Exhibit 10.1





Exhibit 10.1


CREDIT AGREEMENT




by and among



HAMPSHIRE GROUP, LIMITED



as Parent,



HAMPSHIRE DESIGNERS, INC., ITEM-EYES, INC. and SCOTT JAMES, LLC



as Borrowers,



THE LENDERS THAT ARE SIGNATORIES HERETO



as the Lenders,



and



WELLS FARGO CAPITAL FINANCE, LLC



as the Agent



Dated as of October 28, 2010


 


 









 







TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 	 	 

	CREDIT AGREEMENT	 	 	1	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	1.	 	 	DEFINITIONS AND CONSTRUCTION	 	 	1	 
	 	 	 	 	1.1

	 	Definitions
	 	 	1	 
	 	 	 	 	1.2

	 	Accounting Terms
	 	 	1	 
	 	 	 	 	1.3

	 	Code
	 	 	1	 
	 	 	 	 	1.4

	 	Construction
	 	 	1	 
	 	 	 	 	1.5

	 	Schedules and Exhibits
	 	 	2	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	2.	 	 	LOANS AND TERMS OF PAYMENT	 	 	2	 
	 	 	 	 	2.1

	 	Revolver Advances
	 	 	2	 
	 	 	 	 	2.2

	 	[Reserved]
	 	 	3	 
	 	 	 	 	2.3

	 	Borrowing Procedures and Settlements
	 	 	3	 
	 	 	 	 	2.4

	 	Payments; Reductions of Commitments; Prepayments
	 	 	8	 
	 	 	 	 	2.5

	 	Overadvances
	 	 	11	 
	 	 	 	 	2.6

	 	Interest Rates and Letter of Credit Fee
	 	 	11	 
	 	 	 	 	2.7

	 	Crediting Payments
	 	 	12	 
	 	 	 	 	2.8

	 	Designated Account
	 	 	12	 
	 	 	 	 	2.9

	 	Maintenance of Loan Account; Statements of Obligations
	 	 	12	 
	 	 	 	 	2.10

	 	Fees
	 	 	13	 
	 	 	 	 	2.11

	 	Letters of Credit
	 	 	13	 
	 	 	 	 	2.12

	 	LIBOR Option
	 	 	16	 
	 	 	 	 	2.13

	 	Capital Requirements
	 	 	18	 
	 	 	 	 	2.14

	 	Joint and Several Liability of Borrowers
	 	 	19	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	3.	 	 	CONDITIONS; TERM OF AGREEMENT	 	 	22	 
	 	 	 	 	3.1

	 	Conditions Precedent to the Initial Extension of Credit
	 	 	22	 
	 	 	 	 	3.2

	 	Conditions Precedent to all Extensions of Credit
	 	 	22	 
	 	 	 	 	3.3

	 	Maturity
	 	 	22	 
	 	 	 	 	3.4

	 	Effect of Maturity
	 	 	22	 
	 	 	 	 	3.5

	 	Early Termination by Borrower
	 	 	22	 
	 	 	 	 	3.6

	 	Conditions Subsequent
	 	 	22	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	4.	 	 	REPRESENTATIONS AND WARRANTIES	 	 	23	 
	 	 	 	 	4.1

	 	Due Organization and Qualification; Subsidiaries
	 	 	23	 
	 	 	 	 	4.2

	 	Due Authorization; No Conflict
	 	 	24	 
	 	 	 	 	4.3

	 	Governmental Consents
	 	 	24	 
	 	 	 	 	4.4

	 	Binding Obligations; Perfected Liens
	 	 	24	 
	 	 	 	 	4.5

	 	Title to Assets; No Encumbrances
	 	 	24	 
	 	 	 	 	4.6

	 	Jurisdiction of Organization; Location of
Chief Executive Office; Organizational Identification
Number; Commercial Tort Claims
	 	 	25	 
	 	 	 	 	4.7

	 	Litigation
	 	 	25	 
	 	 	 	 	4.8

	 	Compliance with Laws
	 	 	25	 
	 	 	 	 	4.9

	 	No Material Adverse Change
	 	 	25	 
	 	 	 	 	4.10

	 	Fraudulent Transfer
	 	 	26	 
	 	 	 	 	4.11

	 	Employee Benefits
	 	 	26	 
	 	 	 	 	4.12

	 	Environmental Condition
	 	 	26	 
	 	 	 	 	4.13

	 	Intellectual Property
	 	 	26	 
	 	 	 	 	4.14

	 	Leases
	 	 	26	 
	 	 	 	 	4.15

	 	Deposit Accounts and Securities Accounts
	 	 	26	 
	 	 	 	 	4.16

	 	Complete Disclosure
	 	 	26	 
	 	 	 	 	4.17

	 	Material Contracts
	 	 	27	 
	 	 	 	 	 
	 	 	 	 	 	 




 


-i-









 





TABLE OF CONTENTS
(continued)





	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	4.18

	 	Patriot Act
	 	 	27	 
	 	 	 	 	4.19

	 	Indebtedness
	 	 	27	 
	 	 	 	 	4.20

	 	Payment of Taxes
	 	 	27	 
	 	 	 	 	4.21

	 	Margin Stock
	 	 	28	 
	 	 	 	 	4.22

	 	Governmental Regulation
	 	 	28	 
	 	 	 	 	4.23

	 	OFAC
	 	 	28	 
	 	 	 	 	4.24

	 	Employee and Labor Matters
	 	 	28	 
	 	 	 	 	4.25

	 	[Reserved]
	 	 	28	 
	 	 	 	 	4.26

	 	[Reserved]
	 	 	28	 
	 	 	 	 	4.27

	 	Excluded Copyrights
	 	 	28	 
	 	 	 	 	4.28

	 	Eligible Accounts
	 	 	29	 
	 	 	 	 	4.29

	 	Eligible Inventory
	 	 	29	 
	 	 	 	 	4.30

	 	Locations of Inventory
	 	 	29	 
	 	 	 	 	4.31

	 	Inventory Records
	 	 	29	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	5.	 	 	AFFIRMATIVE COVENANTS	 	 	29	 
	 	 	 	 	5.1

	 	Financial Statements, Reports, Certificates
	 	 	29	 
	 	 	 	 	5.2

	 	Collateral Reporting
	 	 	29	 
	 	 	 	 	5.3

	 	Existence
	 	 	30	 
	 	 	 	 	5.4

	 	Maintenance of Properties
	 	 	30	 
	 	 	 	 	5.5

	 	Taxes
	 	 	30	 
	 	 	 	 	5.6

	 	Insurance
	 	 	30	 
	 	 	 	 	5.7

	 	Inspection
	 	 	31	 
	 	 	 	 	5.8

	 	Compliance with Laws
	 	 	31	 
	 	 	 	 	5.9

	 	Environmental
	 	 	31	 
	 	 	 	 	5.10

	 	Disclosure Updates
	 	 	31	 
	 	 	 	 	5.11

	 	Formation of Subsidiaries
	 	 	31	 
	 	 	 	 	5.12

	 	Further Assurances
	 	 	32	 
	 	 	 	 	5.13

	 	Lender Meetings
	 	 	32	 
	 	 	 	 	5.14

	 	[Reserved]
	 	 	32	 
	 	 	 	 	5.15

	 	Location of Inventory
	 	 	33	 
	 	 	 	 	5.16

	 	Assignable Material Contracts
	 	 	33	 
	 	 	 	 	5.17

	 	Treasury Management Services and Bank Accounts
	 	 	33	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	6.	 	 	NEGATIVE COVENANTS	 	 	33	 
	 	 	 	 	6.1

	 	Indebtedness
	 	 	33	 
	 	 	 	 	6.2

	 	Liens
	 	 	33	 
	 	 	 	 	6.3

	 	Restrictions on Fundamental Changes
	 	 	33	 
	 	 	 	 	6.4

	 	Disposal of Assets
	 	 	34	 
	 	 	 	 	6.5

	 	Change Name
	 	 	34	 
	 	 	 	 	6.6

	 	Nature of Business
	 	 	34	 
	 	 	 	 	6.7

	 	Prepayments and Amendments
	 	 	34	 
	 	 	 	 	6.8

	 	Change of Control
	 	 	34	 
	 	 	 	 	6.9

	 	Restricted Junior Payments
	 	 	35	 
	 	 	 	 	6.10

	 	Accounting Methods
	 	 	35	 
	 	 	 	 	6.11

	 	Investments; Controlled Investments
	 	 	35	 
	 	 	 	 	6.12

	 	Transactions with Affiliates
	 	 	35	 
	 	 	 	 	6.13

	 	Use of Proceeds
	 	 	36	 
	 	 	 	 	6.14

	 	Limitation on Issuance of Stock
	 	 	36	 
	 	 	 	 	6.15

	 	[Reserved]
	 	 	36	 
	 	 	 	 	6.16

	 	Consignments
	 	 	36	 
	 	 	 	 	6.17

	 	Inventory with Bailees
	 	 	36	 
	 	 	 	 	 
	 	 	 	 	 	 




 


-ii-









 





TABLE OF CONTENTS
(continued)





	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 
	 	 	 	 	 	 
	 	7.	 	 	FINANCIAL COVENANTS	 	 	37	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	8.	 	 	EVENTS OF DEFAULT	 	 	37	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	9.	 	 	RIGHTS AND REMEDIES	 	 	39	 
	 	 	 	 	9.1

	 	Rights and Remedies
	 	 	39	 
	 	 	 	 	9.2

	 	Remedies Cumulative
	 	 	39	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	10.	 	 	WAIVERS; INDEMNIFICATION	 	 	39	 
	 	 	 	 	10.1

	 	Demand; Protest; etc.
	 	 	40	 
	 	 	 	 	10.2

	 	The Lender Group’s Liability for Collateral
	 	 	40	 
	 	 	 	 	10.3

	 	Indemnification
	 	 	40	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	11.	 	 	NOTICES	 	 	41	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	12.	 	 	CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER	 	 	42	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	13.	 	 	ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS	 	 	42	 
	 	 	 	 	13.1

	 	Assignments and Participations
	 	 	42	 
	 	 	 	 	13.2

	 	Successors
	 	 	45	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	14.	 	 	AMENDMENTS; WAIVERS	 	 	45	 
	 	 	 	 	14.1

	 	Amendments and Waivers
	 	 	45	 
	 	 	 	 	14.2

	 	Replacement of Certain Lenders
	 	 	46	 
	 	 	 	 	14.3

	 	No Waivers; Cumulative Remedies
	 	 	47	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	15.	 	 	AGENT; THE LENDER GROUP	 	 	47	 
	 	 	 	 	15.1

	 	Appointment and Authorization of Agent
	 	 	47	 
	 	 	 	 	15.2

	 	Delegation of Duties
	 	 	48	 
	 	 	 	 	15.3

	 	Liability of Agent
	 	 	48	 
	 	 	 	 	15.4

	 	Reliance by Agent
	 	 	48	 
	 	 	 	 	15.5

	 	Notice of Default or Event of Default
	 	 	49	 
	 	 	 	 	15.6

	 	Credit Decision
	 	 	49	 
	 	 	 	 	15.7

	 	Costs and Expenses; Indemnification
	 	 	50	 
	 	 	 	 	15.8

	 	Agent in Individual Capacity
	 	 	50	 
	 	 	 	 	15.9

	 	Successor Agent
	 	 	50	 
	 	 	 	 	15.10

	 	Lender in Individual Capacity
	 	 	51	 
	 	 	 	 	15.11

	 	Collateral Matters
	 	 	51	 
	 	 	 	 	15.12

	 	Restrictions on Actions by Lenders; Sharing of Payments
	 	 	52	 
	 	 	 	 	15.13

	 	Agency for Perfection
	 	 	53	 
	 	 	 	 	15.14

	 	Payments by Agent to the Lenders
	 	 	53	 
	 	 	 	 	15.15

	 	Concerning the Collateral and Related Loan Documents
	 	53

	 	 	 	 	15.16

	 	Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information
	 	 	53	 
	 	 	 	 	15.17

	 	Several Obligations; No Liability
	 	 	54	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	16.	 	 	WITHHOLDING TAXES	 	 	55	 
	 	 	 	 	 
	 	 	 	 	 	 




 


-iii-









 





TABLE OF CONTENTS
(continued)





	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 
	 	 	 	 	 	 
	 	17.	 	 	GENERAL PROVISIONS	 	 	57	 
	 	 	 	 	17.1

	 	Effectiveness
	 	 	57	 
	 	 	 	 	17.2

	 	Section Headings
	 	 	57	 
	 	 	 	 	17.3

	 	Interpretation
	 	 	57	 
	 	 	 	 	17.4

	 	Severability of Provisions
	 	 	57	 
	 	 	 	 	17.5

	 	Bank Product Providers
	 	 	57	 
	 	 	 	 	17.6

	 	Debtor-Creditor Relationship
	 	 	58	 
	 	 	 	 	17.7

	 	Counterparts; Electronic Execution
	 	 	58	 
	 	 	 	 	17.8

	 	Revival and Reinstatement of Obligations
	 	 	58	 
	 	 	 	 	17.9

	 	Confidentiality
	 	 	59	 
	 	 	 	 	17.10

	 	Lender Group Expenses
	 	 	60	 
	 	 	 	 	17.11

	 	Survival
	 	 	60	 
	 	 	 	 	17.12

	 	Patriot Act
	 	 	60	 
	 	 	 	 	17.13

	 	Integration
	 	 	60	 
	 	 	 	 	 
	 	 	 	 	 	 






EXHIBITS AND SCHEDULES




	 	 	 

	Exhibit A-1

	 	Form of Assignment and Acceptance
	Exhibit B-1

	 	Form of Borrowing Base Certificate
	Exhibit C-1

	 	Form of Compliance Certificate
	Exhibit I-1

	 	Form of Imported Goods Agreement
	Exhibit L-1

	 	Form of LIBOR Notice
	 
	 	 
	Schedule A-1

	 	Agent’s Account
	Schedule A-2

	 	Authorized Persons
	Schedule C-1

	 	Commitments
	Schedule D-1

	 	Designated Account
	Schedule E-1

	 	Eligible Inventory Locations
	Schedule P-1

	 	Permitted Investments
	Schedule P-2

	 	Permitted Liens
	Schedule P-3

	 	Permitted Art Dispositions
	Schedule R-1

	 	Real Property Collateral
	Schedule 1.1

	 	Definitions
	Schedule 3.1

	 	Conditions Precedent
	Schedule 3.6

	 	Conditions Subsequent
	Schedule 4.1(b)

	 	Capitalization
	Schedule 4.1(c)

	 	Capitalization of Subsidiaries
	Schedule 4.6(a)

	 	States of Organization
	Schedule 4.6(b)

	 	Chief Executive Offices
	Schedule 4.6(c)

	 	Organizational Identification Numbers
	Schedule 4.6(d)

	 	Commercial Tort Claims
	Schedule 4.7(b)

	 	Litigation
	Schedule 4.12

	 	Environmental Matters
	Schedule 4.13

	 	Intellectual Property
	Schedule 4.14

	 	Leases
	Schedule 4.15

	 	Deposit Accounts and Securities Accounts
	Schedule 4.17

	 	Material Contracts
	Schedule 4.19

	 	Permitted Indebtedness
	Schedule 4.30

	 	Locations of Inventory
	Schedule 5.1

	 	Financial Statements, Reports, Certificates
	Schedule 5.2

	 	Collateral Reporting
	Schedule 6.6

	 	Nature of Business
	 
	 	 






 


-iv-











 





CREDIT AGREEMENT




THIS CREDIT AGREEMENT (this “Agreement”), is entered into as of October 28, 2010, by
and among the lenders identified on the signature pages hereof (each of such lenders, together with
their respective successors and permitted assigns, are referred to hereinafter as a
“Lender”, as that term is hereinafter further defined), WELLS FARGO CAPITAL FINANCE, LLC, a
Delaware limited liability company, as agent for the Lenders (in such capacity, together with its
successors and assigns in such capacity, “Agent”), HAMPSHIRE GROUP, LIMITED, a Delaware
corporation (“Parent”), and HAMPSHIRE DESIGNERS, INC., a Delaware corporation
(“Hampshire Designers”), ITEM-EYES, INC., a Delaware corporation (“Item-Eyes”), and
SCOTT JAMES, LLC, a Delaware limited liability company (“Scott James”; Hampshire Designers,
Item-Eyes and Scott James are herein collectively called the “Borrowers” and each
individually, a “Borrower”).



The parties agree as follows:



1. DEFINITIONS AND CONSTRUCTION.




1.1 Definitions. Capitalized terms used in this Agreement shall have the meanings specified therefor on
Schedule 1.1.



1.2 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with
GAAP; provided, however, that if Borrowers notify Agent that Borrowers request an amendment
to any provision hereof to eliminate the effect of any Accounting Change occurring after the
Closing Date or in the application thereof on the operation of such provision (or if Agent notifies
Borrowers that the Required Lenders request an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such Accounting Change or in the
application thereof, then Agent and Borrowers agree that they will negotiate in good faith
amendments to the provisions of this Agreement that are directly affected by such Accounting Change
with the intent of having the respective positions of the Lenders and Borrowers after such
Accounting Change conform as nearly as possible to their respective positions as of the date of
this Agreement and, until any such amendments have been agreed upon, the provisions in this
Agreement shall be calculated as if no such Accounting Change had occurred. When used herein, the
term “financial statements” shall include the notes and schedules thereto. Whenever the term
“Parent” or “Borrower” is used in respect of a financial covenant or a related definition, it shall
be understood to mean such Person and its Subsidiaries on a consolidated basis, unless the context
clearly requires otherwise.



1.3 Code. Any terms used in this Agreement that are defined in the Code shall be construed and
defined as set forth in the Code unless otherwise defined herein; provided, however, that to the
extent that the Code is used to define any term herein and such term is defined differently in
different Articles of the Code, the definition of such term contained in Article 9 of the Code
shall govern.



1.4 Construction. Unless the context of this Agreement or any other Loan Document clearly requires otherwise,
references to the plural include the singular, references to the singular include the plural, the
terms
“includes” and “including” are not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” The words “hereof,” “herein,”
“hereby,” “hereunder,” and similar terms in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document, as the case may be, as a whole and not to any particular
provision of this Agreement or such other Loan Document, as the case may be. Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified.
Any reference in this Agreement or in any other Loan Document to any agreement, instrument, or
document shall include all alterations, amendments, changes, extensions, modifications, renewals,
replacements,


 


 









 







substitutions, joinders, and supplements, thereto and thereof, as applicable (subject
to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements set forth herein). The words “asset” and
“property” shall be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities, accounts, and contract
rights. Any reference herein or in any other Loan Document to the satisfaction, repayment, or
payment in full of the Obligations shall mean the repayment in full in cash or immediately
available funds (or, (a) in the case of contingent reimbursement obligations with respect to
Letters of Credit, providing Letter of Credit Collateralization, and (b) in the case of obligations
with respect to Bank Products (other than Hedge Obligations), providing Bank Product
Collateralization) of all of the Obligations (including the payment of any termination amount then
applicable (or which would or could become applicable as a result of the repayment of the other
Obligations) under Hedge Agreements provided by Hedge Providers) other than (i) unasserted
contingent indemnification Obligations, (ii) any Bank Product Obligations (other than Hedge
Obligations) that, at such time, are allowed by the applicable Bank Product Provider to remain
outstanding without being required to be repaid or cash collateralized, and (iii) any Hedge
Obligations that, at such time, are allowed by the applicable Hedge Provider to remain outstanding
without being required to be repaid. Any reference herein to any Person shall be construed to
include such Person’s successors and assigns. Any requirement of a writing contained herein or in
any other Loan Document shall be satisfied by the transmission of a Record.



1.5 Schedules and Exhibits. All of the schedules and exhibits attached to this Agreement shall be deemed incorporated
herein by reference.



2. LOANS AND TERMS OF PAYMENT.




2.1 Revolver Advances.



(a) Subject to the terms and conditions of this Agreement, and during the term of this
Agreement, each Lender with a Commitment agrees (severally, not jointly or jointly and severally)
to make revolving loans (“Advances”) to Borrowers in an amount at any one time outstanding
not to exceed the lesser of:



(i) such Lender’s Commitment, or



(ii) such Lender’s Pro Rata Share of an amount equal to the lesser of:



(A) the Maximum Revolver Amount less the sum of (1) the Letter of Credit Usage at such time,
plus (2) the principal amount of Swing Loans outstanding at such time, and



(B) the Borrowing Base at such time less the sum of (1) the Letter of Credit Usage at such
time, plus (2) the principal amount of Swing Loans outstanding at such time.



(b) Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to the
terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement.
The outstanding principal amount of the Advances, together with interest accrued thereon, shall be
due and payable on the Maturity Date or, if earlier, on the date on which they are declared due and
payable pursuant to the terms of this Agreement.


 


2









 





(c) Anything to the contrary in this Section 2.1 notwithstanding, Agent shall have the
right (but not the obligation) to establish, increase, reduce, eliminate, or otherwise adjust
reserves from time to time against the Borrowing Base or the Maximum Revolver Amount in such
amounts, and with respect to such matters, as Agent in its Permitted Discretion shall deem
necessary or appropriate, including (i) reserves in an amount equal to the Bank Product Reserve
Amount, (ii) reserves with respect to (A) sums that Parent or its Subsidiaries are required to pay
under any Section of this Agreement or any other Loan Document (such as taxes, assessments,
insurance premiums, or, in the case of leased assets, rents or other amounts payable under such
leases) and has failed to pay when due, and (B) amounts owing by Parent or its Subsidiaries to any
Person to the extent secured by a Lien on, or trust over, any of the Collateral (other than a
Permitted Lien which is a permitted purchase money Lien or the interest of a lessor under a Capital
Lease), which Lien or trust, in the Permitted Discretion of Agent likely would have a priority
superior to Agent’s Liens (such as Liens or trusts in favor of landlords, warehousemen, carriers,
mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales,
or other taxes where given priority under applicable law) in and to such item of the Collateral,
and (iii) Inventory Reserves. The amount of any reserve established by Agent shall have a
reasonable relationship to the event, condition or other matter which is the basis for such reserve
(or increase thereof) as determined by Agent in good faith.



2.2 [Reserved].



2.3 Borrowing Procedures and Settlements.



(a) Procedure for Borrowing. Each Borrowing shall be made by a written request by an
Authorized Person delivered to Agent. Unless Swing Lender is not obligated to make a Swing Loan
pursuant to Section 2.3(b) below, such notice must be received by Agent no later than 1:00
p.m. (Atlanta, Georgia time) on the Business Day that is the requested Funding Date specifying (i)
the amount of such Borrowing, and (ii) the requested Funding Date, which shall be a Business Day;
provided, however, that if Swing Lender is not obligated to make a Swing Loan as to a
requested Borrowing, such notice must be received by Agent no later than 11:00 a.m. (Atlanta,
Georgia time) on the Business Day that is the requested Funding Date. At Agent’s election, in lieu
of delivering the above-described written request, any Authorized Person may give Agent telephonic
notice of such request by the required time. In such circumstances, Borrowers agree that any such
telephonic notice will be confirmed in writing within 24 hours of the giving of such telephonic
notice, but the failure to provide such written confirmation shall not affect the validity of the
request.



(b) Making of Swing Loans. In the case of a request for an Advance and so long as either (i)
the aggregate amount of Swing Loans made since the last Settlement Date, minus the amount of
Collections or payments applied to Swing Loans since the last Settlement Date, plus the amount of
the requested Advance does not exceed $5,000,000, or (ii) Swing Lender, in its sole discretion,
shall agree to make a Swing Loan notwithstanding the foregoing limitation, Swing Lender shall make
an Advance in the amount of such requested Borrowing (any such Advance made solely by Swing Lender
pursuant to this Section 2.3(b) being referred to as a “Swing Loan” and such
Advances being referred to as “Swing
Loans”) available to Borrowers on the Funding Date applicable thereto by transferring
immediately available funds to the Designated Account. Anything contained herein to the contrary
notwithstanding, the Swing Lender may, but shall not be obligated to, make Swing Loans at any time
that one or more of the Lenders is a Defaulting Lender. Each Swing Loan shall be deemed to be an
Advance hereunder and shall be subject to all the terms and conditions (including Section
3) applicable to other Advances, except that all payments on any Swing Loan shall be payable to
Swing Lender solely for its own account. Subject to the provisions of Section 2.3(d)(ii),
Swing Lender shall not make and shall not be obligated to make any Swing Loan if Swing Lender has
actual knowledge that (i) one or more of the applicable conditions precedent set forth in
Section 3 will not be satisfied on the requested Funding Date for the applicable Borrowing,
or (ii) the requested Borrowing would exceed the Availability on such Funding Date. Swing Lender
shall not otherwise be required to determine whether the applicable conditions precedent set forth
in Section 3 have been satisfied on the Funding Date applicable thereto prior to making any
Swing Loan. The Swing Loans shall be secured by Agent’s Liens, constitute Advances and Obligations
hereunder, and bear interest at the rate applicable from time to time to Advances that are Base
Rate Loans.


 


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(c) Making of Loans.



(i) In the event that Swing Lender is not obligated to make a Swing Loan, then promptly after
receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent shall notify the
Lenders by telecopy, telephone, or other similar form of transmission, of the requested Borrowing.
Each Lender shall make the amount of such Lender’s Pro Rata Share of the requested Borrowing
available to Agent in immediately available funds, to Agent’s Account, not later than 1:00 p.m.
(Atlanta, Georgia time) on the Funding Date applicable thereto. After Agent’s receipt of the
proceeds of such Advances, Agent shall make the proceeds thereof available to Borrowers on the
applicable Funding Date by transferring immediately available funds equal to such proceeds received
by Agent to the Designated Account; provided, however, that, subject to the
provisions of Section 2.3(d)(ii), Agent shall not request any Lender to make, and no Lender
shall have the obligation to make, any Advance if (1) one or more of the applicable conditions
precedent set forth in Section 3 will not be satisfied on the requested Funding Date for
the applicable Borrowing unless such condition has been waived, or (2) the requested Borrowing
would exceed the Availability on such Funding Date.



(ii) Unless Agent receives notice from a Lender prior to 12:00 noon (Atlanta, Georgia time) on
the date of a Borrowing, that such Lender will not make available as and when required hereunder to
Agent for the account of Borrowers the amount of that Lender’s Pro Rata Share of the Borrowing,
Agent may assume that each Lender has made or will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may (but shall not be so required), in
reliance upon such assumption, make available to Borrowers on such date a corresponding amount. If
any Lender shall not have made its full amount available to Agent in immediately available funds
and if Agent in such circumstances has made available to Borrowers such amount, that Lender shall
on the Business Day following such Funding Date make such amount available to Agent, together with
interest at the Defaulting Lender Rate for each day during such period. A notice submitted by
Agent to any Lender with respect to amounts owing under this Section 2.3(c)(ii) shall be
conclusive, absent manifest error. If such amount is so made available, such payment to Agent
shall constitute such Lender’s Advance on the date of Borrowing for all purposes of this Agreement.
If such amount is not made available to Agent on the Business Day following the Funding Date,
Agent will notify Borrowers of such failure to fund and, upon demand by Agent, Borrowers shall pay
such amount to Agent for Agent’s account, together with interest thereon for each day elapsed since
the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time
to the Advances composing such Borrowing.



(d) Protective Advances and Optional Overadvances.



(i) Any contrary provision of this Agreement or any other Loan Document notwithstanding, Agent
hereby is authorized by each Borrower and the Lenders, from time to time in Agent’s sole
discretion, (A) after the occurrence and during the continuance of a Default or an Event of
Default, or (B) at any time that any of the other applicable conditions precedent set forth in
Section 3 are not satisfied, to make Advances to, or for the benefit of, Borrowers on
behalf of the Lenders (in an aggregate amount for all such Advances taken together not exceeding
$5,000,000 outstanding at any one time) that Agent, in its Permitted Discretion deems necessary or
desirable (1) to preserve or protect the Collateral, or any portion thereof, or (2) to enhance the
likelihood of repayment of the Obligations (other than the Bank Product Obligations) (any of the
Advances described in this Section 2.3(d)(i) shall be referred to as “Protective
Advances”).


