11
Guaranty
39
7.12
Intentionally omitted.
40

 
 
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     Page      
7.13
Transactions with Affiliates
40
7.14
Stock Issuance
40
7.15
Financial Condition
40
7.16
Transactions Under ERISA
40
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES
41
8.1
Events of Default
41
8.2
Remedies
44
8.3
Setoff
44
8.4
Appointment of Receiver or Trustee.
44
8.5
Remedies Cumulative
44
ARTICLE IX TAXES
45
9.1
Taxes on Payments
45
9.2
Indemnification For Taxes
45
9.3
Evidence of Payment
45
ARTICLE X MISCELLANEOUS
46
10.1
Notices
46
10.2
No Waivers
46
10.3
Expenses; Documentary Taxes; Indemnification.
46
10.4
Amendments and Waivers
47
10.5
Successors and Assigns; Participations; Disclosure.
47
10.6
Confidentiality
48
10.7
Counterparts; Effectiveness; Integration
49
10.8
Severability
49
10.9
Knowledge.
49
10.10
Additional Waivers.
49
10.11
Destruction Of Borrowers’ Documents
50
10.12
CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
50
10.13
Second Amended and Restated Agreement
51
10.14
No Novation; Reaffirmation of Loan Documents
51

 
 
 
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TABLE OF CONTENTS
 
 

   Page    
ARTICLE XI JOINT AND SEVERAL LIABILITY; SINGLE LOAN ACCOUNT
52
11.1
Joint and Several Liability
52
11.2
Primary Obligation; Waiver of Marshalling
52
11.3
Financial Condition of Borrowers
52
11.4
Continuing Liability
52
11.5
Additional Waivers
53
11.6
Settlement or Releases
55
11.7
No Election
56
11.8
Indefeasible Payment
56
11.9
Single Loan Account
56
11.10
Apportionment of Proceeds of Loans
56
11.11
Bank Held Harmless
56
11.12
Borrowers’ Integrated Operations
57

 
 
 
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EXHIBITS AND SCHEDULES

 
Schedule 5.6
-
Permitted Debt
     
Schedule 5.7
-
Litigation
     
Schedule 5.9
-
Subsidiaries
     
Schedule 5.12
-
Employee Benefit Plans
     
Schedule 7.5
-
Leases

 
 
 
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
 
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 27, 2010, is
entered into among Deckers Outdoor Corporation, a Delaware corporation
(“Parent”),  and Tsubo, LLC, a Delaware limited liability company
(“Tsubo”, Parent and Tsubo collectively sometimes referred to herein as
“Borrowers” and individually as a “Borrower”), on the one hand, and Comerica
Bank (“Bank”), on the other hand.
 
The parties hereto are parties to that certain Revolving Credit Agreement, dated
as of February 21, 2002, as amended and restated on November 25, 2002 (the
“Prior Agreement”).
 
The parties hereto desire to again amend and restate the Prior Agreement in its
entirety in accordance with the terms and conditions of this Agreement.
 
NOW THEREFORE, the parties hereto hereby agree as follows:
 
ARTICLE I
 
DEFINITIONS AND INTERPRETATIONS
 
1.1 Definitions .  The following terms, as used herein, shall have the following
meanings:
 
“Account” and “Account Debtor” have the meanings given to such terms in the
Security Agreement.
 
“Acquisition”  means the purchase and sale transactions set forth in the
Purchase Agreement respecting the assets relating to or used in commerce in
connection with the Teva® brand.
 
“Affiliate” means any Person (i) that, directly or indirectly, controls, is
controlled by or is under common control with any Borrower or any Subsidiary;
(ii) which to the Knowledge of Parent, directly or indirectly beneficially owns
or controls ten percent (10%) or more of any class of voting stock of any
Borrower or any Subsidiary; or (iii) ten percent (10%) or more of the voting
stock of which is directly or indirectly beneficially owned or held by any
Borrower or any Subsidiary.  For purposes of the foregoing, control (including
controlled by and under common control with) shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
 
“Agreement”  means this Second Amended and Restated Credit Agreement, as amended
or restated from time to time in accordance with its terms.
 
“Annual Fee” has the meaning given to such term in Section 2.15(b).
 
 
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“Applicable Margin” has the meaning set forth in the Interest Rate Addendum.
 
“Asset” means any interest of a Person in any kind of property or asset, whether
real, personal, or mixed real and personal, and whether tangible or intangible.
 
“Asset Sale” means any sale, transfer or other disposition of any Borrower’s or
any Subsidiary’s (other than an Excluded Subsidiary) businesses or Asset(s) now
owned or hereafter acquired, including shares of stock and indebtedness of any
Subsidiary (other than an Excluded Subsidiary), receivables and leasehold
interests.
 
“Audit Fee” has the meaning given to such term in Section 6.2.
 
“Bankruptcy Code” means The Bankruptcy Reform Act of 1978 (Pub. L. No. 95-598;
11 U.S.C.), as amended or supplemented from time to time, or any successor
statute, and any and all rules and regulations issued or promulgated in
connection therewith.
 
“Base Lending Rate” has the meaning ascribed to “Applicable Interest Rate” in
the Interest Rate Addendum with respect to any Prime-based Advance.
 
“Borrowing” means a borrowing of Revolving Loans from Bank pursuant to the terms
and conditions hereof.
 
“Business Day” has the meaning set forth in the Interest Rate Addendum.
 
“Capital Expenditures” means expenditures made in cash, or financed with long
term debt, by any Person for the acquisition of any fixed Assets or
improvements, replacements, substitutions, or additions thereto that have a
useful life of more than one (1) year, including the direct or indirect
acquisition of such Assets by way of increased product or service charges,
offset items, or otherwise, and the principal portion of payments with respect
to Capital Lease Obligations, calculated in accordance with GAAP.
 
“Capital Lease” means any lease of an Asset by a Person as lessee which would,
in conformity with GAAP, be required to be accounted for as an Asset and
corresponding liability on the balance sheet of that Person.
 
“Capital Lease Obligations” of a Person means the amount of the obligations of
such Person under all Capital Leases which would be shown as a liability on a
balance sheet of such Person prepared in accordance with GAAP.
 
“Capital Stock” means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
 
 
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“Change of Control” means any (i) reorganization, recapitalization,
consolidation or merger (or similar transaction or series of related
transactions) of any Borrower, or sale or exchange of outstanding shares (or
similar transaction or series of related transactions) of any Borrower, in each
case in which the holders of any Borrower’s outstanding shares immediately
before consummation of such transaction or series of related transactions do
not, immediately after consummation of such transaction or series of related
transactions, retain shares representing more than fifty percent (50%) of the
voting power of the surviving entity of such transaction or series of related
transactions (or the parent of such surviving entity if such surviving entity is
wholly owned by such parent), in each case without regard to whether such
Borrower is the surviving entity, or (ii) sale or issuance by any Borrower of
new shares of preferred stock of such Borrower to investors, none of whom are
current investors in such Borrower, and such new shares of preferred stock are
senior to all existing preferred stock and common stock with respect to
liquidation preferences, and the aggregate liquidation preference of the new
shares of preferred stock is more than fifty percent (50%) of the aggregate
liquidation preference of all shares of preferred stock of such Borrower.
 
“Closing Date” means the date when all of the conditions set forth in
Section 4.1 have been fulfilled to the reasonable satisfaction of Bank and its
counsel.
 
“Closing Fee” has the meaning given to such term in Section 2.15(a).
 
“Collateral Access Agreement” has the meaning given to such term in the Security
Agreement.
 
“Consolidated Effective Tangible Net Worth” means, as of the date of
determination, the result of (a) the sum of (i) Borrowers’ and Subsidiaries’
consolidated total stockholder’s equity, and (ii) any subordinate debt, minus
(b) the sum of (i) all Intangible Assets of Borrowers and Subsidiaries, and (ii)
all amounts due to Borrower from Affiliates (other than Subsidiaries).
 
“Consolidated Net Profit” and “Consolidated Net Loss” mean, respectively, with
respect to any period, the consolidated net profit, or loss, as applicable, of
Borrowers and the Subsidiaries after all federal, state and local income taxes
reflected on Borrowers’ Financial Statement for such period, calculated in
accordance with GAAP, plus any write-off of goodwill pursuant to FASB 142.
 
 “Copyright Security Agreements” means, collectively, (i) that certain Copyright
Security Agreement, dated as of November 25, 2002, between Borrowers and Bank,
and (ii) any Copyright Security Agreement or like agreement hereafter entered
into by Borrower or any Subsidiary, on the one hand, and Bank, on the other
hand, pursuant to Section 6.13(a).]
 
“Currency Obligation” has the meaning given to such term in the Foreign Exchange
Agreement.
 
“Debt” means, as of the date of determination, the sum, but without duplication,
of any and all of a Person’s:  (i) indebtedness heretofore or hereafter created,
issued, incurred or assumed by such Person (directly or indirectly) for or in
respect of money borrowed; (ii) Capital Lease Obligations; (iii) obligations
evidenced by bonds, debentures, notes, or other similar instruments;
(iv) obligations for the deferred purchase price of property or services
(including trade obligations except accounts payable to trade creditors for
goods or services which are not aged more than 90 days from the billing date and
current operating liabilities (other than for borrowed money) which are not more
than 90 days past due, in each case incurred in the ordinary course of business,
as presently conducted, and paid within the specified time, unless contested in
good faith in appropriate proceedings (if applicable)); (v) current liabilities
in respect of unfunded vested benefits under any Plan; (vi) obligations under
letters of credit; (vii) obligations under acceptance facilities;
(viii) obligations under all guaranties, endorsements (other than for collection
or deposit in the ordinary course of business), and other voluntary contingent
obligations to purchase, to provide funds for payment, or supply funds to invest
in any other Person, or otherwise to assure a creditor against loss;
(ix) obligations secured by any Lien on any Asset of such Person, whether or not
such obligations have been assumed; and (x) Swaps.
 
 
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“Distributions” means dividends or distributions of earnings made by a Person to
its shareholders, partners or members, as the case may be.
 
“Dollars” or “$” means lawful currency of the United States of America.
 
“Eligible Assignee” means (a) a commercial bank, commercial finance company or
other asset based lender, having total assets in excess of $1,000,000,000; (b)
any Affiliate of Bank, and (c) if an Event of Default exists, any Person
reasonably acceptable to Bank.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, or any successor statute, and any and all regulations
thereunder.
 
“ERISA Event” means (a) a Reportable Event with respect to a Plan or
Multiemployer Plan, (b) the withdrawal of a member of the ERISA Group from a
Plan during a plan year in which it was a substantial employer (as defined in
Section 4001(a)(2) of ERISA), (c) the providing of notice of intent to terminate
a Plan in a distress termination (as described in Section 4041(c) of ERISA),
(d) the institution by the PBGC of proceedings to terminate a Plan or
Multiemployer Plan, (e) any event or condition (i) that provides a basis under
Section 4042(a)(1), (2), or (3) of ERISA for the termination of or the
appointment of a trustee to administer, any Plan or Multiemployer Plan, of
(ii) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA, (f) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA of a member of the ERISA Group from a
Multiemployer Plan, or (g) providing any security to any Plan under
Section 401(a)(29) of the Internal Revenue Code by a member of the ERISA Group.
 
“ERISA Group” means Borrowers and all members of a controlled group of
corporations and all trades or business (whether or not incorporated) under
common control which, together with Borrowers are treated as a single employer
under Section 414 of the Internal Revenue Code.
 
“Event of Default” has the meaning set forth in Section 8.1.
 
 
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“Excluded Subsidiaries” means all Subsidiaries of Borrowers that:  (i) are not
organized under the laws of any state or any territory of the United States of
America, or (ii) are not wholly owned by any Borrower or any Subsidiary.
 
“Expenses” means (i) all out-of-pocket expenses of Bank paid or incurred in
connection with their due diligence and investigation of Borrower, including
appraisal, filing, recording, documentation, publication and search fees and
other such expenses, and all attorneys’ fees and expenses (including attorneys’
fees incurred pursuant to proceedings arising under the Bankruptcy Code)
incurred in connection with the structuring, negotiation, drafting, preparation,
execution and delivery of this Agreement, the Loan Documents, and any and all
other documents, instruments and agreements entered into in connection herewith;
(ii) all out-of-pocket expenses of Bank, including attorneys’ fees and expenses
(including attorneys’ fees incurred pursuant to proceedings arising under the
Bankruptcy Code) paid or incurred in connection with the negotiation,
preparation, execution and delivery of any waiver, forbearance, consent,
amendment or addition to this Agreement or any Loan Document, or the termination
hereof and thereof; (iii) all costs or expenses paid or advanced by Bank which
are required to be paid by Borrowers under this Agreement or the Loan Documents,
including taxes and insurance premiums of every nature and kind of Bank; and
(iv) if an Event of Default occurs, all expenses paid or incurred by Bank,
including attorneys’ fees and expenses (including attorneys’ fees incurred
pursuant to proceedings arising under the Bankruptcy Code), costs of collection,
suit, arbitration, judicial reference and other enforcement proceedings, and any
other out-of-pocket expenses incurred in connection therewith or resulting
therefrom, whether or not suit is brought, or in connection with any refinancing
or restructuring of the Obligations and the liabilities of Borrowers under this
Agreement, any of the Loan Documents, or any other document, instrument or
agreement entered into in connection herewith in the nature of a workout.
 
“Fees” means the Annual Fee, the Closing Fee, the Late Payment Fee, the Letter
of Credit Fees and the Audit Fees.
 
“Financial Statement(s)” means, with respect to any accounting period of any
Person, statements of income and statements of cash flows of such Person for
such period, and balance sheets of such Person as of the end of such period,
setting forth in each case in comparative form figures for the corresponding
period in the preceding fiscal year or, if such period is a full fiscal year,
corresponding figures from the preceding annual audit, all prepared in
reasonable detail and in accordance with GAAP, subject to year-end adjustments
in the case of quarterly Financial Statements.  Financial Statement(s) shall
include the schedules thereto and annual Financial Statements shall also include
the footnotes thereto.
 
“Foreign Exchange Agreement” means that certain Foreign Currency Exchange Master
Agreement, dated as of January 11, 2002, as amended, restated or superseded,
between Parent and Bank, together with all other Bank’s standard agreements,
instruments and documents executed by a Borrower in connection therewith.
 
 
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“Foreign Exchange Reserve” means an amount equal to ten percent (10%) of the
Dollar equivalent of all of Borrower’s outstanding Currency Obligations.
 
“Foreign Exchange Sublimit” means Twenty Million Dollars ($20,000,000).
 
“GAAP” means generally accepted accounting principles in the United States of
America, consistently applied, which are in effect as of the date of this
Agreement.  If any changes in accounting principles from those in effect on the
date hereof are hereafter occasioned by promulgation of rules, regulations,
pronouncements or opinions by or are otherwise required by the Financial
Accounting Standards Board or the American Institute of Certified Public
Accountants (or successors thereto or agencies with similar functions), and any
of such changes results in a change in the method of calculation of, or affects
the results of such calculation of, any of the financial covenants, standards or
terms found herein, then the parties hereto agree to enter into and diligently
pursue negotiations in order to amend such financial covenants, standards or
terms so as to equitably reflect such changes, with the desired result that the
criteria for evaluating financial condition and results of operations of
Borrower and the Subsidiaries shall be the same after such changes as if such
changes had not been made.
 
“Governing Documents” means the certificate or articles or certificate of
incorporation, by-laws, articles or certificate of organization, operating
agreement, or other organizational or governing documents of any Person.
 
“Governmental Authority” means any federal, state, local or other governmental
department, commission, board, bureau, agency, central bank, court, tribunal or
other instrumentality or authority or subdivision thereof, domestic or foreign,
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
 
“Guaranties” and “Guaranty” means, individually or collectively as the context
requires, each certain Continuing Guaranty executed by a Guarantor in favor of
Bank.
 
“Guarantor(s)” means, individually or collectively as the context requires, any
Person who executes a Guaranty in favor of Bank with respect to the Obligations
in accordance with Section 6.14.
 
“Hazardous Materials” means all or any of the following:  (a) substances that
are defined or listed in, or otherwise classified pursuant to, any applicable
laws or regulations as hazardous substances, hazardous materials, hazardous
wastes, toxic substances, or any other formulation intended to define, list, or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or EP toxicity
or are otherwise regulated for the protection of persons, property or the
environment; (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources; (c) any flammable substances or explosives
or any radioactive materials; and (d) asbestos in any form or electrical
equipment which contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty (50) parts per million.
 
 
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“Holbrook” means Holbrook LTD, a Honk Kong corporation and a wholly-owned
subsidiary of Parent.
 
“Indemnified Person(s)” has the meaning given to such term in Section 10.3(c).
 
“Insolvency Proceeding” means any proceeding commenced by or against any Person,
under any provision of the Bankruptcy Code, or under any other bankruptcy or
insolvency law, including, but not limited to, assignments for the benefit of
creditors, formal or informal moratoriums, compositions, or extensions with some
or all creditors.
 
“Intangible Assets” means, with respect to any Person, that portion of the book
value of all of such Person’s assets that would be treated as intangibles under
GAAP.
 
“Interest Payment Date” means:
 
(i) with respect to each Prime-based Advance, the last day of each and every
month commencing the first such day after the making of such Loan, and the
Revolving Loans Maturity Date; and
 
(ii) with respect to each LIBOR-based Advance, the earlier of:  (1) the last day
of the LIBOR Period with respect thereto, or (2) if the LIBOR Period has a
duration of more than one month, every Business Day that occurs during such
LIBOR Period every one month from the first day of such LIBOR Period.
 
“Interest Rate Addendum” means the LIBOR/Prime Referenced Rate Addendum dated
the same date herewith among Borrowers and Bank, and all subsequent amendments,
restatements, supplements and other modifications thereto or replacements
therefore.
 
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute, and any and all regulations  thereunder.
 
“Inventory” has the meaning given to such term in the Security Agreement.
 
“ISP” means the International Standby Practices (1998 version), and any
subsequent versions or revisions approved by a Congress of the International
Chamber of Commerce Publication 590 and adhered to by Bank.
 
“Knowledge” has the meaning given to such term in Section 10.9.
 
“Late Payment Fee” has the meaning given to such term in Section 2.15(c).
 
“LC Fee Percentage” means 0.75%.
 
 
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“Lending Office” means Bank’s office located at its address set forth on the
signature pages hereof, or such other office of Bank as it may hereafter
desig­nate as its Lending Office by notice to Parent.
 