 


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(ii) Any contrary provision of this Agreement or any other Loan Document notwithstanding, the
Lenders hereby authorize Agent or Swing Lender, as applicable, and either Agent or Swing Lender, as
applicable, may, but is not obligated to, knowingly and intentionally, continue to make Advances
(including Swing Loans) to Borrowers notwithstanding that an Overadvance exists or thereby would be
created, so long as (A) after giving effect to such Advances, the outstanding Revolver Usage does
not exceed the Borrowing Base by more than $5,000,000, and (B) after giving effect to such
Advances, the outstanding Revolver Usage (except for and excluding amounts charged to the Loan
Account for interest, fees, or Lender Group Expenses) does not exceed the Maximum Revolver Amount.
In the event Agent obtains actual knowledge that the Revolver Usage exceeds the amounts permitted
by the immediately foregoing provisions, regardless of the amount of, or reason for, such excess,
Agent shall notify the Lenders as soon as practicable (and prior to making any (or any additional)
intentional Overadvances (except for and excluding amounts charged to the Loan Account for
interest, fees, or Lender Group Expenses) unless Agent determines that prior notice would result in
imminent harm to the Collateral or its value, in which case Agent may make such Overadvances and
provide notice as promptly as practicable thereafter), and the Lenders with Commitments thereupon
shall, together with Agent, jointly determine the terms of arrangements that shall be implemented
with Borrowers intended to reduce, within a reasonable time, the outstanding principal amount of
the Advances to Borrowers to an amount permitted by the preceding sentence. In such circumstances,
if any Lender with a Commitment objects to the proposed terms of reduction or repayment of any
Overadvance, the terms of reduction or repayment thereof shall be implemented according to the
determination of the Required Lenders. The foregoing provisions are meant for the benefit of the
Lenders and Agent and are not meant for the benefit of Borrowers, which shall continue to be bound
by the provisions of Section 2.5. Each Lender with a Commitment shall be obligated to
settle with Agent as provided in Section 2.3(e) (or Section 2.3(g), as applicable)
for the amount of such Lender’s Pro Rata Share of any unintentional Overadvances by Agent reported
to such Lender, any intentional Overadvances made as permitted under this Section
2.3(d)(ii), and any Overadvances resulting from the charging to the Loan Account of interest,
fees, or Lender Group Expenses.



(iii) Each Protective Advance and each Overadvance shall be deemed to be an Advance hereunder,
except that no Protective Advance or Overadvance shall be eligible to be a LIBOR Rate Loan and,
prior to Settlement therefor, all payments on the Protective Advances shall be payable to Agent
solely for its own account. The Protective Advances and Overadvances shall be repayable on demand,
secured by Agent’s Liens, constitute Obligations hereunder, and bear interest at the rate
applicable from time to time to Advances that are Base Rate Loans. The ability of Agent to make
Protective Advances is separate and distinct from its ability to make Overadvances and its ability
to make Overadvances is separate and distinct from its ability to make Protective Advances. For
the avoidance of doubt, the limitations on Agent’s ability to make Protective Advances do not apply
to Overadvances and the limitations on Agent’s ability to make Overadvances do not apply to
Protective Advances. The provisions of this Section 2.3(d) are for the exclusive benefit
of Agent, Swing Lender, and the Lenders and are not intended to benefit Borrowers in any way.



(e) Settlement. It is agreed that each Lender’s funded portion of the Advances is intended by
the Lenders to equal, at all times, such Lender’s Pro Rata Share of the outstanding Advances. Such
agreement notwithstanding, Agent, Swing Lender, and the other Lenders agree (which agreement shall
not be for the benefit of Borrowers) that in order to facilitate the administration of this
Agreement and the other Loan Documents, settlement among the Lenders as to the Advances, the Swing
Loans, and the Protective Advances shall take place on a periodic basis in accordance with the
following provisions:


 


5









 





(i) Agent shall request settlement (“Settlement”) with the Lenders on a weekly basis,
or on a more frequent basis if so determined by Agent (1) on behalf of Swing Lender, with respect
to the outstanding Swing Loans, (2) for itself, with respect to the outstanding Protective
Advances, and (3) with respect to Borrowers’ or their Subsidiaries’ Collections or payments
received, as to each by notifying the Lenders by telecopy, telephone, or other similar form of
transmission, of such requested Settlement, no later than 5:00 p.m. (Atlanta, Georgia time) on the
Business Day immediately prior to the date of such requested Settlement (the date of such requested
Settlement being the “Settlement Date”). Such notice of a Settlement Date shall include a
summary statement of the amount of outstanding Advances, Swing Loans, and Protective Advances for
the period since the prior Settlement Date. Subject to the terms and conditions contained herein
(including Section 2.3(g)): (y) if the amount of the Advances (including Swing Loans and
Protective Advances) made by a Lender that is not a Defaulting Lender exceeds such Lender’s Pro
Rata Share of the Advances (including Swing Loans and Protective Advances) as of a Settlement Date,
then Agent shall, by no later than 3:00 p.m. (Atlanta, Georgia time) on the Settlement Date,
transfer in immediately available funds to a Deposit Account of such Lender (as such Lender may
designate), an amount such that each such Lender shall, upon receipt of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances (including Swing Loans and Protective
Advances), and (z) if the amount of the Advances (including Swing Loans and Protective Advances)
made by a Lender is less than such Lender’s Pro Rata Share of the Advances (including Swing Loans
and Protective Advances) as of a Settlement Date, such Lender shall no later than 3:00 p.m.
(Atlanta, Georgia time) on the Settlement Date transfer in immediately available funds to Agent’s
Account, an amount such that each such Lender shall, upon transfer of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances (including Swing Loans and Protective
Advances). Such amounts made available to Agent under clause (z) of the immediately preceding
sentence shall be applied against the amounts of the applicable Swing Loans or Protective Advances
and, together with the portion of such Swing Loans or Protective Advances representing Swing
Lender’s Pro Rata Share thereof, shall constitute Advances of such Lenders. If any such amount is
not made available to Agent by any Lender on the Settlement Date applicable thereto to the extent
required by the terms hereof, Agent shall be entitled to recover for its account such amount on
demand from such Lender together with interest thereon at the Defaulting Lender Rate.



(ii) In determining whether a Lender’s balance of the Advances, Swing Loans, and Protective
Advances is less than, equal to, or greater than such Lender’s Pro Rata Share of the Advances,
Swing Loans, and Protective Advances as of a Settlement Date, Agent shall, as part of the relevant
Settlement, apply to such balance the portion of payments actually received in good funds by Agent
with respect to principal, interest, fees payable by Borrowers and allocable to the Lenders
hereunder, and proceeds of Collateral.



(iii) Between Settlement Dates, Agent, to the extent Protective Advances or Swing Loans are
outstanding, may pay over to Agent or Swing Lender, as applicable, any Collections or payments
received by Agent, that in accordance with the terms of this Agreement would be applied to the
reduction of the Advances, for application to the Protective Advances or Swing Loans. Between
Settlement Dates, Agent, to the extent no Protective Advances or Swing Loans are outstanding, may
pay over to Swing Lender any Collections or payments received by Agent, that in accordance with the
terms of this Agreement would be applied to the reduction of the Advances, for application to Swing
Lender’s
Pro Rata Share of the Advances. If, as of any Settlement Date, Collections or payments of
Parent or its Subsidiaries received since the then immediately preceding Settlement Date have been
applied to Swing Lender’s Pro Rata Share of the Advances other than to Swing Loans, as provided for
in the previous sentence, Swing Lender shall pay to Agent for the accounts of the Lenders, and
Agent shall pay to the Lenders (other than a Defaulting Lender if Agent has implemented the
provisions of Section 2.3(g)), to be applied to the outstanding Advances of such Lenders,
an amount such that each such Lender shall, upon receipt of such amount, have, as of such
Settlement Date, its Pro Rata Share of the Advances. During the period between Settlement Dates,
Swing Lender with respect to Swing Loans, Agent with respect to Protective Advances, and each
Lender (subject to the effect of agreements between Agent and individual Lenders) with respect to
the Advances other than Swing Loans and Protective Advances, shall be entitled to interest at the
applicable rate or rates payable under this Agreement on the daily amount of funds employed by
Swing Lender, Agent, or the Lenders, as applicable.


 


6









 





(iv) Anything in this Section 2.3(e) to the contrary notwithstanding, in the event
that a Lender is a Defaulting Lender, Agent shall be entitled to refrain from remitting settlement
amounts to the Defaulting Lender and, instead, shall be entitled to elect to implement the
provisions set forth in Section 2.3(g).



(f) Notation. Agent, as a non-fiduciary agent for Borrowers, shall maintain a register
showing the principal amount of the Advances, owing to each Lender, including the Swing Loans owing
to Swing Lender, and Protective Advances owing to Agent, and the interests therein of each Lender,
from time to time and such register shall, absent manifest error, conclusively be presumed to be
correct and accurate.



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


 


7









 







document if it fails to do so) subject
only to being repaid its share of the outstanding Obligations (other than Bank Product Obligations,
but including (1) all interest, fees, and other amounts that may be due and payable in respect
thereof, and (2) an assumption of its Pro Rata Share of the Letters of Credit); provided,
however, that any such assumption of the Commitment of such Defaulting Lender shall not be deemed
to constitute a waiver of any of the Lender Groups’ or Borrowers’ rights or remedies against any
such Defaulting Lender arising out of or in relation to such failure to fund. In the event of a
direct conflict between the priority provisions of this Section 2.3(g) and any other
provision contained in this Agreement or any other Loan Document, it is the intention of the
parties hereto that such provisions be read together and construed, to the fullest extent possible,
to be in concert with each other. In the event of any actual, irreconcilable conflict that cannot
be resolved as aforesaid, the terms and provisions of this Section 2.3(g) shall control and
govern.



(h) Independent Obligations. All Advances (other than Swing Loans and Protective Advances)
shall be made by the Lenders contemporaneously and in accordance with their Pro Rata Shares. It is
understood that (i) no Lender shall be responsible for any failure by any other Lender to perform
its obligation to make any Advance (or other extension of credit) hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by any other Lender
to perform its obligations hereunder, and (ii) no failure by any Lender to perform its obligations
hereunder shall excuse any other Lender from its obligations hereunder.



2.4 Payments; Reductions of Commitments; Prepayments.



(a) Payments by Borrowers.



(i) Except as otherwise expressly provided herein, all payments by Borrowers shall be made to
Agent’s Account for the account of the Lender Group and shall be made in immediately available
funds, no later than 2:00 p.m. (Atlanta, Georgia time) on the date specified herein. Any payment
received by Agent later than 2:00 p.m. (Atlanta, Georgia time) shall be deemed to have been
received on the following Business Day and any applicable interest or fee shall continue to accrue
until such following Business Day.



(ii) Unless Agent receives notice from Borrowers prior to the date on which any payment is due
to the Lenders that Borrowers will not make such payment in full as and when required, Agent may
assume that Borrowers have made (or will make) such payment in full to Agent on such date in
immediately available funds and Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the amount then due such
Lender. If and to the extent Borrowers do not make such payment in full to Agent on the date when
due, each Lender severally shall repay to Agent on demand such amount distributed to such Lender,
together with interest thereon at the Defaulting Lender Rate for each day from the date such amount
is distributed to such Lender until the date repaid.



(b) Apportionment and Application.



(i) So long as no Application Event has occurred and is continuing and except as otherwise
provided herein with respect to Defaulting Lenders, all principal and interest payments received by
Agent shall be apportioned ratably among the Lenders (according to the unpaid principal balance of
the Obligations to which such payments relate held by each Lender) and all payments of fees and
expenses received by Agent (other than fees or expenses that are for Agent’s separate account or
for the separate account of the Issuing Lender) shall be apportioned ratably among the Lenders
having a Pro Rata Share of the type of Commitment or Obligation to which a particular fee or
expense relates. All payments to be made hereunder by Borrowers shall be remitted to Agent and all
(subject to Section 2.4(b)(iv), Section 2.4(e), and Section 2.4(f)) such
payments, and all proceeds of Collateral received by Agent, shall be applied, so long as no
Application Event has occurred and is continuing, to reduce the balance of the Advances outstanding
and, thereafter, to Borrowers (to be wired to the Designated Account) or such other Person entitled
thereto under applicable law.


 


8









 





(ii) At any time that an Application Event has occurred and is continuing and except as
otherwise provided herein with respect to Defaulting Lenders, all payments remitted to Agent and
all proceeds of Collateral received by Agent shall be applied as follows:



(A) first, to pay any Lender Group Expenses (including cost or expense reimbursements)
or indemnities then due to Agent under the Loan Documents, until paid in full,



(B) second, to pay any fees or premiums then due to Agent under the Loan Documents
until paid in full,



(C) third, to pay interest due in respect of all Protective Advances until paid in
full,



(D) fourth, to pay the principal of all Protective Advances until paid in full,



(E) fifth, ratably, to pay any Lender Group Expenses (including cost or expense
reimbursements) or indemnities then due to any of the Lenders under the Loan Documents, until paid
in full,



(F) sixth, ratably, to pay any fees or premiums then due to any of the Lenders under
the Loan Documents until paid in full,



(G) seventh, to pay interest accrued in respect of the Swing Loans until paid in full,



(H) eighth, to pay the principal of all Swing Loans until paid in full,



(I) ninth, ratably, to pay interest accrued in respect of the Advances (other than
Protective Advances) until paid in full,



(J) tenth, ratably (i) to pay the principal of all Advances until paid in full, (ii)
to Agent, to be held by Agent, for the benefit of Issuing Lender (and for the ratable benefit of
each of the Lenders that have an obligation to pay to Agent, for the account of the Issuing Lender,
a share of each Letter of Credit Disbursement), as cash collateral in an amount up to 105% of the
Letter of Credit Usage (to the extent permitted by applicable law, such cash collateral shall be
applied to the
reimbursement of any Letter of Credit Disbursement as and when such disbursement occurs and,
if a Letter of Credit expires undrawn, the cash collateral held by Agent in respect of such Letter
of Credit shall, to the extent permitted by applicable law, be reapplied pursuant to this
Section 2.4(b)(ii), beginning with tier (A) hereof), and (iii) ratably, to the Bank Product
Providers based upon amounts then certified by the applicable Bank Product Provider to Agent (in
form and substance satisfactory to Agent) to be due and payable to such Bank Product Providers on
account of Bank Product Obligations,



(K) eleventh, to pay any other Obligations other than Obligations owed to Defaulting
Lenders,


 


9









 





(L) twelfth, ratably, to pay any Obligations owed to Defaulting Lenders; and



(M) thirteenth, to Borrowers (to be wired to the Designated Account) or such other
Person entitled thereto under applicable law.



(iii) Agent promptly shall distribute to each Lender, pursuant to the applicable wire
instructions received from each Lender in writing, such funds as it may be entitled to receive,
subject to a Settlement delay as provided in Section 2.3(e).



(iv) In each instance, so long as no Application Event has occurred and is continuing,
Section 2.4(b)(i) shall not apply to any payment made by Borrowers to Agent and specified
by Borrowers to be for the payment of specific Obligations then due and payable (or prepayable)
under any provision of this Agreement or any other Loan Document.



(v) For purposes of Section 2.4(b)(ii), “paid in full” of a type of Obligation means
payment in cash or immediately available funds of all amounts owing on account of such type of
Obligation, including interest accrued after the commencement of any Insolvency Proceeding, default
interest, interest on interest, and expense reimbursements, irrespective of whether any of the
foregoing would be or is allowed or disallowed in whole or in part in any Insolvency Proceeding.



(vi) In the event of a direct conflict between the priority provisions of this Section
2.4 and any other provision contained in this Agreement or any other Loan Document, it is the
intention of the parties hereto that such provisions be read together and construed, to the fullest
extent possible, to be in concert with each other. In the event of any actual, irreconcilable
conflict that cannot be resolved as aforesaid, if the conflict relates to the provisions of
Section 2.3(g) and thisSection 2.4, then the provisions of Section 2.3(g)
shall control and govern, and if otherwise, then the terms and provisions of this Section
2.4 shall control and govern.



(c) Reduction of Commitments. The Commitments shall terminate on the Maturity Date.
Borrowers may reduce the Commitments to an amount not less than the greater of (i) $25,000,000 or
(ii) the sum of (A) the Revolver Usage as of such date, plus (B) the principal amount of all
Advances not yet made as to which a request has been given by Borrowers under Section
2.3(a), plus (C) the amount of all Letters of Credit not yet issued as to which a request has
been given by Borrowers pursuant to Section 2.11(a). Each such reduction shall be in an
amount which is not less than $5,000,000, shall be made by providing not less than 10 Business Days
prior written notice to Agent, and shall be irrevocable. Once reduced, the Commitments may not be
increased. Each such reduction of the Commitments shall reduce the Commitments of each Lender
proportionately in accordance with its Pro Rata Share thereof.



(d) Optional Prepayments. Borrowers may prepay the principal of any Advance at any time in
whole or in part, without premium or penalty.



(e) Mandatory Prepayments — Borrowing Base Excess. If, at any time, (A) the Revolver Usage on
such date exceeds (B) the Borrowing Base (such excess being referred to as the “Borrowing Base
Excess”), then, within 1 Business Day thereafter, Borrowers shall prepay the Obligations in
accordance with Section 2.4(f), and/or provide Restricted Cash, in an aggregate amount
equal to the Borrowing Base Excess. All such Restricted Cash shall be taken into account in
calculating the Borrowing Base.



(f) Application of Payments. Each prepayment pursuant to Section 2.4(e) shall, (i)
so long as no Application Event shall have occurred and be continuing, be applied to the
outstanding principal amount of the Advances until paid in full, and (ii) if an Application Event
shall have occurred and be continuing, be applied in the manner set forth in Section
2.4(b)(ii).


 


10









 





2.5 Overadvances. If, at any time or for any reason, the amount of Obligations owed by Borrowers to the
Lender Group pursuant to Section 2.1 or Section 2.11 is greater than any of the
limitations set forth in Section 2.1 or Section 2.11, as applicable (an
“Overadvance”), Borrowers shall immediately pay to Agent, in cash, the amount of such
excess, which amount shall be used by Agent to reduce the Obligations in accordance with the
priorities set forth in Section 2.4(b). Borrowers promise to pay the Obligations
(including principal, interest, fees, costs, and expenses) in full on the Maturity Date or, if
earlier, on the date on which the Obligations (other than the Bank Product Obligations) become due
and payable pursuant to the terms of this Agreement.



2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations.



(a) Interest Rates. Except as provided in Section 2.6(c), all Obligations (except for
undrawn Letters of Credit) that have been charged to the Loan Account pursuant to the terms hereof
shall bear interest on the Daily Balance thereof as follows:



(i) if the relevant Obligation is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR
Rate plus the LIBOR Rate Margin, and



(ii) otherwise, at a per annum rate equal to the Base Rate plus the Base Rate Margin.



(b) Letter of Credit Fee. Borrowers shall pay Agent (for the ratable benefit of the Lenders
with a Commitment, subject to any agreements between Agent and individual Lenders), a Letter of
Credit fee (in addition to the charges, commissions, fees, and costs set forth in Section
2.11(e)) which shall accrue at a rate equal to (i) 2.15% per annum times the Daily Balance of
the undrawn amount of all outstanding trade Letters of Credit, and (ii) 2.50% per annum times the
Daily Balance of the undrawn amount of all other outstanding Letters of Credit.



(c) Default Rate. Upon the occurrence and during the continuation of an Event of Default and
at the election of the Required Lenders,



(i) all Obligations (except for undrawn Letters of Credit) that have been charged to the Loan
Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof at a per
annum rate equal to 2 percentage points above the per annum rate otherwise applicable thereunder,
and



(ii) each Letter of Credit fee provided for in Section 2.6(b) shall be increased to 2
percentage points above the per annum rate otherwise applicable hereunder.



(d) Payment. Except to the extent provided to the contrary in Section 2.10,
2.12(a) or 17.10, all interest, all Letter of Credit fees, all other fees payable
hereunder or under any of the other Loan Documents, and all costs, expenses, and Lender Group
Expenses payable hereunder or under any of the other Loan Documents shall be due and payable, in
arrears, on the first day of each month at any time that Obligations or Commitments are
outstanding. Borrowers hereby authorize Agent, from time to time without prior notice to
Borrowers, to charge all interest, Letter of Credit fees, and all other fees payable hereunder or
under any of the other Loan Documents (in each case, as and when due and payable), all costs,
expenses, and Lender Group Expenses payable hereunder or under any of the other Loan Documents (in
each case, as and when incurred), all charges, commissions, fees, and costs provided for in


 


11









 







Section 2.11(e) (as and when accrued or incurred), all fees and costs provided for in
Section 2.10 (as and when accrued or incurred), and all other payments as and when due and
payable under any Loan Document or any Bank Product Agreement (including any amounts due and
payable to the Bank Product Providers in respect of Bank Products) to the Loan Account, which
amounts thereafter shall constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances that are Base Rate Loans. Any interest, fees, costs, expenses, Lender Group
Expenses, or other amounts payable hereunder or under any other Loan Document or under any Bank
Product Agreement that are charged to the Loan Account shall thereafter constitute Advances
hereunder and shall initially accrue interest at the rate then applicable to Advances that are Base
Rate Loans (unless and until converted into LIBOR Rate Loans in accordance with the terms of this
Agreement).



(e) Computation. All interest and fees chargeable under the Loan Documents shall be computed
on the basis of a 360 day year, in each case, for the actual number of days elapsed in the period
during which the interest or fees accrue. In the event the Base Rate is changed from time to time
hereafter, the rates of interest hereunder based upon the Base Rate automatically and immediately
shall be increased or decreased by an amount equal to such change in the Base Rate.



(f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the interest rate or
rates payable under this Agreement, plus any other amounts paid in connection herewith, exceed the
highest rate permissible under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrowers and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated
within it; provided, however, that, anything contained herein to the contrary
notwithstanding, if said rate or rates of interest or manner of payment exceeds the maximum
allowable under applicable law, then, ipso facto, as of the date of this Agreement, Borrowers are
and shall be liable only for the payment of such maximum as allowed by law, and payment received
from Borrowers in excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.



2.7 Crediting Payments. The receipt of any payment item by Agent shall not be considered a payment on account
unless such payment item is a wire transfer of immediately available federal funds made to Agent’s
Account or unless and until such payment item is honored when presented for payment. Should any
payment item not be honored when presented for payment, then Borrowers shall be deemed not to have
made such payment and interest shall be calculated accordingly. Anything to the contrary contained
herein notwithstanding, any payment item shall be deemed received by Agent only if it is received
into Agent’s Account on a Business Day on or before 2:00 p.m. (Atlanta, Georgia time). If any
payment item is received into Agent’s Account on a non-Business Day or after 2:00 p.m. (Atlanta,
Georgia time) on a
Business Day, it shall be deemed to have been received by Agent as of the opening of business
on the immediately following Business Day.



2.8 Designated Account. Agent is authorized to make the Advances, and Issuing Lender is authorized to issue the
Letters of Credit, under this Agreement based upon telephonic or other instructions received from
anyone purporting to be an Authorized Person or, without instructions, if pursuant to Section
2.6(d). Borrowers agree to establish and maintain the Designated Account with the Designated
Account Bank for the purpose of receiving the proceeds of the Advances requested by Borrowers and
made by Agent or the Lenders hereunder. Unless otherwise agreed by Agent and Borrowers, any
Advance or Swing Loan requested by Borrowers and made by Agent or the Lenders hereunder shall be
made to the Designated Account.


 


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2.9 Maintenance of Loan Account; Statements of Obligations. Agent shall maintain an
account on its books in the name of Borrowers (the “Loan
Account”) on which Borrowers will be charged with all Advances (including Protective Advances
and Swing Loans) made by Agent, Swing Lender, or the Lenders to Borrowers or for Borrowers’
account, the Letters of Credit issued or arranged by Issuing Lender for Borrowers’ account, and
with all other payment Obligations hereunder or under the other Loan Documents, including, accrued
interest, fees and expenses, and Lender Group Expenses. In accordance with Section 2.7,
the Loan Account will be credited with all payments received by Agent from Borrowers or for
Borrowers’ account. Agent shall render monthly statements regarding the Loan Account to Borrowers,
including principal, interest, fees, and including an itemization of all charges and expenses
constituting Lender Group Expenses owing, and such statements, absent manifest error, shall be
conclusively presumed to be correct and accurate and constitute an account stated between Borrowers
and the Lender Group unless, within 30 days after receipt thereof by Borrowers, Borrowers shall
deliver to Agent written objection thereto describing the error or errors contained in any such
statements.



2.10 Fees. Borrowers shall pay to Agent,



(a) for the account of Agent, as and when due and payable under the terms of the Fee Letter,
the fees set forth in the Fee Letter, and



(b) for the ratable account of the Lenders with Commitments, on the first day of each month
from and after the Closing Date up to the first day of the month prior to the Payoff Date and on
the Payoff Date, an unused line fee in an amount equal to 0.50% per annum times the result of (i)
the aggregate amount of the Commitments, less (ii) the average Daily Balance of the Revolver Usage
during the immediately preceding month (or portion thereof).



2.11 Letters of Credit.



(a) Subject to the terms and conditions of this Agreement, upon the request of Parent or a
Borrower made in accordance herewith, the Issuing Lender agrees to issue, or to cause an Underlying
Issuer (including, as Issuing Lender’s agent) to issue, a requested Letter of Credit. If Issuing
Lender, at its option, elects to cause an Underlying Issuer to issue a requested Letter of Credit,
then Issuing Lender agrees that it will enter into arrangements relative to the reimbursement of
such Underlying Issuer (which may include, among, other means, by becoming an applicant with
respect to such Letter of Credit or
entering into undertakings which provide for reimbursements of such Underlying Issuer with
respect to such Letter of Credit; each such obligation or undertaking, irrespective of whether in
writing, a “Reimbursement Undertaking”) with respect to Letters of Credit issued by such
Underlying Issuer. By Parent’s or a Borrower’s submission of a request to Issuing Lender for the
issuance of a Letter of Credit, Borrowers shall be deemed to have requested that Issuing Lender
issue or that an Underlying Issuer issue the requested Letter of Credit and to have requested
Issuing Lender to issue a Reimbursement Undertaking with respect to such requested Letter of Credit
if it is to be issued by an Underlying Issuer (it being expressly acknowledged and agreed by
Borrowers that Borrowers are and shall be deemed to be an applicant (within the meaning of Section
5-102(a)(2) of the Code) with respect to each Underlying Letter of Credit). Each request for the
issuance of a Letter of Credit, or the amendment, renewal, or extension of any outstanding Letter
of Credit, shall be made in writing by an Authorized Person and delivered to the Issuing Lender via
hand delivery, telefacsimile, or other electronic method of transmission reasonably in advance of
the requested date of issuance, amendment, renewal, or extension. Each such request shall be in
form and substance reasonably satisfactory to the Issuing Lender and shall specify (i) the amount
of such Letter of Credit, (ii) the date of issuance, amendment, renewal, or extension of such
Letter of Credit, (iii) the expiration date of such Letter of Credit, (iv) the name and address of
the beneficiary of the Letter of Credit, and (v) such other information (including, in the case of
an amendment, renewal, or extension, identification of the Letter of Credit to be so amended,
renewed, or extended) as shall be necessary to prepare, amend, renew, or extend such Letter of
Credit. Anything contained herein to the contrary notwithstanding, the Issuing Lender may, but
shall not be obligated to, issue or cause the issuance of a Letter of Credit or to issue a
Reimbursement Undertaking in respect of an Underlying Letter of Credit, in


 


13









 







either case, that
supports the obligations of Parent or its Subsidiaries (1) in respect of (A) a lease of real
property if the amount of the Letter of Credit or Underlying Letter of Credit is greater than the
rent payable under such lease (without acceleration) for one year, or (B) an employment contract,
or (2) at any time that one or more of the Lenders is a Defaulting Lender. The Issuing Lender
shall have no obligation to issue a Letter of Credit or a Reimbursement Undertaking in respect of
an Underlying Letter of Credit, in either case, if any of the following would result after giving
effect to the requested issuance:



(i) the Letter of Credit Usage would exceed the Borrowing Base less the outstanding amount of
Advances (inclusive of Swing Loans), or



(ii) the Letter of Credit Usage would exceed $30,000,000, or



(iii) the Letter of Credit Usage would exceed the Maximum Revolver Amount less the outstanding
amount of Advances (including Swing Loans).