“Letter(s) of Credit” has the meaning given to such term in Section 3.1(a).
 
“Letter of Credit Application” means a Commercial Letter of Credit Application
and Agreement or a Standby Letter of Credit Application and Agreement, as
applicable, in Bank’s standard format.
 
“Letter of Credit Sublimit” means Two Million Five Hundred Thousand Dollars
($2,500,000) with respect to standby Letters of Credit and Ten Million Dollars
($10,000,000) with respect to commercial Letters of Credit.
 
“Letter of Credit Usage” means, on any date of determination, the aggregate
maximum amounts available to be drawn under all outstanding Letters of Credit,
without regard to whether any conditions to drawing could then be met.
 
“LIBOR” means London interbank offered rate.
 
“LIBOR Lending Rate” has the meaning ascribed to “Applicable Interest Rate” set
forth in the Interest Rate Addendum with respect to any LIBOR-based Advance.
 
“LIBOR Period” has the meaning set forth in the Interest Rate Addendum.
 
“LIBOR-based Advance” has the meaning set forth in the Interest Rate Addendum.
 
“Lien” means any mortgage, deed of trust, pledge, security inter­est,
hypothecation, assignment, deposit arrangement or other preferential
arrangement, charge or encumbrance (including, any conditional sale or other
title retention agreement, or finance lease) of any kind.
 
“Loan Document(s)” means each of the following documents, instruments, and
agreements individually or collectively, as the context requires:
 
(i) the Security Agreement (Borrowers);
 
(ii) the Letter of Credit Applications;
 
(iii) the Guaranties;
 
(iv) the Security Agreements (Subsidiary);
 
(v) the Stock Pledge Agreements;
 
(vi) the Patent and Trademark Security Agreements;
 
 
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(vii) the Copyright Security Agreements;
 
(viii) the Foreign Exchange Agreement; and
 
(ix) such other documents, instruments, and agreements (including intellectual
property security agreements, control agreements, financing statements and
fixture filings) as Bank may reasonably request in connection with the
transactions contemplated hereunder or to perfect or protect the liens and
security interests granted to Bank in connection herewith.
 
“Loan Party” means any Borrower or any Guarantor.
 
“Loans” means the Revolving Loans.
 
“Material Adverse Effect” means a material adverse effect on (i) the business,
Assets, condition (financial or otherwise), or results of operations of the
Borrowers and the Subsidiaries taken as a whole; (ii) the ability of the
Borrowers to perform their obligations under this Agreement and the Loan
Documents to which they are parties (including, without limitation, repayment of
the Obligations as they come due), or the ability of any Guarantor to perform
its obligations under the Loan Documents to which it is a party, (iii) the
validity or enforceability of this Agreement, the Loan Documents, or the rights
or remedies of Bank hereunder and thereunder, (iv) the value of the Assets
(taken as a whole) assigned or pledged to Bank as collateral, or (v) the
priority of Bank’s Liens with respect to the Assets assigned or pledged thereto
as collateral.
 
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA or Section 3(37) of ERISA to which any member of the ERISA Group has
contributed, or was obligated to contribute, within the preceding six plan years
(while a member of such ERISA Group) including for these purposes any Person
which ceased to be a member of the ERISA Group during such six year period.
 
“Net Cash Proceeds” means in connection with any Asset Sale, the cash proceeds
(including any cash payments received by way of deferred payment whether
pursuant to a note, installment receivable or otherwise, but only as and when
actually received) from such Asset Sale, less any proceeds used to replace the
Asset which is the subject of the Asset Sale and net of (i) attorneys’ fees,
accountants’ fees, investment banking fees, brokerage commissions and amounts
required to be applied to the repayment of any portion of the Debt secured by a
Lien not prohibited hereunder on any Asset which is the subject of such sale,
(ii) other customary fees, expenses and commissions incurred in connection with
the Asset Sale, and (iii) taxes paid or reasonably estimated to be payable as a
result of such Asset Sale.
 
“New Guarantor” means Deckers Consumer Direct Corporation, an Arizona
corporation.
 
“Obligations” means any and all indebtedness, liabilities, and obligations of
Borrowers owing to Bank and to its successors and assigns, previously, now, or
hereafter incurred, and howsoever evidenced, whether direct or indirect,
absolute or contingent, joint or several, liquidated or unliquidated, voluntary
or involuntary, due or not due, legal or equitable, whether incurred before,
during, or after any Insolvency Proceeding and whether recovery thereof is or
becomes barred by a statute of limitations or is or becomes otherwise
unenforceable or unallowable as claims in any Insolvency Proceeding, together
with all interest thereupon (including interest under Section 2.4(b) and
including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued during the pendency of an Insolvency Proceeding.  The
Obligations shall include, without limiting the generality of the foregoing, all
principal and interest owing under the Loans, all Reimbursement Obligations, all
Expenses, the Fees, any other fees and expenses due hereunder and under the Loan
Documents (including any fees or expenses that, but for the provisions of the
Bankruptcy Code, would have accrued during the pendency of an Insolvency
Proceeding), and all other indebted­ness evidenced by this Agreement and/or the
Loan Documents.
 
 
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“Participant” has the meaning set forth in Section 10.5(d).
 
“Patent and Trademark Security Agreements” means, collectively, (i) that certain
Patent and Trademark Security Agreement, dated as of February 21, 2002, between
Parent and Bank, (ii) that certain Patent and Trademark Security Agreement,
dated as of November 25, 2002, between Parent and Bank, and (iii) any Patent and
Trademark Security Agreement or like agreement hereafter entered into by any
Borrower or any Subsidiary, on the one hand, and Bank, on the other hand,
pursuant to Section 6.13(a).
 
“PBGC” means the Pension Benefit Guaranty Corpora­tion or any entity succeeding
to any or all of its functions under ERISA.
 
“Permitted Debt” means (i) Debt owing to Bank in accordance with the terms of
this Agreement and the Loan Documents, (ii) Debt listed on Schedule 5.6, but no
renewals, extensions or refinancings thereof, (iii) Debt up to a maximum
aggregate amount of Twenty Million Dollars ($20,000,000) outstanding at any one
time incurred in the ordinary course of business, (iv) trade obligations and
normal accruals in the ordinary course of its business not yet due and payable,
or with respect to which such Borrower is contesting in good faith the amount of
validity thereof by appropriate proceedings diligently pursued and available to
such Borrower, (v) Debt in the form of guaranties permitted under Section 7.11,
and (vi) obligations or indebtedness owing to another Borrower or Subsidiary to
the extent permitted by Section 7.8.
 
“Permitted Investments” means any of the following investments denominated and
payable in Dollars, maturing within one year from the date of acquisition,
selected by a Borrower:  (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States;
(ii) marketable direct obligations issued by any state of the United States or
any political subdivision of any such state or any public instrumentality
thereof and, at the time of acquisition, having a credit rating obtainable from
Standard & Poor’s Corporation (“S&P”) of not less than A-1 or not less than P-1
from Moody’s Investors Service, Inc. (“Moody’s”); (iii) commercial paper or
corporate promissory notes bearing at the time of acquisition a credit rating of
S&P of not less than A-1 or not less than P-1 from Moody’s issued by United
States, United Kingdom, Hong Kong, China, PRC, Singapore, Canadian, European or
Japanese bank holding companies or industrial or financial companies, with
maturities of 365 days or less; (iv) certificates of deposit issued by and
bankers acceptances of and interest bearing deposits; and (v) money market funds
organized under the laws of the United States or any state thereof that invest
predominantly in any of the foregoing investments permitted under clauses (i),
(ii), (iii) and (iv).
 
 
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“Permitted Liens” means (i) Liens for current taxes, assessments or other
governmental charges which are not delinquent or remain payable without any
penalty, or are being contested in good faith by appropriate proceedings,
provided that, if delinquent, adequate reserves have been set aside with respect
thereto as required by GAAP and, by reason of nonpayment, no property is subject
to a material risk of loss or forfeiture; (ii) Liens in favor of Bank, in
accordance with the Loan Documents, (iii) statutory Liens, such as inchoate
mechanics’, inchoate materialmen’s, landlord’s, warehousemen’s, and carriers’
liens, and other similar liens, other than those described in clause (i) above,
arising in the ordinary course of business with respect to obligations which are
not delinquent or are being contested in good faith by appropriate proceedings,
provided that, if delinquent, adequate reserves have been set aside with respect
thereto as required by GAAP and, by reason of nonpayment, no property is subject
to a material risk of loss or forfeiture; (iv) Liens relating to Capital Lease
Obligations permitted hereunder and Liens securing any leases permitted in
Section 7.5, (v) judgment Liens that do not constitute an Event of Default under
Section 8.1(i), and (vi) Liens, if they constitute such, of any true lease and
consignment UCC filings permitted hereunder, and (vii) Purchase Money Liens
securing Debt described in clauses (ii) and (iii) of the definition of
“Permitted Debt” hereinabove.
 
“Person” means and includes natural persons, corporations, limited partnerships,
general partnerships, limited liability companies, limited liability
partnerships, joint stock companies, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.
 
“Plan” means an employee benefit plan as defined in Section 3(3) of ERISA in
which any personnel of any member of the ERISA Group participate or from which
any such personnel may derive a benefit or with respect to which any member of
the ERISA Group may incur liability, excluding any Multiemployer Plan, but
including any plan either established or maintained by any member of the ERISA
Group or to which such Person contributes under the laws of any foreign country.
 
“Prime Referenced Rate” has the meaning set forth in the Interest Rate Addendum.
 
“Prime-based Advance” has the meaning set forth in the Interest Rate Addendum.
 
“Prior Agreement” has the meaning given to such term in the Recitals hereof.
 
“Purchase Money Lien” means a Lien on any item of equipment of a Borrower;
provided that (i) such Lien attaches only to that Asset and (ii) the
purchase-money obligation secured by such item of equipment does not exceed one
hundred percent (100%) of the purchase price of such item of equipment.
 
 
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 “Regulation D” means Regulation D of the Board of Governors of the Federal
Reserve System, as such regulation may be amended or supplemented from time to
time.
 
“Reimbursement Obligations” means the obligations of Borrowers to reimburse Bank
pursuant to Section 3.4 amounts drawn under Letters of Credit.
 
“Reportable Event” means any of the events described in Section 4043(c) of ERISA
other than a Reportable Event as to which the provision of 30 days notice to the
PBGC is waived under applicable regulations.
 
“Request for Advance” has the meaning set forth in the Interest Rate Addendum.
 
“Responsible Officer” means either the Chief Executive Officer, Chief Financial
Officer or Controller of a Person, or such other officer, employee, or Bank of
such Person designated by a Responsible Officer in a writing delivered to Bank.
 
“Restricted Payment” means (i) any payment made to purchase, redeem, retire, or
otherwise acquire for value any Capital Stock now or hereafter outstanding or
(ii) any action by a Person to allocate or otherwise set apart any sum for the
purchase, redemption or retirement of, any of its Capital Stock..
 
“Retiree Health Plan” means an employee welfare benefit plan within the meaning
of Section 3(1) of ERISA that provides benefits to individuals after termination
of their employment, other than as required by Section 601 of ERISA.
 
“Revolving Credit Commitment” means Twenty Million Dollars ($20,000,000).
 
“Revolving Loans” has the meaning given to such term in Section 2.1.
 
“Revolving Loans Maturity Date” means June 1, 2012.
 
“Revolving Loans Note” means that certain Amended and Restated Secured
Promissory Note (Revolving Loans), dated as of November 25, 2002, in the amount
up to Twenty Million Dollars ($20,000,000), made by Borrowers to the order of
Bank.
 
“SEC” means United States Securities and Exchange Commission.
 
“Security Agreement (Borrowers)” means that certain Security Agreement, dated as
of February 21, 2002, among Borrowers and Bank.
 
“Security Agreement (Subsidiary)” means any Security Agreement now or hereafter
entered into by a Subsidiary and Bank in accordance with Section 6.14.
 
 
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“Shareholder” means a shareholder of any Borrower.
 
“Solvent” means, with respect to any Person on the date any determination
thereof is to be made, that on such date:  (a) the present fair valuation of the
Assets of such Person is greater than such Person’s probable liability in
respect of existing debts; (b) such Person does not intend to, and does not
believe that it will, incur debts beyond such Person’s ability to pay as such
debts mature; and (c) such Person is not engaged in business or a transaction,
and is not about to engage in business or a transaction, which would leave such
Person with Assets remaining which would constitute unrea­sonably small capital
after giving effect to the nature of the particular business or
trans­action.  For purposes of this definition (i) the fair valua­tion of any
property or assets means the amount realizable within a reasonable time, either
through collection or sale of such Assets at their regular market value, which
is the amount obtainable by a capable and diligent Person from an interested
buyer willing to purchase such property or assets within a reasonable time under
ordinary circumstances; and (ii) the term debts includes any payment obligation,
whether or not reduced to judgment, equitable or legal, matured or unmatured,
liquidated or unliquidated, disputed or undisputed, secured or unsecured,
absolute, fixed or contingent.
 
“Standby Letter of Credit Fee” has the meaning given to such term in Section
3.3(a).
 
“Stock Pledge Agreements” means, collectively, (i)  that certain Security
Agreement-Stock Pledge, dated as of February 21, 2002, between Parent and Bank,
(ii) that certain Security Agreement-Stock Pledge, dated as of even date
herewith, between Parent and Bank, and (iii) any other Security Agreement-Stock
Pledge or like agreement hereafter entered into between Borrower and Bank
pursuant to Section 6.13(b).
 
“Subsidiary” means any corporation, limited liability company, partnership,
trust or other entity (whether now existing or hereafter organized or acquired)
of which any Borrower or one or more Subsidiaries of any Borrower at the time
owns or controls directly or indirectly more than 50% of the shares of stock or
partnership or other ownership interest having general voting power under
ordinary circumstances to elect a majority of the board of directors, managers
or trustees or otherwise exercising control of such corporation, limited
liability company, partnership, trust or other entity (irrespective of whether
at the time stock or any other form of ownership of any other class or clas­ses
shall have or might have voting power by reason of the happening of any
contingency).
 
“Swaps” means payment obligations with respect to interest rate swaps, currency
swaps and similar obligations obligating a Person to make payments, whether
periodically or upon the happening of a contingency.  For the purposes of this
Agreement, the amount of the obligation under any Swap shall be the amount
determined, in respect thereof as of the end of the then most recently ended
fiscal quarter of Borrowers, based on the assumption that such Swap had
terminated at the end of such fiscal quarter, and in making such determination,
if any agreement relating to such Swap provides for the netting of amounts
payable by and to each party thereto or if any such agreement provides for the
simultaneous payment of amounts by and to each party, then in each such case,
the amount of such obligation shall be the net amount so determined.
 
 
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“Taxes” has the meaning set forth in Section 9.1.
 
“UCC” means the California Uniform Commercial Code, as amended or supplemented
from time to time.
 
“Uniform Customs” means the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500, as the
same may be amended from time to time.
 
“Unmatured Event of Default” means any condition or event which with the giving
of notice or lapse of time or both would, unless cured or waived, become an
Event of Default.
 
1.2 Accounting Terms and Determinations.  Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all accounting determinations
hereunder shall be made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with GAAP.
 
1.3 Computation of Time Periods.  In this Agreement, with respect to the
computation of periods of time from a specified date to a later specified date,
the word from means from and including and the words to and until each mean to
but excluding.  Periods of days referred to in this Agreement shall be counted
in calendar days unless otherwise stated.
 
1.4 Construction.  Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular and to the singular
include the plural, references to any gender include any other gender, the part
includes the whole, the term including is not limiting, and the term or has,
except where otherwise indicated, the inclusive meaning represented by the
phrase and/or.  References in this Agreement to determination by Bank include
good faith estimates by Bank (in the case of quantitative determinations), and
good faith beliefs by Bank (in the case of qualitative determinations).  The
words hereof, herein, hereby, hereunder, and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement.  Article, section, subsection, clause, exhibit and schedule
references are to this Agreement, unless otherwise specified.  Any reference in
this Agreement or any of the Loan Documents to this Agreement or any of the Loan
Documents includes any and all permitted alterations, amendments, changes,
extensions, modifications, renewals, or supplements thereto or thereof, as
applicable.
 
1.5 Exhibits and Schedules.  All of the exhibits and schedules attached hereto
shall be deemed incorporated herein by reference.
 
1.6 No Presumption Against Any Party.  Neither this Agreement, any of the Loan
Documents, any other document, agreement, or instrument entered into in
connection herewith, nor any uncertainty or ambiguity herein or therein shall be
construed or resolved using any presumption against any party hereto, whether
under any rule of construc­tion or otherwise.  On the contrary, this Agreement,
the Loan Documents, and the other documents, instruments, and agreements entered
into in connection herewith have been reviewed by each of the parties and their
counsel and shall be construed and inter­preted according to the ordinary
meanings of the words used so as to accomplish fairly the purposes and
intentions of all parties hereto.
 
 
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1.7 Independence of Provisions.  All agreements and covenants hereunder, under
the Loan Documents, and the other documents, instruments, and agreements entered
into in connection herewith shall be given independent effect such that if a
particular action or condition is prohibited by the terms of any such agreement
or covenant, the fact that such action or condition would be permitted within
the limitations of another agreement or covenant shall not be construed as
allowing such action to be taken or condition to exist.
 
ARTICLE II
 
TERMS OF THE CREDIT
 
2.1 Revolving Loans.  Provided that no Event of Default or Unmatured Event of
Default has occurred and is continuing, and subject to the other terms and
conditions hereof, Bank agrees to make revolving loans (“Revolving Loans”) to
Borrowers, upon notice in accordance with Section 2.5(b), from the Closing Date
up to but not including the Revolving Loans Maturity Date, the proceeds of which
shall be used only for the purposes allowed in Section 7.1(a).  Borrowers shall
not be permitted to borrow, and Bank shall not be obligated to make, any
Revolving Loans to Borrowers, unless and until all of the conditions for a
Borrowing set forth in Section 4.2 have been met to the reasonable satisfaction
of Bank.
 
Borrowers may repay and, subject to the terms and conditions hereof, reborrow
Revolving Loans. All such repayments shall be without penalty or premium except
as otherwise required by Section 2.7 with respect to repayments of LIBOR-based
Advances.  Borrowers shall give Bank at least three (3) Business Days’ prior
written notice of any repayment of a LIBOR-based Advance.  On the Revolving
Loans Maturity Date, Borrowers shall pay to Bank the entire unpaid principal
balance of the Revolving Loans together with all accrued but unpaid interest
thereon.
 