Each Letter of Credit shall be in form and substance reasonably acceptable to the Issuing Lender,
including the requirement that the amounts payable thereunder must be payable in Dollars. If
Issuing Lender makes a payment under a Letter of Credit or an Underlying Issuer makes a payment
under an Underlying Letter of Credit, Borrowers shall pay to Agent an amount equal to the
applicable Letter of Credit Disbursement on the date such Letter of Credit Disbursement is made
and, in the absence of such payment, the amount of the Letter of Credit Disbursement immediately
and automatically shall be deemed to be an Advance hereunder and, initially, shall bear interest at
the rate then applicable to Advances that are Base Rate Loans. If a Letter of Credit Disbursement
is deemed to be an Advance hereunder, Borrowers’ obligation to pay the amount of such Letter of
Credit Disbursement to Issuing Lender shall be discharged and replaced by the resulting Advance.
Promptly following receipt by Agent of any payment from Borrowers pursuant to this paragraph, Agent
shall distribute such payment to the Issuing Lender or, to the extent that Lenders have made
payments pursuant to Section 2.11(b) to reimburse the Issuing Lender, then to such Lenders
and the Issuing Lender as their interests may appear.




(b) Promptly following receipt of a notice of a Letter of Credit Disbursement pursuant to
Section 2.11(a), each Lender with a Commitment agrees to fund its Pro Rata Share of any
Advance deemed made pursuant to Section 2.11(a) on the same terms and conditions as if
Borrowers had requested the amount thereof as an Advance and Agent shall promptly pay to Issuing
Lender the amounts so received by it from the Lenders. By the issuance of a Letter of Credit or a
Reimbursement Undertaking (or an amendment to a Letter of Credit or a Reimbursement Undertaking
increasing the amount thereof) and without any further action on the part of the Issuing Lender or
the Lenders with Commitments, the Issuing Lender shall be deemed to have granted to each Lender
with a Commitment, and each Lender with a Commitment shall be deemed to have purchased, a
participation in each Letter of Credit issued by Issuing Lender and each Reimbursement Undertaking,
in an amount equal to its Pro Rata Share of such Letter of Credit or Reimbursement Undertaking, and
each such Lender agrees to pay to Agent, for the account of the Issuing Lender, such Lender’s Pro
Rata Share of any Letter of Credit Disbursement made by Issuing Lender or an Underlying Issuer
under the applicable Letter of Credit. In consideration and in furtherance of the foregoing, each
Lender with a Commitment hereby absolutely and unconditionally agrees to pay to Agent, for the
account of the Issuing Lender, such Lender’s Pro Rata Share of each Letter of Credit Disbursement
made by Issuing Lender or an Underlying Issuer and not reimbursed by Borrowers on the date due as
provided in Section 2.11(a), or of any reimbursement payment required to be refunded to
Borrowers for any reason. Each Lender with a Commitment acknowledges and agrees that its
obligation to deliver to Agent, for the account of the Issuing Lender, an amount equal to its
respective Pro Rata Share of each Letter of Credit Disbursement pursuant to this Section
2.11(b) shall be absolute and unconditional and such remittance shall be made notwithstanding
the occurrence or continuation of an Event of Default or Default or the failure to satisfy any
condition set forth in Section 3. If any such Lender fails to make available to Agent the
amount of such Lender’s Pro Rata Share of a Letter of Credit Disbursement as provided in this
Section, such Lender shall be deemed to be a Defaulting Lender and Agent (for the account of the
Issuing Lender) shall be entitled to recover such amount on demand from such Lender together with
interest thereon at the Defaulting Lender Rate until paid in full.


 


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(c) Each Borrower and Parent hereby agree to indemnify, save, defend, and hold the Lender
Group and each Underlying Issuer harmless from any damage, loss, cost, expense, or liability (other
than Taxes, which shall be governed by Section 16), and reasonable attorneys fees incurred
by Issuing Lender, any other member of the Lender Group, or any Underlying Issuer arising out of or
in connection with any Reimbursement Undertaking or any Letter of Credit; provided,
however, that Borrowers and Parent shall not be obligated hereunder to indemnify for any loss,
cost, expense, or liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of the Issuing Lender, any other member of
the Lender Group, or any Underlying Issuer. Each Borrower and Parent agree to be bound by the
Underlying Issuer’s regulations and interpretations of any Letter of Credit or by Issuing Lender’s
interpretations of any Reimbursement Undertaking even though this interpretation may be different
from Borrowers’ or Parent’s own, and Borrowers and Parent understand and agree that none of the
Issuing Lender, the Lender Group, or any Underlying Issuer shall be liable for any error,
negligence, or mistake, whether of omission or commission, in following Borrowers’ or Parent’s
instructions or those contained in the Letter of Credit or any modifications, amendments, or
supplements thereto. Each Borrower and Parent understand that the Reimbursement Undertakings may
require Issuing Lender to indemnify the Underlying Issuer for certain costs or liabilities arising
out of claims by Borrowers or Parent against such Underlying Issuer. Each Borrower and Parent
hereby agree to indemnify, save, defend, and hold Issuing Lender and the other members of the
Lender Group harmless with respect to any loss, cost, expense (including reasonable attorneys
fees), or liability (other than Taxes, which shall be governed by Section 16) incurred by
them as a result of the Issuing Lender’s indemnification of an Underlying Issuer; provided,
however, that Borrowers and Parent shall not be obligated hereunder to indemnify for any such loss,
cost, expense, or liability to the extent that it is caused by the gross negligence or willful
misconduct of the Issuing Lender
or any other member of the Lender Group. Each Borrower and Parent hereby acknowledge and
agree that none of the Issuing Lender, any other member of the Lender Group, or any Underlying
Issuer shall be responsible for delays, errors, or omissions resulting from the malfunction of
equipment in connection with any Letter of Credit.



(d) Borrowers and Parent hereby authorize and direct any Underlying Issuer to deliver to the
Issuing Lender all instruments, documents, and other writings and property received by such
Underlying Issuer pursuant to such Underlying Letter of Credit and to accept and rely upon the
Issuing Lender’s instructions with respect to all matters arising in connection with such
Underlying Letter of Credit and the related application.



(e) Any and all issuance charges, usage charges, commissions, fees, and costs incurred by the
Issuing Lender relating to Underlying Letters of Credit shall be Lender Group Expenses for purposes
of this Agreement and shall be reimbursable immediately by Borrowers to Agent for the account of
the Issuing Lender; it being acknowledged and agreed by Borrowers that, as of the Closing Date, the
usage charge imposed by the Underlying Issuer is 0.125% per annum times the undrawn amount of each
Underlying Letter of Credit, that such usage charge may be changed from time to time, and that the
Underlying Issuer also imposes a schedule of charges for amendments, extensions, drawings, and
renewals.


 


15









 





(f) If by reason of (i) any change after the Closing Date in any applicable law, treaty, rule,
or regulation or any change in the interpretation or application thereof by any Governmental
Authority, or (ii) compliance by the Issuing Lender, any other member of the Lender Group, or
Underlying Issuer with any direction, request, or requirement (irrespective of whether having the
force of law) of any Governmental Authority or monetary authority including, Regulation D of the
Federal Reserve Board as from time to time in effect (and any successor thereto):



(i) any reserve, deposit, or similar requirement is or shall be imposed or modified in respect
of any Letter of Credit issued or caused to be issued hereunder or hereby, or



(ii) there shall be imposed on the Issuing Lender, any other member of the Lender Group, or
Underlying Issuer any other condition regarding any Letter of Credit or Reimbursement Undertaking,



and the result of the foregoing is to increase, directly or indirectly, the cost to the Issuing
Lender, any other member of the Lender Group, or an Underlying Issuer of issuing, making,
guaranteeing, or maintaining any Reimbursement Undertaking or Letter of Credit or to reduce the
amount receivable in respect thereof, then, and in any such case, Agent may, at any time within a
reasonable period after the additional cost is incurred or the amount received is reduced, notify
Borrowers, and Borrowers shall pay within 30 days after demand therefor, such amounts as Agent may
specify to be necessary to compensate the Issuing Lender, any other member of the Lender Group, or
an Underlying Issuer for such additional cost or reduced receipt, together with interest on such
amount from the date of such demand until payment in full thereof at the rate then applicable to
Base Rate Loans hereunder; provided, however, that Borrowers shall not be required
to provide any compensation pursuant to this Section 2.11(f) for any such amounts incurred
more than 180 days prior to the date on which the demand for payment of such amounts is first made
to Borrowers; provided further, however, that if an event or circumstance
giving rise to such amounts is retroactive, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof. The determination by Agent of any
amount due pursuant to this Section 2.11(f), as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable
error, be final and conclusive and binding on all of the parties hereto.




(g) Borrowers acknowledge and agree that certain of the Qualified Import Letters of Credit may
provide for the presentation of time drafts to the Underlying Issuer. If an Underlying Issuer
accepts such a time draft that is presented under an Underlying Letter of Credit, it is
acknowledged and agreed that (i) the Letter of Credit will require the Issuing Lender to reimburse
the Underlying Issuer for amounts paid on account of such time draft on or after the maturity date
thereof, (ii) the pricing provisions hereof (including Sections 2.6(b) and 2.11(e))
shall continue to apply, until payment of such time draft on or after the maturity date thereof, as
if the Underlying Letter of Credit were still outstanding, and (iii) on the date on which Issuing
Lender makes payment to the Underlying Issuer of the amounts paid on account of such time draft,
Borrowers immediately shall reimburse such amount to Issuing Lender and such amount shall
constitute a Letter of Credit Disbursement hereunder.



2.12 LIBOR Option.



(a) Interest and Interest Payment Dates. In lieu of having interest charged at the rate based
upon the Base Rate, Borrowers shall have the option, subject to Section 2.12(b) below (the
“LIBOR Option”) to have interest on all or a portion of the Advances be charged (whether at
the time when made (unless otherwise provided herein), upon conversion from a Base Rate Loan to a
LIBOR Rate Loan, or upon continuation of a LIBOR Rate Loan as a LIBOR Rate Loan) at a rate of
interest based upon the LIBOR Rate. Interest on LIBOR Rate Loans shall be payable on the earliest
of (i) the last day of the Interest Period applicable thereto; (ii) the date on which all or any
portion of the Obligations are accelerated pursuant to the terms hereof, or (iii) the date on which
this Agreement is terminated pursuant


 


16









 







to the terms hereof. On the last day of each applicable
Interest Period, unless Borrowers properly have exercised the LIBOR Option with respect thereto,
the interest rate applicable to such LIBOR Rate Loan automatically shall convert to the rate of
interest then applicable to Base Rate Loans of the same type hereunder. At any time that an Event
of Default has occurred and is continuing, at the written election of the Required Lenders,
Borrowers no longer shall have the option to request that Advances bear interest at a rate based
upon the LIBOR Rate.



(b) LIBOR Election.



(i) Borrowers may, at any time and from time to time, so long as Borrowers have not received a
notice from Agent, after the occurrence and during the continuance of an Event of Default, of the
election of the Required Lenders to terminate the right of Borrowers to exercise the LIBOR Option
during the continuance of such Event of Default, elect to exercise the LIBOR Option by notifying
Agent prior to 2:00 p.m. (Atlanta, Georgia time) at least 3 Business Days prior to the commencement
of the proposed Interest Period (the “LIBOR Deadline”). Notice of Borrowers’ election of
the LIBOR Option for a permitted portion of the Advances and an Interest Period pursuant to this
Section shall be made by delivery to Agent of a LIBOR Notice received by Agent before the LIBOR
Deadline, or by telephonic notice received by Agent before the LIBOR Deadline (to be confirmed by
delivery to Agent of a LIBOR Notice received by Agent prior to 5:00 p.m. (Atlanta, Georgia time) on
the same day). Promptly upon its receipt of each such LIBOR Notice, Agent shall provide a copy
thereof to each of the affected Lenders.



(ii) Each LIBOR Notice shall be irrevocable and binding on Borrowers. In connection with each
LIBOR Rate Loan, Borrowers shall indemnify, defend, and hold Agent and the Lenders harmless against
any loss, cost, or expense actually incurred by Agent or any Lender as a result of (A) the payment
of any principal of any LIBOR Rate Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (B) the conversion of any LIBOR Rate Loan
other than on the last day of the Interest Period applicable thereto, or (C) the failure to borrow,
convert, continue or prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered
pursuant hereto (such losses, costs, or expenses, “Funding Losses”). A certificate of
Agent or a Lender
delivered to Borrowers setting forth in reasonable detail any amount or amounts that Agent or
such Lender is entitled to receive pursuant to this Section 2.12 shall be conclusive absent
manifest error. Borrowers shall pay such amount to Agent or the Lender, as applicable, within 30
days of the date of its receipt of such certificate. If a payment of a LIBOR Rate Loan on a day
other than the last day of the applicable Interest Period would result in a Funding Loss, Agent
shall, if Borrowers have provided at least 2 Business Days written notice of such request under
this Section 2.12(b)(ii), and provided that no Event of Default shall have occurred and be
continuing, hold the amount of such payment as cash collateral in support of the Obligations until
the last day of such Interest Period and apply such amounts to the payment of the applicable LIBOR
Rate Loan on such last day.



(iii) Borrowers shall have not more than 10 LIBOR Rate Loans in effect at any given time.
Borrowers only may exercise the LIBOR Option for proposed LIBOR Rate Loans of at least $1,000,000.



(c) Conversion. Borrowers may convert LIBOR Rate Loans to Base Rate Loans at any time;
provided, however, that in the event that LIBOR Rate Loans are converted or prepaid on any date
that is not the last day of the Interest Period applicable thereto, including as a result of any
automatic prepayment through the required application by Agent of proceeds of Borrowers’ and their
Subsidiaries’ Collections in accordance with Section 2.4(b) or for any other reason,
including early termination of the term of this Agreement or acceleration of all or any portion of
the Obligations pursuant to the terms hereof, Borrowers shall indemnify, defend, and hold Agent and
the Lenders and their Participants harmless against any and all Funding Losses in accordance with
Section 2.12(b)(ii).


 


17









 





(d) Special Provisions Applicable to LIBOR Rate.



(i) The LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective basis
to take into account any additional or increased costs to such Lender of maintaining or obtaining
any eurodollar deposits or increased costs, in each case, due to changes in applicable law (other
than changes in laws relative to Taxes, which shall be governed by Section 16) occurring
subsequent to the commencement of the then applicable Interest Period, including changes in tax
laws (except changes of general applicability in corporate income tax laws) and changes in the
reserve requirements imposed by the Board of Governors of the Federal Reserve System (or any
successor), which additional or increased costs would increase the cost of funding or maintaining
loans bearing interest at the LIBOR Rate. In any such event, the affected Lender shall give
Borrowers and Agent notice of such a determination and adjustment and Agent promptly shall transmit
the notice to each other Lender and, upon its receipt of the notice from the affected Lender,
Borrowers may, by notice to such affected Lender (y) require such Lender to furnish to Borrowers a
statement setting forth the basis for adjusting such LIBOR Rate and the method for determining the
amount of such adjustment, or (z) repay the LIBOR Rate Loans with respect to which such adjustment
is made (together with any amounts due under Section 2.12(b)(ii)).



(ii) In the event that any change in market conditions or any law, regulation, treaty, or
directive, or any change therein or in the interpretation or application thereof, shall at any time
after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for
such Lender to fund or maintain LIBOR Rate Loans or to continue such funding or maintaining, or to
determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed
circumstances to Agent and Borrowers and Agent promptly shall transmit the notice to each other
Lender and (y) in the case of any LIBOR Rate Loans of such Lender that are outstanding, the date
specified in such Lender’s notice shall be deemed to be the last day of the Interest Period of such
LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such Lender thereafter shall accrue
interest at the rate then
applicable to Base Rate Loans, and (z) Borrowers shall not be entitled to elect the LIBOR
Option until such Lender determines that it would no longer be unlawful or impractical to do so.



(e) No Requirement of Matched Funding. Anything to the contrary contained herein
notwithstanding, neither Agent, nor any Lender, nor any of their Participants, is required actually
to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest
accrues at the LIBOR Rate.



2.13 Capital Requirements.



(a) If, after the date hereof, any Lender determines that (i) the adoption of or change in any
law, rule, regulation or guideline regarding capital or reserve requirements for banks or bank
holding companies, or any change in the interpretation, implementation, or application thereof by
any Governmental Authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request or directive of any such
entity regarding capital adequacy (whether or not having the force of law), has the effect of
reducing the return on such Lender’s or such holding company’s capital as a consequence of such
Lender’s Commitments hereunder to a level below that which such Lender or such holding company
could have achieved but for such adoption, change, or compliance (taking into consideration such
Lender’s or such holding company’s then existing policies with respect to capital adequacy and
assuming the full utilization of such entity’s capital) by any amount deemed by such Lender to be
material, then such Lender may notify Borrowers and Agent


 


18









 







thereof. Following receipt of such
notice, Borrowers agree to pay such Lender on demand the amount of such reduction of return of
capital as and when such reduction is determined, payable within 30 days after presentation by such
Lender of a statement in the amount and setting forth in reasonable detail such Lender’s
calculation thereof and the assumptions upon which such calculation was based (which statement
shall be deemed true and correct absent manifest error). In determining such amount, such Lender
may use any reasonable averaging and attribution methods. Failure or delay on the part of any
Lender to demand compensation pursuant to this Section shall not constitute a waiver of such
Lender’s right to demand such compensation; provided that Borrowers shall not be required
to compensate a Lender pursuant to this Section for any reductions in return incurred more than 180
days prior to the date that such Lender notifies Borrowers of such law, rule, regulation or
guideline giving rise to such reductions and of such Lender’s intention to claim compensation
therefor; provided further that if such claim arises by reason of the adoption of or change in any
law, rule, regulation or guideline that is retroactive, then the 180-day period referred to above
shall be extended to include the period of retroactive effect thereof.



(b) If any Lender requests additional or increased costs referred to in Section
2.12(d)(i) or amounts under Section 2.13(a) or sends a notice under Section
2.12(d)(ii) relative to changed circumstances (any such Lender, an “Affected Lender”),
then such Affected Lender shall use reasonable efforts to promptly designate a different one of its
lending offices or to assign its rights and obligations hereunder to another of its offices or
branches, if (i) in the reasonable judgment of such Affected Lender, such designation or assignment
would eliminate or reduce amounts payable pursuant to Section 2.12(d)(i) or Section
2.13(a), as applicable, or would eliminate the illegality or impracticality of funding or
maintaining LIBOR Rate Loans and (ii) in the reasonable judgment of such Affected Lender, such
designation or assignment would not subject it to any material unreimbursed cost or expense and
would not otherwise be materially disadvantageous to it. Each Borrower agrees to pay all
reasonable out-of-pocket costs and expenses incurred by such Affected Lender in connection with any
such designation or assignment. If, after such reasonable efforts, such Affected Lender does not
so designate a different one of its lending offices or assign its rights to another of its offices
or branches so as to eliminate Borrowers’
obligation to pay any future amounts to such Affected Lender pursuant to Section
2.12(d)(i) or Section 2.13(a), as applicable, or to enable Borrowers to obtain LIBOR
Rate Loans, then Borrowers (without prejudice to any amounts then due to such Affected Lender under
Section 2.12(d)(i) or Section 2.13(a), as applicable) may, unless prior to the
effective date of any such assignment the Affected Lender withdraws its request for such additional
amounts under Section 2.12(d)(i) or Section 2.13(a), as applicable, or indicates
that it is no longer unlawful or impractical to fund or maintain LIBOR Rate Loans, may seek a
substitute Lender reasonably acceptable to Agent to purchase the Obligations owed to such Affected
Lender and such Affected Lender’s Commitments hereunder (a “Replacement Lender”), and if
such Replacement Lender agrees to such purchase, such Affected Lender shall assign to the
Replacement Lender its Obligations and Commitments, pursuant to an Assignment and Acceptance
Agreement, and upon such purchase by the Replacement Lender, such Replacement Lender shall be
deemed to be a “Lender” for purposes of this Agreement and such Affected Lender shall cease
to be a “Lender” for purposes of this Agreement.



2.14 Joint and Several Liability of Borrowers.



(a) Each Borrower is accepting joint and several liability hereunder and under the other Loan
Documents in consideration of the financial accommodations to be provided by the Lender Group under
this Agreement, for the mutual benefit, directly and indirectly, of each Borrower and in
consideration of the undertakings of the other Borrowers to accept joint and several liability for
the Obligations.



 


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(b) Each Borrower, jointly and severally, hereby irrevocably and unconditionally accepts,
not merely as a surety but also as a co-debtor, joint and several liability with the other
Borrowers, with respect to the payment and performance of all of the Obligations (including,
without limitation, any Obligations arising under this Section 2.14) it being the intention
of the parties hereto that all the Obligations shall be the joint and several obligations of each
Borrower without preferences or distinction among them.



(c) If and to the extent that any Borrower shall fail to make any payment with respect to any
of the Obligations as and when due or to perform any of the Obligations in accordance with the
terms thereof, then in each such event the other Borrowers will make such payment with respect to,
or perform, such Obligation.



(d) The Obligations of each Borrower under the provisions of this Section 2.14
constitute the absolute and unconditional, full recourse Obligations of each Borrower enforceable
against each Borrower to the full extent of its properties and assets, irrespective of the
validity, regularity or enforceability of this Agreement or any other circumstances whatsoever.



(e) Except as otherwise expressly provided in this Agreement, each Borrower hereby waives
notice of acceptance of its joint and several liability, notice of any Advances or Letters of
Credit issued under or pursuant to this Agreement, notice of the occurrence of any Default, Event
of Default, or of any demand for any payment under this Agreement, notice of any action at any time
taken or omitted by Agent or Lenders under or in respect of any of the Obligations, any requirement
of diligence or to mitigate damages and, generally, to the extent permitted by applicable law, all
demands, notices and other formalities of every kind in connection with this Agreement (except as
otherwise provided in this Agreement). Each Borrower hereby assents to, and waives notice of, any
extension or postponement of the time for the payment of any of the Obligations, the acceptance of
any payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver,
consent or other action or acquiescence by Agent or Lenders at any time or times in respect of any
default by any Borrower in the performance or satisfaction of any term, covenant, condition or
provision of this Agreement, any and all other indulgences whatsoever by Agent or Lenders in
respect of any of the Obligations, and the taking, addition, substitution or release, in whole or
in part, at any time or times, of any security for any of the Obligations or the addition,
substitution or release, in whole or in part, of any Borrower. Without limiting the generality of
the foregoing, each Borrower assents to any other action or delay in acting or failure to act on
the part of any Agent or Lender with respect to the failure by any Borrower to comply with any of
its respective Obligations, including, without limitation, any failure strictly or diligently to
assert any right or to pursue any remedy or to comply fully with applicable laws or regulations
thereunder, which might, but for the provisions of this Section 2.14, afford grounds for
terminating, discharging or relieving any Borrower, in whole or in part, from any of its
Obligations under this Section 2.14 it being the intention of each Borrower that, so long
as any of the Obligations hereunder remain unsatisfied, the Obligations of each Borrower under this
Section 2.14 shall not be discharged except by performance and then only to the extent of
such performance. The Obligations of each Borrower under this Section 2.14 shall not be
diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation,
reconstruction or similar proceeding with respect to any Borrower or any Agent or Lender.



(f) Each Borrower represents and warrants to Agent and Lenders that such Borrower is currently
informed of the financial condition of each other Borrower and of all other circumstances which a
diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. Each
Borrower further represents and warrants to Agent and Lenders that such Borrower has read and
understands the terms and conditions of the Loan Documents. Each Borrower hereby covenants that
such Borrower will continue to keep informed of each other Borrower’s financial condition, the
financial
condition of guarantors, if any, and of all other circumstances which bear upon the risk of
nonpayment or nonperformance of the Obligations.


 


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(g) The provisions of this Section 2.14 are made for the benefit of Agent, Lenders and
their respective successors and assigns and may be enforced by it or them from time to time against
any or all Borrowers as often as occasion therefor may arise and without requirement on the part of
any such Agent, Lender, successor or assign first to marshal any of its or their claims or to
exercise any of its or their rights against any Borrower or to exhaust any remedies available to it
or them against any Borrower or to resort to any other source or means of obtaining payment of any
of the Obligations hereunder or to elect any other remedy. The provisions of this Section
2.14 shall remain in effect until all of the Obligations shall have been paid in full or
otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any
of the Obligations, is rescinded or must otherwise be restored or returned by any Agent or Lender
upon the insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the provisions of
this Section 2.14 will forthwith be reinstated in effect, as though such payment had not
been made.



(h) Each Borrower hereby agrees that it will not enforce any of its rights of contribution or
subrogation against any other Borrower with respect to any liability incurred by it hereunder or
under any of the other Loan Documents, any payments made by it to Agent or Lenders with respect to
any of the Obligations or any collateral security therefor until such time as all of the
Obligations have been paid in full in cash. Any claim which any Borrower may have against any
other Borrower with respect to any payments to any Agent or Lender hereunder or under any other
Loan Documents are hereby expressly made subordinate and junior in right of payment, without
limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior
payment in full in cash of the Obligations and, in the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding under the laws of any
jurisdiction relating to any Borrower, its debts or its assets, whether voluntary or involuntary,
all such Obligations shall be paid in full in cash before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to any other Borrower
therefor.



(i) Each Borrower hereby agrees that, after the occurrence and during the continuance of any
Event of Default, the payment of any amounts due with respect to the indebtedness owing by any
Borrower to any other Borrower is hereby subordinated to the prior payment in full in cash of the
Obligations. Each Borrower hereby agrees that after the occurrence and during the continuance of
any Event of Default, such Borrower will not demand, sue for or otherwise attempt to collect any
indebtedness of any other Borrower owing to such Borrower until the Obligations shall have been
paid in full in cash. If, notwithstanding the foregoing sentence, such Borrower shall collect,
enforce or receive any amounts in respect of such indebtedness, such amounts shall be collected,
enforced and received by, such Borrower as trustee for Agent, and such Borrower shall deliver any
such amounts to Agent for application to the Obligations in accordance with Section 2.4(b).



(j) Each Borrower agrees that the Obligations may at any time and from time to time exceed the
Maximum Liability of such Borrower, without impairing its liability under this Agreement or
affecting the rights and remedies of Agent or any other member of the Lender Group or Bank Product
Provider hereunder, but that such Borrower’s obligations hereunder shall be in, but not in excess
of, the Maximum Liability. The “Maximum Liability,” with respect to any Borrower, shall be
the maximum amount that could be paid by such Borrower (taking into account, among other things,
(i) all rights of contribution, reimbursement and subrogation available to such Borrower with
respect to the other Loan Parties, and (ii) the adequacy and reasonableness of all consideration
and value received by such Borrower in connection herewith) without rendering such Borrower’s
Obligations void under Section 548 of the Bankruptcy Code or any comparable provisions of
applicable state law.


 


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3. CONDITIONS; TERM OF AGREEMENT.




3.1 Conditions Precedent to the Initial Extension of Credit. The obligation of each
Lender to make its initial extension of credit provided for hereunder is subject to the
fulfillment, to the satisfaction of Agent and each Lender, of each of the conditions precedent set
forth on Schedule 3.1 (the making of such initial extension of credit by a Lender being
conclusively deemed to be its satisfaction or waiver of the conditions precedent ).