2.2 Foreign Exchange Forward  Contracts.  Provided that no Event of Default or
Unmatured Event of Default has occurred and is continuing, and subject to the
other terms and conditions of this Agreement and the Foreign Exchange Agreement,
Parent may incur Currency Obligations from time to time from the Closing Date up
to but not including the Revolving Loans Maturity Date, subject to the following
conditions and limitations:
 
(a) Tenors for Parent’s Currency Obligations shall not exceed the lesser of 365
days and the Revolving Loans Maturity Date;
 
(b) The aggregate amount of Parent’s Currency Obligations outstanding at any one
time after giving effect to any proposed incurrence of a Currency Obligation by
Parent shall not exceed the Foreign Exchange Sublimit;
 
(c) Intentionally omitted;
 
 
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(d) The Currency Obligations shall be incurred by Parent only for international
transactions incurred in the ordinary course of business; and
 
(e) In connection with all Currency Obligations, Borrower shall pay all amounts
due to Bank, including all fees, charges and expenses, in accordance with the
terms of the Foreign Exchange Agreement.
 
2.3 Intentionally omitted.
 
2.4 Interest Rates; Payments of Interest.
 
(a) Interest Rate Options on Loans.  Subject to the terms and conditions hereof,
all Loans, or portions thereof, may be outstanding as either Prime-based
Advances or LIBOR-based Advances at interest rates set forth in the Interest
Rate Addendum.
 
(b) Default Rate.  Upon the occurrence and during the continuance of an Event of
Default, in addition to and not in substitution of any of Bank’s other rights
and remedies with respect to such Event of Default, the entire unpaid principal
balance of the Loans shall bear interest at the otherwise applicable rate plus
the default interest rate set forth in the Interest Rate Addendum.
 
(c) Computation of Interest.  All computations of interest shall be calculated
on the basis of a year of three hundred sixty (360) days for the actual days
elapsed.  In the event that the Prime Referenced Rate announced is, from time to
time, changed, adjustment in the rate of interest payable hereunder on all
Prime-based Advances shall be made as of 12:01 a.m. (Pacific time) on the
effective date of the change in the Prime Referenced Rate.  Interest shall
accrue from the Closing Date to the date of repayment of the Loans in accordance
with the provisions of this Agreement; provided, however, if a Loan is repaid on
the same day on which it is made, then one (1) day’s interest shall be paid on
that Loan.  Any and all interest not paid when due shall thereafter be deemed to
be a Revolving Loan as a Prime-based Advance made under Section 2.1 and shall
bear interest thereafter as provided for in Section 2.4(b).
 
(d) Intentionally omitted.
 
(e) Maximum Interest Rate.  In no event shall the interest rate and other
charges hereunder exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto.  In the event that such a court determines that Bank has received
interest and other charges hereunder in excess of the highest rate applicable
hereto, such excess shall be deemed received on account of, and shall
automa­tic­ally be applied to reduce, the Obligations, other than interest, in
the inverse order of maturity, and the provisions hereof shall be deemed amended
to provide for the highest permissible rate.  If there are no Obligations
outstanding, Bank shall refund to Borrowers such excess.
 
 
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(f) Payments of Interest.  All accrued but unpaid interest on the Loans,
calculated in accordance with this Section 2.4, shall be due and payable, in
arrears, on each and every Interest Payment Date.
 
2.5 Request for Advance Requirements.
 
(a) Each Borrowing of a Prime-based Advance or a LIBOR-based Advance shall be
made on an applicable Business Day.
 
(b) Each Borrowing shall be made upon telephonic notice given by a Responsible
Officer of a Borrower, followed by a Request for Advance, given by facsimile or
personal service, delivered to Bank at the address set forth in the Request for
Advance.  If for a Prime-based Advance, Bank shall be given such notice no later
than 11:00 a.m., Pacific time, one (1) Business Day prior to the day on which
such Borrowing is to be made, and, if for a LIBOR-based Advance, Bank shall be
given notice no later than 9:00 a.m., Pacific time, three (3) Business Days
prior to the day on which such Borrowing is to be made, and such notice shall
state the amount and purpose thereof (subject to the provisions of Section 2.1).
 
(c) Bank shall not incur any liability to Borrowers in acting upon any
telephonic notice which Bank believes in good faith to have been given by a
Responsible Officer of Borrower, or for otherwise acting in good faith under
this Section 2.5, and in making any Loans pursuant to telephonic notice.
 
(d) So long as all of the conditions for a Borrowing of a Loan set forth herein
have been satisfied, Bank shall credit the proceeds of such Loan on the
applicable Borrowing date into Borrowers general deposit account number
XXXXXXXXXX maintained with Bank.
 
2.6 Conversion or Continuation Requirements.
 
(a) Parent shall have the option to:  (i) convert, at any time, all or any
portion of any of the outstanding Loans, subject to the limitations and
requirements of Section 2.4(a), from a portion bearing interest at one of the
interest rate options available pursuant to Section 2.4(a) to another; or (ii)
upon the expiration of any LIBOR Period applicable to a LIBOR-based Advance, to
continue all or any portion of such LIBOR-based Advance as a LIBOR-based Advance
with the succeeding LIBOR Period(s) of such continued LIBOR-based Advance
commencing on the expiration date of the LIBOR Period previously applicable
thereto, subject in the following limitations:
 
(i) a LIBOR-based Advance may only be converted to a Prime-based Advance or
continued as a LIBOR-based Advance on the expiration date of the LIBOR Period
applicable thereto;
 
(ii) no outstanding Loan, or portion thereof, may be continued as, or be
converted into, a LIBOR-based Advance in the event that, on the earlier of the
date of the delivery of the Request for Advance or the telephonic notice in
respect thereof, any Event of Default or Unmatured Event of Default has occurred
and is continuing;
 
 
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(iii) if Parent fails to deliver the appropriate Request for Advance or the
telephonic notice in respect thereof pursuant to the required notice period
before the expiration of the LIBOR Period of a LIBOR-based Advance, such
LIBOR-based Advance shall automatically be converted to a Prime-based Advance;
and
 
(iv) no outstanding Loan may be continued as, or be converted into, a
LIBOR-based Advance in the event that, after giving effect to any such
conversion or continuation, there would be more than three (3) LIBOR-based
Advances outstanding.
 
(b) Parent shall give telephonic notice of any proposed continuation or
conversion pursuant to this Section 2.6 followed by a Request for Advance, given
by facsimile or personal service, delivered to Bank at the address set forth in
the Request for Advance, no later than 11:00 a.m., Pacific time, on the Business
Day which is the proposed conversion date (in the case of a conversion to a
Prime-based Advance) and no later than 9:00 a.m., Pacific time, three (3)
Business Days in advance of the proposed conversion or continuation date (in the
case of a conversion to, or a continuation of, a LIBOR-based Advance).  If such
Request for Advance is received by Bank not later than 11:00 a.m., Pacific time,
on a Business Day, such day shall be treated as the first Business Day of the
required notice period.  In any other event, such notice will be treated as
having been received at the opening of business of the next Business Day.  A
Request for Advance shall specify:  (1) the proposed conversion or continuation
date (which shall be a Business Day or a Business Day, as applicable); (2) the
amount of the Revolving Loan to be converted or continued; (3) the nature of the
proposed conversion or continuation; and (4) in the case of a conversion to or
continuation of a LIBOR-based Advance, the requested LIBOR Period.
 
(c) Bank shall not incur any liability to Borrowers in acting upon any
telephonic notice referred to above which Bank believes in good faith to have
been given by a Responsible Officer of Parent or for otherwise acting in good
faith under this Section 2.6.  Any Request for Advance (or tele­phonic notice in
respect thereof) shall be irrevocable and Borrowers shall be bound to convert or
continue in accordance therewith.
 
2.7 Additional Costs.
 
(a) Borrowers shall reimburse Bank for any increase in Bank’s costs (which shall
include, but not be limited to, taxes, other than taxes imposed on the overall
net income of Bank, fees or charges), or any loss or expense (including, without
limitation, any loss or expense incurred by reason of the liquidation or
re-employment of deposits or other funds acquired by Bank to fund or maintain
outstanding the principal amount of the Loans) incurred by it directly or
indirectly resulting from the making of any LIBOR-based Advance due to:  (i) the
modification, adoption, or enactment of any law, rule, regulation or treaty or
the interpretation thereof by any governmental or other authority (whether or
not having the force of law) which becomes effective after the date hereof;
(ii) the modification or new application of any law, regulation or treaty or the
interpretation thereof by any governmental or other authority (whether or not
having the force of law) which becomes effective after the date hereof;
(iii) compliance by Bank with any request or directive (whether or not having
the force of law) of any monetary or fiscal agency or authority which becomes
effective after the date hereof; (iv) violations by Borrowers of the terms of
this Agreement; or (v) any prepay­ment of a LIBOR-based Advance at any time
prior to the end of the applicable LIBOR Period, including pursuant to
Section 8.2.
 
 
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(b) The amount of such costs, losses, or expenses shall be determined solely by
Bank based upon the assumption that Bank funded one hundred percent (100%) of
each LIBOR-based Advance in the LIBOR market.  In attributing Bank’s general
costs relating to its eurocurrency operations to any transaction under this
Agreement or averaging any costs over a period of time, Bank may use any
reasonable attribution or averaging methods which it deems appropriate and
practical.  Bank shall notify Borrowers of the amount due Bank pursuant to this
Section 2.7 and Borrowers shall pay to Bank the amount due within fifteen (15)
days of its receipt of such notice.  A certificate as to the amounts payable
pursuant to the foregoing sentence together with whatever detail is reasonably
available to Bank shall be submitted by such Bank to Borrowers.  Such
determination shall, if not objected to within ten (10) days, be conclusive and
binding upon Borrowers in the absence of manifest error.  If Bank claims
increased costs, loss, or expenses pursuant to this Section 2.7, then Bank, if
requested by Borrower, shall use reasonable efforts to take such steps that
Borrowers reasonably request, includ­ing designating different Lending Offices,
as would eliminate or reduce the amount of such increased costs, losses, or
expenses, so long as taking such steps would not, in the reasonable judgment of
Bank, otherwise be disadvantageous to Bank.  Any recovery by Bank or its Lending
Office of amounts previously borne by Borrowers pursuant to this Section 2.7
shall be promptly remitted, without interest (unless Bank received interest on
such recovered amounts), to Borrowers by such Bank.
 
2.8 Illegality; Impossibility.  Notwithstanding anything herein to the contrary,
if Bank determines (which determination shall be conclusive absent manifest
error) that any law, rule, regulation, treaty or directive, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or its Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it unlawful
or impossible for Bank (or its Lending Office) to fund or maintain a LIBOR-based
Advance in the LIBOR market or to continue such funding or maintaining, then
Bank shall give notice of such circumstances to Borrowers and (i) in the case of
each and every LIBOR-based Advance which is outstanding, Borrowers shall, if
requested by Bank, prepay such LIBOR-based Advance(s) on or before the date
specified in such request, together with interest accrued thereon, and the date
so specified shall be deemed to be the last day of the LIBOR Period of that
LIBOR-based Advance, and concurrent with any such prepayment, Bank shall make a
Prime-based Advance to Borrowers in the principal amount equal to the principal
amount of the LIBOR-based Advances so prepaid, and (ii) Bank shall not be
obligated to make any further LIBOR-based Advances until Bank determines that it
would no longer be unlawful or impossible to do so.
 
 
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2.9 Disaster.  Notwithstanding anything herein to the contrary, if Bank
determines (which determination shall be conclusive absent manifest error) that
(i) Bank is unable to determine the LIBOR Lending Rate with respect to any
Request for Advance selecting the LIBOR Lending Rate because quotations of
interest rates for the relevant deposits are not being provided in the relevant
amounts or for the relative maturities or (ii) the LIBOR Lending Rate will not
adequately reflect the cost to Bank of making or funding LIBOR-based Advances,
then (x) the right of Borrowers to select the LIBOR Lending Rate shall be
suspended until Bank notifies Borrowers that the circumstances causing such
suspension no longer exist, and (y) Borrowers shall repay in full the then
outstanding principal balance of all LIBOR-based Advances, together with
interest accrued thereon, on the last day of the LIBOR Period applicable to each
such LIBOR-based Advance, and concurrent with any such prepayment, Bank shall
make a Prime-based Advance to Borrowers in the principal amount equal to the
principal amount of the LIBOR-based Advances so repaid.
 
2.10 Increased Risk-Based Capital Cost.  If the amount of capital required or
expected to be maintained by Bank or any Person directly or indirectly owning or
controlling Bank (each a “Control Person”), shall be affected by:
 
(a) the introduction or phasing in of any law, rule or regulation after the date
hereof;
 
(b) any change after the date hereof in the interpretation of any existing law,
rule or regulation by any central bank or United States or foreign governmental
authority charged with the administration thereof; or
 
(c) compliance by Bank or such Control Person with any directive, guideline or
request from any central bank or United States or foreign governmental authority
(whether or not having the force of law) promulgated or made after the date
hereof, and Bank shall have reasonably determined that such introduction,
phasing in, change or compliance shall have had or will thereafter have the
effect of reducing (x) the rate of return on Bank’s or such Control Person’s
capital, or (y) the asset value to Bank or such Control Person of the Loans made
or maintained by Bank, in either case to a level below that which Bank or such
Control Person could have achieved or would thereafter be able to achieve but
for such introduction, phasing in, change or compliance (after taking into
account Bank’s or such Control Person’s policies regarding capital), in either
case by an amount which Bank in its reasonable judgment deems material, then, on
demand by Bank, Borrowers shall pay to Bank or such Control Person such
additional amount or amounts as shall be sufficient to compensate Bank or such
Control Person, as the case may be, for such reduction.
 
2.11 Statements of Obligations.  The Revolving Loans and Borrowers’ obligation
to repay the same shall be evidenced by this Agreement and the books and records
of Bank. Bank shall render monthly statements of the Loans to Borrowers,
including state­ments of all principal and interest owing on the Loans, and all
Fees and Expenses owing, and such statements (absent manifest error) shall be
presumed to be correct and accurate and constitute an account stated between
Borrower and Bank’s unless, within thirty (30) days after receipt thereof by
Parent, Parent delivers to Bank, at the address specified in Section 10.1,
written objection thereof specifying the error or errors, if any, contained in
any such statement.
 
 
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2.12 Holidays.  Any principal or interest in respect of the Loans (other than in
respect of a LIBOR-based Advance) which would otherwise become due on a day
other than a Business Day, shall instead become due on the next succeeding
Business Day and such adjustment shall be reflected in the computation of
interest; provided, however, that in the event that such due date shall,
subsequent to the specifi­ca­tion thereof by Bank, for any reason no longer
constitute a Business Day, Bank may change such specified due date in accordance
with this Section 2.12.
 
2.13 Time and Place of Payments.
 
(a) All payments due hereunder shall be made available to Bank in immediately
available Dollars, not later than 12:00 p.m., Pacific time, on the day of
payment, to the following address or such other address as Bank may from time to
time specify by notice to Parent:
 
Comerica Bank
15303 Ventura Boulevard
Sherman Oaks, California  91403
Attention:  Isabel Barreiro
 
(b) Borrowers hereby authorize Bank to charge Borrowers’ general demand deposit
account number XXXXXXXXXX with Bank, or any other demand deposit account
maintained by Borrower with Bank, for the amount of any payment due or past due
hereunder or under any Loan Document, for the full amount thereof.  Should there
be insufficient funds in any such demand deposit account to pay all such sums
when due, the full amount of such deficiency shall be immediately due and
payable in cash by Borrowers.
 
(c) In addition, Borrowers hereby authorize Bank at its option, without prior
notice to Borrowers, to advance a Revolving Loan as a Prime-based Advance for
any payment due or past due hereunder, including principal and interest owing on
the Loans, the Fees and all Expenses, and to pay the proceeds of such Revolving
Loan to Bank for application toward such due or past due payment.
 
2.14 Mandatory Principal Reductions.  Borrower shall pay to Bank, on the first
Business Day following Borrower's receipt thereof, one hundred percent (100%) of
the Net Cash Proceeds derived from each and all of its Asset Sales (except to
the extent such Net Cash Proceeds exceed the amount of all outstanding Revolving
Loans on such date), other than Asset Sales permitted by Section 7.7; provided,
however, in accordance with Section 7.7, Borrowers shall not conduct or
consummate any Asset Sales unless and until the prior written consent of Bank
has been obtained, or unless such Asset Sale is otherwise permitted by
Section 7.7.
 
 
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2.15 Fees.
 
(a) On the Closing Date, Borrowers shall pay to Bank a closing fee (the “Closing
Fee”) in the amount of Sixty Thousand Dollars ($60,000), provided, however that
such Closing Fee shall be waived as long as Borrowers establish, on or before
the Closing Date, at least Ten Million Dollars ($10,000,000) (the “Non-Interest
Deposit Limit”) in non-interest bearing new deposits with Bank.  Borrowers, at
their discretion, may withdraw all or any portion of such deposits, in which
case a withdrawal fee (“Withdrawal Fee”) in an amount representing a prorated
Closing Fee shall be due and payable to Bank in cash within fifteen (15) days of
such withdrawal.  Any subsequent withdrawal(s) shall also incur a Withdrawal Fee
representing a prorated portion of the Closing Fee, but in no event shall the
aggregate Withdrawal Fees incurred by Borrowers exceed the Closing Fee.  Bank
shall reassess the foregoing fees on the first anniversary of this Agreement.
 
(b) On each anniversary of the Closing Date, Borrowers shall pay to Bank an
annual fee (the “Annual Fee”), each in the amount of Sixty Thousand Dollars
($60,000); provided, however that such Annual Fee shall be waived for the
relevant period as long as Borrowers establish and maintain, for such relevant
period, non-interest bearing deposits with Bank in an amount equal or greater
than the Non-Interest Deposit Limit.  For the avoidance of doubt, any such
non-interest bearing deposits resulting in any waived Annual Fee under this
Section 2.15(b) shall not be used to offset any treasury management service
charges imposed by Bank on Borrowers.
 
(c) If any payment due hereunder, whether for principal, interest, or otherwise,
is not paid on or before the tenth (10th) day after the date such payment is
due, in addition to and not in substitution of any of Bank’s other rights and
remedies with respect to such nonpayment, Borrowers shall pay to Bank a late
payment fee (the “Late Payment Fee”) equal to five percent (5%) of the amount of
such overdue payment.  The Late Payment Fee shall be due and payable on the
eleventh (11th) day after the due date of the overdue payment with respect
thereto.
 