3.2 Conditions Precedent to all Extensions of Credit. The obligation of the Lender Group
(or any member thereof) to make any Advances hereunder (or to extend any other credit hereunder) at
any time shall be subject to the following conditions precedent:



(a) the representations and warranties of Parent or its Subsidiaries contained in this
Agreement or in the other Loan Documents shall be true and correct in all material respects (except
that such materiality qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof) on and as of the date of such
extension of credit, as though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date); and



(b) no Default or Event of Default shall have occurred and be continuing on the date of such
extension of credit, nor shall either result from the making thereof.



3.3 Maturity. This Agreement shall continue in full force and effect for a term ending on
October 28, 2014 (the “Maturity Date”). The foregoing notwithstanding, the Lender Group,
upon the election of the Required Lenders, shall have the right to terminate its obligations under
this Agreement immediately and without notice upon the occurrence and during the continuation of an
Event of Default.



3.4 Effect of Maturity. On the Maturity Date, all commitments of the Lender Group to
provide additional credit hereunder shall automatically be terminated and all of the Obligations
immediately shall become due and payable without notice or demand and Borrowers shall be required
to repay all of the Obligations in full. No termination of the obligations of the Lender Group
(other than payment in full of the Obligations and termination of the Commitments) shall relieve or
discharge any Loan Party of its duties, obligations, or covenants hereunder or under any other Loan
Document and Agent’s Liens in the Collateral shall continue to secure the Obligations and shall
remain in effect until all Obligations have been paid in full and the Commitments have been
terminated. When all of the Obligations have been paid in full and the Lender Group’s obligations
to provide additional credit under the Loan Documents have been terminated irrevocably, Agent will,
at Borrowers’ sole expense, execute and deliver any termination statements, lien releases,
discharges of security interests, and other similar discharge or release documents (and, if
applicable, in recordable form) as are reasonably necessary to release, as of record, Agent’s Liens
and all notices of security interests and liens previously filed by Agent.



3.5 Early Termination by Borrower. Borrowers have the option, at any time upon 10
Business Days prior written notice to Agent, to terminate this Agreement and terminate the
Commitments hereunder by repaying to Agent all of the Obligations in full. Borrowers shall not be
liable for any early termination penalty or premium in connection with any termination under this
Section, but shall be liable for any applicable Funding Losses in connection therewith in
accordance with Section 2.12.



3.6 Conditions Subsequent. The obligation of the Lender Group (or any member thereof) to
continue to make Advances (or otherwise extend credit hereunder) is subject to the fulfillment, on
or before the date applicable thereto, of the conditions subsequent set forth on Schedule
3.6 (the failure by
Borrowers to so perform or cause to be performed such conditions subsequent as and when
required by the terms thereof, shall constitute an Event of Default).


 


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4. REPRESENTATIONS AND WARRANTIES.




In order to induce the Lender Group to enter into this Agreement, each of Parent and each
Borrower makes the following representations and warranties to the Lender Group which shall be
true, correct, and complete, in all material respects (except that such materiality qualifier shall
not be applicable to any representations and warranties that already are qualified or modified by
materiality in the text thereof), as of the Closing Date, and shall be true, correct, and complete,
in all material respects (except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by materiality in the text
thereof), as of the date of the making of each Advance (or other extension of credit) made
thereafter, as though made on and as of the date of such Advance (or other extension of credit)
(except to the extent that such representations and warranties relate solely to an earlier date)
and such representations and warranties shall survive the execution and delivery of this Agreement:



4.1 Due Organization and Qualification; Subsidiaries.



(a) Each (i) Primary Obligor is duly organized and existing and in good standing under the
laws of the jurisdiction of its organization, (ii) Loan Party is qualified to do business in any
state where the failure to be so qualified could reasonably be expected to result in a Material
Adverse Change, and (iii) Primary Obligor has all requisite power and authority to own and operate
its properties, to carry on its business as now conducted and as proposed to be conducted, to enter
into the Loan Documents to which it is a party, and to carry out the transactions contemplated
thereby.



(b) Set forth on Schedule 4.1(b) is a complete and accurate description of the
authorized capital Stock of Borrowers, by class, and, as of the Closing Date, a description of the
number of shares of each such class that are issued and outstanding. Other than as described on
Schedule 4.1(b), there are no subscriptions, options, warrants, or calls relating to any
shares of any Borrower’s capital Stock, including any right of conversion or exchange under any
outstanding security or other instrument. No Borrower is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its capital Stock or any
security convertible into or exchangeable for any of its capital Stock.



(c) Set forth on Schedule 4.1(c) (as such Schedule may be updated from time to time to
reflect changes resulting from transactions permitted under this Agreement), is a complete and
accurate list of the Loan Parties’ direct and indirect Subsidiaries, showing: (i) the number of
shares of each class of common and preferred Stock authorized for each of such Subsidiaries, (ii)
the number and the percentage of the outstanding shares of each such class owned directly or
indirectly by the respective Loan Party, and (iii) whether each such Subsidiary is an Inactive
Subsidiary as of the Closing Date. All of the outstanding capital Stock of each such Subsidiary
has been validly issued and is fully paid and non-assessable.



(d) Except as set forth on Schedule 4.1(c) (as such Schedule may be updated from time
to time to reflect changes resulting from transactions permitted under this Agreement), there are
no subscriptions, options, warrants, or calls relating to any shares of Parent’s or any of its
Subsidiaries’ capital Stock, including any right of conversion or exchange under any outstanding
security or other instrument. No Loan Party is subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any shares of such Person’s Subsidiaries’ capital
Stock or any security convertible into or exchangeable for any such capital Stock.


 


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4.2 Due Authorization; No Conflict.



(a) As to each Primary Obligor, the execution, delivery, and performance by such Primary
Obligor of the Loan Documents to which it is a party have been duly authorized by all necessary
action on the part of such Primary Obligor.



(b) As to each Primary Obligor, the execution, delivery, and performance by such Primary
Obligor of the Loan Documents to which it is a party do not and will not violate any material
provision of federal, state, or local law or regulation applicable to any Primary Obligor, the
Governing Documents of any Primary Obligor, or any order, judgment, or decree of any court or other
Governmental Authority binding on any Primary Obligor. As to each Loan Party, the execution,
delivery, and performance by such Loan Party of the Loan Documents to which it is a party do not
and will not (i) conflict with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under any Material Contract of any Loan Party except to the extent that any
such conflict, breach or default could not individually or in the aggregate reasonably be expected
to have a Material Adverse Change, (ii) result in or require the creation or imposition of any Lien
of any nature whatsoever upon any assets of any Loan Party, other than Permitted Liens, or (iii)
require any approval of any Loan Party’s interestholders or any approval or consent of any Person
under any Material Contract of any Loan Party, other than consents or approvals that have been
obtained and that are still in force and effect and except, in the case of Material Contracts, for
consents or approvals, the failure to obtain could not individually or in the aggregate reasonably
be expected to cause a Material Adverse Change.



4.3 Governmental Consents. The execution, delivery, and performance by each Primary
Obligor of the Loan Documents to which such Primary Obligor is a party and the consummation of the
transactions contemplated by the Loan Documents do not and will not require any registration with,
consent, or approval of, or notice to, or other action with or by, any Governmental Authority,
other than registrations, consents, approvals, notices, or other actions that have been obtained
and that are still in force and effect and except for filings and recordings with respect to the
Collateral to be made, or otherwise delivered to Agent for filing or recordation, as of the Closing
Date.



4.4 Binding Obligations; Perfected Liens.



(a) Each Loan Document has been duly executed and delivered by each Primary Obligor that is a
party thereto and is the legally valid and binding obligation of such Primary Obligor, enforceable
against such Primary Obligor in accordance with its respective terms, except as enforcement may be
limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or
similar laws relating to or limiting creditors’ rights generally.



(b) Agent’s Liens are validly created, perfected (other than in respect of (i) motor vehicles
that are subject to a certificate of title and as to which Agent has not caused its Lien to be
noted on the applicable certificate of title, (ii) any Deposit Accounts not subject to a Control
Agreement as permitted by Section 6.11, (iii) any letter-of credit rights not subject to
the control of Agent, and (iv) the Excluded Copyrights, and subject only to the filing of financing
statements, the recordation of the Copyright Security Agreement, and the recordation of the
Mortgages (if any), in each case, in the appropriate filing offices), and first priority Liens,
subject only to Permitted Liens.



     4.5 Title to Assets; No Encumbrances. Each of the Loan Parties and its Subsidiaries has
(a) good, sufficient and legal title to (in the case of fee interests in Real Property), (b) valid
leasehold interests in (in the case of leasehold interests in real or personal property), and (c)
good and marketable
title to (in the case of all other personal property), all of their respective assets
reflected in their most recent financial statements delivered pursuant to Section 5.1, in
each case except for assets disposed of since the date of such financial statements to the extent
permitted hereby. All of such assets are free and clear of Liens except for Permitted Liens.


 


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4.6 Jurisdiction of Organization; Location of Chief Executive Office; Organizational
Identification Number; Commercial Tort Claims.



(a) The name of (within the meaning of Section 9-503 of the Code) and jurisdiction of
organization of each Loan Party is set forth on Schedule 4.6(a) (as such Schedule may be
updated from time to time to reflect changes resulting from transactions permitted under this
Agreement).



(b) The chief executive office of each Loan Party is located at the address indicated on
Schedule 4.6(b) (as such Schedule may be updated from time to time to reflect changes
resulting from transactions permitted under this Agreement).



(c) Each Loan Party’s tax identification numbers and organizational identification numbers, if
any, are identified on Schedule 4.6(c) (as such Schedule may be updated from time to time
to reflect changes resulting from transactions permitted under this Agreement).



(d) As of the Closing Date, no Loan Party holds any commercial tort claims that exceed
$100,000 in amount, except as set forth on Schedule 4.6(d).



4.7 Litigation.



(a) There are no actions, suits, or proceedings pending or, to the knowledge of Borrowers,
after due inquiry, threatened in writing against a Loan Party or any of its Subsidiaries that
either individually or in the aggregate could reasonably be expected to result in a Material
Adverse Change.



(b) Schedule 4.7(b) sets forth a complete and accurate description, with respect to
each of the actions, suits, or proceedings that, as of the Closing Date, is pending or, to the
knowledge of Borrowers, after due inquiry, threatened against a Loan Party or any of its
Subsidiaries, of (i) the parties to such actions, suits, or proceedings, (ii) the nature of the
dispute that is the subject of such actions, suits, or proceedings, (iii) the status, as of the
Closing Date, with respect to such actions, suits, or proceedings, and (iv) whether any liability
of the Loan Parties’ and their Subsidiaries in connection with such actions, suits, or proceedings
is covered by insurance.



4.8 Compliance with Laws. No Loan Party nor any of its Subsidiaries (a) is in violation
of any applicable laws, rules, regulations, executive orders, or codes (including Environmental
Laws) that, individually or in the aggregate, could reasonably be expected to result in a Material
Adverse Change, or (b) is subject to or in default with respect to any final judgments, writs,
injunctions, decrees, rules or regulations of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign,
that, individually or in the aggregate, could reasonably be expected to result in a Material
Adverse Change.



4.9 No Material Adverse Change. All historical financial statements relating to the Loan
Parties and their Subsidiaries that have been delivered by the Loan Parties to Agent have been
prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the
lack of footnotes and being subject to year-end audit adjustments) and present fairly in all
material respects, the Loan Parties’ and their Subsidiaries’ consolidated financial condition as of
the date thereof and results of operations for the period then ended. Since December 31, 2009, no
event, circumstance, or change has occurred with respect to the Loan Parties and their Subsidiaries
that has or could reasonably be expected to result in a Material Adverse Change.


 


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4.10 Fraudulent Transfer.



(a) Each Primary Obligor is Solvent.



(b) No transfer of property is being made by any Loan Party and no obligation is being
incurred by any Loan Party in connection with the transactions contemplated by this Agreement or
the other Loan Documents with the intent to hinder, delay, or defraud either present or future
creditors of such Loan Party.



4.11 Employee Benefits. No Loan Party, none of their Subsidiaries, nor any of their ERISA
Affiliates maintains or contributes to any Benefit Plan.



4.12 Environmental Condition. Except as set forth on Schedule 4.12, (a) to each
Borrower’s knowledge, no Loan Party’s properties or assets has ever been used by a Loan Party, or
by previous owners or operators in the disposal of, or to produce, store, handle, treat, release,
or transport, any Hazardous Materials, where such disposal, production, storage, handling,
treatment, release or transport was in violation, in any material respect, of any applicable
Environmental Law, (b) to each Borrower’s knowledge, after due inquiry, no Loan Party’s properties
or assets has ever been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, (c) no Loan Party has received notice
that a Lien arising under any Environmental Law has attached to any revenues or to any Real
Property owned or operated by a Loan Party, and (d) no Loan Party nor any of their respective
facilities or operations is subject to any outstanding written order, consent decree, or settlement
agreement with any Person relating to any Environmental Law or Environmental Liability that,
individually or in the aggregate, could reasonably be expected to result in a Material Adverse
Change.



4.13 Intellectual Property. Each Loan Party and its Subsidiaries own, or hold licenses in,
all trademarks, trade names, copyrights, patents, and licenses that are necessary to the conduct of
its business as currently conducted, except for those the failure to own or have such legal right
to use would not reasonably be expected to have a Material Adverse Change, and attached hereto as
Schedule 4.13 (as updated from time to time) is a true, correct, and complete listing of
all material trademarks, trade names, copyrights, patents, and licenses as to which Parent or one
of its Subsidiaries is the owner or is an exclusive licensee; provided, however, that
Borrowers may amend Schedule 4.13 to add additional intellectual property so long as such
amendment occurs by written notice to Agent at the time that Parent provides its Compliance
Certificate pursuant to Section 5.1.



4.14 Leases. Each Loan Party enjoys peaceful and undisturbed possession under all leases
material to the business of the Loan Parties, taken as a whole, and, subject to Permitted Protests,
all of such material leases are valid and subsisting and, except as set forth on Schedule
4.14, no material default by the applicable Loan Party exists under any of them.



4.15 Deposit Accounts and Securities Accounts. Set forth on Schedule 4.15 (as
updated pursuant to the provisions of the Security Agreement from time to time) is a listing of all
of the Loan Parties’ Deposit Accounts and Securities Accounts, including, with respect to each bank
or securities intermediary (a) the name and address of such Person, and (b) the account numbers of
the Deposit Accounts or Securities Accounts maintained with such Person.


 


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4.16 Complete Disclosure. All factual information taken as a whole (other than
forward-looking information and projections and information of a general economic nature and
general information about Borrowers’ industry) furnished by or on behalf of a Loan Party or its
Subsidiaries in writing to Agent or any Lender (including all information contained in the
Schedules hereto or in the other Loan Documents) for purposes of or in connection with this
Agreement or the other Loan Documents, and all other such factual information taken as a whole
(other than forward-looking information and projections and information of a general economic
nature and general information about Borrowers’ industry) hereafter furnished by or on behalf of a
Loan Party or its Subsidiaries in writing to Agent or any Lender will be, true and accurate, in all
material respects, on the date as of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make such information (taken as a whole) not
misleading in any material respect at such time in light of the circumstances under which such
information was provided. The Projections delivered to Agent on September 14, 2010 represent, and
as of the date on which any other Projections are delivered to Agent, such additional Projections
will represent, Borrowers’ good faith estimate, on the date such Projections are delivered, of the
Loan Parties’ and their Subsidiaries’ future performance for the periods covered thereby based upon
assumptions believed by Borrowers to be reasonable at the time of the delivery thereof to Agent (it
being understood that such Projections are subject to uncertainties and contingencies, many of
which are beyond the control of the Loan Parties and their Subsidiaries, that no assurances can be
given that such Projections will be realized, and that actual results may differ in a material
manner from such Projections).



4.17 Material Contracts. Set forth on Schedule 4.17 is a reasonably detailed
description of the Material Contracts of each Loan Party and its Subsidiaries as of the Closing
Date. Except for matters which, either individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Change, each Material Contract (other than those that have
expired at the end of their normal terms) (a) is in full force and effect and is binding upon and
enforceable against the applicable Loan Party or its Subsidiary and, to each Borrower’s knowledge,
after due inquiry, each other Person that is a party thereto in accordance with its terms, (b) has
not been otherwise amended or modified (other than amendments or modifications permitted by
Section 6.7(b)), and (c) is not in default due to the action or inaction of the applicable
Loan Party or its Subsidiary.



4.18 Patriot Act. To the extent applicable, each Loan Party is in compliance, in all
material respects, with the (a) Trading with the Enemy Act, as amended, and each of the foreign
assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V,
as amended) and any other enabling legislation or executive order relating thereto, and (b) Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism (USA Patriot Act of 2001) (the “Patriot Act”). No part of the proceeds of the
loans made hereunder will be used by any Loan Party or any of their Affiliates, directly or
indirectly, for any payments to any governmental official or employee, political party, official of
a political party, candidate for political office, or anyone else acting in an official capacity,
in order to obtain, retain or direct business or obtain any improper advantage, in violation of the
United States Foreign Corrupt Practices Act of 1977, as amended.



4.19 Indebtedness. Set forth on Schedule 4.19 is a true and complete list of all
Indebtedness of each Loan Party and each of its Subsidiaries outstanding immediately prior to the
Closing Date that is to remain outstanding immediately after giving effect to the closing hereunder
on the Closing Date and such Schedule accurately sets forth, in all material respects, the
aggregate principal amount of such Indebtedness as of the Closing Date.



4.20 Payment of Taxes. All tax returns and reports of each Loan Party and its Subsidiaries
required to be filed by any of them have been timely filed, and all taxes shown on such tax returns
to be due and payable and all assessments, fees and other governmental charges upon a Loan Party
and its
Subsidiaries and upon their respective assets, income, businesses and franchises that are due
and payable have been paid when due and payable, except to the extent that (a) adequate provision
therefor was made in accordance with GAAP as of the Closing Date, or (b) they are the subject of a
Permitted Protest. Each Loan Party and each of its Subsidiaries have made adequate provision in
accordance with GAAP for all taxes not yet due and payable.


 


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4.21 Margin Stock. No Loan Party nor any of its Subsidiaries is engaged principally, or as
one of its important activities, in the business of extending credit for the purpose of purchasing
or carrying any Margin Stock. No part of the proceeds of the loans made to Borrowers will be used
to purchase or carry any such Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock or for any purpose that violates the provisions of
Regulation T, U or X of the Board of Governors of the United States Federal Reserve.



4.22 Governmental Regulation. No Loan Party nor any of its Subsidiaries is subject to
regulation under the Federal Power Act or under any other federal or state statute or regulation
which may limit its ability to incur Indebtedness or which may otherwise render all or any portion
of the Obligations unenforceable. No Loan Party nor any of its Subsidiaries is a “registered
investment company” or a company “controlled” by a “registered investment company” or a “principal
underwriter” of a “registered investment company” as such terms are defined in the Investment
Company Act of 1940.



4.23 OFAC. No Loan Party nor any of its Subsidiaries is in violation of any of the country
or list based economic and trade sanctions administered and enforced by OFAC. No Loan Party nor
any of its Subsidiaries (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its assets
located in Sanctioned Entities, or (c) derives revenues from investments in, or transactions with,
Sanctioned Persons or Sanctioned Entities. No proceeds of any loan made hereunder will be used to
fund any operations in, finance any investments or activities in, or make any payments to, a
Sanctioned Person or a Sanctioned Entity.



4.24 Employee and Labor Matters. There is (i) no unfair labor practice complaint pending
or, to the knowledge of any Borrower, threatened against Parent or its Subsidiaries before any
Governmental Authority and no grievance or arbitration proceeding pending or threatened against
Parent or its Subsidiaries which arises out of or under any collective bargaining agreement and
that could reasonably be expected to result in a Material Adverse Change, (ii) no strike, labor
dispute, slowdown, stoppage or similar action or grievance pending or threatened in writing against
Parent or its Subsidiaries that could reasonably be expected to result in a Material Adverse
Change, or (iii) to the knowledge of any Borrower, after due inquiry, no union representation
question existing with respect to the employees of Parent or its Subsidiaries and no union
organizing activity taking place with respect to any of the employees of Parent or its
Subsidiaries. None of Parent or its Subsidiaries has incurred any liability or obligation under
the Worker Adjustment and Retraining Notification Act or similar state law, which remains unpaid or
unsatisfied. The hours worked and payments made to employees of Parent or its Subsidiaries have
not been in violation of the Fair Labor Standards Act or any other applicable legal requirements,
except to the extent such violations could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Change. All material payments due from Parent or its
Subsidiaries on account of wages and employee health and welfare insurance and other benefits have
been paid or accrued as a liability on the books of Parent, except where the failure to do so could
not, individually or in the aggregate, reasonably be expected to result in a Material Adverse
Change.



4.25 [Reserved]



4.26 [Reserved]



4.27 Excluded Copyrights. The Excluded Copyrights, taken as a whole, are not material to
the business and assets of the Loan Parties, nor are any of the Excluded Copyrights, individually
or taken as a whole, used in connection with the sale of any material portion of the Inventory
included in the Borrowing Base.


 


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4.28 Eligible Accounts. As to each Account that is identified by any Borrower as an
Eligible Account in a Borrowing Base Certificate submitted to Agent, such Account is (a) a bona
fide existing payment obligation of the applicable Account Debtor created by the sale and delivery
of Inventory or the rendition of services to such Account Debtor in the ordinary course of the
applicable Borrower’s business, (b) owed to such Borrower, and (c) not excluded as ineligible by
virtue of one or more of the excluding criteria (other than Agent-discretionary criteria) set forth
in the definition of Eligible Accounts.



4.29 Eligible Inventory. As to each item of Inventory that is identified by any Borrower
as Eligible Inventory (whether constituting Eligible In-Transit Inventory or Eligible Landed
Inventory) in a Borrowing Base Certificate submitted to Agent, such Inventory is (a) of good and
merchantable quality, free from known defects, and (b) not excluded as ineligible by virtue of one
or more of the excluding criteria (other than Agent-discretionary criteria) set forth in the
definitions of Eligible Inventory, Eligible In-Transit Inventory or Eligible Landed Inventory, as
applicable.



4.30 Locations of Inventory. The Inventory included in the Borrowing Base is (a) not
stored with a bailee, warehouseman, or similar party unless a Collateral Access Agreement has been
executed by such party and delivered to Agent, and (b) located only at, or in-transit between or
to, the locations identified on Schedule 4.30 (as such Schedule may be updated pursuant to
Section 5.15).



4.31 Inventory Records. Each Loan Party keeps correct and accurate records, in all
material respects, itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.



5. AFFIRMATIVE COVENANTS.




Each of Parent and each Borrower covenants and agrees that, until termination of all of the
Commitments and payment in full of the Obligations, Parent and each Borrower shall comply, and
shall cause each of their Subsidiaries to comply (except to the extent the applicability of any of
the following covenants is expressly limited so as not to apply to any such Subsidiary), with each
of the following:



5.1 Financial Statements, Reports, Certificates. Deliver to Agent, with copies to each
Lender, each of the financial statements, reports, and other items set forth on Schedule
5.1 no later than the times specified therein. In addition, each of Parent and each Borrower
agrees that no Subsidiary of a Loan Party will have a fiscal year different from that of Parent.
In addition, Parent agrees to maintain a system of accounting that enables Parent to produce
financial statements in accordance with GAAP. Each Loan Party shall also (a) keep a reporting
system that shows all additions, sales, claims, returns, and allowances with respect to its and its
Subsidiaries’ sales, and (b) maintain its billing systems/practices substantially as in effect as
of the Closing Date and shall only make modifications thereto that are not material, and other
material modifications thereto with notice to Agent.



5.2 Collateral Reporting. Provide Agent (and if so requested by Agent, with copies for
each Lender) with each of the reports set forth on Schedule 5.2 at the times specified
therein. In addition, Borrowers agree to use commercially reasonable efforts in cooperation with
Agent to facilitate and implement a system of electronic collateral reporting in order to provide
electronic reporting of each of the items set forth on such Schedule.


 


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5.3 Existence. Except as otherwise permitted under Section 6.3 or Section
6.4, at all times maintain and preserve in full force and effect each Primary Obligor’s
existence (including being in good standing in its jurisdiction of organization) and all rights and
franchises, licenses and permits material to its business; provided, however, that
no Primary Obligor shall be required to preserve any such right or franchise, license or permit if
(a) such Person’s board of directors (or similar governing body) shall determine that the
preservation thereof is no longer desirable in the conduct of the business of such Person, and (b)
the loss thereof is not disadvantageous in any material respect to the Lenders.



5.4 Maintenance of Properties. Maintain and preserve all of its assets that are necessary
or useful in the proper conduct of its business in good working order and condition, ordinary wear,
tear, and casualty excepted and Permitted Dispositions excepted (and except where the failure to do
so could not reasonably be expected to result in a Material Adverse Change), and comply with the
material provisions of all material leases to which it is a party as lessee, so as to prevent the
loss or forfeiture thereof, unless such provisions are the subject of a Permitted Protest.



5.5 Taxes. Cause all federal, and all material state and local, assessments and taxes
imposed, levied, or assessed against any Loan Party or its Subsidiaries, or any of their respective
assets or in respect of any of their income, businesses, or franchises to be paid in full, before
delinquency or before the expiration of any extension period, except to the extent that the
validity of such assessment or tax shall be the subject of a Permitted Protest and so long as, in
the case of an assessment or tax that has or may become a Lien against any of the Collateral, such
contest proceedings conclusively operate to stay the sale of any portion of the Collateral to
satisfy such assessment or tax. Parent will and will cause each of its Subsidiaries to make timely
payment or deposit of all material tax payments and withholding taxes required of it and them by
applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Agent with proof reasonably
satisfactory to Agent indicating that Parent and its Subsidiaries have made such payments or
deposits.



5.6 Insurance. At Borrowers’ expense, maintain insurance respecting each of the Loan
Parties’ assets wherever located, covering loss or damage by fire, theft, explosion, and all other
hazards and risks as ordinarily are insured against by other Persons engaged in the same or similar
businesses. Borrowers also shall maintain (with respect to each of the Loan Parties) business
interruption, general liability, product liability insurance, director’s and officer’s liability
insurance, fiduciary liability insurance, and employment practices liability insurance, as well as
insurance against larceny, embezzlement, and criminal misappropriation. All such policies of
insurance shall be with responsible and reputable insurance companies reasonably acceptable to
Agent and in such amounts as is carried generally in accordance with sound business practice by
companies in similar businesses similarly situated and located and in any event in amount, adequacy
and scope reasonably satisfactory to Agent. All property insurance policies covering the Collateral
are to be made payable to Agent for the benefit of Agent and the Lenders, as their interests may
appear, in case of loss, pursuant to a standard loss payable endorsement with a standard non
contributory “lender” or “secured party” clause and are to contain such other provisions as Agent
may reasonably require to fully protect the Lenders’ interest in the Collateral and to any payments
to be made under such policies. All certificates of property and general liability insurance are
to be delivered to Agent, with the loss payable (but only in respect of Collateral) and additional
insured endorsements in favor of Agent and shall provide for the insurance companies to endeavor to
give not less than 30 days prior written notice to Agent of the exercise of any right of
cancellation. If Borrowers fail to maintain such insurance, Agent may arrange for such insurance,
but at Borrowers’ expense and without any responsibility on Agent’s part for obtaining the
insurance, the solvency of the insurance companies, the adequacy of the coverage, or the collection
of claims. Borrowers shall give Agent prompt notice of any loss exceeding $1,000,000 covered by
its casualty or business interruption insurance. Upon the occurrence and during the continuance of
an Event of Default,
Agent shall have the sole right to file claims under any property and general liability
insurance policies in respect of the Collateral, to receive, receipt and give acquittance for any
payments that may be payable thereunder, and to execute any and all endorsements, receipts,
releases, assignments, reassignments or other documents that may be necessary to effect the
collection, compromise or settlement of any claims under any such insurance policies.


 


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5.7 Inspection. Permit Agent and each of its duly authorized representatives or agents to
visit any of its properties and inspect any of its assets or books and records, to conduct
appraisals and valuations, to examine and make copies of its books and records, and to discuss its
affairs, finances, and accounts with, and to be advised as to the same by, its officers and
employees at such reasonable times and intervals as Agent may designate and, so long as no Default
or Event of Default exists, with reasonable prior notice to Borrowers.