ARTICLE III
 
LETTERS OF CREDIT
 
3.1 Letters of Credit.
 
(a) Provided that no Event of Default or Unmatured Event of Default is
continuing and subject to the other terms and conditions hereof, Bank agrees to
issue standby and sight and usance commercial letters of credit (“Letters of
Credit”) for the account of Borrowers in such form as may be approved from time
to time by Bank, subject to the following limitations:
 
(i) Intentionally omitted;
 
(ii) The face amount of the Letter of Credit requested if and when issued must
not cause the Letter of Credit Usage to exceed the Letter of Credit Sublimit;
 
 
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(iii) Standby Letters of Credit may not have an expiry date or draw period which
extends beyond the earlier of (x) 365 days following the date of issuance, or
(y) the date which is ten (10) days prior to the Revolving Loans Maturity Date;
 
(iv) Commercial Letters of Credit may not have an expiry date or draw period
which extends beyond the earlier of (x) 180 days following the date of issuance,
or (y) the date which is ten (10) days prior to the Revolving Loans Maturity
Date; and
 
(v) The conditions specified in Section 4.2 shall have been satisfied on the
date of issuance of such Letter of Credit.
 
(b) Each Letter of Credit shall (i) be denominated in Dollars or other currency
acceptable to Bank, and (ii) be a standby or commercial letter of credit issued
to support obligations of a Borrower, contingent or otherwise, in the ordinary
course of business.
 
(c) Each Letter of Credit shall be subject to the Uniform Customs or the ISP, as
determined by Bank, in its sole discretion, and, to the extent not inconsistent
therewith, the laws of the State of California.
 
(d) Bank shall not at any time be obligated to issue any Letter of Credit
hereunder if such issuance would conflict with, or cause the Bank to exceed any
limits imposed by its organizational or governing documents or by any applicable
law, rule, regulation or treaty or determination of an arbitrator or a court or
other governmental authority to which Bank is subject.
 
3.2 Procedure for Issuance of Letters of Credit.  Any Borrower may request that
the Bank issue a Letter of Credit at any time prior to the date which is thirty
(30) days prior to the Revolving Loans Maturity Date by delivering to the Bank a
Letter of Credit Application at its address for notices specified herein a
Letter of Credit Application therefor, completed to the reasonable satisfaction
of the Bank, together with such other certificates, documents and other papers
and information as the Bank may reasonably request.  Upon receipt of any Letter
of Credit Application, the Bank will process such Letter of Credit Application
and the certificates, documents and other papers and information delivered to it
in connection therewith in accordance with its customary procedures and shall
promptly issue the Letter of Credit requested thereby (but in no event shall the
Bank be required to issue any Letter of Credit earlier than three (3) Business
Days after its receipt of the Letter of Credit Application therefor and all such
other certificates, documents and other papers and information relating thereto)
by issuing the original of such Letter of Credit to the beneficiary thereof or
as otherwise may be agreed by the Bank and Borrower.  The Bank shall furnish a
copy of such Letter of Credit to Borrower promptly following the issuance
thereof.
 
3.3 Fees, Commissions and Other Charges.
 
(a) Borrowers shall pay to Bank a fee in an amount equal to the face amount of
each and every standby Letter of Credit times the LC Fee Percentage (the
“Standby Letter of Credit Fee”).  The Standby Letter of Credit Fee shall be due
and payable upon issuance of the applicable standby Letter of Credit.  Borrowers
shall also pay to Bank a fee in an amount consistent with Bank’s standard
pricing with respect to commercial Letters of Credit (the “Commercial Letter of
Credit Fee”).  The Commercial Letter of Credit Fee shall be due and payable upon
issuance of the applicable commercial Letter of Credit
 
 
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(b) In addition to the foregoing, Borrowers shall pay or reimburse the Bank for
such normal and customary costs and expenses as are reasonably incurred or
charged by the Bank in issuing, effecting payment under, amending or otherwise
administering any Letter of Credit.
 
3.4 Reimbursement Obligations.
 
(a) Borrowers agree to reimburse the Bank on the same Business Day on which a
draft is presented under any Letter of Credit and paid by the Bank, provided
that the Bank provides notice to Parent prior to 11:00 a.m., Pacific time, on
such Business Day and otherwise Borrowers will reimburse the Bank on the next
succeeding Business Day; provided, further, that the failure to provide such
notice shall not affect Borrowers’ absolute and unconditional obligation to
reimburse the Bank when required hereunder for any draft paid under any Letter
of Credit.  The Bank shall provide notice to Borrower on such Business Day as a
draft is presented and paid by the Bank indicating the amount of (i) such draft
so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by
the Bank in connection with such payment.  Each such payment shall be made to
the Bank at its address specified on the signature pages hereof in lawful money
of the United States of America and in immediately available funds.
 
(b) Interest shall be payable on any and all amounts remaining unpaid by
Borrowers under this Section from the date such amounts become payable (whether
at stated maturity, by acceleration or otherwise) until payment in full at the
rate which would be payable on any outstanding Revolving Loans that are (i) in
the case of the first day on which such amounts become payable (except where
such amounts become payable by reason of the acceleration thereof), Prime-based
Advances which were not then overdue and (ii) in all cases to which clause (i)
is not applicable, Prime-based Advances which were then overdue.
 
(c) Each drawing under any Letter of Credit shall constitute a request by
Borrowers to Bank for a Borrowing of a Revolving Loan as a Prime-based
Advance.  The date of such drawing shall be deemed the date on which such
Borrowing is made.
 
3.5 Obligations Absolute.
 
(a) Borrowers’ obligations under this Article III shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment which Borrower may have or have had against
the Bank or any beneficiary of a Letter of Credit.
 
(b) Borrowers also agree with the Bank that Borrowers’ Reimbursement Obligations
under Section 3.4 shall not be affected by, among other things, (i) the validity
or genuineness of documents or of any endorsements thereon, even though such
documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any
dispute between or among Borrower and any beneficiary of any Letter of Credit or
any other party to which such Letter of Credit may be transferred or (iii) any
claims whatsoever of Borrower against the beneficiary of such Letter of Credit
or any such transferee.
 
 
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(c) Bank shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions caused by the Bank’s gross negligence or willful misconduct.
 
(d) Borrowers agree that any action taken or omitted by the Bank under or in
connection with any Letter of Credit or the related drafts or documents, if done
in the absence of gross negligence or willful misconduct and in accordance with
the standards of care specified in the UCC, shall be binding on Borrowers and
shall not result in any liability of the Bank to Borrowers.
 
3.6 Letter of Credit Payments.  If any draft shall be presented for payment
under any Letter of Credit, the responsibility of the Bank to Borrowers in
connection with such draft shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of
Credit.  In determining whether to pay under any Letter of Credit, only the Bank
shall be responsible for determining that the documents and certificates
required to be delivered under the Letter of Credit have been delivered and that
they comply on their face with the requirements of such Letter of Credit.
 
3.7 Outstanding Letters of Credit Following Event of Default.  With respect to
all Letters of Credit outstanding upon the occurrence of an Event of Default,
Borrowers shall either replace such Letters of Credit, whereupon such Letters of
Credit shall be canceled, with letters of credit issued by another issuer
acceptable to the beneficiary of such Letter of Credit, or provide the Bank, as
security for such Letters of Credit, with a cash collateral deposit in an amount
equal to one hundred and five percent (105%) of the Letter of Credit Usage for
so long as such Letters of Credit remain outstanding during the continuance of
such Event of Default.  Borrowers hereby grant to Bank a security interest in
such cash collateral to secure all Obligations of Borrowers under this Agreement
and the other Loan Documents.  Amounts held in such cash collateral account
shall be applied by Bank to the payment of drafts drawn under such Letters of
Credit and the payment of customary costs and expenses charged or incurred by
the Bank in connection therewith, and the unused portion thereof after all such
Letters of Credit shall have expired or been fully drawn upon, if any, shall be
applied to repay other Obligations.  After all such Letters of Credit shall have
expired or been fully drawn upon, all Reimbursement Obligations shall have been
satisfied and all other Obligations shall have been paid in full in cash, and
the obligations of Bank hereunder have terminated the balance, if any, in such
cash collateral account shall be returned to Borrowers.  Borrowers shall execute
and deliver to Bank such further documents and instruments as Bank may request
to evidence the creation and perfection of the within security interest in such
cash collateral account.
 
 
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3.8 Letter of Credit Applications.  In the event of any conflict between the
terms of this Article III and the terms of any Letter of Credit Application, the
terms of such Letter of Credit Application shall govern and control any such
conflict.
 
ARTICLE IV
 
CONDITIONS PRECEDENT
 
4.1 Conditions to Initial Loans or Letter(s) of Credit.  Bank’s obligation to
make the initial Loans and/or to issue the initial Letter(s) of Credit is
subject to and contingent upon the fulfillment of each of the following
conditions to the satisfaction of Bank and its counsel:
 
(a) receipt by Bank of this Agreement and each of the Loan Documents, including
a Guaranty from New Guarantor, all duly executed by Borrowers and/or the other
Persons party thereto, acknowledged where required, and in form and substance
satisfactory to Bank; provided, however, that Bank shall receive the Stock
Pledge Agreement between Parent and Bank with respect to the stock of New
Guarantor in a form acceptable to Bank and all deliverables referenced therein
within 30 days of the Closing Date.
 
(b) with respect to each Borrower, receipt by Bank of a Certificate of the
Secretary of such Borrower, dated as of the Closing Date, certifying (i) the
incumbency and signatures of the Responsible Officers of such Borrower who are
executing this Agreement and the Loan Documents on behalf of such Borrower;
(ii) the By-Laws of such Borrower and all amendments thereto as being true and
correct and in full force and effect; and (iii) the resolutions of the Board of
Directors of such Borrower as being true and correct and in full force and
effect, authorizing the execution and delivery of this Agreement and the Loan
Documents, and authorizing the transactions contem­plated hereunder and
thereunder, and authorizing the Responsible Officers of such Borrower to execute
the same on behalf of such Borrower;
 
(c) receipt by Bank of a certificate signed by the Chief Executive Officer and
Chief Financial Officer of each Borrower, dated as of the Closing Date,
certifying that (i) both immediately before and immediately after giving effect
to the transactions contemplated by this Agreement and the Loan Documents, such
Borrower is and will be Solvent; (ii) to the best of their knowledge after due
and diligent inquiry, the representations and warranties of such Borrower
contained in this Agreement and the Loan Documents are true and correct, and
(iii) to the best of their knowledge after due and diligent inquiry, both
immediately before and immediately after giving effect to the transactions
contemplated by this Agreement and the Loan Documents, no Event of Default or
Unmatured Event of Default is continuing or shall occur;
 
(d) receipt by Bank of (i) the Closing Fee (unless waived pursuant to Section
2.15(a) herein), and (ii) all Expenses owing on the Closing Date;
 
(e) no Material Adverse Effect shall have occurred since the close of Parent’s
most recent fiscal year, as determined by Bank in its reasonable discretion;
 
 
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(f) receipt by Bank of such other documents, instruments and agreements as Bank
may reasonably request in connection with the transactions contemplated
hereunder or to perfect or protect the liens and security interests granted to
Bank for the ratable benefit of Bank’s in connection herewith; and
 
(g) the Closing Date shall have occurred on or before June 1, 2010.
 
4.2 Conditions to all Loans and Letters of Credit.  Bank’s obligation hereunder
to make any Loans to Borrowers (including the initial Loans), and/or to issue
any Letters of Credit (including the initial Letter(s) of Credit), is further
subject to and contingent upon the fulfillment of each of the following
conditions to the satisfaction of Bank:
 
(a) (i) in the case of a Borrowing, receipt by Bank of a Request for Advance as
required by Section 2.5(b) and written disbursement instructions to Bank
consistent with Section 7.1, and (ii) in the case of a Letter of Credit, receipt
by Bank of a Letter of Credit Application and the other papers and information
required under Section 3.2;
 
(b) the fact that, immediately before and after such Borrowing or issuance of
Letter of Credit, as the case may be, no Event of Default or Unmatured Event of
Default shall have occurred or be continuing; and
 
(c) the fact that the representations and warranties of Borrowers contained in
this Agree­ment shall be true on and as of the date of such Borrowing, or
issuance of Letter of Credit, as the case may be (except for any representations
and warranties made as of a specific earlier date, which shall remain true as of
such date).
 
ARTICLE V
 
REPRESENTATIONS AND WARRANTIES
 
In order to induce Bank to enter into this Agreement and to make Loans and/or
issue any Letters of Credit, Each Borrower represents and warrants to Bank that
on the Closing Date and on the date of each Borrowing or issuance of a Letter of
Credit:
 
5.1 Legal Status.  Each Borrower is a corporation or limited liability company
duly organized and existing under the laws of the state of its
organization.  Each Borrower and each Subsidiary has the power and authority to
own its own Assets and to transact the business in which it is engaged, and is
properly licensed, qualified to do business and in good standing in every
jurisdiction in which it is doing business where failure to so qualify could
have a Material Adverse Effect.
 
5.2 No Violation; Compliance.
 
(a) The execution, delivery and performance of this Agreement, the Loan
Documents and the Purchase Documents to which each Borrower is a party are
within such Borrower’s powers, are not in conflict with the terms of the
Governing Documents of such Borrower, and do not result in a breach of or
constitute a default under any contract, obligation, indenture or other
instrument to which such Borrower is a party or by which such Borrower is bound
or affected, which breach or default could reasonably be expected to have a
Material Adverse Effect.  To the best Knowledge of Borrowers, there is no law,
rule or regulation (including Regulations T, U and X of the Federal Reserve
Board), nor is there any judgment, decree or order of any court or Governmental
Authority binding on any Borrower which would be contravened by the execution,
delivery, performance or enforcement of this Agreement and the Loan Documents to
which any Borrower is a party.
 
 
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(b) The execution, delivery and performance of the Loan Documents to which each
Guarantor is a party are within such Guarantor’s powers, are not in conflict
with the terms of the Governing Documents of such Guarantor, and do not result
in a breach of or constitute a default under any contract, obligation, indenture
or other instrument to which such Guarantor is a party or by which such
Guarantor is bound or affected, which breach or default could reasonably be
expected to have a Material Adverse Effect.  To the best Knowledge of Borrowers,
there is no law, rule or regulation (including Regulations T, U and X of the
Federal Reserve Board), nor is there any judgment, decree or order of any court
or Governmental Authority binding on any Guarantor which would be contravened by
the execution, delivery, performance or enforcement of the Loan Documents to
which such Guarantor is a party.
 
5.3 Authorization; Enforceability.
 
(a) Each Borrower has taken all corporate action necessary to authorize the
execution and delivery of this Agreement and the Loan Documents to which such
Borrower is a party, and the consummation of the transactions contemplated
hereby and thereby.  Upon their execution and delivery in accordance with the
terms hereof, this Agreement and the Loan Documents to which each Borrower is a
party will constitute legal, valid and binding agreements and obligations of
such Borrower enforceable against such Borrower in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, and similar laws and equitable principles affecting the enforcement
of creditors’ rights generally.
 
(b) Each Guarantor has taken all corporate, partnership or limited liability
company action, as applicable, necessary to authorize the execution and delivery
of the Loan Documents to which such Guarantor is a party, and the consummation
of the transactions contemplated thereby.  Upon their execution and delivery in
accordance with the terms hereof, the Loan Documents to which each Guarantor is
a party will constitute legal, valid and binding agreements and obligations of
such Guarantor enforceable against such Guarantor in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, and similar laws and equitable principles
affecting the enforcement of creditors’ rights generally.
 
5.4 Approvals; Consents.  No approval, consent, exemption or other action by, or
notice to or filing with, any Governmental Authority is necessary in connection
with the execution, delivery, performance or enforcement of this Agreement or
the Loan Documents.  All requisite Governmental Authorities and third parties
have approved or consented to the transactions contemplated by this Agreement
and the Loan Documents, and all applicable waiting periods have expired and
there is no governmental or judicial action, actual or threatened, that has or
could have a reasonable likelihood of restraining, preventing or imposing
burdensome conditions on the transactions contemplated by this Agreement and the
Loan Documents.
 
 
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5.5 Liens.  Each Borrower and each of the Subsidiaries (other than the Excluded
Subsidiaries) has good and marketable title to, or valid leasehold interests in,
all of its Assets, free and clear of all Liens or rights of others, except for
Permitted Liens.
 
5.6 Debt.  Each Borrower and each of the Subsidiaries (other than the Excluded
Subsidiaries) has no Debt other than Permitted Debt.
 
5.7 Litigation.  Except as set forth in Schedule 5.7, there are no material
suits, proceedings, claims or disputes pending or, to the Knowledge of
Borrowers, threatened, against or affecting any Borrower or any of Borrowers’
Assets, or any Subsidiary (other than the Excluded Subsidiaries) or any of such
Subsidiary’s (other than the Excluded Subsidiaries) Assets, that could
individually or in the aggregate result in a Material Adverse Effect.
 
5.8 No Default.  No Event of Default or Unmatured Event of Default has occurred
and is continuing or would result from the incurring of obligations by any
Borrower or any Subsidiary (other than the Excluded Subsidiaries) under this
Agreement or the Loan Documents.
 
5.9 Subsidiaries.  Set forth in Schedule 5.9 is a complete and accurate list of
the Subsidiaries (other than Excluded Subsidiaries), showing the jurisdiction of
incorporation of each and showing the percentage of each Borrower’s ownership of
the Capital Stock of each such Subsidiary.  All of the outstanding Capital Stock
of each Subsidiary (other than Excluded Subsidiaries) has been validly issued,
is fully paid and nonassessable, and is owned by Borrower free and clear of all
Liens except Permitted Liens.
 
5.10 Taxes.  All material tax returns required to be filed by each Borrower and
each of the Subsidiaries (other than the Excluded Subsidiaries) in any
jurisdic­tion have in fact been filed, and all material taxes, assessments, fees
and other governmental charges upon each Borrower and each of the Subsidiaries
(other than the Excluded Subsidiaries) or upon any of their Assets, income or
franchises, which are due and payable have been paid.  The provisions for taxes
on the books of each Borrower and each of the Subsidiaries (other than the
Excluded Subsidiaries) are adequate for all open years, and for each Borrower’s
and each of the Subsidiaries (other than the Excluded Subsidiaries) current
fiscal period.
 
5.11 Correctness of Financial Statements.  Borrowers audited, consolidated
Financial Statement as of its fiscal year ended December 31, 2009, are complete
and correct in all material respects and accurately and fairly present in all
material respects the financial condition and results of operations of Borrowers
and the Subsidiaries as of their respective dates.  Any forecasts of future
financial performance delivered by Borrowers to Bank have been made in good
faith and are based on reasonable assumptions and investigations by
Borrowers.  Said audited Financial Statement have been prepared in accordance
with GAAP.  Since the date of such audited Financial Statement, there has been
no change in any Borrower’s financial condition or results of operations
sufficient to have a Material Adverse Effect.  Borrowers and the Subsidiaries
(other than the Excluded Subsidiaries) have no contingent obligations,
liabilities for taxes or other outstanding financial obligations which are
material in the aggregate, except as disclosed in such statements, information
and data.
 
 
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5.12 ERISA.  Neither any Borrower nor any member of the ERISA Group maintains or
contributes to any Plan or Multiemployer Plan, other than those listed on
Schedule 5.12. Except as set forth on Schedule 5.12, each Borrower and each
member of the ERISA Group have satisfied the minimum funding standards of ERISA
and the Internal Revenue Code with respect to each Plan and Multiemployer Plan
to which it is obligated to contribute.  Except as set forth in Schedule 5.12,
no ERISA Event has occurred nor has any other event occurred that may result in
an ERISA Event that reasonably could be expected to result in a Material Adverse
Effect.  None of Borrowers, any member of the ERISA Group, or any fiduciary of
any Plan is subject to any direct or indirect liability with respect to any Plan
that could reasonably be expected to result in a Material Adverse Effect (other
than to make regularly scheduled required contributions and to pay Plan benefits
in the normal course) under any applicable law, treaty, rule, regulation, or
agreement.  Neither Borrowers nor any member of the ERISA Group is required to
provide security to any Plan under Section 401(a)(29) of the Internal Revenue
Code.  Each Plan will be able to fulfill its benefit obligations as they come
due in accordance with the Plan documents and under GAAP.
 
5.13 Other Obligations.  Neither any Borrower nor any Subsidiary (other than the
Excluded Subsidiaries) is in default on any (i) Debt in the aggregate principal
amount among all Borrowers in excess of $2,500,000 or (ii) any other lease,
commitment, contract, instrument or obligation which is material to the
operation of its business.
 
5.14 Public Utility Holding Company Act.  No Borrower is a holding company, or
an affiliate of a holding company or a subsidiary company of a holding company,
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
 
5.15 Investment Company Act.  No Borrower is an investment company, or a company
controlled by an investment company, within the meaning of the Investment
Company Act of 1940, as amended.
 
5.16 Patents, Trademarks, Copyrights, and Intellectual Property, etc.  Each
Borrower and each Subsidiary (other than the Excluded Subsidiaries) has all
necessary, patents, patent rights, licenses, trademarks, trademark rights, trade
names, trade name rights, copyrights, permits, and franchises in order for it to
conduct its business and to operate its Assets, without known conflict with the
rights of third Persons.  The consummation of the transactions contemplated by
this Agreement will not alter or impair any of such rights of any Borrower or
any Subsidiary (other than the Excluded Subsidiaries).  No adverse judgments or
pending material claims have been made with respect to each Borrower’s and each
Subsidiary’s (other than Excluded Subsidiaries) title to or the validity of any
unexpired trademark, trademark registration, trade name, patent, copyright,
copyright registration, except as may be as set forth on Schedule C to the
Patent and Trademark Security Agreement.  The representations and warranties set
forth in this Section 5.16 are qualified by reference to the matters disclosed
in a letter, dated November 25, 2002, from Sheppard, Mullin, Richter & Hampton,
counsel to Borrowers, addressed to Bank.
 
 
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5.17 Environmental Condition.  (i) None of any Borrower’s or any Subsidiary’s
(other than the Excluded Subsidiaries) Assets has ever been used by any Borrower
or such Subsidiary (other than the Excluded Subsidiaries) or by previous owners
or operators in the disposal of, or to produce, store, handle, treat, release,
or transport, any Hazardous Materials; (ii) none of any Borrower’s or any
Subsidiary’s (other than the Excluded Subsidiaries) Assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a Hazardous Materials disposal site, or a candidate for closure
pursuant to any environmental protection statute which would have a Material
Adverse Effect; (iii) no Lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned or
operated by any Borrower or any Subsidiary; (other than the Excluded
Subsidiaries) and (iv) neither Borrower nor any Subsidiary has received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal or state governmental agency concerning any action or
omission by any Borrower or any Subsidiary (other than the Excluded
Subsidiaries) resulting in the releasing or disposing of Hazardous Materials
into the environment.
 
5.18 Solvency.  Both before and after giving effect to this Agreement, the Loan
Documents and the Purchase Documents, and the transactions contemplated hereby
and thereby, each Borrower and each Subsidiary (other than the Excluded
Subsidiaries) is Solvent.  No transfer of property is being made by any Borrower
or any Subsidiary and no obligation is being incurred by any Borrower or any
Subsidiary in connection with the transactions contemplated by this Agreement,
the Loan Documents or the Purchase Documents with the intent to hinder, delay,
or defraud either present or future creditors of any Borrower or any Subsidiary.
 
5.19  Intentionally omitted.
 
5.20  Intentionally omitted.
 
5.21  Intentionally omitted.
 
 
 
ARTICLE VI
 
AFFIRMATIVE COVENANTS
 
Each Borrower covenants and agrees that from the Closing Date and thereafter
until the indefeasible payment, performance and satisfaction in full of the
Obligations, all of Bank’s obligations hereunder have been terminated and no
Letters of Credit are outstanding, such Borrower shall:
 
 
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6.1 Punctual Payments.  Punctually pay the interest and principal on the Loans,
the Fees and all Expenses and any other fees and liabilities due under this
Agreement and the Loan Documents at the times and place and in the manner
specified in this Agreement or the Loan Documents.
 
6.2 Books and Records; Collateral Audits.  Maintain, and cause each of the
Subsidiaries (other than the Excluded Subsidiaries) to maintain, adequate books
and records in accordance with GAAP, and permit any officer, employee or agent
of Bank, at any time (upon one (1) Business Day’s notice unless an Event of
Default has occurred and is continuing, in which event no notice shall be
required) and from time to time (but not more than twice per year unless an
Event of Default has occurred and is continuing), (a) to inspect, audit and
examine such books and records, and to make copies of the same, and/or (b) to
audit the Accounts and the Inventory in order to verify such Borrower’s
financial condition or the amount, quality, value, condition of, or any other
matter relating to, the Accounts and/or the Inventory.  In connection therewith,
Borrowers shall pay to Bank Bank’s standard audit fee (“Audit Fee”) for each
audit plus all Expenses in connection therewith, payable upon demand. The Audit
Fee shall in no event exceed $1,500 per auditor per day.
 
6.3 Collateral Reporting and Financial Statements.  Deliver to Bank the
following, all in form and detail reasonably satisfactory to Bank and in such
number of copies as Bank may reasonably request:
 
(a) as soon as available but not later than forty five (45) days after the end
of each fiscal quarter, a backlog report;
 
(b) as soon as available but not later than forty five (45) days after the end
of each quarterly accounting period, a consolidated internally prepared
Financial Statement for Borrowers and the Subsidiaries which shall include
Borrowers’ and the Subsidiaries’ consolidated balance sheet as of the close of
such period, and Borrowers’ and the Subsidiaries’ consolidated statement of
income and retained earnings and consolidated statement of cash flow for such
period and year to date, certified by the Chief Financial Officer of Borrowers,
to the best of his or her knowledge after due and diligent inquiry, as being
complete and correct and fairly presenting in all material respects Borrowers’
and its Subsidiaries’ financial condition and results of operations for such
period;
 
(c) as soon as available but not later than one hundred twenty (120) days after
the end of each fiscal year, a complete copy of Borrowers’ and the Subsidiaries’
consolidated audited Financial Statement, which shall include at least
Borrowers’ and the Subsidiaries’ balance sheet as of the close of such fiscal
year, and Borrowers’ and the Subsidiaries’ statement of income and retained
earnings and statement of cash flow for such fiscal year, certified by KPMG LLP
or another certified public accountant selected by Borrower and reasonably
satisfactory to Bank, which certificate shall not be qualified in any manner
whatsoever;
 
(d) as soon as available but not later than fifteen (15) days after filing
thereof with the SEC, (i) copies of each annual or quarterly report, proxy or
Financial Statement or other report or communications sent to the Shareholders
of Parent, and (ii) copies of all annual, regular, periodic and special reports
and registration statements which Parent may file or be required to file with
the SEC;
 
 
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(e) promptly upon receipt by any Borrower, copies of any and all reports and
management letters submitted to a Borrower or any Subsidiary by any certified
public accountant in connection with any examination of any Borrower’s or any
Subsidiary’s financial records made by such accountant; and
 
(f) from time to time, operating statistics, operating plans and any other
information as Bank may reasonably request, promptly upon such request.
 
6.4 Existence; Preservation of Licenses; Compliance with Law.  Preserve and
maintain, and cause each Subsidiary (other than the Excluded Subsidiaries) to
preserve and maintain, its corporate existence and good standing in the state of
its organization, qualify and remain qualified, and cause each Subsidiary (other
than the Excluded Subsidiaries) to qualify and remain qualified, as a foreign
corporation in every jurisdiction where the failure to be so qualified could
have a Material Adverse Effect; and preserve, and cause each of the Subsidiaries
(other than the Excluded Subsidiaries) to preserve, all of its licenses,
permits, governmental approvals, rights, privileges and franchises required for
its operations; and comply, and cause each of the Subsidiaries (other than the
Excluded Subsidiaries) to comply, with the provisions of its Governing
Documents; and comply, and cause each of the Subsidiaries (other than the
Excluded Subsidiaries) to comply, with the requirements of all applicable laws,
rules, regulations, orders of any Governmental Authority having authority or
jurisdiction over it, except for such laws, rules and regulations where the
failure to so comply could not have a Material Adverse Effect, and comply, and
cause each of the Subsidiaries (other than the Excluded Subsidiaries) to comply,
with all requirements for the maintenance of its business, insurance, licenses,
permits, governmental approvals, rights, privileges and franchises.
 
6.5 Insurance.  Cause properties of Borrowers and Subsidiaries to be insured
with financially sound and reputable insurance companies that are not Affiliates
of Borrowers, in such amounts, with such deductibles and covering such risks as
are customarily carried by companies engaged in similar businesses and owning
similar properties in localities where the Borrowers or the applicable
Subsidiary operates, and reasonably satisfactory to Bank. Each Borrower shall
deliver to Bank, from time to time, certificates of insurance (naming Bank as
sole loss payee or additional insured, as applicable), proof of premium payment,
and or copies of insurance policies upon Bank’s request.
 
6.6 Assets.  Maintain, keep and preserve, and cause each Subsidiary (other than
the Excluded Subsidiaries) to maintain, keep and preserve, all of its Assets
(tangible or intangible) which are necessary to its business in good repair and
condition, and from time to time make necessary repairs, renewals and
replacements thereto so that such Assets shall be fully and efficiently
preserved and maintained.
 
 
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6.7 Taxes and Other Liabilities.  Pay and discharge when due, and cause each
Subsidiary (other than the Excluded Subsidiaries) to pay and discharge when due,
any and all assessments and taxes, both real or personal and including federal
and state income taxes, and any and all other Permitted Debt.
 
6.8 Notice to Bank.  Promptly, upon any Borrower acquiring Knowledge thereof,
give written notice to Bank of:
 
(a) all litigation affecting any Borrower or any Subsidiary (other than the
Excluded Subsidiaries) where the amount in controversy is in excess of Five
Million Dollars ($5,000,000);
 
(b) any material dispute which may exist between any Borrower or any Subsidiary
(other than the Excluded Subsidiaries), on the one hand, and any Governmental
Authority, on the other;
 
(c) any labor controversy resulting in or threatening to result in a strike
against any Borrower or any Subsidiary (other than the Excluded Subsidiaries);
 
(d) any proposal by any Governmental Authority to acquire the Assets or
business, valued in the aggregate in excess of $2,500,000, of any Borrower or
any Subsidiary (other than the Excluded Subsidiaries), or to compete with any
Borrower or any Subsidiary (other than the Excluded Subsidiaries);
 
(e) any reportable event under Section 4043(c)(5), (6) or (13) of ERISA with
respect to any Plan, any decision to terminate or withdraw from a Plan, any
finding made with respect to a Plan under Section 4041(c) or (e) of ERISA, the
commencement of any proceeding with respect to a Plan under Section 4042 of
ERISA, or any material increase in the actuarial present value of unfunded
vested benefits under all Plans over the preceding year;
 
(f) any Event of Default or Unmatured Event of Default; and
 
(g) any other matter which has resulted or reasonably could be expected to have
a Material Adverse Effect.
 
6.9 Employee Benefits.
 
(a) (i) Promptly, and in any event within ten (10) Business Days after Borrower
obtains Knowledge that an ERISA Event has occurred that reasonably could be
expected to result in a Material Adverse Effect, deliver or cause to be
delivered a written statement of the Chief Financial Officer of Parent
describing such ERISA Event and any action that is being taken with respect
thereto by Borrowers or member of the ERISA Group, and any action taken or
threatened by the Internal Revenue Service, Department of Labor, or PBGC.  Each
Borrower shall (i) be deemed to know all facts known by the administrator of any
Plan of which it is the plan sponsor; (ii) promptly and in any event within
three (3) Business Days after the filing thereof with the Internal Revenue
Service, deliver or cause to be delivered a copy of each funding waiver request
filed with respect to any Plan and all communications received by Borrower or,
to the knowledge of any Borrower, any member of the ERISA Group with respect to
such request; and (iii) promptly and in any event within three (3) Business Days
after receipt by Borrowers or, to the Knowledge of Borrowers, any member of the
ERISA Group, of the PBGC’s intention to terminate a Plan or to have a trustee
appointed to administer a Plan, copies of each such notice.
 
 
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(b)           Cause to be delivered to Bank, upon Bank’s request, each of the
following:  (i) a copy of each Plan (or, where any such plan is not in writing,
complete description thereof) (and if applicable, related trust agreements of
other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of any Borrower or its
Subsidiaries; (ii) the most recent determination letter issued by the IRS with
respect to each Plan; (iii) for the three (3) most recent Plan years, annual
reports on Form 5500 Series required to be filed with any governmental agency
for each Plan; (iv) all actuarial reports prepared for the last three (3) Plan
years for each Plan; (v) a listing of all Multiemployer Plans, with the
aggregate amount of the most recent annual contributions required to be made by
any Borrower or any member of the ERISA Group to each such plan and copies of
the collective bargaining agreements requiring such contributions; (vi) any
information that has been provided to any Borrower or any member of the ERISA
Group regarding withdrawal liability under any Multiemployer Plan; and (vii) the
aggregate amount of the most recent annual payments made to former employees of
Borrowers under any Retiree Health Plan.
 
6.10           Further Assurances. Execute and deliver, or cause to be executed
and delivered, upon the request of Bank and at Borrowers expense, such
additional documents, instruments and agreements as Bank may reasonably
determine to be necessary or advisable to carry out the provisions of this
Agreement and the Loan Documents, and the transactions and actions contemplated
hereunder and thereunder.
 
6.11           Bank Accounts.  Maintain, and cause each Subsidiary (other than
the Excluded Subsidiaries) to maintain, its cash on hand and cash equivalent
investments in deposit accounts  listed on Schedule 1 to the Security Agreement
(Borrowers) (which schedule may be amended from time to time by notice to Bank),
and (ii) if an Event of Default has occurred or is continuing, Borrowers shall
promptly deliver to Bank such control agreements and/or other agreements,
instruments and documents, fully and duly executed, as Bank shall reasonably
require to perfect and maintain perfected Bank’s security interest in such
deposit accounts, all in form and substance reasonably satisfactory to Bank.
 
6.12           Environment.  Be and remain, and cause each Subsidiary (other
than the Excluded Subsidiaries) and each operator of any of any Borrower’s or
any Subsidiary’s (other than the Excluded Subsidiaries) Assets to be and remain,
in compliance in all material respects with the provisions of all federal, state
and local environmental, health and safety laws, codes and ordinances, and all
rules and regulations issued thereunder; notify Bank immediately of any notice
of a hazardous discharge or environmental complaint received from any
Governmental Authority or any other Person; notify Bank immediately of any
hazardous discharge from or affecting its premises; immediately contain and
remove the same, in compliance with all applicable laws; promptly pay any fine
or penalty assessed in connection therewith; permit Bank to inspect the
premises, to conduct tests thereon, and to inspect all books, correspondence,
and records pertaining thereto; and at Bank’s request, and at Borrowers’
expense, provide a report of a qualified environmental engineer, satisfactory in
scope, form and content to Bank, and such other and further assurances
reasonably satisfactory to Bank that the condition has been corrected.
 
 
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6.13           Additional Collateral.
 
(a)           With respect to any Assets (or any interest therein) acquired
after the Closing Date by any Borrower or any Subsidiary (other than the
Excluded Subsidiaries) that are of a type covered by the Lien created by any of
the Loan Documents but which are not so subject, promptly (and in any event
within thirty (30) days after the acquisition thereof):  (i) execute and
deliver, or cause such Subsidiary (other than the Excluded Subsidiaries) to
execute and deliver, to Bank such amendments to the relevant Loan Documents or
such other documents as Bank shall deem necessary or advisable to grant to Bank
a Lien on such Assets (or such interest therein), (ii) take all actions, or
cause such Subsidiary (other than the Excluded Subsidiaries) to take all
actions, necessary or advisable to cause such Lien to be duly perfected in
accordance with all applicable law, including, without limitation, the filing of
financing statements in such jurisdictions as may be requested by Bank, (iii) if
requested by Bank, deliver to Bank legal opinions relating to the matters
described in the immediately preceding clauses (i) and (ii), which opinions
shall be in form and substance, and from counsel, reasonably satisfactory to
Bank, and (iv) if requested by Bank, deliver to Bank evidence of insurance as
required by Section 6.5.
 
(b)           Without limiting the generality of Section 6.13(a), except as
otherwise provided in Section 6.13(c), each Borrower shall pledge to Bank all of
its right, title and interest in and to the Capital Stock of each presently
existing and hereafter acquired or formed Subsidiaries (other than Excluded
Subsidiaries) pursuant to a Stock Pledge Agreement, and such Borrower shall take
such actions as Bank shall reasonably require to perfect its security interest
in all such Capital Stock; provided that Borrowers shall not acquire or form any
new Subsidiaries except as otherwise permitted under Section 7.8(b).
 