5.8 Compliance with Laws. Comply with the requirements of all applicable laws, rules,
regulations, and orders of any Governmental Authority (including all Environmental Laws), other
than laws, rules, regulations, and orders the non-compliance with which, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse Change.



5.9 Environmental.



(a) Keep any property either owned or operated by any Loan Party free of any Environmental
Liens or post bonds or other financial assurances sufficient to satisfy the obligations or
liability evidenced by such Environmental Liens,



(b) Promptly notify Agent of any release of which Parent or any Borrower has knowledge of a
Hazardous Material in any reportable quantity from or onto property owned or operated by any Loan
Party and take any Remedial Actions required to abate said release or otherwise to come into
compliance, in all material respects, with applicable Environmental Law, and



(c) Promptly, but in any event within 10 Business Days of its receipt thereof, provide Agent
with written notice of any of the following: (i) notice that an Environmental Lien has been filed
against any of the real or personal property of any Loan Party, (ii) commencement of any
Environmental Action or written notice that an Environmental Action will be filed against any Loan
Party, and (iii) written notice of a violation, citation, or other administrative order from a
Governmental Authority.




5.10 Disclosure Updates. Promptly and in no event later than 10 Business Days after a
Responsible Officer obtaining knowledge thereof, notify Agent if any written information, exhibit,
or report furnished to Agent or the Lenders contained, at the time it was furnished, any untrue
statement of a material fact or omitted to state any material fact necessary to make the statements
contained therein not misleading in light of the circumstances in which made. The foregoing to the
contrary notwithstanding, any notification pursuant to the foregoing provision will not cure or
remedy the effect of the prior untrue statement of a material fact or omission of any material fact
nor shall any such notification have the effect of amending or modifying this Agreement or any of
the Schedules hereto.



5.11 Formation of Subsidiaries. At the time that any Loan Party forms any direct or
indirect Subsidiary or acquires any direct or indirect Subsidiary after the Closing Date, such Loan
Party shall (a) within 30 days of such formation or acquisition (or such later date as permitted by
Agent in its sole discretion) cause any such new Subsidiary to provide to Agent a joinder agreement
with respect to the Guaranty (or, if Agent agrees to allow such Subsidiary to become a Borrower
hereunder, with respect to this Agreement) and with respect to the Security Agreement, together
with such other security documents (including mortgages with respect to any Real Property owned in
fee of such new Subsidiary with a fair market value of at least $1,000,000), as well as appropriate market value of


 


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at least $1,000,000), as well as appropriate
financing statements (and with respect to all property subject to a mortgage, fixture filings), all
in form and substance reasonably satisfactory to Agent (including being sufficient to grant Agent a
first priority Lien (subject to Permitted Liens) in and to the assets of such newly formed or
acquired Subsidiary); provided, that, such joinder agreements and other security documents
shall not be required to be provided to Agent with respect to any such Subsidiary that is a Foreign
Subsidiary, (b) within 30 days of such formation or acquisition (or such later date as
permitted by Agent in its sole discretion) provide to Agent a pledge agreement (or an addendum
to the Security Agreement) and appropriate certificates and powers or financing statements,
pledging all of the direct or beneficial ownership interest in such new Subsidiary reasonably
satisfactory to Agent; provided, that, only 65% of the total outstanding voting Stock of
any such Subsidiary that is a Foreign Subsidiary (and none of the Stock of any Subsidiary of such
Foreign Subsidiary) shall be required to be pledged (which pledge, if reasonably requested by
Agent, shall be governed by the laws of the jurisdiction of such Subsidiary), and (c) within 30
days of such formation or acquisition (or such later date as permitted by Agent in its sole
discretion) provide to Agent all other documentation, including one or more opinions of counsel
reasonably satisfactory to Agent, which in its opinion is appropriate with respect to the execution
and delivery of the applicable documentation referred to above (including policies of title
insurance or other documentation with respect to all Real Property owned in fee and subject to a
Mortgage). Any document, agreement, or instrument executed or issued pursuant to this Section
5.11 shall be a Loan Document.




5.12 Further Assurances. At any time upon the reasonable request of Agent, execute or
deliver to Agent any and all financing statements, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title, mortgages, deeds of trust, opinions of counsel,
and all other documents (the “Additional Documents”) that Agent may reasonably request in
form and substance reasonably satisfactory to Agent, to create, perfect, and continue perfected or
to better perfect Agent’s Liens in all of the assets of Parent and its Subsidiaries (whether now
owned or hereafter arising or acquired, tangible or intangible, real or personal), to create and
perfect Liens in favor of Agent in any Real Property acquired by Parent or its Subsidiaries after
the Closing Date with a fair market value in excess of $1,000,000, and in order to fully consummate
all of the transactions contemplated hereby and under the other Loan Documents; provided,
that, the foregoing shall not apply to any such Subsidiary that is a Foreign Subsidiary. To the
maximum extent permitted by applicable law, if Parent or any other Loan Party refuses or fails to
execute or deliver any reasonably requested Additional Documents within a reasonable period of time
following the request to do so, Parent and each Borrower hereby authorizes Agent to execute any
such Additional Documents in the applicable Loan Party’s name, and authorizes Agent to file such
executed Additional Documents in any appropriate filing office. In furtherance and not in
limitation of the foregoing, each Loan Party shall take such actions as Agent may reasonably
request from time to time to ensure that the Obligations are guarantied by the Guarantors and are
secured by substantially all of the assets of the Loan Parties and all of the outstanding capital
Stock of Borrowers and their Subsidiaries (subject to exceptions and limitations contained in the
Loan Documents with respect to Foreign Subsidiaries).



5.13 Lender Meetings. Within 120 days after the close of each Fiscal Year, at the request
of Agent or of the Required Lenders and upon reasonable prior notice, hold a meeting (at a mutually
agreeable location and time or, at the option of Agent, by conference call) with all Lenders who
choose to attend such meeting at which meeting shall be reviewed the financial results of the
previous Fiscal Year and the financial condition of Parent and its Subsidiaries and the projections
presented for the current Fiscal Year.



5.14 [Reserved]


 


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5.15 Location of Inventory. Keep all Inventory (other than (i) In-Transit Inventory, and
(ii) Inventory with an aggregate net book value of not more than $50,000) included in the Borrowing
Base only at the locations identified on Schedule 4.30 and each Loan Party’s chief
executive offices only at the locations identified on Schedule 4.6(b); provided,
however, that Borrowers may amend Schedule 4.30 or Schedule 4.6(b) so long as such
amendment occurs by written notice to Agent not less than 5 days prior to the date on which such
Inventory is moved to such new location, or such chief executive office is relocated, and so long
as (a) such new location is within the continental United States and (b) Borrowers use commercially
reasonable efforts to provide Agent a Collateral Access Agreement with respect thereto promptly
after the date of such written notification. For the avoidance of doubt, the 5 day notice
provision referred to in this Section 5.15 shall not apply to any Inventory transferred
from a warehouse to a Scott James retail location so long as when such Inventory is transferred it
is not included in the Borrowing Base.



5.16 Assignable Material Contracts. Use commercially reasonable efforts to ensure that any
Material Contract entered into after the Closing Date by any Loan Party that generates or, by its
terms, will generate revenue, permits the assignment of such agreement to such Loan Party’s lenders
or an agent for any lenders (and any transferees of such lenders or such agent, as applicable).



5.17 Treasury Management Services and Bank Accounts. Utilize Wells Fargo (and/or its
Affiliates) as their primary bank for depository and treasury management services, including all
concentration, collection and disbursement services; provided, that: (a) the Loan Parties
may maintain payroll, pension and other employee benefit accounts at other financial institutions;
(b) Foreign Subsidiaries may maintain such services with other banks outside the United States; (c)
during the Transition Period, the Loan Parties may continue to use their Deposit Accounts
(including collection accounts) in existence as of the Closing Date, subject to the Loan Parties’
compliance with the terms set forth in item 1 of Schedule 3.6; and (d) the Loan Parties
may maintain the HSBC Cash Collateral Account.



6. NEGATIVE COVENANTS.




Each of Parent and each Borrower covenants and agrees that, until termination of all of the
Commitments and payment in full of the Obligations, neither Parent nor any Borrower will, nor will
Parent nor any Borrower permit any of their Subsidiaries to (except to the extent the applicability
of any of the following covenants is expressly limited so as not to apply to any such Subsidiary),
do any of the following:



6.1 Indebtedness. Create, incur, assume, suffer to exist, guarantee, or otherwise become
or remain, directly or indirectly, liable with respect to any Indebtedness, except for Permitted
Indebtedness.



6.2 Liens. Create, incur, assume, or suffer to exist, directly or indirectly, any Lien on
or with respect to any of its assets, of any kind, whether now owned or hereafter acquired, or any
income or profits therefrom, except for Permitted Liens.



6.3 Restrictions on Fundamental Changes.



(a) Enter into any merger, consolidation, reorganization, or recapitalization, or reclassify
its Stock, except for (i) any merger between Loan Parties, provided, that, a Borrower must be the
surviving entity of any such merger to which it is a party, (ii) any merger between a Loan Party
and Subsidiaries of such Loan Party that are not Loan Parties so long as such Loan Party is the
surviving entity of any such merger, and (iii) any merger between Subsidiaries of Parent that are
not Loan Parties,


 


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(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation or dissolution), except
for (i) the liquidation or dissolution of non-operating Subsidiaries of Parent with nominal assets
and nominal liabilities, (ii) the liquidation or dissolution of a Loan Party (other than Parent or
any Borrower) or any of their wholly-owned Subsidiaries so long as all of the assets (including any
interest in any Stock) of such liquidating or dissolving Loan Party or Subsidiary are transferred
to a Loan Party that is not liquidating or dissolving, or (iii) the liquidation or dissolution of a
Subsidiary of Parent that is not a Loan Party so long as all of the assets of such liquidating or
dissolving Subsidiary are transferred to a Subsidiary of Parent that is not liquidating or
dissolving, or



(c) Suspend or go out of a substantial portion of its or their business, except as permitted
pursuant to clauses (a) or (b) above or in connection with the transactions
permitted pursuant to Section 6.4.



6.4 Disposal of Assets. Other than Permitted Dispositions or transactions expressly
permitted by Sections 6.3 or 6.11, convey, sell, lease, license, assign, transfer,
or otherwise dispose of (or enter into an agreement to convey, sell, lease, license, assign,
transfer, or otherwise dispose of) any of Parent’s or its Subsidiaries assets.



6.5 Change Name. Change any Loan Party’s name, organizational identification number,
state of organization or organizational identity; provided, however, that any Loan Party
may change its name if such Loan Party provides written notice of such change to Agent prior to or
on the date of such change.



6.6 Nature of Business. Make any change in the nature of its or their business as
described in Schedule 6.6 or acquire any properties or assets that are not reasonably
related to the conduct of such business activities; provided, however, that the foregoing
shall not prevent Parent and its Subsidiaries from engaging in any business that is reasonably
related, ancillary or complimentary to its or their business.



6.7 Prepayments and Amendments.



(a) Make any payment on account of Indebtedness that has been contractually subordinated in
right of payment to the Obligations if such payment is not permitted at such time under the
subordination terms and conditions applicable thereto, or



(b) Directly or indirectly, amend, modify, or change any of the terms or provisions of



(i) any Material Contract except to the extent that such amendment, modification, or change
could not, individually or in the aggregate, reasonably be expected to be materially adverse to the
interests of the Lenders,



(ii) the Governing Documents of any Loan Party or any of its Subsidiaries if the effect
thereof, either individually or in the aggregate, could reasonably be expected to be materially
adverse to the interests of the Lenders, or



(iii) any Factoring Agreement, except to the extent that such amendment, modification, or
change could not, individually or in the aggregate, reasonably be expected to be materially adverse
to the interests of the Lenders.



6.8 Change of Control. Cause, permit, or suffer, directly or indirectly, any Change of
Control.


 


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6.9 Restricted Junior Payments. Make any Restricted Junior Payment; provided, however,
that, so long as it is permitted by law, and so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, the Loan Parties may:



(a) make distributions to former employees, officers, or directors of Loan Parties (or any
spouses, ex-spouses, or estates of any of the foregoing) on account of redemptions of Stock of
Parent held by such Persons, provided, however, that the aggregate amount of such
redemptions made by the Loan Parties during the term of this Agreement plus the amount of
Indebtedness outstanding under clause (j) of the definition of Permitted Indebtedness, does
not exceed $1,000,000 in the aggregate, and



(b) make distributions to former employees, officers, or directors of the Loan Parties (or any
spouses, ex-spouses, or estates of any of the foregoing), solely in the form of forgiveness of
Indebtedness of such Persons owing to Parent on account of repurchases of the Stock of Parent held
by such Persons; provided, that, such Indebtedness was incurred by such Persons solely to
acquire Stock of Parent.



6.10 Accounting Methods. Modify or change its fiscal year or its method of accounting
(other than, in the case of modifications and changes to its method of accounting, as may be
required to conform to GAAP or as would otherwise not reasonably be expected to be materially
adverse to the interests of the Lenders).



6.11 Investments; Controlled Investments .



(a) Except for Permitted Investments, directly or indirectly, make or acquire any Investment
or incur any liabilities (including contingent obligations) for or in connection with any
Investment.



(b) Other than (i) an aggregate amount of not more than $250,000 at any one time, in the case
of Parent and its Subsidiaries (other than those Subsidiaries that are Foreign Subsidiaries), (ii)
amounts deposited into Deposit Accounts specially and exclusively used for payroll, payroll taxes
and other employee wage and benefit payments to or for Parent’s or its Subsidiaries’ employees,
(iii) an aggregate amount of not more than $300,000 (calculated at current exchange rates) at any
one time, in the case of Subsidiaries of Parent that are Foreign Subsidiaries, (iv) amounts
deposited into the HSBC Cash Collateral Account, and (v) amounts deposited into escrow accounts
solely to the extent required to be deposited and segregated therein (A) pursuant to any
Environmental Law or Environmental Action in order to satisfy obligations of the Loan Parties with
respect thereto, (B) to secure Parent’s and its Subsidiaries’ obligations in connection with the
making or entering into of Real Property leases in the ordinary course of business, and (C) as a
good faith or similar deposit in connection with any Acquisition that, at the time of making such
deposit, is reasonably expected to constitute a Permitted Acquisition upon the closing of such
Acquisition, make, acquire, or permit to exist Permitted Investments consisting of cash, Cash
Equivalents, or amounts credited to Deposit Accounts or Securities Accounts unless Parent or its
Subsidiary, as applicable, and the applicable bank or securities intermediary have entered into
Control Agreements with Agent governing such Permitted Investments in order to perfect (and further
establish) Agent’s Liens in such Permitted Investments. Except as provided in this Section
6.11(b), Parent shall not and shall not permit its Subsidiaries to establish or maintain any
Deposit Account or Securities Account unless Agent shall have received a Control Agreement in
respect of such Deposit Account or Securities Account.



6.12 Transactions with Affiliates. Directly or indirectly enter into or permit to exist
any transaction between or among any Loan Party and any Affiliate of such Loan Party (other than
any Affiliate that is also a Loan Party), except for:


 


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(a) transactions (other than the payment of management, consulting, monitoring, or advisory
fees) between any Loan Party, on the one hand, and any Affiliate of such Loan Party, on the other
hand, so long as such transactions (i) are fully disclosed to Agent prior to the consummation
thereof, if they are not in the ordinary course of business and involve one or more payments by a
Loan Party in excess of $1,000,000 for any single transaction or series of related transactions,
and (ii) are no less favorable, taken as a whole, to the Loan Parties than would be obtained in an
arm’s length transaction with a non-Affiliate,



(b) so long as it has been approved by Parent’s or other applicable Loan Party’s board of
directors (or comparable governing body) in accordance with applicable law, any indemnity provided
for the benefit of directors (or comparable managers) of Parent or other applicable Loan Party,



(c) so long as it has been approved by Parent’s or other applicable Loan Party’s board of
directors (or comparable governing body) in accordance with applicable law, the payment of
reasonable compensation, severance, or employee benefit arrangements to employees, officers, and
outside directors of Parent and other Loan Parties in the ordinary course of business and
consistent with industry practice, and



(d) transactions permitted by Section 6.3 or Section 6.9, or any Permitted
Intercompany Advance or a Permitted Investment as described in clause (j) or (l) of
the definition thereof.



6.13 Use of Proceeds. Use the proceeds of any loan made hereunder for any purpose other
than (a) on the Closing Date, (i) to repay, in full, the outstanding principal, accrued interest,
and accrued fees and expenses owing under or in connection with the Existing Credit Facility, and
(ii) to pay transactional fees, costs, and expenses incurred in connection with this Agreement, the
other Loan Documents, and the transactions contemplated hereby and thereby, and (b) thereafter,
consistent with the terms and conditions hereof, for their lawful and permitted purposes (including
that no part of the proceeds of the loans made to Borrowers will be used to purchase or carry any
such Margin Stock or to extend credit to others for the purpose of purchasing or carrying any such
margin stock or for any purpose that violates the provisions of Regulation T, U or X of the Board
of Governors of the United States Federal Reserve).



6.14 Limitation on Issuance of Stock. Except for the issuance or sale of common stock,
warrants or options to purchase common stock or Permitted Preferred Stock by Parent, Permitted
Investments as described in clause (l) of the definition thereof and as otherwise permitted
by the Loan Documents, issue or sell or enter into any agreement or arrangement for the issuance
and sale of any of its Stock.



6.15 [Reserved]



6.16 Consignments. Except in the ordinary course of business, consign any of its or their
Inventory or sell any of its or their Inventory on bill and hold, sale or return, sale on approval,
or other conditional terms of sale.



6.17 Inventory with Bailees. Store the Inventory included in the Borrowing Base at any
time now or hereafter with a bailee, warehouseman, or similar party, except to the extent that a
Collateral Access Agreement is in effect with respect to such party.


 


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7. FINANCIAL COVENANTS.




Each of Parent and Borrowers covenant and agree that, until termination of all of the
Commitments and payment in full of the Obligations, Parent and its Subsidiaries, on a consolidated
basis, shall have a Fixed Charge Coverage Ratio of at least 1.0 to 1.0, measured as of the last day
of each fiscal month for the twelve fiscal month period then ending; provided,
however, that such financial covenant shall only apply if at any time Adjusted Excess
Liquidity falls below the Trigger Level. Upon Adjusted Excess Liquidity falling below the Trigger
Level, unless Borrowers prepay the Obligations in accordance with Section 2.4(e) and/or
provide Qualified Cash or Restricted Cash (together with reasonably satisfactory evidence of the
provision of such Qualified Cash or Restricted Cash) in an amount sufficient to restore the
Adjusted Excess Liquidity to or above the Trigger Level within 2 Business Days (the “FCCR Cure
Period”), the Loan Parties shall be required to (a) establish that they are in compliance with
this Section 7as of the most recently ended fiscal month for which financial statements
are then required to have been delivered to Agent in accordance with Section 5.1, and (b)
thereafter maintain compliance with this Section 7 as of each fiscal month end unless and
until Adjusted Excess Liquidity thereafter equals or exceeds the Trigger Level for 90 consecutive
days. If, during any FCCR Cure Period, the Loan Parties are not able to establish that they have a
Fixed Charge Coverage Ratio of at least 1.0 to 1.0 as of the most recently ended fiscal month for
which financial statements are then required to have been delivered to Agent in accordance with
Section 5.1, a Default shall exist for all purposes hereunder (including for purposes of
Section 3.2(b)), subject to the Loan Parties’ right to cure such Default during the FCCR
Cure Period as described above.



8. EVENTS OF DEFAULT.




Any one or more of the following events shall constitute an event of default (each, an
“Event of Default”) under this Agreement:



8.1 If any Borrower fails to pay when due and payable, or when declared due and payable, (a)
all or any portion of the Obligations consisting of interest, fees, or charges due the Lender
Group, reimbursement of Lender Group Expenses, or other amounts (other than any portion thereof
constituting principal) constituting Obligations (including any portion thereof that accrues after
the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole
or in part as a claim in any such Insolvency Proceeding), and such failure continues for a period
of 5 Business Days, or (b) all or any portion of the principal of the Obligations;



8.2 If any Loan Party:



(a) fails to perform or observe any covenant or other agreement contained in any of (i)
Sections 3.6, 5.1, 5.2, 5.7 (solely if any Loan Party refuses to
allow Agent or its representatives or agents to visit such Loan Party’s properties, inspect its
assets or books or records, examine and make copies of its books and records, or discuss such Loan
Party’s affairs, finances, and accounts with officers and employees of such Loan Party),
5.10, 5.11, 5.15, or 5.17 of this Agreement, (ii) Sections
6.1 through 6.17 of this Agreement, (iii) Section 7 of this Agreement, or (iv)
Section 6 of the Security Agreement;



(b) fails to perform or observe any covenant or other agreement contained in Section
5.3 (solely if any Primary Obligor is not in good standing in its jurisdiction of organization)
of this Agreement and such failure continues for a period of 3 Business Days after the earlier of
(i) the date on which such failure shall first become known to any Responsible Officer or (ii) the
date on which written notice thereof is given to Borrowers by Agent;


 


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(c) fails to perform or observe any covenant or other agreement contained in any of
Sections 5.3 (other than if any Primary Obligor is not in good standing in its jurisdiction
of organization), 5.4, 5.5, 5.6, 5.8, and 5.12 of this
Agreement and such failure continues for a period of 10 days after the earlier of (i) the date on
which such failure shall first become known to any Responsible Officer or (ii) the date on which
written notice thereof is given to Borrowers by Agent; or



(d) fails to perform or observe any covenant or other agreement contained in this Agreement,
or in any of the other Loan Documents, in each case, other than any such covenant or agreement that
is the subject of another provision of this Section 8 (in which event such other provision
of this Section 8 shall govern), and such failure continues for a period of 30 days after
the earlier of (i) the date on which such failure shall first become known to any Responsible
Officer or (ii) the date on which written notice thereof is given to Borrowers by Agent;



8.3 If one or more judgments, orders, or awards for the payment of money involving an
aggregate amount of $1,000,000, or more (except to the extent fully covered (other than to the
extent of customary deductibles) by insurance pursuant to which the insurer has not denied
coverage) is entered or filed against any Primary Obligor, or with respect to any of their
respective assets, and either (a) there is a period of 30 consecutive days at any time after the
entry of any such judgment, order, or award during which (i) the same is not discharged, satisfied,
vacated, or bonded pending appeal, or (ii) a stay of enforcement thereof is not in effect, or (b)
enforcement proceedings are commenced upon such judgment, order, or award;



8.4 If an Insolvency Proceeding is commenced by any Primary Obligor;



8.5 If an Insolvency Proceeding is commenced against any Primary Obligor and any of the
following events occur: (a) such Primary Obligor consents to the institution of such Insolvency
Proceeding against it, (b) the petition commencing the Insolvency Proceeding is not timely
controverted, (c) the petition commencing the Insolvency Proceeding is not dismissed within 60
calendar days of the date of the filing thereof, (d) an interim trustee is appointed to take
possession of all or any substantial portion of the properties or assets of, or to operate all or
any substantial portion of the business of, such Primary Obligor, or (e) an order for relief shall
have been issued or entered therein;



8.6 If a Loan Party is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of the business affairs of Parent and its
Subsidiaries, taken as a whole;



8.7 If there is (a) a default in one or more agreements to which a Loan Party or any of its
Subsidiaries is a party with one or more third Persons relative to a Loan Party’s or any of its
Subsidiaries’ Indebtedness involving an aggregate amount of $1,000,000 or more, and such default
(i) occurs at the final maturity of the obligations thereunder, or (ii) results in a right by such
third Person, irrespective of whether exercised, to accelerate the maturity of such Loan Party’s or
its Subsidiary’s obligations thereunder, or (b) a default in or an involuntary early termination of
one or more Hedge Agreements to which a Loan Party or any of its Subsidiaries is a party involving
an aggregate amount of $1,000,000 or more;



8.8 If any warranty, representation, certificate, statement, or Record made herein or in any
other Loan Document or delivered in writing to Agent or any Lender in connection with this
Agreement or any other Loan Document proves to be untrue in any material respect (except that such
materiality qualifier shall not be applicable to any representations and warranties that already
are qualified or modified by materiality in the text thereof) as of the date of issuance or making
or deemed making thereof;


 


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8.9 If the obligation of any Guarantor under the Guaranty is limited or terminated by such
Guarantor, or the obligation of any Guarantor (other than an Inactive Subsidiary) under the
Guaranty is limited or terminated by operation of law, in any such case other than in accordance
with the terms thereof or of this Agreement;



8.10 If any of the Agent’s Liens that are purported to be created by the Security Agreement or
any other Loan Document shall, for any reason, fail or cease to be valid and perfected Liens on the
Collateral covered thereby, except (a) as a result of a disposition of the applicable Collateral in
a transaction permitted under any Loan Document, (b) with respect to Collateral the aggregate fair
market value (or net book value) of which, for all such Collateral, does not exceed at any time,
$250,000, or (c) as the result of an action or failure to act on the part of Agent; or



8.11 The validity or enforceability of any Loan Document shall at any time for any reason
(other than solely as the result of an action or failure to act on the part of Agent) be declared
to be null and void, or a proceeding shall be commenced by a Loan Party, or by any Governmental
Authority having jurisdiction over a Loan Party, seeking to establish the invalidity or
unenforceability thereof, or a Loan Party shall deny that such Loan Party has any liability or
obligation purported to be created under any Loan Document.



9. RIGHTS AND REMEDIES.




9.1 Rights and Remedies. Upon the occurrence and during the continuation of an Event of
Default, Agent may, and, at the instruction of the Required Lenders, shall (in each case under
clauses (a) or (b) by written notice to Borrowers), in addition to any other rights
or remedies provided for hereunder or under any other Loan Document or by applicable law, do any
one or more of the following:



(a) declare the Obligations (other than the Bank Product Obligations), whether evidenced by
this Agreement or by any of the other Loan Documents immediately due and payable, whereupon the
same shall become and be immediately due and payable and Borrowers shall be obligated to repay all
of such Obligations in full, without presentment, demand, protest, or further notice or other
requirements of any kind, all of which are hereby expressly waived by Borrowers;



(b) declare the Commitments terminated, whereupon the Commitments shall immediately be
terminated together with (i) any obligation of any Lender hereunder to make Advances, (ii) the
obligation of the Swing Lender to make Swing Loans, and (iii) the obligation of the Issuing Lender
to issue Letters of Credit; and



(c) exercise all other rights and remedies available to Agent or the Lenders under the Loan
Documents or applicable law.



The foregoing to the contrary notwithstanding, upon the occurrence of any Event of Default
described in Section 8.4 or Section 8.5, in addition to the remedies set forth
above, without any notice to Borrowers or any other Person or any act by the Lender Group, the
Commitments shall automatically terminate and the Obligations (other than the Bank Product
Obligations), inclusive of all accrued and unpaid interest thereon and all fees and all other
amounts owing under this Agreement or under any of the other Loan Documents, shall automatically
and immediately become due and payable and Borrowers shall be obligated to repay all of such
Obligations in full, without presentment, demand, protest, or notice of any kind, all of which are
expressly waived by Parent and Borrowers.


 


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9.2 Remedies Cumulative. The rights and remedies of the Lender Group under this
Agreement, the other Loan Documents, and all other agreements shall be cumulative. The Lender
Group shall have all other rights and remedies not inconsistent herewith as provided under the
Code, by law, or in equity. No exercise by the Lender Group of one right or remedy shall be deemed
an election, and no waiver by the Lender Group of any Event of Default shall be deemed a continuing
waiver. No delay by the Lender Group shall constitute a waiver, election, or acquiescence by it.



10. WAIVERS; INDEMNIFICATION.



10.1 Demand; Protest; etc. Except to the extent of any notice expressly required to be
provided in accordance with the terms of any Loan Document, each Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and nonpayment, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of documents, instruments, chattel
paper, and guarantees at any time held by the Lender Group on which Borrowers may in any way be
liable.



10.2 The Lender Group’s Liability for Collateral. Each Borrower hereby agrees that: (a)
so long as Agent complies with its obligations, if any, under the Code, the Lender Group shall not
in any way or manner be liable or responsible for: (i) the safekeeping of the Collateral, (ii) any
loss or damage thereto occurring or arising in any manner or fashion from any cause, (iii) any
diminution in the value thereof, or (iv) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person, and (b) all risk of loss, damage, or destruction of the
Collateral shall be borne by Borrowers.



10.3 Indemnification. Each Borrower shall pay, indemnify, defend, and hold the
Agent-Related Persons, the Lender-Related Persons, and each Participant (each, an “Indemnified
Person”) harmless (to the fullest extent permitted by law) from and against any and all claims,
demands, suits, actions, investigations, proceedings, liabilities, fines, costs, penalties, and
damages, and all reasonable fees and disbursements of attorneys, experts, or consultants and all
other costs and expenses actually incurred in connection therewith or in connection with the
enforcement of this indemnification (as and when they are incurred and irrespective of whether suit
is brought), at any time asserted against, imposed upon, or incurred by any of them (a) in
connection with or as a result of or related to the execution and delivery (provided that Borrowers
shall not be liable for costs and expenses (including attorneys fees) of any Lender (other than
WFCF) incurred in advising, structuring, drafting, reviewing, administering or syndicating the Loan
Documents), enforcement, performance, or administration (including any restructuring or workout
with respect hereto) of this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby or the monitoring of Parent’s and its Subsidiaries’ compliance with
the terms of the Loan Documents (provided, however, that the indemnification in this clause (a)
shall not extend to (i) disputes solely between or among the Lenders, (ii) disputes solely between
or among the Lenders and their respective Affiliates; it being understood and agreed that the
indemnification in this clause (a) shall extend to Agent (but not the Lenders) relative to disputes
between or among Agent on the one hand, and one or more Lenders, or one or more of their
Affiliates, on the other hand, or (iii) any Taxes or any costs attributable to Taxes, which shall
be governed by Section 16), (b) with respect to any investigation, litigation, or
proceeding related to this Agreement, any other Loan Document, or the use of the proceeds of the
credit provided hereunder (irrespective of whether any Indemnified Person is a party thereto), or
any act, omission, event, or circumstance in any manner related thereto, and (c) in connection with
or arising out of any presence or release of Hazardous Materials at, on, under, to or from any
assets or properties owned, leased or operated by Borrowers or any of their Subsidiaries or any
Environmental Actions, Environmental Liabilities or Remedial Actions related in any way to any such
assets or properties of Borrowers or any of their Subsidiaries (each and all of the foregoing, the
“Indemnified Liabilities”). The foregoing to the contrary notwithstanding, Borrowers shall
have no obligation to any Indemnified Person under this Section with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have resulted from the gross
negligence or
willful misconduct of such Indemnified Person or its officers, directors, employees,
attorneys, or agents. This provision shall survive the termination of this Agreement and the
repayment of the Obligations.


 


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If any Indemnified Person makes any payment to any other Indemnified Person with respect to an
Indemnified Liability as to which any Borrower was required to indemnify the Indemnified Person
receiving such payment, the Indemnified Person making such payment is entitled to be indemnified
and reimbursed by Borrowers with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY
SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN
PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF
ANY OTHER PERSON.




11. NOTICES.




Unless otherwise provided in this Agreement, all notices or demands relating to this Agreement
or any other Loan Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return receipt requested),
overnight courier, electronic mail (at such email addresses as a party may designate in accordance
herewith), or telefacsimile. In the case of notices or demands to Parent, Borrowers or Agent, as
the case may be, they shall be sent to the respective address set forth below:



	 	 	 

	If to Parent or any Borrower:

	 	Hampshire Group, Limited
	 

	 	1924 Pearman Dairy Road
	 

	 	Anderson, SC 29625
	 

	 	Attn: Jonathan Norwood, CFO
	 

	 	Fax No. 864-662-0715
	 
	 	 
	with copies to:

	 	Willkie Farr & Gallagher LLP
	 

	 	787 Seventh Avenue
	 

	 	New York, NY 10019
	 

	 	Attn: Leslie Mazza, Esq.
	 

	 	Fax No.: 212-728-9245
	 
	 	 
	If to Agent:

	 	Wells Fargo Capital Finance, LLC
	 

	 	1100 Abernathy Road, Suite 1600
	 

	 	Atlanta, GA 30328
	 

	 	Attn: Portfolio Manager — Hampshire Group
	 

	 	Fax No.: 770-804-0785
	 
	 	 
	with copies to:

	 	Greenberg Traurig, LLP
	 

	 	3290 Northside Parkway, Suite 400
	 

	 	Atlanta, GA 30327
	 

	 	Attn: David Kurzweil, Esq.
	 

	 	Fax No.: 678-553-2681






Any party hereto may change the address at which they are to receive notices hereunder, by notice
in writing in the foregoing manner given to the other party. All notices or demands sent in
accordance with this Section 11, shall be deemed received on the earlier of the date of
actual receipt or 3 Business Days after the deposit thereof in the mail; provided, that (a)
notices sent by overnight courier service shall be deemed to have been given when received, (b)
notices by facsimile shall be deemed to have been given when sent (except that, if not given during
normal business hours for the recipient, shall be deemed to have been given at the opening of
business on the next Business Day for the recipient) and (c) notices by
electronic mail shall be deemed received upon the sender’s receipt of an acknowledgment from the
intended recipient (such as by the “return receipt requested” function, as available, return email
or other written acknowledgment).



 


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12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.




(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO
THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND
THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO
SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.



(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE OF NEW YORK
AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
EACH OF PARENT AND BORROWERS AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
12(b).



(c) TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF PARENT AND BORROWERS AND EACH
MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH OF PARENT AND] BORROWERS AND EACH MEMBER OF THE LENDER GROUP
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.



13. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.




13.1 Assignments and Participations.



(a) With the prior written consent of Borrowers (which consent of Borrowers shall not be
unreasonably withheld, delayed or conditioned, and shall not be required (1) if an Event of Default
has occurred and is continuing, or (2) in connection with an assignment to a Person that,
immediately prior to such assignment, is a Lender or an Affiliate (other than individuals) of a
Lender) and Agent (which consent of Agent shall not be unreasonably withheld, delayed or
conditioned, and shall not be required in connection with an assignment to a Person that,
immediately prior to such assignment, is a Lender or an Affiliate (other than individuals) of a


 


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Lender), any Lender may assign and delegate to one or more assignees so long as such prospective
assignee is an Eligible Transferee (each, an “Assignee”; provided, however, that no
Loan Party or Affiliate of a Loan Party shall be permitted to become an Assignee) all or any
portion of the Obligations, the Commitments and the other rights and obligations of
such Lender hereunder and under the other Loan Documents, in a minimum amount of $10,000,000
(except such minimum amount shall not apply to (x) an assignment or delegation by any Lender to any
other Lender or an Affiliate of any Lender or (y) a group of new Lenders, each of which is an
Affiliate of each other, to the extent that the aggregate amount to be assigned to all such new
Lenders is at least $10,000,000); provided, however, that Borrowers and Agent may continue
to deal solely and directly with such Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment instructions,
addresses, and related information with respect to the Assignee, have been given to Borrowers and
Agent by such Lender and the Assignee, (ii) such Lender and its Assignee have delivered to
Borrowers and Agent an Assignment and Acceptance and Agent has notified the assigning Lender of its
receipt thereof in accordance with Section 13.1(b), and (iii) unless waived by Agent, the
assigning Lender or Assignee has paid to Agent for Agent’s separate account a processing fee in the
amount of $3,500.




(b) From and after the date that Agent notifies the assigning Lender (with a copy to
Borrowers) that it has received an executed Assignment and Acceptance and, if applicable, payment
of the required processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, shall be a “Lender” and shall have the rights and obligations of a Lender
under the Loan Documents, and (ii) the assigning Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights (except with respect to Section 10.3) and
be released from any future obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations
under this Agreement and the other Loan Documents, such Lender shall cease to be a party hereto and
thereto); provided, however, that nothing contained herein shall release any assigning
Lender from agreements and obligations that survive the termination of this Agreement, including
such assigning Lender’s agreements and obligations under Sections 12, 15 and
17.9(a).



(c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder
and the Assignee thereunder confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any
other Loan Document furnished pursuant hereto, (ii) such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to the financial condition of Borrowers or
the performance or observance by Borrowers of any of their obligations under this Agreement or any
other Loan Document furnished pursuant hereto, (iii) such Assignee confirms that it has received a
copy of this Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such Assignment and
Acceptance, (iv) such Assignee will, independently and without reliance upon Agent, such assigning
Lender or any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or not taking action
under this Agreement, (v) such Assignee appoints and authorizes Agent to take such actions and to
exercise such powers under this Agreement and the other Loan Documents as are delegated to Agent,
by the terms hereof and thereof, together with such powers as are reasonably incidental thereto,
and (vi) such Assignee agrees that it will perform all of the obligations which by the terms of
this Agreement are required to be performed by it as a Lender.


 


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(d) Immediately upon Agent’s receipt of the required processing fee, if applicable, and
delivery of notice to the assigning Lender pursuant to Section 13.1(b), this Agreement
shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The
Commitment allocated to each Assignee shall reduce such Commitments of the assigning Lender pro
tanto.



(e) Any Lender may at any time sell to one or more Persons that are Eligible Transferees (each
such Person, a “Participant”) participating interests in all or any portion of its
Obligations, its Commitment, and the other rights and interests of that Lender (the
“Originating Lender”) hereunder and under the other Loan Documents; provided,
however, that (i) the Originating Lender shall remain a “Lender” for all purposes of this
Agreement and the other Loan Documents and the Participant receiving the participating interest in
the Obligations, the Commitments, and the other rights and interests of the Originating Lender
hereunder shall not constitute a “Lender” hereunder or under the other Loan Documents and
the Originating Lender’s obligations under this Agreement shall remain unchanged, (ii) the
Originating Lender shall remain solely responsible for the performance of such obligations, (iii)
Borrowers, Agent, and the Lenders shall continue to deal solely and directly with the Originating
Lender in connection with the Originating Lender’s rights and obligations under this Agreement and
the other Loan Documents, (iv) no Lender shall transfer or grant any participating interest under
which the Participant has the right to approve any amendment to, or any consent or waiver with
respect to, this Agreement or any other Loan Document, except to the extent such amendment to, or
consent or waiver with respect to this Agreement or of any other Loan Document would (A) extend the
final maturity date of the Obligations hereunder in which such Participant is participating, (B)
reduce the interest rate applicable to the Obligations hereunder in which such Participant is
participating, (C) release all or substantially all of the Collateral or guaranties (except to the
extent expressly provided herein or in any of the Loan Documents) supporting the Obligations
hereunder in which such Participant is participating, (D) postpone the payment of, or reduce the
amount of, the interest or fees payable to such Participant through such Lender (other than a
waiver of default interest), or (E) decreases the amount or postpones the due dates of scheduled
principal repayments or prepayments or premiums payable to such Participant through such Lender,
and (v) all amounts payable by Borrowers hereunder shall be determined as if such Lender had not
sold such participation, except that, if amounts outstanding under this Agreement are due and
unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an
Event of Default, each Participant shall be deemed to have the right of set off in respect of its
participating interest in amounts owing under this Agreement to the same extent as if the amount of
its participating interest were owing directly to it as a Lender under this Agreement. The rights
of any Participant only shall be derivative through the Originating Lender with whom such
Participant participates and no Participant shall have any rights under this Agreement or the other
Loan Documents or any direct rights as to the other Lenders, Agent, Borrowers, the Collections of
Borrowers or their Subsidiaries, the Collateral, or otherwise in respect of the Obligations. No
Participant shall have the right to participate directly in the making of decisions by the Lenders
among themselves.



(f) In connection with any such assignment or participation or proposed assignment or
participation or any grant of a security interest in, or pledge of, its rights under and interest
in this Agreement, a Lender may, subject to the provisions of Section 17.9, disclose all
documents and information which it now or hereafter may have relating to Parent and its
Subsidiaries and their respective businesses.



(g) Any other provision in this Agreement notwithstanding, any Lender may at any time create a
security interest in, or pledge, all or any portion of its rights under and interest in this
Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the Federal
Reserve Bank or U.S. Treasury Regulation 31 CFR §203.24, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.



 


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13.2 Successors. This Agreement shall bind and inure to the benefit of the respective successors and assigns
of each of the parties; provided, however, that Borrowers may not assign this Agreement or any
rights or duties hereunder without the Lenders’ prior written consent and any prohibited assignment
shall be absolutely void ab initio. No consent to assignment by the Lenders shall release
Borrowers from their Obligations. A Lender may assign this Agreement and the other Loan Documents
and its rights and duties hereunder and thereunder pursuant to Section 13.1 and, except as
expressly required pursuant to Section 13.1, no consent or approval by Borrowers is
required in connection with any such assignment.



14. AMENDMENTS; WAIVERS.




14.1 Amendments and Waivers.



(a) No amendment, waiver or other modification of any provision of this Agreement or
any other Loan Document (other than Bank Product Agreements or the Fee Letter), and no consent with
respect to any departure by Parent or Borrowers therefrom, shall be effective unless the same shall
be in writing and signed by the Required Lenders (or by Agent at the written request of the
Required Lenders) and the Loan Parties that are party thereto and then any such waiver or consent
shall be effective, but only in the specific instance and for the specific purpose for which given;
provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed
by all of the Lenders directly affected thereby and all of the Loan Parties that are party thereto,
do any of the following:



(i) increase the amount of or extend the expiration date of any Commitment of any Lender
or amend, modify, or eliminate the last sentence of Section 2.4(c),



(ii) postpone or delay any date fixed by this Agreement or any other Loan Document for any
payment of principal, interest, fees, or other amounts due hereunder or under any other Loan
Document,



(iii) reduce the principal of, or the rate of interest on, any loan or other extension of
credit hereunder, or reduce any fees or other amounts payable hereunder or under any other Loan
Document (except in connection with the waiver of applicability of Section 2.6(c), which
waiver shall be effective with the written consent of the Required Lenders),



(iv) amend, modify, or eliminate this Section or any provision of this Agreement providing for
consent or other action by all Lenders,



(v) other than as permitted by Section 15.11, release Agent’s Lien in and to any of
the Collateral,



(vi) amend, modify, or eliminate the definition of “Required Lenders” or “Pro Rata
Share”,



(vii) contractually subordinate any of Agent’s Liens,



(viii) other than in connection with a merger, liquidation, dissolution or sale of such Person
expressly permitted by the terms hereof or the other Loan Documents, release Borrowers or any
Guarantor from any obligation for the payment of money or consent to the assignment or transfer by
Borrowers or any Guarantor of any of its rights or duties under this Agreement or the other Loan
Documents,


 


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(ix) amend, modify, or eliminate any of the provisions of Section 2.4(b)(i) or
(ii),



(x) amend, modify, or eliminate any of the provisions of Section 13.1(a) to permit a
Loan Party or an Affiliate of a Loan Party to be permitted to become an Assignee, or



(xi) amend, modify, or eliminate the definition of Borrowing Base or any of the defined terms
(including the definitions of Eligible Accounts, Eligible Inventory, Eligible In-Transit Inventory
and Eligible Landed Inventory) that are used in such definition to the extent that any such change
results in more credit being made available to Borrowers based upon the Borrowing Base], but not
otherwise, or the definition of Maximum Revolver Amount, or change Section 2.1(c).



(b) No amendment, waiver, modification, elimination, or consent shall amend, modify, or waive
(i) the definition of, or any of the terms or provisions of, the Fee Letter, without the written
consent of Agent, Parent and Borrowers (and shall not require the written consent of any of the
Lenders), and (ii) any provision of Section 15 pertaining to Agent, or any other rights or
duties of Agent under this Agreement or the other Loan Documents, without the written consent of
Agent, Borrowers, and the Required Lenders,



(c) No amendment, waiver, modification, elimination, or consent shall amend, modify, or waive
any provision of this Agreement or the other Loan Documents pertaining to Issuing Lender, or any
other rights or duties of Issuing Lender under this Agreement or the other Loan Documents, without
the written consent of Issuing Lender, Agent, Parent, Borrowers, and the Required Lenders,



(d) No amendment, waiver, modification, elimination, or consent shall amend, modify, or waive
any provision of this Agreement or the other Loan Documents pertaining to Swing Lender, or any
other rights or duties of Swing Lender under this Agreement or the other Loan Documents, without
the written consent of Swing Lender, Agent, Parent, Borrowers, and the Required Lenders,



(e) Anything in this Section 14.1 to the contrary notwithstanding, (i) any amendment,
modification, elimination, waiver, consent, termination, or release of, or with respect to, any
provision of this Agreement or any other Loan Document that relates only to the relationship of the
Lender Group among themselves, and that does not affect the rights or obligations of any Loan
Party, shall not require consent by or the agreement of any Loan Party, and (ii) any amendment,
waiver, modification, elimination, or consent of or with respect to any provision of this Agreement
or any other Loan Document may be entered into without the consent of, or over the objection of,
any Defaulting Lender.



14.2 Replacement of Certain Lenders.



(a) If (i) any action to be taken by the Lender Group or Agent hereunder requires the consent,
authorization, or agreement of all Lenders or all Lenders affected thereby and if such action has
received the consent, authorization, or agreement of the Required Lenders but not of all Lenders or
all Lenders affected thereby, or (ii) any Lender makes a claim for compensation under Section
16, then Borrowers or Agent, upon at least 5 Business Days prior irrevocable notice, may
permanently replace any Lender that failed to give its consent, authorization, or agreement (a
“Holdout Lender”) or any Lender that made a claim for compensation (a “Tax Lender”)
with one or more Replacement Lenders, and the Holdout Lender or Tax Lender, as applicable, shall
have no right to refuse to be replaced hereunder. Such notice to replace the Holdout Lender or Tax
Lender, as applicable, shall specify an effective date for such replacement, which date shall not
be later than 15 Business Days after the date such notice is given.


 


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(b) Prior to the effective date of such replacement, the Holdout Lender or Tax Lender, as
applicable, and each Replacement Lender shall execute and deliver an Assignment and Acceptance,
subject only to the Holdout Lender or Tax Lender, as applicable, being repaid in full its share of
the outstanding Obligations (without any premium or penalty of any kind whatsoever, but including
(i) all interest, fees and other amounts that may be due in payable in respect thereof, and (ii) an
assumption of its Pro Rata Share of the Letters of Credit). If the Holdout Lender or Tax Lender,
as applicable, shall refuse or fail to execute and deliver any such Assignment and Acceptance prior
to the effective date of such replacement, Agent may, but shall not be required to, execute and
deliver such Assignment and Acceptance in the name or and on behalf of the Holdout Lender or Tax
Lender, as applicable, and irrespective of whether Agent executes and delivers such Assignment and
Acceptance, the Holdout Lender or Tax Lender, as applicable, shall be deemed to have executed and
delivered such Assignment and Acceptance. The replacement of any Holdout Lender or Tax Lender, as
applicable, shall be made in accordance with the terms of Section 13.1. Until such time as
one or more Replacement Lenders shall have acquired all of the Obligations, the Commitments, and
the other rights and obligations of the Holdout Lender or Tax Lender, as applicable, hereunder and
under the other Loan Documents, the Holdout Lender or Tax Lender, as applicable, shall remain
obligated to make the Holdout Lender’s or Tax Lender’s, as applicable, Pro Rata Share of Advances
and to purchase a participation in each Letter of Credit, in an amount equal to its Pro Rata Share
of such Letters of Credit.



14.3 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to exercise any right, remedy, or option under this
Agreement or any other Loan Document, or delay by Agent or any Lender in exercising the same, will
operate as a waiver thereof. No waiver by Agent or any Lender will be effective unless it is in
writing, and then only to the extent specifically stated. No waiver by Agent or any Lender on any
occasion shall affect or diminish Agent’s and each Lender’s rights thereafter to require strict
performance by Parent and Borrowers of any provision of this Agreement. Agent’s and each Lender’s
rights under this Agreement and the other Loan Documents will be cumulative and not exclusive of
any other right or remedy that Agent or any Lender may have.



15. AGENT; THE LENDER GROUP.




15.1 Appointment and Authorization of Agent. Each Lender hereby designates and appoints WFCF as its agent under this Agreement and the
other Loan Documents and each Lender hereby irrevocably authorizes (and by entering into a Bank
Product Agreement, each Bank Product Provider shall be deemed to designate, appoint, and authorize)
Agent to execute and deliver each of the other Loan Documents on its behalf and to take such other
action on its behalf under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to Agent by the terms of
this Agreement or any other Loan Document, together with such powers as are reasonably incidental
thereto. Agent agrees to act as agent for and on behalf of the Lenders (and the Bank Product
Providers) on the conditions contained in this Section 15. Any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent shall
not have any duties or responsibilities, except those expressly set forth herein or in the other
Loan Documents, nor shall Agent have or be deemed to have any fiduciary relationship with any
Lender (or Bank Product Provider), and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against Agent. Without limiting the generality of the foregoing, the use of the
term “agent” in this Agreement or the other Loan Documents with reference to Agent is not intended
to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of
any applicable law. Instead, such term is used merely as a matter of market custom, and is
intended to
create or reflect only a representative relationship between independent contracting parties.
Each Lender hereby further authorizes (and by entering into a Bank Product Agreement, each Bank
Product Provider shall be deemed to authorize) Agent to act as the secured party under each of the
Loan Documents that create a Lien on any item of Collateral. Except as expressly otherwise
provided in this Agreement,


 


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 Agent shall have and may use its sole discretion with respect to
exercising or refraining from exercising any discretionary rights or taking or refraining from
taking any actions that Agent expressly is entitled to take or assert under or pursuant to this
Agreement and the other Loan Documents. Without limiting the generality of the foregoing, or of
any other provision of the Loan Documents that provides rights or powers to Agent, Lenders agree
that Agent shall have the right to exercise the following powers as long as this Agreement remains
in effect: (a) maintain, in accordance with its customary business practices, ledgers and records
reflecting the status of the Obligations, the Collateral, the Collections of Parent and its
Subsidiaries, and related matters, (b) execute or file any and all financing or similar statements
or notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and
other written agreements with respect to the Loan Documents, (c) make Advances, for itself or on
behalf of Lenders, as provided in the Loan Documents, (d) exclusively receive, apply, and
distribute the Collections of Parent and its Subsidiaries as provided in the Loan Documents, (e)
open and maintain such bank accounts and cash management arrangements as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes with respect to the
Collateral and the Collections of Parent and its Subsidiaries, (f) perform, exercise, and enforce
any and all other rights and remedies of the Lender Group with respect to Parent or its
Subsidiaries, the Obligations, the Collateral, the Collections of Parent and its Subsidiaries, or
otherwise related to any of same as provided in the Loan Documents, and (g) incur and pay such
Lender Group Expenses as Agent may deem necessary or appropriate for the performance and
fulfillment of its functions and powers pursuant to the Loan Documents.




15.2 Delegation of Duties. Agent may execute any of its duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys in fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney in fact that it selects as long as such selection
was made without gross negligence or willful misconduct.



15.3 Liability of Agent. None of the Agent-Related Persons shall (a) be liable for any action taken or omitted to be
taken by any of them under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful misconduct), or
(b) be responsible in any manner to any of the Lenders (or Bank Product Providers) for any recital,
statement, representation or warranty made by Parent or any of its Subsidiaries or Affiliates, or
any officer or director thereof, contained in this Agreement or in any other Loan Document, or in
any certificate, report, statement or other document referred to or provided for in, or received by
Agent under or in connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of Parent or its Subsidiaries or any other party to any Loan Document
to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any
obligation to any Lenders (or Bank Product Providers) to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions of, this Agreement
or any other Loan Document, or to inspect the books and records or properties of Parent or its
Subsidiaries.



15.4 Reliance by Agent. Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, telegram, telefacsimile or other
electronic method of transmission, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed, sent, or made by the
proper Person or Persons, and upon advice and statements of legal counsel (including counsel to
Borrowers or counsel to any Lender), independent accountants and other experts selected by Agent.
Agent shall be fully justified in failing or refusing to take any action under this Agreement or
any other Loan Document unless Agent shall first receive such advice or concurrence of the Lenders
as it deems appropriate and until such instructions are received, Agent shall act, or refrain from
acting, as it deems advisable. If


 


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Agent so requests, it shall first be indemnified to its
reasonable satisfaction by the Lenders (and, if it so elects, the Bank Product Providers) against
any and all liability and expense that may be incurred by it by reason of taking or continuing to
take any such action. Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a request or consent of
the Required Lenders and such request and any action taken or failure to act pursuant thereto shall
be binding upon all of the Lenders (and Bank Product Providers).




15.5 Notice of Default or Event of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default, except with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Agent for the account of the Lenders and, except with respect to
Events of Default of which Agent has actual knowledge, unless Agent shall have received written
notice from a Lender or Borrowers referring to this Agreement, describing such Default or Event of
Default, and stating that such notice is a “notice of default.” Agent promptly will notify the
Lenders of its receipt of any such notice or of any Event of Default of which Agent has actual
knowledge. If any Lender obtains actual knowledge of any Event of Default, such Lender promptly
shall notify the other Lenders and Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to Section 15.4,
Agent shall take such action with respect to such Default or Event of Default as may be requested
by the Required Lenders in accordance with Section 9; provided, however, that unless and
until Agent has received any such request, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or Event of Default as it
shall deem advisable.



15.6 Credit Decision. Each Lender (and Bank Product Provider) acknowledges that none of the Agent-Related Persons
has made any representation or warranty to it, and that no act by Agent hereinafter taken,
including any review of the affairs of Parent and its Subsidiaries or Affiliates, shall be deemed
to constitute any representation or warranty by any Agent-Related Person to any Lender (or Bank
Product Provider). Each Lender represents (and by entering into a Bank Product Agreement, each
Bank Product Provider shall be deemed to represent) to Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such due diligence, documents and information
as it has deemed appropriate, made its own appraisal of and investigation into the business,
prospects, operations, property, financial and other condition and creditworthiness of Borrowers or
any other Person party to a Loan Document, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this Agreement and to
extend credit to Borrowers. Each Lender also represents (and by entering into a Bank Product
Agreement, each Bank Product Provider shall be deemed to represent) that it will, independently and
without reliance upon any Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under this Agreement and the other Loan Documents, and to
make such investigations as it deems necessary to inform itself as to the business, prospects,
operations, property, financial and other condition and creditworthiness of Borrowers or any
other Person party to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall not have any duty or
responsibility to provide any Lender (or Bank Product Provider) with any credit or other
information concerning the business, prospects, operations, property, financial and other condition
or creditworthiness of Borrowers or any other Person party to a Loan Document that may come into
the possession of any of the Agent-Related Persons. Each Lender acknowledges (and by entering into
a Bank Product Agreement, each Bank Product Provider shall be deemed to acknowledge) that Agent
does not have any duty or responsibility, either initially or on a continuing basis (except to the
extent, if any, that is expressly specified herein) to provide such Lender (or Bank Product
Provider) with any credit or other information with respect to Borrowers, their Affiliates or any
of their respective business, legal, financial or other affairs, and irrespective of whether such
information came into Agent’s or its Affiliates’ or representatives’ possession before or after the
date on which such Lender became a party to this Agreement (or such Bank Product Provider entered
into a Bank Product Agreement).