(c)           Notwithstanding Section 6.13(b), if an Event of Default has
occurred or is continuing, Borrowers shall be required, if requested by Bank, to
pledge sixty-five percent (65%) of the Capital Stock of the Excluded
Subsidiaries.
 
6.14           Guarantors.  Cause (a) New Guarantor to execute and deliver to
Bank a Guaranty in form and substance satisfactory to Bank, and (b) upon Bank’s
request (in its sole and absolute discretion), each and every now existing and
hereafter acquired or formed Subsidiary (other than any Borrower and the
Excluded Subsidiaries) to execute and deliver to Bank a Guaranty and Security
Agreement (Subsidiary), in form and substance satisfactory to Bank.
 
6.15           Returns.  Cause returns and allowances, as between any Borrower
and its Account Debtors, to be on the same basis and in accordance with the
usual customary practices of such Borrower, as they exist at the time of the
execution and delivery of this Agreement.  If, at a time when no Event of
Default has occurred and is continuing, any Account Debtor returns any Inventory
to any Borrower, such Borrower promptly shall determine the reason for such
return and, if Borrower accepts such return, issue a credit memorandum (with a
copy to be sent to Bank upon its request) in the appropriate amount to such
Account Debtor.  If, at a time when an Event of Default has occurred and is
continuing, any Account Debtor returns any Inventory to any Borrower, such
Borrower promptly shall determine the reason for such return and, if Bank
consents (which consent shall not be unreasonably withheld), issue a credit
memorandum (with a copy to be sent to Bank upon its request) in the appropriate
amount to such Account Debtor.
 
 
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ARTICLE VII
 
NEGATIVE COVENANTS
 
Each Borrower further covenants and agrees that from the Closing Date and
thereafter until the indefeasible payment, performance and satisfaction in full
of the Obligations, all of Bank’s, obligations hereunder have been terminated
and no Letters of Credit are outstanding, such Borrower shall not:
 
7.1           Use of Funds; Margin Regulation.
 
(a)           Use any proceeds of the Revolving Loans for any purpose other than
(i) for working capital, (ii) for general corporate purposes, and (iii) for
Permitted Payments; or
 
(b)           Use any portion of the proceeds of the Loans in any manner which
might cause the Loans, the applica­tion of the proceeds thereof, or the
transactions contemplated by this Agreement to violate Regulation T, U, or X of
the Board of Governors of the Federal Reserve System, or any other regulation of
such board, or to violate the Securities and Exchange Act of 1934, as amended or
supplemented.
 
7.2           Debt.  Create, incur, assume or suffer to exist, or permit any
Subsidiary (other than the Excluded Subsidiaries) to create, incur, assume or
suffer to exist, any Debt except Permitted Debt.
 
7.3           Liens.  Create, incur, assume or suffer to exist, or permit any
Subsidiary (other than the Excluded Subsidiaries) to create, incur, assume or
suffer to exist, any Lien (including the lien of an attachment, judgment or
execution) on any of its Assets, whether now owned or hereafter acquired, except
Permitted Liens; or sign or file, or permit any Subsidiary (other than the
Excluded Subsidiaries) to sign or file, under the UCC as adopted in any
jurisdiction, a financing statement which names any Borrower or any Subsidiary
(other than the Excluded Subsidiaries) as a debtor, except with respect to
Permitted Liens, or sign, or permit any Subsidiary (other than the Excluded
Subsidiaries) to sign, any security agreement authorizing any secured party
thereunder to file such a financing statement, except with respect to Permitted
Liens.
 
7.4           Merger, Consolidation, Transfer of Assets.  Wind up, liquidate or
dissolve, reorganize, reincorporate, merge or consolidate with or into any other
Person, or acquire all or substantially all of the Assets or the business of any
other Person, or permit any Subsidiary to do so; provided, however, upon prior
written notice to Bank, any Subsidiary may merge into or consolidate with or
transfer Assets to any Borrower or any other Subsidiary.
 
 
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7.5           Intentionally omitted.
 
7.6           Sales and Leasebacks.  Sell, transfer, or otherwise dispose of, or
permit any Subsidiary (other than the Excluded Subsidiaries) to sell, transfer,
or otherwise dispose of, any real or personal property to any Person, and
thereafter directly or indirectly leaseback the same or similar property.
 
7.7           Asset Sales.  Conduct any Asset Sale, or permit any Subsidiary
(other than the Excluded Subsidiaries) to do so, other than (i) sales of
Inventory in the ordinary course of business, (ii) dispositions of obsolete,
worn or nonfunctional equipment, (iii) sales of Assets generating aggregate Net
Cash Proceeds of no more than $5,000,000 in any fiscal year, (iv) sales of
marketable securities, (v) licensing of intellectual property in the ordinary
course of business, and (vi) other Asset Sales approved in writing by Bank
(which approval shall not be unreasonably withheld or delayed).
 
7.8           Investments.
 
(a)           Except as otherwise permitted by clauses (b), (c) and (d) of this
Section 7.8, make any loans or advances to, or any investment in, any Person
(other than Permitted Investments); or acquire, or permit any Subsidiary to
acquire, any Capital Stock, (other than pursuant to Parent’s stock buyback
program), Assets, obligations, or other securities of, make any contribution to,
or otherwise acquire any interest in, any Person; or acquire or form or permit
any Subsidiary (other than the Excluded Subsidiaries) to acquire or form, any
new Subsidiary (other than the Excluded Subsidiaries); or participate, or permit
any Subsidiary  to participate, as a partner or joint venturer with any other
Person.
 
(b)           Notwithstanding the terms of Section 7.8(a), any Borrower may
acquire or form, and permit any Subsidiary to acquire or form, any new
Subsidiary or the Assets or a minority investment in the equity securities of
another Person; provided that (i) at any time the outstanding Obligations exceed
$2,000,000, the acquisition costs for all such acquisitions (including the total
consideration paid to the seller(s), taxes, fees and other transaction costs),
does not exceed, in the aggregate, Twenty Five Million Dollars ($25,000,000),
(ii) such acquisition is of a business engaged in the manufacture, design,
marketing, distribution and/or sale (wholesale or retail) of apparel, shoes,
footwear and/or outdoor sporting goods, (iii) Borrowers shall have complied with
Sections 6.13 and 6.14 (other than with respect to an Excluded Subsidiary),
(iv) the acquisition shall not be hostile, and (v) at any time the outstanding
Obligations exceed $2,000,000, prior to the consummation of the acquisition,
Borrowers shall have demonstrated to the reasonable satisfaction of Bank that
both before and, on a pro forma basis after giving effect to such acquisition,
no Event of Default shall be continuing or will result therefrom.
 
 
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(c)           Intentionally omitted.
 
(d)           Notwithstanding the terms of Section 7.8(a), Borrowers shall be
permitted to make loans and advances (i) to their employees, provided that such
loans and advances do not exceed Two Hundred Thousand Dollars ($200,000) in the
aggregate outstanding at any time, (ii) to any Subsidiary and (iii) to any
Excluded Subsidiary, provided that such net loans and advances to Subsidiaries
(who are not Loan Parties) and Excluded Subsidiaries (who are not Loan Parties)
do not exceed Twenty Five Million Dollars ($25,000,000) in the aggregate per
calendar year.
 
7.9           Character of Business.  Engage in any business activities or
operations substantially different from or unrelated to its present business
activities and operations, or permit any Subsidiary (other than the Excluded
Subsidiaries) to do so (it being specifically acknowledged by Bank that
Borrowers may directly or indirectly engage in the wholesale and retail sale of
apparel, footwear and shoes and sale of consumer goods).
 
7.10           Distributions.
 
(a)           Except as otherwise permitted by Section 7.10(b), make any
Restricted Payments, or permit any Subsidiary to do so (other than an Excluded
Subsidiary).
 
(b)           Notwithstanding the terms of Section 7.10(a), Parent may make
Restricted Payments pursuant to its (i) stock buyback program provided that the
proceeds of the Loans may not be used for such purpose and (ii) any cash
dividend program as may be approved by the Parent’s Board of Directors so long
as no Event of Default has occurred or is continuing and Borrowers are in
compliance with the financial covenants set forth in Section 7.15 without regard
to the amount of outstanding Obligations.
 
7.11           Guaranty.  Assume, guaranty, endorse (other than checks and
drafts received by a Borrower in the ordinary course of business so long as an
Event of Default has not occurred), or otherwise be or become directly or
contingently responsible or liable, or permit any Subsidiary (other than the
Excluded Subsidiaries) to assume, guaranty, endorse, or otherwise be or become
directly or contingently responsible or liable (including, any agreement to
purchase any obligation, stock, Assets, goods, or services or to supply or
advance any funds, Assets, goods, or services, or any agreement to maintain or
cause such Person to maintain, a minimum working capital or net worth, or
otherwise to assure the creditors of any Person against loss) for the
obligations of any other Person (other than a Borrower); or pledge or
hypothecate, or permit any Subsidiary (other than the Excluded Subsidiaries) to
pledge or hypothecate, any of its Assets as security for any liabilities or
obligations of any other Person (other than a Borrower); notwithstanding the
foregoing, Borrowers may guaranty operating leases of any Subsidiary or Excluded
Subsidiary.  The foregoing restriction shall not apply to any guaranty or
contractual commitment issued by Parent in connection with Permitted Debt as
well as any contractual commitment issued by Borrower in the ordinary course of
business to any supplier of products, such as sheepskin products, necessary for
the operation of Parent’s business.
 
7.12           Intentionally omitted.
 
 
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7.13           Transactions with Affiliates.  Enter into any transaction,
including borrowing or lending and the purchase, sale, or exchange of property
or the rendering of any service (including management services), with any
Affiliate (other than with Parent or with a Subsidiary that is not an Excluded
Subsidiary), or permit any Subsidiary (other than the Excluded Subsidiaries) to
enter into any transaction, including borrowing or lending and the purchase,
sale, or exchange of property or the rendering of any service (including
management services), with any Affiliate (other than with Parent or with a
Subsidiary that is not an Excluded Subsidiary), other than in the ordinary
course of and pursuant to the reasonable requirements of such Borrower’s or such
Subsidiary’s business and upon fair and reasonable terms no less favorable to
such Borrower or such Subsidiary than would obtain in a comparable arm’s length
transaction with a Person not an Affiliate. Notwithstanding the foregoing, (a)
Parent shall be permitted to sell to Holbrook the foreign intellectual property
assets acquired in the Acquisition, and Holbrook shall be entitled to repay the
purchase price thereof, all in accordance with terms agreed to between Holbrook
and Parent, and (b) parent may provide management services to Holbrook in
consideration of a management fee payable by Holbrook to Parent.
 
7.14           Stock Issuance.  Permit any Subsidiary to issue any additional
Capital Stock.
 
7.15           Financial Condition.  Permit or suffer:
 
(a)           At any time outstanding Obligations exceed Two Million Dollars
($2,000,000), Consolidated Effective Tangible Net Worth, measured as of the end
of each fiscal quarter of Parent, commencing with the fiscal quarter ended
December 31, 2009, to be less than the sum of (i) $294,891,000 plus (ii) on a
cumulative basis, 75% of the Consolidated Net Profit (but in no event less than
zero) for each fiscal year, commencing with the fiscal year ended December 31,
2010.
 
(b)           At any time outstanding Obligations exceed Two Million Dollars
($2,000,000), any Consolidated Net Loss for two or more consecutive fiscal
quarters.
 
7.16           Transactions Under ERISA.  Directly or indirectly:
 
(a)           engage, or permit any member of the ERISA Group to engage, in any
prohibited transaction which is reasonably likely to result in a civil penalty
or excise tax described in Sections 406 of ERISA or 4975 of the Internal Revenue
Code for which a statutory or class exemption is not available or a private
exemption has not been previously obtained from the Department of Labor;
 
(b)           permit to exist with respect to any Plan any accumulated funding
deficiency (as defined in Sections 302 of ERISA and 412 of the Internal Revenue
Code), whether or not waived;
 
(c)           fail, or permit any member of the ERISA Group to fail, to pay
timely required contributions or installments due with respect to any waived
funding deficiency to any Plan;
 
 
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(d)           terminate, or permit any member of the ERISA Group to terminate,
any Plan where such event would result in any liability of any Borrower or any
member of ERISA Group under Title IV of ERISA;
 
(e)           fail, or permit any member of the ERISA Group to fail, to make any
required contribution or payment to any Multiemployer Plan;
 
(f)           fail, or permit any member of the ERISA Group to fail, to pay to a
Plan or Multiemployer Plan any required installment or any other payment
required under Section 412 of the Internal Revenue Code on or before the due
date for such installment or other payment;
 
(g)           amend, or permit any member of the ERISA Group to amend, a Plan
resulting in an increase in current liability for the plan year such that either
of any Borrower or any member of the ERISA Group is required to provide security
to such Plan under Section 401(a)(29) of the Internal Revenue Code; or
 
(h)           withdraw, or permit any member of the ERISA Group to withdraw,
from any Multiemployer Plan where such withdrawal is reasonably likely to result
in any liability of any such entity under Title IV of ERISA;
 
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of any Borrower, any of the
Subsidiaries or any member of the ERISA Group in excess of Two Million Five
Hundred Thousand Dollars ($2,500,000).
 
ARTICLE VIII
 
EVENTS OF DEFAULT AND REMEDIES
8.1           Events of Default.  The occurrence of any one or more of the
following events, acts or occurrences shall constitute an event of default (an
“Event of Default”) hereunder:
 
(a)           Borrowers fail to pay when due any payment of principal due on the
Loans, or fail to pay within three (3) days of the due date thereof any interest
due on the Loans, the Fees, any Expenses, or any other amount payable hereunder
or under any Loan Document;
 
(b)           Borrowers fail to observe or perform any of the covenants and
agreements set forth in Article VII and such failure continues for a period of
five (5) Business Days after the earlier to occur of (i) Borrowers obtaining
Knowledge of such failure or (ii) Bank’s dispatch of notice to Borrowers of such
failure;
 
(c)           Borrowers or any Guarantor fail to observe or perform any covenant
or agreement set forth in this Agreement or the Loan Documents (other than those
covenants and agreements described in Sections 8.1(a) and 8.1(b)), and such
failure continues for fifteen (15) days after the earlier to occur of
(i) Borrowers obtaining Knowledge of such failure or (ii) Bank’s dispatch of
notice to Borrowers of such failure;
 
 
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(d)           Any representation, warranty or certifi­cation made by any
Borrower or any Guarantor or any officer or employee of any Borrower or any
Guarantor in this Agreement or any Loan Document, in any certificate, financial
statement or other document delivered pursuant to this Agreement or any Loan
Document proves to have been misleading or untrue in any material respect when
made or if any such representation, warranty or certification is withdrawn;
 
(e)           Any Borrower or any Guarantor fails to pay when due any payment in
respect of its Debt in the aggregate principal amount in excess of $2,500,000
(other than under this Agreement);
 
(f)           Any event or condition occurs that:  (i) results in the
acceleration of the maturity of any of any Borrower’s or any Guarantor’s Debt in
the aggregate principal amount in excess of $2,500,000; or (ii) permits (or,
with the giving of notice or lapse of time or both, would permit) the holder or
holders of such Debt or any Person acting on behalf of such holder or holders to
accelerate the maturity thereof;
 
(g)           Any Borrower or any Guarantor commences a voluntary Insolvency
Proceeding seeking liquidation, reorganization or other relief with respect to
itself or its Debt or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official over it or any substantial part
of its property, or consents to any such relief or to the appointment of or
taking possession by any such official in an involuntary Insolvency Proceeding
or fails generally to pay its Debt as it becomes due, or takes any action to
authorize any of the foregoing;
 
(h)           An involuntary Insolvency Proceeding is commenced against any
Borrower or any Guarantor seeking liquidation, reorganization or other relief
with respect to it or its Debt or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property and any of the following events occur:  (i) the
petition commencing the Insolvency Proceeding is not timely controverted;
(ii) the petition commencing the Insolvency Proceeding is not dismissed within
forty-five (45) calendar days of the date of the filing thereof; (iii) an
interim trustee is appointed to take possession of all or a substantial portion
of the Assets of, or to operate all or any substantial portion of the business
of, Borrower or such Guarantor; or (iv) an order for relief shall have been
issued or entered therein;
 
(i)           Any Borrower or any Guarantor suffers (i) one or more money
judgments in excess of $5,000,000 in the aggregate over applicable insurance
coverage or (ii) one or more writs, warrants of attachment, or similar process
involving Assets valued in the aggregate in excess of $5,000,000, and any of the
foregoing shall continue in effect for a period of thirty (30) days without
being vacated, discharged, satisfied, stayed or bonded pending appeal;
 
(j)           A judgment creditor obtains possession of any of the Assets valued
in the aggregate in excess of $5,000,000 of any Borrower or any Guarantor by any
means, including levy, distraint, replevin, or self-help,
 
 
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(k)           Any order, judgment or decree is entered decreeing the dissolution
of Borrower or any Guarantor, or any Guarantor dies;
 
(l)           Any Borrower or any Guarantor is enjoined, restrained or in any
way prevented by court order from continuing to conduct all or any material part
of its business affairs;
 
(m)           A notice of lien, levy or assessment is filed of record with
respect to any or all of any Borrower's or any Guarantor’s Assets valued in the
aggregate in excess of $5,000,000 by any Governmental Authority, or any taxes or
debts owing at any time hereafter to any Governmental Authority becomes a Lien,
whether inchoate or otherwise, upon any or all of any Borrower's or any
Guarantor’s Assets valued in the aggregate in excess of $5,000,000 and the same
is not paid on the payment date thereof;
 
(n)           If any Borrower's or any Guarantor’s records are prepared and kept
by an outside computer service bureau on the Closing Date or during the term of
this Agreement such an agreement with an outside service bureau is entered into,
and at any time thereafter, without first obtaining the written consent of Bank,
such Borrower or Guarantor terminates, modifies, amends or changes its
contractual relationship with said computer service bureau or said computer
service bureau fails to provide Bank with any requested information or financial
data pertaining to Bank’s Collateral, such Borrower's or Guarantor’s financial
condition or the results of such Borrower's or Guarantor’s operations;
 
(o)           Any reportable event, which Bank determines constitutes grounds
for the termination of any Plan by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer any such
Plan, shall have occurred and be continuing thirty (30) days after written
notice of such determination shall have been given to Parent by Bank, or any
such Plan shall be terminated within the meaning of Title IV of ERISA, or a
trustee shall be appointed by the appropriate United States District Court to
administer any such Plan, or the PBGC shall institute proceedings to terminate
any Plan and in case of any event described in this Section 8.1(p), the
aggregate amount of Borrowers’ liability to the PBGC under Sections 4062, 4063
or 4064 of ERISA shall exceed five percent (5%) of the Consolidated Effective
Tangible Effective Net Worth;
 
(p)           Any Change of Control occurs;
 
(q)           Any of the Loan Documents fails to be in full force and effect for
any reason, or Bank fails to have a perfected, first priority Lien in and upon
all of the collateral assigned or pledged to Bank thereunder, or a breach,
default or an event of default occurs under any Loan Document; or
 
(r)           Any other Material Adverse Effect occurs.
 