 


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15.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender Group Expenses to the extent Agent reasonably deems
necessary or appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including court costs, reasonable attorneys’ fees and
expenses, fees and expenses of financial accountants, advisors, consultants, and appraisers, costs
of collection by outside collection agencies, auctioneer fees and expenses, and costs of security
guards or insurance premiums paid to maintain the Collateral, whether or not Borrowers are
obligated to reimburse Agent or Lenders for such expenses pursuant to this Agreement or otherwise.
Agent is authorized and directed to deduct and retain sufficient amounts from the Collections of
Parent and its Subsidiaries received by Agent to reimburse Agent for such out-of-pocket costs and
expenses prior to the distribution of any amounts to Lenders (or Bank Product Providers). In the
event Agent is not reimbursed for such costs and expenses by Parent or its Subsidiaries, each
Lender hereby agrees that it is and shall be obligated to pay to Agent such Lender’s ratable
thereof. Whether or not the transactions contemplated hereby are consummated, each of the Lenders,
on a ratable basis, shall indemnify and defend the Agent-Related Persons (to the extent not
reimbursed by or on behalf of Borrowers and without limiting the obligation of Borrowers to do so)
from and against any and all Indemnified Liabilities; provided, however, that no Lender shall be
liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities
resulting solely from such Person’s gross negligence or willful misconduct nor shall any Lender be
liable for the obligations of any Defaulting Lender in failing to make an Advance or other
extension of credit hereunder. Without limitation of the foregoing, each Lender shall reimburse
Agent upon demand for such Lender’s ratable share of any costs or out of pocket expenses (including
attorneys, accountants, advisors, and consultants fees and expenses) incurred by Agent in
connection with the preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement or any other Loan Document to the
extent that Agent is not reimbursed for such expenses by or on behalf of Borrowers. The
undertaking in this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Agent.



15.8 Agent in Individual Capacity. WFCF and its Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, provide Bank Products to, acquire equity interests in, and generally engage
in any kind of banking, trust, financial advisory, underwriting, or other business with Parent and
its Subsidiaries and Affiliates and any other Person party to any Loan Document as though WFCF were
not Agent hereunder, and, in each case, without notice to or consent of the other members of the
Lender Group. The other members of the Lender Group acknowledge (and by entering into a Bank
Product Agreement, each Bank
Product Provider shall be deemed to acknowledge) that, pursuant to such activities, WFCF or
its Affiliates may receive information regarding Parent or its Affiliates or any other Person party
to any Loan Documents that is subject to confidentiality obligations in favor of Parent or such
other Person and that prohibit the disclosure of such information to the Lenders (or Bank Product
Providers), and the Lenders acknowledge (and by entering into a Bank Product Agreement, each Bank
Product Provider shall be deemed to acknowledge) that, in such circumstances (and in the absence of
a waiver of such confidentiality obligations, which waiver Agent will use its reasonable best
efforts to obtain), Agent shall not be under any obligation to provide such information to them.
The terms “Lender” and “Lenders” include WFCF in its individual capacity.


 


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15.9 Successor Agent. Agent may resign as Agent upon 30 days prior written notice to the Lenders (unless such
notice is waived by the Required Lenders) and Borrowers (unless such notice is waived by Borrowers)
and without any notice to the Bank Product Providers. If Agent resigns under this Agreement, the
Required Lenders shall be entitled, with (so long as no Event of Default has occurred and is
continuing) the consent of Borrowers (such consent not to be unreasonably withheld, delayed, or
conditioned), appoint a successor Agent for the Lenders (and the Bank Product Providers). If, at
the time that Agent’s resignation is effective, it is acting as the Issuing Lender or the Swing
Lender, such resignation shall also operate to effectuate its resignation as the Issuing Lender or
the Swing Lender, as applicable, and it shall automatically be relieved of any further obligation
to issue Letters of Credit, to cause the Underlying Issuer to issue Letters of Credit, or to make
Swing Loans. If no successor Agent is appointed prior to the effective date of the resignation of
Agent, Agent may appoint, after consulting with the Lenders and Borrowers, a successor Agent. If
Agent has materially breached or failed to perform any material provision of this Agreement or of
applicable law, the Required Lenders may agree in writing to remove and replace Agent with a
successor Agent from among the Lenders with (so long as no Event of Default has occurred and is
continuing) the consent of Borrowers (such consent not to be unreasonably withheld, delayed, or
conditioned). In any such event, upon the acceptance of its appointment as successor Agent
hereunder, such successor Agent shall succeed to all the rights, powers, and duties of the retiring
Agent and the term “Agent” shall mean such successor Agent and the retiring Agent’s
appointment, powers, and duties as Agent shall be terminated. After any retiring Agent’s
resignation hereunder as Agent, the provisions of this Section 15 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor Agent has accepted appointment as Agent by the date which is 30 days
following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the duties of Agent
hereunder until such time, if any, as the Lenders appoint a successor Agent as provided for above.



15.10 Lender in Individual Capacity. Any Lender and its respective Affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, provide Bank Products to, acquire equity interests in and
generally engage in any kind of banking, trust, financial advisory, underwriting, or other business
with Parent and its Subsidiaries and Affiliates and any other Person party to any Loan Documents as
though such Lender were not a Lender hereunder without notice to or consent of the other members of
the Lender Group (or the Bank Product Providers). The other members of the Lender Group
acknowledge (and by entering into a Bank Product Agreement, each Bank Product Provider shall be
deemed to acknowledge) that, pursuant to such activities, such Lender and its respective Affiliates
may receive information regarding Parent or its Affiliates or any other Person party to any Loan
Documents that is subject to confidentiality obligations in favor of Parent or such other Person
and that prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge
(and by entering into a Bank Product Agreement, each Bank
Product Provider shall be deemed to acknowledge) that, in such circumstances (and in the
absence of a waiver of such confidentiality obligations, which waiver such Lender will use its
reasonable best efforts to obtain), such Lender shall not be under any obligation to provide such
information to them.



15.11 Collateral Matters.



(a) The Lenders hereby irrevocably authorize (and by entering into a Bank Product Agreement,
each Bank Product Provider shall be deemed to authorize) Agent to release any Lien on any
Collateral (i) upon the termination of the Commitments and payment and satisfaction in full by
Borrowers of all of the Obligations, (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Borrowers certify to Agent that the
sale or disposition is permitted under Section 6.4 (and Agent may rely conclusively on any
such certificate, without further inquiry), (iii) constituting property in which Parent or its
Subsidiaries owned no interest at the time Agent’s Lien was granted nor at any time thereafter, or
(iv) constituting property leased to Parent or its Subsidiaries under a lease that has expired or
is terminated in a transaction permitted under this Agreement. The Loan Parties and the Lenders
hereby irrevocably authorize (and by entering into a Bank Product Agreement, each Bank Product
Provider shall be deemed to authorize) Agent, based upon the instruction of the Required Lenders,
to credit bid and


 


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 purchase (either directly or through one or more acquisition vehicles) or to sell
or otherwise dispose of (or to consent to any such sale or other disposition of) all or any portion
of the Collateral at any sale thereof conducted by Agent under the provisions of the Code,
including pursuant to Sections 9-610 or 9-620 of the Code, at any sale thereof conducted under the
provisions of the Bankruptcy Code, including Section 363 of the Bankruptcy Code, or at any sale or
foreclosure conducted by Agent (whether by judicial action or otherwise) in accordance with
applicable law. Except as provided above, Agent will not execute and deliver a release of any Lien
on any Collateral without the prior written authorization of (y) if the release is of all or
substantially all of the Collateral, all of the Lenders (without requiring the authorization of the
Bank Product Providers), or (z) otherwise, the Required Lenders (without requiring the
authorization of the Bank Product Providers). Upon request by Agent or Borrowers at any time, the
Lenders will (and if so requested, the Bank Product Providers will) confirm in writing Agent’s
authority to release any such Liens on particular types or items of Collateral pursuant to this
Section 15.11; provided, however, that (1) Agent shall not be required to execute
any document necessary to evidence such release on terms that, in Agent’s opinion, would expose
Agent to liability or create any obligation or entail any consequence other than the release of
such Lien without recourse, representation, or warranty, and (2) such release shall not in any
manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being
released) upon (or obligations of Borrowers in respect of) all interests retained by Borrowers,
including, the proceeds of any sale, all of which shall continue to constitute part of the
Collateral. The Lenders further hereby irrevocably authorize (and by entering into a Bank Product
Agreement, each Bank Product Provider shall be deemed to authorize) Agent, at its option and in its
sole discretion, to subordinate any Lien granted to or held by Agent under any Loan Document to the
holder of any Permitted Lien on such property if such Permitted Lien secures Permitted Purchase
Money Indebtedness.




(b) Agent shall have no obligation whatsoever to any of the Lenders (or the Bank Product
Providers) to assure that the Collateral exists or is owned by Parent or its Subsidiaries or is
cared for, protected, or insured or has been encumbered, or that Agent’s Liens have been properly
or sufficiently or lawfully created, perfected, protected, or enforced or are entitled to any
particular priority, or that any particular items of Collateral meet the eligibility criteria
applicable in respect thereof, or whether to impose, maintain, reduce, or eliminate any particular
reserve hereunder or whether the amount of any such reserve is appropriate or not, or to exercise
at all or in any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or available to Agent
pursuant to any of the Loan Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission, or event related thereto, subject to the terms and
conditions contained herein, Agent may act in any manner it may deem appropriate, in its sole
discretion given Agent’s own interest in the Collateral in its capacity as one of the Lenders and
that Agent shall have no other duty or liability whatsoever to any Lender (or Bank Product
Provider) as to any of the foregoing, except as otherwise provided herein.



15.12 Restrictions on Actions by Lenders; Sharing of Payments.



(a) Each of the Lenders agrees that it shall not, without the express written consent of
Agent, and that it shall, to the extent it is lawfully entitled to do so, upon the written request
of Agent, set off against the Obligations, any amounts owing by such Lender to Parent or its
Subsidiaries or any deposit accounts of Parent or its Subsidiaries now or hereafter maintained with
such Lender. Each of the Lenders further agrees that it shall not, unless specifically requested
to do so in writing by Agent, take or cause to be taken any action, including, the commencement of
any legal or equitable proceedings to enforce any Loan Document against any Borrower or any
Guarantor or to foreclose any Lien on, or otherwise enforce any security interest in, any of the
Collateral.


 


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(b) If, at any time or times any Lender shall receive (i) by payment, foreclosure, setoff, or
otherwise, any proceeds of Collateral or any payments with respect to the Obligations, except for
any such proceeds or payments received by such Lender from Agent pursuant to the terms of this
Agreement, or (ii) payments from Agent in excess of such Lender’s Pro Rata Share of all such
distributions by Agent, such Lender promptly shall (A) turn the same over to Agent, in kind, and
with such endorsements as may be required to negotiate the same to Agent, or in immediately
available funds, as applicable, for the account of all of the Lenders and for application to the
Obligations in accordance with the applicable provisions of this Agreement, or (B) purchase,
without recourse or warranty, an undivided interest and participation in the Obligations owed to
the other Lenders so that such excess payment received shall be applied ratably as among the
Lenders in accordance with their Pro Rata Shares; provided, however, that to the extent that such
excess payment received by the purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable, and the applicable portion of
the purchase price paid therefor shall be returned to such purchasing party, but without interest
except to the extent that such purchasing party is required to pay interest in connection with the
recovery of the excess payment.



15.13 Agency for Perfection. Agent hereby appoints each other Lender (and each Bank Product Provider) as its agent (and
each Lender hereby accepts (and by entering into a Bank Product Agreement, each Bank Product
Provider shall be deemed to accept) such appointment) for the purpose of perfecting Agent’s Liens
in assets which, in accordance with Article 8 or Article 9, as applicable, of the Code can be
perfected by possession or control. Should any Lender obtain possession or control of any such
Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor
shall deliver possession or control of such Collateral to Agent or in accordance with Agent’s
instructions.



15.14 Payments by Agent to the Lenders. All payments to be made by Agent to the Lenders (or Bank Product Providers) shall be made
by bank wire transfer of immediately available funds pursuant to such wire transfer instructions as
each party may designate for itself by written notice to Agent. Concurrently with each such
payment, Agent shall identify whether such payment (or any portion thereof) represents principal,
premium, fees, or interest of the Obligations.



15.15 Concerning the Collateral and Related Loan Documents. Each member of the Lender Group authorizes and directs Agent to enter into this Agreement
and the other Loan Documents. Each member of the Lender Group agrees (and by entering into a Bank
Product Agreement, each Bank Product Provider shall be deemed to agree) that any action taken by
Agent in accordance with the terms of this Agreement or the other Loan Documents relating to the
Collateral and the exercise by Agent of its powers set forth therein or herein, together with such
other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders (and
such Bank Product Provider).



15.16 Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other
Reports and Information.



By becoming a party to this Agreement, each Lender:



(a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes
available, a copy of each field audit or examination report respecting Parent or its Subsidiaries
(each, a “Report”) prepared by or at the request of Agent, and Agent shall so furnish each
Lender with such Reports,



(b) expressly agrees and acknowledges that Agent does not (i) make any representation or
warranty as to the accuracy of any Report, and (ii) shall not be liable for any information
contained in any Report,


 


53









 





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



(d) agrees to keep all Reports and other material, non-public information regarding Parent and
its Subsidiaries and their operations, assets, and existing and contemplated business plans in a
confidential manner in accordance with Section 17.9, and



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



In addition to the foregoing: (x) any Lender may from time to time request of Agent in writing
that Agent provide to such Lender a copy of any report or document provided by Parent or its
Subsidiaries to Agent that has not been contemporaneously provided by Parent or such Subsidiary to
such Lender, and, upon receipt of such request, Agent promptly shall provide a copy of same to such
Lender, (y) to the extent that Agent is entitled, under any provision of the Loan Documents, to
request additional reports or information from Parent or its Subsidiaries, any Lender may, from
time to time, reasonably request Agent to exercise such right as specified in such Lender’s notice
to Agent, whereupon Agent promptly shall request of Borrowers the additional reports or information
reasonably specified by such Lender, and, upon receipt
thereof from Parent or its Subsidiaries, Agent promptly shall provide a copy of same to such
Lender, and (z) any time that Agent renders to Borrowers a statement regarding the Loan Account,
Agent shall send a copy of such statement to each Lender.




15.17 Several Obligations; No Liability. Notwithstanding that certain of the Loan Documents now or hereafter may have been or will
be executed only by or in favor of Agent in its capacity as such, and not by or in favor of the
Lenders, any and all obligations on the part of Agent (if any) to make any credit available
hereunder shall constitute the several (and not joint) obligations of the respective Lenders on a
ratable basis, according to their respective Commitments, to make an amount of such credit not to
exceed, in principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest in, or subject any
Lender to any liability for, or in respect of, the business, assets, profits, losses, or
liabilities of any other Lender. Each Lender shall be solely responsible for notifying its
Participants of any matters relating to the Loan Documents to the extent any such notice may be
required, and no Lender shall have any obligation, duty, or liability to any Participant of any
other Lender. Except as provided in Section 15.7, no member of the Lender Group shall have
any liability for the acts of any other member of the Lender Group. No Lender shall be responsible
to any Borrower or any other Person for any failure by any other Lender (or Bank Product Provider)
to fulfill its obligations to make credit available hereunder, nor to advance for such Lender (or
Bank Product Provider) or on its behalf, nor to take any other action on behalf of such Lender (or
Bank Product Provider) hereunder or in connection with the financing contemplated herein.


 


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16. WITHHOLDING TAXES.




(a) All payments made by Borrowers hereunder or under any note or other Loan Document will be
made without setoff, counterclaim, or other defense. In addition, all such payments will be made
free and clear of, and without deduction or withholding for, any present or future Taxes, and in
the event any deduction or withholding of Taxes is required, Borrowers shall comply with the next
sentence of this Section 16(a). If any Taxes are so levied or imposed, each Borrower
agrees to pay the full amount of such Taxes and such additional amounts as may be necessary so that
every payment of all amounts due under this Agreement, any note, or Loan Document, including any
amount paid pursuant to this Section 16(a) after withholding or deduction for or on account
of any Taxes, will not be less than the amount provided for herein; provided, however, that
Borrowers shall not be required to increase any such amounts if the increase in such amount payable
results from Agent’s or such Lender’s own willful misconduct or gross negligence (as finally
determined by a court of competent jurisdiction). Borrowers will furnish to Agent as promptly as
possible after the date the payment of any Tax is due pursuant to applicable law, certified copies
of tax receipts evidencing such payment by Borrowers.



(b) Each Borrower agrees to pay any present or future stamp, value added or documentary taxes
or any other excise or property taxes, charges, or similar levies that arise from any payment made
hereunder or from the execution, delivery, performance, recordation, or filing of, or otherwise
with respect to this Agreement or any other Loan Document.



(c) If a Lender or Participant is entitled to claim an exemption or reduction from United
States withholding tax, such Lender or Participant agrees with and in favor of Agent, to deliver to
Agent (or, in the case of a Participant, to the Lender granting the participation only) one of the
following before receiving its first payment under this Agreement:



(i) if such Lender or Participant is entitled to claim an exemption from United States
withholding tax pursuant to the portfolio interest exception, (A) a statement of the Lender
or Participant, signed under penalty of perjury, that it is not a (I) a “bank” as described in
Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder of any Borrower (within the meaning of
Section 871(h)(3)(B) of the IRC), or (III) a controlled foreign corporation related to any Borrower
within the meaning of Section 864(d)(4) of the IRC, and (B) a properly completed and executed IRS
Form W-8BEN or Form W-8IMY (with proper attachments);



(ii) if such Lender or Participant is entitled to claim an exemption from, or a reduction of,
withholding tax under a United States tax treaty, a properly completed and executed copy of IRS
Form W-8BEN;



(iii) if such Lender or Participant is entitled to claim that interest paid under this
Agreement is exempt from United States withholding tax because it is effectively connected with a
United States trade or business of such Lender, a properly completed and executed copy of IRS Form
W-8ECI;



(iv) if such Lender or Participant is entitled to claim that interest paid under this
Agreement is exempt from United States withholding tax because such Lender or Participant serves as
an intermediary, a properly completed and executed copy of IRS Form W-8IMY (with proper
attachments); or



(v) a properly completed and executed copy of any other form or forms, including IRS Form W-9,
as may be required under the IRC or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding or backup withholding tax.


 


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Each Lender or Participant shall provide new forms (or successor forms) upon the expiration or
obsolescence of any previously delivered forms and to promptly notify Agent (or, in the case of a
Participant, to the Lender granting the participation only) of any change in circumstances which
would modify or render invalid any claimed exemption or reduction.




(d) If a Lender or Participant claims an exemption from withholding tax in a jurisdiction
other than the United States, such Lender or such Participant agrees with and in favor of Agent, to
deliver to Agent (or, in the case of a Participant, to the Lender granting the participation only)
any such form or forms, as may be required under the laws of such jurisdiction as a condition to
exemption from, or reduction of, foreign withholding or backup withholding tax before receiving its
first payment under this Agreement, but only if such Lender or such Participant is legally able to
deliver such forms, provided, however, that nothing in this Section 16(d) shall require a
Lender or Participant to disclose any information that it deems to be confidential (including
without limitation, its tax returns). Each Lender and each Participant shall provide new forms (or
successor forms) upon the expiration or obsolescence of any previously delivered forms and to
promptly notify Agent (or, in the case of a Participant, to the Lender granting the participation
only) of any change in circumstances which would modify or render invalid any claimed exemption or
reduction.



(e) If a Lender or Participant claims exemption from, or reduction of, withholding tax and
such Lender or Participant sells, assigns, grants a participation in, or otherwise transfers all or
part of the Obligations of Borrowers to such Lender or Participant, such Lender or Participant
agrees to notify Agent (or, in the case of a sale of a participation interest, to the Lender
granting the participation only) of the percentage amount in which it is no longer the beneficial
owner of Obligations of Borrowers to such Lender or Participant. To the extent of such percentage
amount, Agent will treat such Lender’s or such Participant’s documentation provided pursuant to
Section 16(c) or 16(d) as no longer valid. With respect to such percentage amount,
such Participant or Assignee may provide new documentation, pursuant to Section 16(c) or
16(d), if applicable. Each Borrower agrees that each Participant shall be entitled to the
benefits of this Section 16 with respect to its participation in any portion of the
Commitments and the Obligations so long as such Participant complies with the obligations set forth
in this Section 16 with respect thereto.



(f) If a Lender or a Participant is entitled to a reduction in the applicable withholding tax,
Agent (or, in the case of a Participant, to the Lender granting the participation) may withhold
from any interest payment to such Lender or such Participant an amount equivalent to the applicable
withholding tax after taking into account such reduction. If the forms or other documentation
required by Section 16(c) or 16(d) are not delivered to Agent (or, in the case of a
Participant, to the Lender granting the participation), then Agent (or, in the case of a
Participant, to the Lender granting the participation) may withhold from any interest payment to
such Lender or such Participant not providing such forms or other documentation an amount
equivalent to the applicable withholding tax.



(g) If the IRS or any other Governmental Authority of the United States or other jurisdiction
asserts a claim that Agent (or, in the case of a Participant, to the Lender granting the
participation) did not properly withhold tax from amounts paid to or for the account of any Lender
or any Participant due to a failure on the part of the Lender or any Participant (because the
appropriate form was not delivered, was not properly executed, or because such Lender failed to
notify Agent (or such Participant failed to notify the Lender granting the participation) of a
change in circumstances which rendered the exemption from, or reduction of, withholding tax
ineffective, or for any other reason) such Lender shall indemnify and hold Agent harmless (or, in
the case of a Participant, such Participant shall indemnify and hold the Lender granting the
participation harmless) for all amounts paid, directly or indirectly, by Agent (or, in the case of
a Participant, to the Lender granting the participation), as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts payable to Agent
(or, in the case of a Participant, to the Lender granting the participation only) under this
Section 16, together with all costs and expenses (including attorneys fees and expenses).
The obligation of the Lenders and the Participants under this subsection shall survive the payment
of all Obligations and the resignation or replacement of Agent.


 


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(h) If Agent or a Lender determines, in its sole discretion, that it has received a refund of
any Taxes as to which it has been indemnified by Borrowers or with respect to which Borrowers have
paid additional amounts pursuant to this Section 16, so long as no Default or Event of
Default has occurred and is continuing, it shall pay over such refund to Borrowers (but only to the
extent of payments made, or additional amounts paid, by Borrowers under this Section 16
with respect to Taxes giving rise to such a refund), net of all out-of-pocket expenses of Agent or
such Lender and without interest (other than any interest paid by the relevant Governmental
Authority with respect to such a refund); provided, that Borrowers, upon the request of Agent or
such Lender, agree to repay the amount paid over to Borrowers (plus any penalties, interest or
other charges, imposed by the relevant Governmental Authority, other than such penalties, interest
or other charges imposed as a result of the willful misconduct or gross negligence of Agent
hereunder) to Agent or such Lender in the event Agent or such Lender is required to repay such
refund to such Governmental Authority. Notwithstanding anything in this Agreement to the contrary,
this Section 16 shall not be construed to require Agent or any Lender to make available its
tax returns (or any other information which it deems confidential) to Borrowers or any other
Person.



17. GENERAL PROVISIONS.




17.1 Effectiveness.  This Agreement shall be binding and deemed effective when executed by Parent, Borrowers,
Agent, and each Lender whose signature is provided for on the signature pages hereof.



17.2 Section Headings.  Headings and numbers have been set forth herein for convenience only. Unless the contrary
is compelled by the context, everything contained in each Section applies equally to this entire
Agreement.



17.3 Interpretation.  Neither this Agreement nor any uncertainty or ambiguity herein shall be construed against
the Lender Group or Parent or Borrowers, whether under any rule of construction or otherwise. On
the contrary, this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to accomplish fairly the
purposes and intentions of all parties hereto.



17.4 Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this
Agreement for the purpose of determining the legal enforceability of any specific provision.



17.5 Bank Product Providers. Each Bank Product Provider shall be deemed a third party beneficiary hereof and of the
provisions of the other Loan Documents for purposes of any reference in a Loan Document to the
parties for whom Agent is acting. Agent hereby agrees to act as agent for such Bank Product
Providers and, by virtue of entering into a Bank Product Agreement, the applicable Bank Product
Provider shall be automatically deemed to have appointed Agent as its agent and to have accepted
the benefits of the Loan Documents; it being understood and agreed that the rights and benefits of
each Bank Product Provider under the Loan Documents consist exclusively of such Bank Product
Provider’s being a beneficiary of the Liens and security interests (and, if applicable, guarantees)
granted to Agent and the right to share in payments and collections out of the Collateral as more
fully set forth herein. In addition, each Bank Product Provider, by virtue of entering into a Bank
Product Agreement, shall be automatically deemed to have agreed that Agent shall have the right,
but shall have no obligation, to establish, maintain, relax, or release reserves in respect of the
Bank Product Obligations and that if reserves are established there is no obligation on the part of
Agent to determine or insure


 


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whether
the amount of any such reserve is appropriate or not. In
connection with any such distribution of payments or proceeds of Collateral, Agent shall be
entitled to assume no amounts are due or owing to any Bank Product Provider unless such Bank
Product Provider has provided a written certification (setting forth a reasonably detailed
calculation) to Agent as to the amounts that are due and owing to it and such written certification
is received by Agent a reasonable period of time prior to the making of such distribution. Agent
shall have no obligation to calculate the amount due and payable with respect to any Bank Products,
but may rely upon the written certification of the amount due and payable from the relevant Bank
Product Provider. In the absence of an updated certification, Agent shall be entitled to assume
that the amount due and payable to the relevant Bank Product Provider is the amount last certified
to Agent by such Bank Product Provider as being due and payable (less any distributions made to
such Bank Product Provider on account thereof). Borrowers may obtain Bank Products from any Bank
Product Provider, although Borrowers are not required to do so. Borrowers acknowledge and agree
that no Bank Product Provider has committed to provide any Bank Products and that the providing of
Bank Products by any Bank Product Provider is in the sole and absolute discretion of such Bank
Product Provider. Notwithstanding anything to the contrary in this Agreement or any other Loan
Document, no provider or holder of any Bank Product shall have any voting or approval rights
hereunder (or be deemed a Lender) solely by virtue of its status as the provider or holder of such
agreements or products or the Obligations owing thereunder, nor shall the consent of any such
provider or holder be required (other than in their capacities as Lenders, to the extent
applicable) for
any matter hereunder or under any of the other Loan Documents, including as to any matter
relating to the Collateral or the release of Collateral or Guarantors.




17.6 Debtor-Creditor Relationship.  The relationship between the Lenders and Agent, on the one hand, and the Loan Parties, on
the other hand, is solely that of creditor and debtor. No member of the Lender Group has (or shall
be deemed to have) any fiduciary relationship or duty to any Loan Party arising out of or in
connection with the Loan Documents or the transactions contemplated thereby, and there is no agency
or joint venture relationship between the members of the Lender Group, on the one hand, and the
Loan Parties, on the other hand, by virtue of any Loan Document or any transaction contemplated
therein.



17.7 Counterparts; Electronic Execution.  This Agreement may be executed in any number of counterparts and by different parties on
separate counterparts, each of which, when executed and delivered, shall be deemed to be an
original, and all of which, when taken together, shall constitute but one and the same Agreement.
Delivery of an executed counterpart of this Agreement by telefacsimile or other electronic method
of transmission shall be equally as effective as delivery of an original executed counterpart of
this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile or
other electronic method of transmission also shall deliver an original executed counterpart of this
Agreement but the failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Agreement. The foregoing shall apply to each
other Loan Document mutatis mutandis.



17.8 Revival and Reinstatement of Obligations.  If the incurrence or payment of the Obligations by Borrowers or Guarantor or the transfer
to the Lender Group of any property should for any reason subsequently be asserted, or declared, to
be void or voidable under any state or federal law relating to creditors’ rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, or other
voidable or recoverable payments of money or transfers of property (each, a “Voidable
Transfer”), and if the Lender Group is required to repay or restore, in whole or in part, any
such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to
any such Voidable Transfer, or the amount thereof that the Lender Group is required or elects to
repay or restore, and as to all reasonable costs, expenses, and attorneys fees of the Lender Group
related thereto, the liability of Borrowers or Guarantor automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had never been made.


 


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17.9 Confidentiality.