 
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8.2           Remedies.  Upon the occurrence of any Event of Default described
in Section 8.1(g) or 8.1(h), Bank’s obligation hereunder to make Loans to
Borrowers and/or Bank’s to issue Letters of Credit shall immediately terminate
and the Obligations shall become immediately due and payable without any
election or action on the part of Bank, without presentment, demand, protest or
notice of any kind, all of which each Borrower hereby expressly waives.  Upon
the occurrence and continuance of any other Event of Default, either or both of
the following actions may be taken:  (i) Bank may without notice of its election
and without demand, immediately terminate the Revolving Credit Commitment,
whereupon Bank’s obligation to make Loans to Borrowers and/or to issue Letters
of Credit shall immediately cease; and (ii) Bank may, without notice of its
election and without demand, declare the Obligations to be due and payable,
whereupon the Obligations shall become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which each Borrower
hereby expressly waives.
 
8.3           Setoff.  During the continuance of an Event of Default, Bank is
hereby authorized at any time and from time to time, without notice to Borrowers
(any such notice being expressly waived by each Borrower), to set off and apply
any and all deposits (general or special, time or demand, provisional or final),
at any time held and other indebtedness at any time owing by Bank to or for the
credit or the account of Borrowers, against any and all of the Obligations owing
to Bank, irrespective of whether Bank shall have made any demand under this
Agreement or the Loan Documents, and although the Obligations may be unmatured.
Bank agrees promptly to notify Borrowers after any such setoff and application,
provided that the failure to give such notice shall not affect the validity of
such setoff and application.
 
8.4           Appointment of Receiver or Trustee. Borrowers hereby irrevocably
agree that Bank, has the right under this Agreement, upon the occurrence of an
Event of Default, to seek the appointment of a receiver, trustee or similar
official over Borrowers to effect the transactions contemplated by this
Agreement, and that Bank is entitled to seek such relief.  Borrowers hereby
irrevocably agree not to object to such appointment on any grounds.
 
8.5           Remedies Cumulative.  The rights and remedies of Bank herein and
in the Loan Documents are cumulative, and are not exclusive of any other rights,
powers, privileges, or remedies, now or hereafter existing, at law, in equity or
otherwise.
 
ARTICLE IX
 
TAXES
9.1           Taxes on Payments.  All payments in respect of the Obligations
shall be made free and clear of and without any deduction or withholding for or
on account of any present and future taxes, levies, imposts, deductions,
charges, withholdings, assessments or governmental charges, and all liabilities
with respect thereto, imposed by the United States of America, any foreign
government, or any political subdivision or taxing authority thereof or therein,
excluding any taxes imposed on Bank under the Internal Revenue Code or similar
state and local laws and determined by such Bank’s net income, and any franchise
taxes imposed on Bank by any state (or any political subdivision thereof) (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings,
assessments, charges and liabilities being hereinafter referred to as
“Taxes”).  If any Taxes are imposed and required by law to be deducted or
withheld from any amount payable to Bank, then Borrower shall (i) increase the
amount of such payment so that Bank will receive a net amount (after deduction
of all Taxes) equal to the amount due hereunder, and (ii) pay such Taxes to the
appropriate taxing authority for the account of Bank prior to the date on which
penalties attach thereto or interest accrues thereon; provided, however, if any
such penalties or interest shall become due, Borrowers shall make prompt payment
thereof to the appropriate taxing authority.
 
 
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9.2           Indemnification For Taxes.  Borrowers shall indemnify Bank for the
full amount of Taxes (including penalties, interest, expenses and Taxes arising
from or with respect to any indemnification payment) arising therefrom or with
respect thereto, whether or not the Taxes were correctly or legally
asserted.  This indemnification shall be made on demand.  If Borrowers make a
payment under Section 9.1 or this Section 9.2 for account of Bank and Bank
reasonably determines that it has received or been granted a credit against or
relief or remission for, or repayment of, any Tax paid or payable by it in
respect of or calculated with reference to the deduction or withholding giving
rise to such payment, Bank shall, to the extent that it can do so without
prejudice to the retention of the amount of such credit, relief, remission or
repayment, pay to Borrowers such amount as Bank shall have reasonably determined
to be attributable to such deduction or withholding.  The amount paid by Bank to
Borrowers pursuant to the immediately preceding sentence shall not exceed: (x)
in the case of a refund of cash, the amount of cash refunded to Bank with
respect to such Tax; or (y) in the case of a refund taking the form of a credit
against Tax, the economic benefit to Bank with respect to the amount received as
credit with respect to such Tax.  Borrowers further agree promptly to return to
Bank the amount of any credit or refund actually paid to Borrowers by Bank if
Bank is required to repay it.
 
9.3           Evidence of Payment.  Within thirty (30) days after the date of
payment of any Taxes, Borrowers shall furnish to Bank the original or a
certified copy of a receipt evidencing payment thereof.  If no Taxes are payable
in respect of any payment due hereunder, Borrowers shall furnish to Bank a
certificate from each appropriate taxing authority, or an opinion of counsel
acceptable to Bank, in either case stating that such payment is exempt from or
not subject to Taxes.
 
ARTICLE X
 
MISCELLANEOUS
10.1           Notices.  All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission or similar
writing) and shall be given to such party at its address or facsimile number set
forth on the signature pages hereof or such other address or facsimile number as
such party may hereafter specify by notice to the other party in accordance with
this Section 10.1.  Each such notice, request or other communica­tion shall be
deemed given on the second (2nd) business day after mailing; provided that
actual notice, however and from whomever given or received, shall always be
effective on receipt; provided further that notices to Bank pursuant to
Article II and Article III shall not be effective until received by a
Responsible Officer of Bank; provided further that notices sent by Bank in
connection with Bank’s exercise of its enforcement rights against any of its
collateral shall be deemed given when deposited in the mail or personally
delivered, or, where permitted by law, transmitted by facsimile.
 
 
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10.2           No Waivers.  No failure or delay by Bank in exercising any right,
power or privilege hereunder or under any Loan Document shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.
 
10.3           Expenses; Documentary Taxes; Indemnification.
 
(a)           Borrowers shall pay all Expenses on demand.
 
(b)           Borrowers shall pay all and indemnify Bank against any and all
transfer taxes, documentary taxes, assessments, or charges made by any
Governmental Authority and imposed by reason of the execution and delivery of
this Agreement, any of the Loan Documents, or any other document, instrument or
agreement entered into in connection herewith.
 
(c)           Each Borrower shall and hereby agrees to indemnify, protect,
defend and hold harmless Bank and their respective directors, officers, Banks,
employees and attorneys (collectively, the “Indemnified Persons” and
individually, an “Indemnified Person”) from and against (i) any and all losses,
claims, damages, liabilities, deficiencies, judgments, costs and expenses
(including attorneys’ fees and attorneys’ fees incurred pursuant to proceedings
arising under the Bankruptcy Code) incurred by any Indemnified Person (except to
the extent that it is finally judicially determined to have resulted from the
gross negligence or willful misconduct of any Indemnified Person) arising out of
or by reason of any litigations, investigations, claims or proceedings (whether
administrative, judicial or otherwise), including discovery, whether or not Bank
is designated a party thereto, which arise out of or are in any way related to
(1) this Agreement, the Loan Documents or the transactions contemplated hereby
or thereby, (2) any actual or proposed use by Borrowers of the proceeds of the
Loans, or (3) Bank’s entering into this Agreement, the Loan Documents or any
other agreements and documents relating hereto; (ii) any such losses, claims,
damages, liabilities, deficiencies, judgments, costs and expenses arising out of
or by reason of the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal or presence on, under or about any
Borrower’s operations or property or property leased by any Borrower of any
material, substance or waste which is or becomes designated as Hazardous
Materials; and (iii) any such losses, claims, damages, liabilities,
deficiencies, judgments, costs and expenses incurred in connection with any
remedial or other action taken by any Borrower or Bank in connection with
compliance by any Borrower with any federal, state or local environmental laws,
acts, rules, regulations, orders, directions, ordinances, criteria or guidelines
(except to the extent that it is finally judicially determined to have resulted
from the gross negligence or willful misconduct of any Indemnified Person).  If
and to the extent that the obligations of Borrowers hereunder are unenforceable
for any reason, Borrowers hereby agree to make the maximum contribution to the
payment and satisfaction of such obligations to Bank which is permissible under
applicable law.
 
(d)           Borrowers obligations under this Section 10.3 and under
Section 9.2 shall survive any termination of this Agreement and the Loan
Documents and the payment in full of the Obligations, and are in addition to,
and not in substitution of, any other of its obligations set forth in this
Agreement.
 
 
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10.4           Amendments and Waivers.  Neither this Agreement nor any Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.4.  Bank
may from time to time, (a) enter into with Borrowers or any other Person written
amendments, supplements or modifications hereto and to the Loan Documents or (b)
waive, on such terms and conditions as Bank may specify in such instrument, any
of the requirements of this Agreement or the Loan Documents or any Event Default
or Unmatured Event of Default and its consequences, if, but only if, such
amendment, supplement, modification or waiver is in writing and is signed by the
party asserted to be bound thereby, and then such amendment, supplement,
modification or waiver shall be effective only in the specific instance and
specific purpose for which given.  Any such waiver and any such amendment,
supplement or modification shall be binding upon Borrower, Bank and all future
holders of the Loans.  In the case of any waiver, Borrower and Bank shall be
restored to their former positions and rights hereunder and under the Loan
Documents, and any Event of Default or Unmatured Event of Default waived shall
be deemed to be cured and not continuing; no such waiver shall extend to any
subsequent or other Event of Default or Unmatured Event of Default or impair any
right consequent thereon.
 
Borrowers may, from time to time, prospectively amend any Schedule hereto or to
any Loan Document.  No such amendment shall be evidence, in and of itself, that
the representations and warranties in the corresponding section of the
applicable agreement previously made are no longer true and correct in all
material respects, nor shall any such amendment cure any Event of Default caused
by a misrepresentation previously made.
 
10.5           Successors and Assigns; Participations; Disclosure.
 
(a)           This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that
Borrowers may not assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of all Bank’s and any such
prohibited assignment or transfer by Borrowers shall be void.
 
(b)           Bank may make, carry or transfer the Loans at, to or for the
account of, any of its branch offices or the office of an Affiliate of Bank or
to any Federal Reserve Bank, all without Borrowers consent.
 
(c)           Bank may, at its own expense, assign to one or more banks or other
Eligible Assignees all or a portion of its rights (including voting rights) and
obligations under this Agreement and the Loan Documents.  In the event of any
such assignment by Bank pursuant to this Section 10.5(c), Bank’s obligations
under this Agreement arising after the effective date of such assignment shall
be released and concurrently therewith, transferred to and assumed by Bank’s
assignee to the extent provided for in the document evidencing such assignment,
and Bank shall give prompt notice of such assignment to Borrowers.  The
provisions of this Section 10.5 relate only to absolute assignments (whether or
not arising as the result of foreclosure of a security interest) and that such
provisions do not prohibit assignments creating security interests, including,
without limitation, any pledge or assignment by Bank of any Loan or the Note to
any Federal Reserve Bank in accordance with applicable law.
 
 
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(d)           Bank may at any time sell to one or more banks or other financial
institutions (each a “Participant”) participating interests in the Loans, the
Letters of Credit and in any other interest of Bank hereunder.  In the event of
any such sale by Bank of a participating interest to a Participant, Bank’s
obligations under this Agreement shall remain unchanged, Bank shall remain
solely responsible for the performance thereof, and Borrowers shall continue to
deal solely and directly with Bank in connection with Bank’s rights and
obligations under this Agreement. Each Borrower agrees that each Participant
shall, to the extent provided in its participation agreement, be entitled to the
benefits of Article IX with respect to its participating interest.
 
(e)           Each Borrower authorizes Bank to disclose to any assignee under
Section 10.5(c) or any Participant (either, a “Transferee”) and any prospective
Transferee any and all financial information in Bank’s possession con­cern­ing
Borrowers which has been delivered to Bank by Borrowers pursuant to this
Agreement or which has been delivered to Bank by Borrowers in connection with
Bank’s credit evaluation prior to entering into this Agreement; provided that
such Transferee or prospective Transferee has first agreed to be bound by the
provisions of Section 11.6.
 
(f)           Each Borrower agrees that Bank may use Borrower’s and the
Subsidiaries’ name(s) in advertising and promotional materials, and in
conjunction therewith, Bank may disclose the amount of the Loans and the purpose
thereof.
 
10.6           Confidentiality.  Bank agrees to keep confidential any
information relating to Borrower and the Subsidiaries previously delivered or
delivered from time to time by Borrower hereunder; provided that nothing herein
shall prevent Bank from disclosing such information:  (a) to any Affiliate of
Bank or any actual or potential Transferee that agrees to be bound by this
Section 10.6, (b) upon order, subpoena, or other process of any court or
administrative agency, (c) upon the request or demand of any regulatory agency
or authority having jurisdiction over Bank, (d) which has been publicly
disclosed (other than by Bank or any Transferee unless such disclosure was
otherwise permitted hereunder), (e) which has been obtained from any Person that
is not a party hereto or an Affiliate of any such party, (f) in connection with
the exercise of any remedy, or the resolution of any dispute, hereunder or under
any Loan  Document, (g) to the legal counsel or certified public accountants for
Bank or (h) as otherwise permitted by Borrower or as expressly contemplated by
this Agreement.
 
10.7           Counterparts; Effectiveness; Integration.  This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument.  This Agreement shall be effective when executed by each of the
parties hereto.  This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof.
 
10.8           Severability.  The provisions of this Agreement are
severable.  The invalidity, in whole or in part, of any provision of this
Agreement shall not affect the validity or enforceability of any other of its
provisions.  If one or more provisions hereof shall be declared invalid or
unen­forceable, the remaining provisions shall remain in full force and effect
and shall be construed in the broadest possible manner to effectuate the
purposes hereof.
 
 
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10.9           Knowledge.  For purposes of this Agreement, an individual will be
deemed to have knowledge of a particular fact or other matter if:  (a) such
individual is actually aware of such fact or other matter; or (b) a prudent
individual could be expected to discover or otherwise become aware of such fact
or other matter in the course of conducting a reasonably comprehensive
investigation concerning the existence of such fact or other matter.  Each
Borrower will be deemed to have knowledge of a particular fact or other matter
if the chief executive officer, chief operating officer, chief financial
officer, controller, treasurer, president, senior vice president or other such
executive officer of such Borrower has, or at any time had, knowledge of such
fact or other matter.  Parent will be deemed to have knowledge of a partial fact
or other matter if any other Borrower has knowledge of such fact or other
matter.
 
10.10           Additional Waivers.
 
(a)           Each Borrower agrees that checks and other instruments received by
Bank in payment or on account of the Obligations constitute only conditional
payment until such items are actually paid to Bank and each Borrower waives the
right to direct the application of any and all payments at any time or times
hereafter received by Bank on account of the Obligations, and each Borrower
agrees that Bank shall have the continuing exclusive right to apply and reapply
such payments in any manner as Bank may deem advisable, notwithstanding any
entry by Bank upon its books.
 
(b)           Each Borrower waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension or renewal of
any or all commercial paper, accounts, documents, instruments, chattel paper,
and guarantees at any time held by Bank on which Borrower may in any way be
liable.
 
(c)           Bank shall not in any way or manner be liable or responsible for
(a) the safekeeping of the Inventory or Equipment; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency or other person whomsoever. All risk of
loss, damage or destruction of Inventory shall be borne by Borrowers.
 
(d)           Each Borrower waives the right and the right to assert a
confidential relationship, if any, it may have with any accountant, accounting
firm and/or service bureau or consultant in connection with any information
requested by Bank pursuant to or in accordance with this Agreement, and agrees
that Bank may contact directly any such accountants, accounting firm and/or
service bureau or consultant in order to obtain such information.
 
10.11           Destruction Of Borrowers’ Documents.  Any documents, schedules,
invoices or other papers delivered to Bank may be destroyed or otherwise
disposed of by Bank six (6) months after they are delivered to or received by
Bank, unless Parent requests, in writing, the return of the said documents,
schedules, invoices or other papers and makes arrangements, at Borrowers’
expense, for their return.
 
 
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10.12           CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
 
(a)           THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD FOR PRINCIPLES OF
CONFLICTS OF LAWS.
 
(b)           THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT BANK’S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE BANK ELECTS TO BRING SUCH ACTION
OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  BORROWERS AND BANK
WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 10.12.
 
(c)           THE BORROWERS AND BANK HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREIN OR THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.   THE BORROWERS AND BANK
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  IN THE
EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.
 
 
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10.13           Second Amended and Restated Agreement.  This Agreement amends
and restates in its entirety, and continues the Obligations incurred under, the
Prior Agreement.
 
10.14           No Novation; Reaffirmation of Loan Documents. Borrowers and Bank
hereby agree that, upon the Closing Date, this Agreement shall amend, restate
and supersede in its entirety the Prior Agreement.  Nothing contained herein
shall be construed as a substitution or novation of the obligations of Borrowers
outstanding under the Prior Agreement or instruments securing the same, which
obligations shall remain in full force and effect, except to the extent that the
terms thereof are modified hereby or by instruments executed concurrently
herewith.  Nothing expressed or implied in this Agreement shall be construed as
a release or other discharge of Borrowers from any of their obligations or
liabilities under the Prior Agreement or any of the other original Loan
Documents.  Borrowers hereby (i) confirm and agree that each Loan Document to
which any Borrower is a party is, and shall continue to be, in full force and
effect and is hereby ratified and confirmed in all respects except that on and
after the Closing Date all references in any such Loan Document to the “Credit
Agreement”, “Amended and Restated Credit Agreement”, “thereto”, “thereof”,
“thereunder” or words of like import referring to the Prior Agreement shall mean
the Prior Agreement as amended and restated by this Agreement; and (ii) confirms
and agrees that to the extent that the Prior Agreement or any Loan Document
executed in connection therewith purports to assign or pledge to Bank, a
security interest in or lien on, any collateral as security for the Obligations
of Borrowers from time to time existing in respect of the Prior Agreement, such
pledge, assignment or grant of the security interest or lien is hereby ratified
and confirmed in all respects and shall remain effective as of the first date it
became effective.
 
ARTICLE XI
 
JOINT AND SEVERAL LIABILITY; SINGLE LOAN ACCOUNT
 
11.1           Joint and Several Liability.  Each Borrower agrees that it is
jointly and severally, directly and primarily liable to Bank for payment,
performance and satisfaction in full of the Obligations and that such liability
is independent of the duties, obligations, and liabilities of the other
Borrower.  Bank may bring a separate action or actions on each, any, or all of
the Obligations against any Borrower, whether action is brought against the
other Borrowers or whether the other Borrowers are joined in such action.  In
the event that any Borrower fails to make any payment of any obligation on or
before the due date thereof, the other Borrowers immediately shall cause such
payment to be made or each of such obligations to be made or each of such
Obligations to be performed, kept, observed, or fulfilled.
 
11.2           Primary Obligation; Waiver of Marshalling.  This Agreement and
the Loan Documents to which Borrowers are a party are a primary and original
obligation of each Borrower, are not the creation of a surety relationship, and
are an absolute, unconditional, and continuing promise of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to this Agreement or the Loan Documents to which
Borrowers are a party.  Each Borrower agrees that its liability under this
Agreement and the Loan Documents which Borrowers are a party shall be immediate
and shall not be contingent upon the exercise or enforcement by Bank of whatever
remedies they may have against the other Borrowers, or the enforcement of any
lien or realization upon any security Bank may at any time possess.  Each
Borrower consents and agrees that Bank shall be under no obligation to marshal
any assets of any Borrower against or in payment of any or all of the
Obligations.
 
 
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11.3           Financial Condition of Borrowers.  Each Borrower acknowledges
that it is presently informed as to the financial condition of the other
Borrowers and of all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Obligations.  Each Borrower
hereby covenants that it will continue to keep informed as to the financial
condition of the other Borrowers, the status of the other Borrowers and of all
circumstances which bear upon the risk of nonpayment.  Absent a written request
from any Borrower to Bank for information, each Borrower hereby waives any and
all rights it may have to require Bank to disclose to such Borrower any
information which Bank may now or hereafter acquire concerning the condition or
circumstances of the other Borrowers.
 
11.4           Continuing Liability.  The liability of each Borrower under this
Agreement and the Loan Documents to which Borrowers are a party includes
Obligations arising under successive transactions continuing, compromising,
extending, increasing, modifying, releasing, or renewing the Obligations,
changing the interest rate, payment terms, or other terms and conditions
thereof, or creating new or additional Obligations after prior Obligations have
been satisfied in whole or in part.  To the maximum extent permitted by law,
each Borrower hereby waives any right to revoke its liability under this
Agreement and Loan Documents as to future indebtedness, and in connection
therewith, each Borrower hereby waives any rights it may have under Section 2815
of the California Civil Code.
 
11.5           Additional Waivers.  Each Borrower absolutely, unconditionally,
knowingly, and expressly waives:
 
(a)           (1) notice of acceptance hereof; (2) notice of any Loans or other
financial accommodations made or extended under this Agreement and the Loan
Documents to which Borrowers are a party or the creation or existence of any
Obligations; (3) notice of the amount of the Obligations, subject, however, to
each Borrower’s right to make inquiry of Bank to ascertain the amount of the
Obligations at any reasonable time; (4) notice of any adverse change in the
financial condition of the other Borrowers or of any other fact that might
increase such Borrower’s risk hereunder; (5) notice of presentment for payment,
demand, protest, and notice thereof as to any instruments among the Loan
Documents to which Borrowers are a party; (6) notice of any Unmatured Event of
Default or Event of Default; and (7) all other notices (except if such notice is
specifically required to be given to Borrowers hereunder or under the Loan
Documents to which Borrowers are a party) and demands to which such Borrower
might otherwise be entitled.
 
(b)           its right, under Sections 2845 or 2850 of the California Civil
Code, or otherwise, to require Bank to institute suit against, or to exhaust any
rights and remedies which Bank has or may have against, the other Borrowers or
any third party, or against any collateral for the Obligations provided by the
other Borrowers, or any third party.  Each Borrower further waives any defense
arising by reason of any disability or other defense (other than the defense
that the Obligations shall have been fully and finally performed and
indefeasibly paid) of the other Borrowers or by reason of the cessation from any
cause whatsoever of the liability of the other Borrowers in respect thereof.
 
 
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(c)           (1) any rights to assert against Bank any defense (legal and
equitable), set-off, counterclaim, or claim which such Borrower may now or at
any time hereafter have against the other Borrowers or any other party liable to
Bank; (2) any defense, set-off, counterclaim, or claim, of any kind or nature,
arising directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Obligations or any security
therefor; (3) any defense such Borrower has to performance hereunder, and any
right such Borrower has to be exonerate, provided by Sections 2819, 2822, or
2825 of the California Civil Code, or otherwise, arising by reason of:  the
impairment or suspension of Bank’s rights or remedies against the other
Borrowers; the alteration by Bank of the Obligations; any discharge of the other
Borrowers’ obligations to Bank by operation of law as a result of Bank’s
intervention or omission; or the acceptance by Bank of anything in partial
satisfaction of the Obligations; and (4) the benefit of any statute of
limitations affecting such Borrower’s liability hereunder or the enforcement
thereof, and any act which shall defer or delay the operation of any statute of
limitations applicable to the Obligations shall similarly operate to defer or
delay the operation of such statute of limitations applicable to such Borrower’s
liability hereunder.
 
(d)           Each Borrower absolutely, unconditionally, knowingly, and
expressly waives any defense arising by reason of or deriving from (i) any claim
or defense based upon an election of remedies by Bank including any defense
based upon an election of remedies by Bank under the provisions of
Sections 580a, 580b, 580d, and 726 of the California Code of Civil Procedure or
any similar law of California or any other jurisdiction; or (ii) any election by
Bank under Section 1111(b) of the Bankruptcy Code to limit the amount of, or any
collateral securing, its claim against the Borrowers.  Pursuant to California
Civil Code Section 2856(b):
 
(i)           Each Borrower waives all rights and defenses arising out of an
election of remedies by the creditor, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed such Borrower’s rights of subrogation and
reimbursement against the other Borrowers by the operation of Section 580(d) of
the California Code of Civil Procedure or otherwise.
 
(ii)           Each Borrower waives all rights and defenses that such Borrower
may have because the Obligations are secured by real property.  This means,
among other things:  (1) Bank may collect from such Borrower without first
foreclosing on any real or personal property collateral pledged by the other
Borrowers; and (2) if Bank forecloses on any real property collateral pledged by
the other Borrowers:  (A) the amount of the Obligations may be reduced only by
the price for which that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price; and (B) Bank may collect from such
Borrower even if Bank, by foreclosing on the real property collateral, has
destroyed any right such Borrower may have to collect from the other
Borrowers.  This is an unconditional and irrevocable waiver of any rights and
defenses each Borrower may have because the Obligations are secured by real
property.  These rights and defenses include, but are not limited to, any rights
or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code
of Civil Procedure.
 
 
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(e)           If any of the Obligations at any time are secured by a mortgage or
deed of trust upon real property, Bank may elect, in its sole discretion, upon a
default with respect to the Obligations, to foreclose such mortgage or deed of
trust judicially or nonjudicially in any manner permitted by law, before or
after enforcing this Agreement and the Loan Documents, without diminishing or
affecting the liability of any Borrower hereunder except to the extent the
Obligations are repaid with the proceeds of such foreclosure.  Each Borrower
understands that (a) by virtue of the operation of California’s antideficiency
law applicable to nonjudicial foreclosures, an election by Bank nonjudicially to
foreclose such a mortgage or deed of trust probably would have the effect of
impairing or destroying rights of subrogation, reimbursement, contribution, or
indemnity of such Borrower against the other Borrowers or other guarantors or
sureties, and (b) absent the waiver given by such Borrower, such an election
would prevent Bank from enforcing this Agreement and the Loan Documents to which
Borrowers are a party against such Borrower.  Understanding the foregoing, and
understanding that such Borrower is hereby relinquishing a defense to the
enforceability of this Agreement and the Loan Documents to which Borrowers are a
party, such Borrower hereby waives any right to assert against Bank any defense
to the enforcement of this Agreement and the Loan Documents to which Borrowers
are a party, whether denominated “estoppel” or otherwise, based on or arising
from an election by Bank nonjudicially to foreclose any such mortgage or deed of
trust.  Each Borrower understands that the effect of the foregoing waiver may be
that each Borrower may have liability hereunder for amounts with respect to
which such Borrower may be left without rights of subrogation, reimbursement,
contribution, or indemnity against the other Borrower or other guarantors or
sureties.  Each Borrower also agrees that the “fair market value” provisions of
Section 580a of the California Code of Civil Procedure shall have no
applicability with respect to the determination of such Borrower’s liability
under this Agreement and the Loan Documents to which Borrowers are a party.
 
(f)           Each Borrower hereby absolutely, unconditionally, knowingly, and
expressly waives:  (i) any right of subrogation such Borrower has or may have as
against the other Borrowers with respect to the Obligations; (ii) any right to
proceed against the other Borrowers or any other Person, now or hereafter, for
contribution, indemnity, reimbursement, or any other suretyship rights and
claims, whether direct or indirect, liquidated or contingent, whether arising
under express or implied contract or by operation of law, which such Borrower
may now have or hereafter have as against the other Borrowers with respect to
the Obligations; and (iii) any right to proceed or seek recourse against or with
respect to any property or asset of the other Borrowers.
 
(g)           WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS AGREEMENT, EACH BORROWER HEREBY ABSOLUTELY,
KNOWINGLY, UNCONDITIONALLY, AND EXPRESSLY WAIVES AND AGREES NOT TO ASSERT ANY
AND ALL BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR
MORE OF CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810, 2815, 2819, 2820,
2821, 2822, 2825, 2839, 2845, 2848, 2849, AND 2850, CALIFORNIA CODE OF CIVIL
PROCEDURE SECTIONS 580a, 580b, 580c, 580d, AND 726, CALIFORNIA UNIFORM
COMMERCIAL CODE SECTIONS 3116, 3118, 3119, 3419, AND 3605, AND CHAPTER 2 OF
TITLE 14 OF PART 4 OF DIVISION 3 OF THE CALIFORNIA CIVIL CODE.
 
 
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11.6           Settlement or Releases.  Each Borrower consents and agrees that
without notice to or by such Borrower, and without affecting or impairing the
liability of such Borrower hereunder, Bank may, by action or inaction:
 
(a)           compromise, settle, extend the duration or the time for the
payment of, or discharge the performance of, or may refuse to or otherwise not
enforce this Agreement and the Loan Documents, or any part thereof, with respect
to the other Borrowers or any Guarantor;
 
(b)           release the other Borrowers or any Guarantor or grant other
indulgences to the other Borrowers or any Guarantor in respect thereof; or
 
(c)           release or substitute any Guarantor, if any, of the Obligations,
or enforce, exchange, release, or waive any security for the Obligations or any
other guaranty of the Obligations, or any portion thereof.
 
11.7           No Election.  Bank shall have the right to seek recourse against
each Borrower to the fullest extent provided for herein, and no election by Bank
to proceed in one form of action or proceeding, or against any party, or on any
obligation, shall constitute a waiver of Bank’s right to proceed in any other
form of action or proceeding or against other parties unless Bank has expressly
waived such right in writing.  Specifically, but without limiting the generality
of the foregoing, no action or proceeding by Bank under this Agreement and the
Loan Documents shall serve to diminish the liability of any Borrower under this
Agreement and the Loan Documents to which Borrowers are a party except to the
extent that Bank finally and unconditionally shall have realized indefeasible
payment by such action or proceeding.
 
11.8           Indefeasible Payment.  The Obligations shall not be considered
indefeasibly paid unless and until all payments to Bank are no longer subject to
any right on the part of any Person, including any Borrower, any Borrower as a
debtor in possession, or any trustee (whether appointed pursuant to the
Bankruptcy Code, or otherwise) of any Borrower’s Assets to invalidate or set
aside such payments or to seek to recoup the amount of such payments or any
portion thereof, or to declare same to be fraudulent or preferential.  Upon such
full and final performance and indefeasible payment of the Obligations, Bank
shall have no obligation whatsoever to transfer or assign its interest in this
Agreement and the Loan Documents to any Borrower.  In the event that, for any
reason, any portion of such payments to Bank is set aside or restored, whether
voluntarily or involuntarily, after the making thereof, then the obligation
intended to be satisfied thereby shall be revived and continued in full force
and effect as if said payment or payments had not been made, and any Borrower
shall be liable for the full amount Bank is required to repay plus any and all
costs and expenses (including attorneys’ fees and attorneys’ fees incurred in
proceedings brought under the Bankruptcy Code) paid by Bank in connection
therewith.
 
 
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11.9           Single Loan Account.  At the request of Borrowers to facilitate
and expedite the administration and accounting processes and procedures of the
Loans and Borrowings, Bank have agreed, in lieu of maintaining separate loan
accounts on Bank’s books in the name of each of the Borrowers, that Bank may
maintain a single loan account under the name of all of both Borrowers (the
“Loan Account”).  All Loans shall be made jointly and severally to Borrowers and
shall be charged to the Loan Account, together with all interest and other
charges as permitted under and pursuant to this Agreement.  The Loan Account
shall be credited with all repayments of Obligations received by Bank, on behalf
of Borrowers, from either Borrower pursuant to the terms of this Agreement.
 
11.10           Apportionment of Proceeds of Loans.  Each Borrower expressly
agrees and acknowledges that Bank shall have no responsibility to inquire into
the correctness of the apportionment or allocation of or any disposition by any
of Borrowers of (a) the Loans or any Borrowings, or (b) any of the expenses and
other items charged to the Loan Account pursuant to this Agreement.  The Loans
and all such Borrowings and such expenses and other item shall be made for the
collective, joint, and several account of Borrowers and shall be charged to the
Loan Account.
 
11.11           Bank Held Harmless.  Each Borrower agrees and acknowledges that
the administration of this Agreement on a combined basis, as set forth herein,
is being done as an accommodation to Borrowers and at their request, and that
Bank shall incur no liability to Borrowers as a result thereof.  To induce Bank
to do so, and in consideration thereof, each Borrower hereby agrees to indemnify
and hold Bank harmless from and against any and all liability, expense, loss,
damage, claim of damage, or injury, made against Bank by Borrowers or by any
other person or entity, arising from or incurred by reason of such
administration of the Agreement.
 
11.12           Borrowers’ Integrated Operations.  Each Borrower represents and
warrants to Bank that the collective administration of the Loans is being
undertaken by Bank pursuant to this Agreement because Borrowers are integrated
in their operation and administration and require financing on a basis
permitting the availability of credit from time to time to Borrowers.  Each
Borrower will derive benefit, directly and indirectly, from such collective
administration and credit availability because the successful operation of each
Borrower is enhanced by the continued successful performance of the integrated
group.
 
*    *    *
 
[remainder of this page intentionally left blank]
 
*    *    *
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above writ­ten.
 
DECKERS OUTDOOR CORPORATION

By           /s/ Thomas A.
George                                                                

Name: Thomas A. George
Title: Chief Financial Officer

Address for notices:

Deckers Outdoor Corporation
495-A South Fairview Avenue
Goleta, California  93117
Attn:  Chief Financial Officer
Telephone:  (805) 967-7611, Ext. 185
Facsimile:  (805) 967-7862

TSUBO, LLC

By: Deckers Outdoor Corporation, its Manager

By           /s/ Thomas A. George 

Name: Thomas A. George
Title: Chief Financial Officer

Address for notices:
Tsubo, LLC
c/o Deckers Outdoor Corporation
495 A South Fairview Avenue
Goleta, California  93117
Attn:  Chief Financial Officer
Telephone:  (805) 967-7611, Ext. 185
Facsimile:  (805) 967-7862
 
 
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COMERICA BANK

By           /s/ Isabel
Barreiro                                                                

Name: Isabel Barreiro
Title: Assistant Vice President

Address for notices and Lending Office:

Comerica Bank
15303 Ventura Boulevard
Sherman Oaks, California  91403
Attn:  Isabel Barreiro
Telephone:  (818) 379-2925
Facsimile:  (818) 379-2902
 
 
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Schedule 5.6
 
To
 
Second Amended and Restated Credit Agreement
 
Debt
 

 None.
 
 
 

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

 
 
Schedule 5.7
 
To
 
Second Amended and Restated Credit Agreement
 
Litigation
 

 
The following suits, proceedings, claims or disputes are threatened against the
Borrowers:
 
None that could individually or in the aggregate result in a Material Adverse
Effect.
 
 
 

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Schedule 5.9
 
To
 
Second Amended and Restated Credit Agreement
 
Subsidiaries
 
Subsidiary Name
Jurisdiction
 
Borrower’s Ownership %
           
Tsubo, LLC
Delaware
    100 %
Deckers Consumer Direct Corporation
Arizona
    100 %
Mozo, Inc.
Colorado
    100 %
Mozo, Inc.
Delaware
    100 %

 
 

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Schedule 5.12
 
To
 
Second Amended and Restated Credit Agreement
 
ERISA
 
The following ERISA plans exist:
 
 
1)
401(k) Plan

 
 
2)
125 Benefits Plan

 
 
3)
423 Stock Purchase Plan (Plan currently discontinued)

 
 
4)
Nonqualified Deferred Compensation Plan (unfunded for purposes of Title I of
ERISA)

 
 
5)
Health & Welfare Plans

 
In 2000, certain 401(k) contributions were remitted after the required time
period, resulting in an ERISA Event.  The Company voluntarily made an additional
contribution to the plan of less than $100 in efforts to resolve the situation.
 
 
 

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Schedule 7.5
 
To
 
Second Amended and Restated Credit Agreement
 
Intentionally Omitted.