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



(b) Anything in this Agreement to the contrary notwithstanding, Agent may (i) provide
customary information concerning the terms and conditions of this Agreement and the other Loan
Documents to loan syndication and pricing reporting services, and (ii) use the name, logos, and
other insignia of Borrowers and the Loan Parties and the Commitments provided hereunder in any
“tombstone” or comparable advertising, on its website or in other marketing materials of Agent.


 


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17.10 Lender Group Expenses. Borrowers agree to pay any and all Lender Group Expenses on the earlier of (a) the first
day of the month or (b) the date on which demand therefor is made by Agent and agrees that its
obligations contained in this Section 17.10 shall survive payment or satisfaction in full
of all other Obligations.



17.11 Survival. All representations and warranties made by the Loan Parties in the Loan Documents and in
the certificates or other instruments delivered in connection with or pursuant to this Agreement or
any other Loan Document shall be considered to have been relied upon by the other parties hereto
and shall survive the execution and delivery of the Loan Documents and the making of any loans and
issuance of any Letters of Credit, regardless of any investigation made by any such other party or
on its behalf and notwithstanding that Agent, the Issuing Lender, or any Lender may have had notice
or knowledge of any
Default or Event of Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as the principal of or any
accrued interest on any loan or any fee or any other amount payable under this Agreement is
outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have
not expired or terminated.



17.12 Patriot Act. Each Lender that is subject to the requirements of the Patriot Act hereby notifies
Borrowers that pursuant to the requirements of the Act, it is required to obtain, verify and record
information that identifies each Borrower, which information includes the name and address of
Borrowers and other information that will allow such Lender to identify Borrowers in accordance
with the Patriot Act.



17.13 Integration.  This Agreement, together with the other Loan Documents, reflects the entire understanding
of the parties with respect to the transactions contemplated hereby and shall not be contradicted
or qualified by any other agreement, oral or written, before the date hereof. The foregoing to the
contrary notwithstanding, all Bank Product Agreements, if any, are independent agreements governed
by the written provisions of such Bank Product Agreements, which will remain in full force and
effect, unaffected by any repayment, prepayments, acceleration, reduction, increase, or change in
the terms of any credit extended hereunder, except as otherwise expressly provided in such Bank
Product Agreement.



[Signature pages to follow.]




 


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



	 	 	 	 	 
	 	HAMPSHIRE GROUP, LIMITED,

a Delaware corporation, as Parent

 	 
	 	By:  	/s/ Jonathan W. Norwood
 	 
	 	Name:  	Jonathan W. Norwood  	 
	 	Title:  	Treasurer 	 
	 



	 	 	 	 	 
	 	HAMPSHIRE DESIGNERS, INC.,

a Delaware corporation, as a Borrower

 	 
	 	By:  	/s/ Jonathan W. Norwood
 	 
	 	Name:  	Jonathan W. Norwood 	 
	 	Title:  	Treasurer 	 
	 
	 	ITEM-EYES, INC.,

a Delaware corporation, as a Borrower

 	 
	 	By:  	/s/ Jonathan W. Norwood
 	 
	 	Name:  	Jonathan W. Norwood 	 
	 	Title:  	Treasurer 	 
	 
	 	SCOTT JAMES, LLC,

a Delaware limited liability company, as a Borrower

 	 
	 	By:  	/s/ Jonathan W. Norwood
 	 
	 	Name:  	Jonathan W. Norwood 	 
	 	Title:  	Treasurer 	 
	 
	 	WELLS FARGO CAPITAL FINANCE, LLC,

a Delaware limited liability company, as Agent and as a Lender

 	 
	 	By:  	/s/ Samantha Alexander
 	 
	 	Name:  	Samantha Alexander       	 
	 	Title:  	Director 	 
	 



Credit Agreement Signature Page




 


 









 








Schedule 1.1




As used in the Agreement, the following terms shall have the following definitions:





“Acceptable Bill of Lading” means, with respect to In-Transit Inventory, a tangible
bill of lading that: (a) if such bill of lading is a negotiable bill of lading, is made to the
order of the applicable Borrower, as consignee; (b) if such bill of lading is a non-negotiable bill
of lading, is made either (i) to the applicable Borrower as consignee, but subject to a notation
thereon as to the lien and security interest in favor of Agent, or (ii) to Agent (either directly
or by means of endorsements) as consignee; (c) was issued by a carrier (including a non-vessel
operating common carrier) respecting the subject Inventory, (d) is in the possession of Agent, an
Eligible Customs Broker or an Eligible NVOCC, in each case in the United States, and (e) is subject
to a valid and perfected first priority Agent’s Lien, subject only to Permitted Liens.



“Account” means an account (as that term is defined in the Code).



“Account Debtor” means any Person who is obligated on an Account, chattel paper, or a
general intangible.



“Accounting Changes” means changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants (or successor thereto or
any agency with similar functions).



“Acquired Indebtedness” means Indebtedness of a Person whose assets are acquired in a
Permitted Acquisition; provided, however, that such Indebtedness (a) is either
Purchase Money Indebtedness or a Capital Lease with respect to Equipment or mortgage financing with
respect to Real Property, (b) was in existence prior to the date of such Permitted Acquisition, and
(c) was not incurred in connection with, or in contemplation of, such Permitted Acquisition.



“Acquisition” means the purchase or other acquisition by a Person or its Subsidiaries
of all or substantially all of the assets of (or any division or business line of) any other
Person.



“Additional Documents” has the meaning specified therefor in Section 5.12 of
the Agreement.



“Adjusted Excess Liquidity” means, as of any date of determination, (a) the lesser of
(i) the Maximum Revolver Amount (plus, solely in the case of any determination made based on a
Borrowing Base Certificate prepared as of a date during the High Season, $10,000,000) or (ii) the
Borrowing Base plus Qualified Cash as of such date, minus (b) the sum of (i) the aggregate
Revolver Usage as of such date plus (ii) the aggregate amount of all payables, other than
payables which are being disputed in good faith by a Loan Party, which are more than 60 days past
their due date.



“Advances” has the meaning specified therefor in Section 2.1(a) of the
Agreement.



“Affected Lender” has the meaning specified therefor in Section 2.13(b) of the
Agreement.


 


 









 





“Affiliate” means, as applied to any Person, any other Person who controls, is
controlled by, or is under common control with, such Person. For purposes of this definition,
“control” means the possession, directly or indirectly through one or more intermediaries, of the
power to direct the
management and policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; provided, however, that, for purposes of the definition of Eligible
Accounts and Section 6.12 of the Agreement: (a) any Person which owns directly or
indirectly 10% or more of the Stock having ordinary voting power for the election of directors or
other members of the governing body of a Person or 10% or more of the partnership or other
ownership interests of a Person (other than as a limited partner of such Person) shall be deemed an
Affiliate of such Person, (b) each director (or comparable manager) of a Person shall be deemed to
be an Affiliate of such Person, and (c) each partnership in which a Person is a general partner
shall be deemed an Affiliate of such Person.



“Agent” has the meaning specified therefor in the preamble to the Agreement.



“Agent-Related Persons” means Agent, together with its Affiliates, officers,
directors, employees, attorneys, and agents.



“Agent’s Account” means the Deposit Account of Agent identified on Schedule
A-1.



“Agent’s Liens” means the Liens granted by Parent or its Subsidiaries to Agent under
the Loan Documents.



“Agreement” means the Credit Agreement to which this Schedule 1.1 is attached.



“Application Event” means the occurrence of (a) a failure by Borrowers to repay all of
the Obligations in full on the Maturity Date, or (b) an Event of Default and the election by Agent
or the Required Lenders to require that payments and proceeds of Collateral be applied pursuant to
Section 2.4(b)(ii) of the Agreement.



“Assignee” has the meaning specified therefor in Section 13.1(a) of the
Agreement.



“Assignment and Acceptance” means an Assignment and Acceptance Agreement substantially
in the form of Exhibit A-1.



“Assignment of Factoring Proceeds” means any Assignment of Factoring Credit Balance
and Proceeds Agreement among a Borrower, the Factor and Agent, in each case, in form and substance
reasonably satisfactory to Agent, pursuant to which, among other things, the Factor (a) agrees not
to make any loans or advances to such Borrower or any other Loan Party, or to guaranty on behalf of
such Borrower or any other Loan Party any Indebtedness or other obligations, (b) agrees to waive
the right of setoff against any Accounts (or proceeds thereof) of amounts owed by such Borrower or
any other Loan Party to the Factor (or Factor’s other clients) arising out of claims or accounts
receivable owed by such Borrower or any other Loan Party to such other clients of Factor or other
third parties, and (c) agrees that, except with respect to Factored Accounts with respect to which
the Factor pays the purchase price therefor in accordance with the terms of the Factoring Agreement
and such Assignment of Factoring Credit Balance and Proceeds Agreement, the Factor has no ownership
of or security interest in any Accounts of such Borrower.



“Authorized Person” means any one of the individuals identified on Schedule
A-2, as such schedule is updated from time to time by written notice from Borrowers to Agent.



“Availability” means, as of any date of determination, the amount that Borrowers are
entitled to borrow as Advances under Section 2.1 of the Agreement (after giving effect to
all then outstanding Obligations (other than Bank Product Obligations)).


 


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“Bank Product” means any one or more of the following financial products or
accommodations extended to Parent or its Subsidiaries by a Bank Product Provider: (a) credit
cards, (b) credit card processing services, (c) debit cards, (d) stored value cards, (e) purchase
cards (including so-called “procurement cards” or “P-cards”), (f) Cash Management Services, or (g)
transactions under Hedge Agreements.



“Bank Product Agreements” means those agreements entered into from time to time by
Parent or its Subsidiaries with a Bank Product Provider in connection with the obtaining of any of
the Bank Products.



“Bank Product Collateralization” means providing cash collateral (pursuant to
documentation reasonably satisfactory to Agent) to be held by Agent for the benefit of the Bank
Product Providers (other than the Hedge Providers) in an amount determined by Agent as sufficient
to satisfy the reasonably estimated credit exposure with respect to the then existing Bank Product
Obligations (other than Hedge Obligations).



“Bank Product Obligations” means (a) all obligations, liabilities, reimbursement
obligations, fees, or expenses owing by Parent or its Subsidiaries to any Bank Product Provider
pursuant to or evidenced by a Bank Product Agreement and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, (b) all Hedge Obligations, and (c) without duplication of amounts owed pursuant
to the foregoing clauses (a) and (b), all amounts that Agent or any Lender is
obligated to pay to a Bank Product Provider as a result of Agent or such Lender purchasing
participations from, or executing guarantees or indemnities or reimbursement obligations to, a Bank
Product Provider with respect to the Bank Products provided by such Bank Product Provider to Parent
or its Subsidiaries.



“Bank Product Provider” means Wells Fargo or any of its Affiliates (including WFCF).



“Bank Product Reserve Amount” means, as of any date of determination, the Dollar
amount of reserves that Agent has determined it is necessary or appropriate to establish (based
upon the Bank Product Providers’ reasonable determination of their credit exposure to Parent and
its Subsidiaries in respect of Bank Product Obligations) in respect of Bank Products then provided
or outstanding.



“Bankruptcy Code” means title 11 of the United States Code, as in effect from time to
time.



“Base Rate” means the greatest of (a) the Federal Funds Rate plus 0.50%, (b) the LIBOR
Rate (which rate shall be calculated based upon an Interest Period of 1 month and shall be
determined on a daily basis), plus 1.50%, and (c) the rate of interest announced, from time to
time, within Wells Fargo at its principal office in San Francisco as its “prime rate”, with the
understanding that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest
of such rates) and serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto and is evidenced by the recording thereof after its
announcement in such internal publications as Wells Fargo may designate.



“Base Rate Loan” means each portion of the Advances that bears interest at a rate
determined by reference to the Base Rate.



“Base Rate Margin” means 1.75%.


 


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“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of ERISA)
for which Parent or any of its Subsidiaries or ERISA Affiliates has been an “employer” (as defined
in Section 3(5) of ERISA) within the past six years.



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



“Borrower” and “Borrowers” have the meaning specified therefor in the preamble
to the Agreement.



“Borrowing” means a borrowing consisting of Advances made on the same day by the
Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing Loan, or by Agent
in the case of a Protective Advance.



“Borrowing Base” means, as of any date of determination, the result of:



(a) 85% of the amount of Eligible Accounts, less the amount, if any, of the Dilution Reserve,
plus



(b) the lesser of $35,000,000 and the sum of




(i) the lesser of (A) 65% of the value (calculated at the lower of cost or market in
accordance with GAAP on a basis consistent with the terms of Section 6.10) of Eligible
Landed Inventory, and (B) 85% times the most recently determined Net Liquidation Percentage times
the value (calculated at the lower of cost or market in accordance with GAAP on a basis consistent
with the terms of Section 6.10) of Eligible Landed Inventory, plus



(ii) the least of (A) 65% of the value (calculated at the lower of cost or market in
accordance with GAAP on a basis consistent with the terms of Section 6.10) of Eligible
In-Transit Inventory, (B) 85% times the most recently determined Net Liquidation Percentage times
the value (calculated at the lower of cost or market in accordance with GAAP on a basis consistent
with the terms of Section 6.10) of Eligible In-Transit Inventory, and (C) $8,500,000, plus



(iii) 65% of the aggregate undrawn amount of outstanding Qualified Import Letters of Credit,
plus



(c) 100% of Restricted Cash, minus



(d) without duplication of any Dilution Reserve established under clause (a) above,
the aggregate amount of reserves, if any, established by Agent under Section 2.1(c) of the
Agreement.



“Borrowing Base Certificate” means a certificate in the form of Exhibit B-1.



“Borrowing Base Excess” has the meaning set forth in Section 2.4(e).



“Business Day” means any day that is not a Saturday, Sunday, or other day on which
banks are authorized or required to close in the state of Georgia or New York, except that, if a
determination of a Business Day shall relate to a LIBOR Rate Loan, the term “Business Day”
also shall exclude any day on which banks are closed for dealings in Dollar deposits in the London
interbank market.


 


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“Capital Expenditures” means, with respect to any Person for any period, the aggregate
of all expenditures by such Person and its Subsidiaries during such period that are capital
expenditures as determined in accordance with GAAP, whether such expenditures are paid in cash or
financed.



“Capitalized Lease Obligation” means that portion of the obligations under a Capital
Lease that is required to be capitalized in accordance with GAAP.



“Capital Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.



“Cash Equivalents” means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States or issued by any agency thereof and backed by the
full faith and credit of the United States, in each case maturing within 1 year from the date of
acquisition thereof, (b) marketable direct obligations issued or fully guaranteed by any state of
the United States or any political subdivision of any such state or any public instrumentality
thereof maturing within 1 year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either Standard & Poor’s Rating
Group (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”), (c) commercial paper
maturing no more than 270 days from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody’s, (d) certificates of deposit,
time deposits, overnight bank deposits or bankers’ acceptances maturing within 1 year from the date
of acquisition thereof issued by any bank organized under the laws of the United States or any
state thereof or the District of Columbia or any United States branch of a foreign bank having at
the date of acquisition thereof combined capital and surplus of not less than $250,000,000, (e)
Deposit Accounts maintained with (i) any bank that satisfies the criteria described in clause
(d) above, or (ii) any other bank organized under the laws of the United States or any state
thereof so long as the full amount maintained with any such other bank is insured by the Federal
Deposit Insurance Corporation, (f) repurchase obligations of any commercial bank satisfying the
requirements of clause (d) of this definition or recognized securities dealer having
combined capital and surplus of not less than $250,000,000, having a term of not more than seven
days, with respect to securities satisfying the criteria in clauses (a) or (d)
above, (g) debt securities with maturities of six months or less from the date of acquisition
backed by standby letters of credit issued by any commercial bank satisfying the criteria described
in clause (d) above, and (h) Investments in money market funds substantially all of whose
assets are invested in the types of assets described in clauses (a) through (g)
above.



“Cash Management Services” means any cash management or related services including
treasury, depository, return items, overdraft, controlled disbursement, merchant store value
cards, e-payables services, electronic funds transfer, interstate depository network, automatic
clearing house transfer (including the Automated Clearing House processing of electronic funds
transfers through the direct Federal Reserve Fedline system) and other cash management
arrangements.



“Change of Control” means that (a) any “person” or “group” (within the meaning of
Sections 13(d) and 14(d) of the Exchange Act), becomes the beneficial owner (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 40%, or more, of the Stock of Parent
having the right to vote for the election of members of the Board of Directors, (b) a majority of
the members of the Board of Directors do not constitute Continuing Directors, or (c) Parent fails
to own and control, directly or indirectly, 100% of the Stock of each other Loan Party, except as a
result of a transaction permitted under Section 6.3 or Section 6.4.



“Closing Date” means the date of the making of the initial Advance (or other extension
of credit) under the Agreement.


 


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“Code” means the New York Uniform Commercial Code, as in effect from time to time.



“Collateral” means all assets and interests in assets and proceeds thereof now owned
or hereafter acquired by the Loan Parties in or upon which a Lien is granted by such Person in
favor of Agent or the Lenders under any of the Loan Documents.



“Collateral Access Agreement” means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person in
possession of, having a Lien upon, or having rights or interests in any Loan Party’s books and
records, Equipment, or Inventory, in each case, in form and substance reasonably satisfactory to
Agent.



“Collateral Reporting Trigger Level” means, (a) in the case of any determination made
based on a Borrowing Base Certificate prepared as of a date during the High Season, $30,000,000,
and (b) in the case of any determination made based on a Borrowing Base Certificate prepared as of
a date during the Low Season, $15,000,000.



“Collections” means all cash, checks, notes, instruments, and other items of payment
(including insurance proceeds, cash proceeds of asset sales, rental proceeds, and tax refunds).



“Commitment” means, with respect to each Lender, its Commitment, and, with respect to
all Lenders, their Commitments, in each case as such Dollar amounts are set forth beside such
Lender’s name under the applicable heading on Schedule C-1 or in the Assignment and
Acceptance pursuant to which such Lender became a Lender under the Agreement, as such amounts may
be reduced or increased from time to time pursuant to assignments made in accordance with the
provisions of Section 13.1 of the Agreement.



“Compliance Certificate” means a certificate substantially in the form of Exhibit
C-1 delivered by the chief financial officer of Parent to Agent.



“Confidential Information” has the meaning specified therefor in Section
17.9(a) of the Agreement.



“Continuing Director” means (a) any member of the Board of Directors who was a
director (or comparable manager) of Parent on the Closing Date, and (b) any individual who becomes
a member of the Board of Directors after the Closing Date if such individual was approved,
appointed or nominated for election to the Board of Directors by a majority of the Continuing
Directors, but excluding any such individual originally proposed for election in opposition to the
Board of Directors in office at the Closing Date in an actual or threatened election contest
relating to the election of the directors (or comparable managers) of Parent and whose initial
assumption of office resulted from such contest or the settlement thereof.



“Control Agreement” means a control agreement, in form and substance reasonably
satisfactory to Agent, executed and delivered by a Loan Party, Agent, and the applicable securities
intermediary (with respect to a Securities Account) or bank (with respect to a Deposit Account).



“Controlled Account Agreement” has the meaning specified therefor in the Security
Agreement.



“Copyright Security Agreement” has the meaning specified therefor in the Security
Agreement.


 


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“Daily Balance” means, as of any date of determination and with respect to any
Obligation, the amount of such Obligation owed at the end of such day.



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



“Defaulting Lender” means any Lender that (a) has failed to fund any amounts required
to be funded by it under the Agreement on the date that it is required to do so under the Agreement
(including the failure to make available to Agent amounts required pursuant to a Settlement or to
make a required payment in connection with a Letter of Credit Disbursement), (b) notified the
Borrowers, Agent, or any Lender in writing that it does not intend to comply with all or any
portion of its funding obligations under the Agreement, (c) has made a public statement to the
effect that it does not intend to comply with its funding obligations under the Agreement or under
other agreements generally (as reasonably determined by Agent) under which it has committed to
extend credit, (d) failed, within 1 Business Day after written request by Agent, to confirm that it
will comply with the terms of the Agreement relating to its obligations to fund any amounts
required to be funded by it under the Agreement, (e) otherwise failed to pay over to Agent or any
other Lender any other amount required to be paid by it under the Agreement on the date that it is
required to do so under the Agreement, or (f) (i) becomes or is insolvent or has a parent company
that has become or is insolvent or (ii) becomes the subject of a bankruptcy or insolvency
proceeding, or has had a receiver, conservator, trustee, or custodian or appointed for it, or has
taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in
any such proceeding or appointment or has a parent company that has become the subject of a
bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, or custodian
appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval
of or acquiescence in any such proceeding or appointment.



“Defaulting Lender Rate” means (a) for the first 3 days from and after the date the
relevant payment is due, the Base Rate, and (b) thereafter, the interest rate then applicable to
Advances that are Base Rate Loans (inclusive of the Base Rate Margin applicable thereto).



“Deposit Account” means any deposit account (as that term is defined in the Code).



“Designated Account” means the Deposit Account identified on Schedule D-1.



“Designated Account Bank” has the meaning specified therefor in Schedule D-1.



“Dilution” means, as of any date of determination, a percentage, based upon the
experience of the immediately prior 90 consecutive days, that is the result of dividing the Dollar
amount of (a) bad debt write-downs, discounts, advertising allowances, credits, or other dilutive
items with respect to Borrowers’ Accounts during such period, in each case to the extent not
already taken into account in Borrowers’ GAAP reserves and Eligible Accounts calculation, by (b)
Borrowers’ billings with respect to Accounts during such period.



“Dilution Reserve” means, as of any date of determination, an amount sufficient to
reduce the advance rate against Eligible Accounts by 1 percentage point for each percentage point
by which Dilution is in excess of 5.0%.



“Dollars” or “$” means United States dollars.



“EBITDA” means, for any period, (a) Net Income, minus (b) extraordinary gains
and interest income, plus (c) to the extent such items were deducted from Net Income during
such period,
interest expense, income taxes, and depreciation and amortization for such period, in each
case as determined on a consolidated basis for Parent and its Subsidiaries in accordance with GAAP.


 


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“Eligible Accounts” means those Accounts created by Borrowers in the ordinary course
of their business, that arise out of Borrowers’ sale of goods or rendition of services, that comply
with each of the representations and warranties respecting Eligible Accounts made in the Loan
Documents, and that are not excluded as ineligible by virtue of one or more of the excluding
criteria set forth below; provided, however, that such criteria may be revised from
time to time by Agent in Agent’s Permitted Discretion to address the results of any audit performed
by Agent from time to time after the Closing Date. In determining the amount to be included,
Eligible Accounts shall be calculated net of customer deposits and unapplied cash. Eligible
Accounts shall not include the following:



(a) Accounts that (i) the Account Debtor has failed to pay within 120 days of original invoice
date, or (ii) have selling terms of more than 95 days; provided, that, the foregoing shall
not exclude Accounts owing by Kohl’s Corporation with respect to new store openings so long as such
Accounts have selling terms of 120 days or less and are not past due by more than 30 days,



(b) Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of all Accounts
owed by that Account Debtor (or its Affiliates) are deemed ineligible under clause (a)
above,



(c) Accounts with respect to which the Account Debtor is an Affiliate of any Borrower or an
employee or agent of any Borrower or any Affiliate of any Borrower,



(d) Accounts arising in a transaction wherein goods are placed on consignment or are sold
pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold, or any other
terms by reason of which the payment by the Account Debtor may be conditional,



(e) Accounts that are not payable in Dollars,



(f) Accounts with respect to which the Account Debtor either (i) does not maintain its chief
executive office in the United States or Canada, or (ii) is not organized under the laws of the
United States or any state thereof, or Canada or any province thereof, or (iii) is the government
of any foreign country or sovereign state, or of any state, province, municipality, or other
political subdivision thereof, or of any department, agency, public corporation, or other
instrumentality thereof, unless (y) the Account is supported by an irrevocable letter of credit
reasonably satisfactory to Agent (as to form, substance, and issuer or domestic confirming bank)
that has been delivered to Agent and is directly drawable by Agent, or (z) the Account is covered
by credit insurance in form, substance, and amount, and by an insurer, reasonably satisfactory to
Agent,



(g) Accounts with respect to which the Account Debtor is either (i) the United States or any
department, agency, or instrumentality of the United States (exclusive, however, of Accounts with
respect to which Borrowers have complied, to the reasonable satisfaction of Agent, with the
Assignment of Claims Act, 31 USC §3727), or (ii) any state of the United States,



(h) Accounts with respect to which the Account Debtor is a creditor of Borrowers, has or has
asserted a right of setoff, or has disputed its obligation to pay all or any portion of the
Account, to the extent of such claim, right of setoff, or dispute,


 


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(i) Accounts with respect to an Account Debtor whose total obligations owing to Borrowers
exceed (i) 40% of the total amount of all Eligible Accounts, in the case of an Account Debtor that
has (or whose parent company has) a rating of at least BBB from S&P or Baa3 from Moody’s, or (ii)
20% of the total amount of all Eligible Accounts, in the case of any other Account Debtor, in
each case to the extent of the obligations owing by such Account Debtor in excess of such
percentage; provided, however, that, in each case, (A) the amount of Eligible
Accounts that are excluded because they exceed the foregoing applicable percentage shall be
determined by Agent based on all of the otherwise Eligible Accounts prior to giving effect to any
eliminations based upon the foregoing concentration limit, and (B) such percentage, as applied to a
particular Account Debtor, is subject to reduction by Agent in its Permitted Discretion if the
creditworthiness of such Account Debtor deteriorates,



(j) Accounts with respect to which the Account Debtor is subject to an Insolvency Proceeding,
is not Solvent, has gone out of business, or as to which Borrowers have received notice of an
imminent Insolvency Proceeding or a material impairment of the financial condition of such Account
Debtor,



(k) Accounts, the collection of which, Agent, in its Permitted Discretion, believes to be
doubtful by reason of the Account Debtor’s financial condition,



(l) Accounts that are not subject to a valid and perfected first priority Agent’s Lien,
except, that, this clause (l) shall not exclude Eligible Factored Accounts solely to the
extent such Accounts are subject to a prior Lien in favor of the Factor,



(m) Accounts with respect to which (i) the goods giving rise to such Account have not been
shipped and billed to the Account Debtor, or (ii) the services giving rise to such Account have not
been performed and billed to the Account Debtor,



(n) Accounts with respect to which the Account Debtor is a Sanctioned Person or Sanctioned
Entity, or



(o) Accounts that represent the right to receive progress payments or other advance billings
that are due prior to the completion of performance by Borrowers of the subject contract for goods
or services.



“Eligible Customs Broker” means, as of any date of determination, a Person (other than
an Affiliate) that is engaged by Borrowers to clear In-Transit Inventory through United States
customs and that is a party to an effective Imported Goods Agreement.



“Eligible Factored Account” means those Factored Accounts that are Eligible Accounts
and as to which (a) the Factor has the credit risk with respect to such Factored Accounts pursuant
to the applicable Factoring Agreement with the Factor, (b) such Factored Accounts at all times are
subject to an Assignment of Factoring Proceeds, and (c) at all times Agent is satisfied with the
creditworthiness of the Factor.



“Eligible Foreign Vendor” means a Foreign Vendor (other than an Affiliate) which (a)
has received timely payment or performance of all liabilities and other obligations at any time
owed to it by Borrowers, and (b) has not asserted (and has no right to assert) any reclamation,
repossession, diversion, stoppage in transit, Lien or title retention rights in respect of such
In-Transit Inventory.


 


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“Eligible In-Transit Inventory” means those items of Inventory that do not qualify as
Eligible Landed Inventory solely because they are not in a location set forth on Schedule
E-1 or are in transit among such locations, but as to which (a) the Inventory is not currently
the subject of a Qualified Import Letter of Credit, (b) such Inventory currently is in transit
(whether by vessel, air, or land) from a location outside of the continental United States to a
location set forth on Schedule E-1 that is the subject
of a Collateral Access Agreement, (c) the vendor with respect to such Inventory is an Eligible
Foreign Vendor, (d) title and risk of loss to such Inventory has passed to a Borrower, (e) such
Inventory is insured against types of loss, damage, hazards, and risks, and in amounts,
satisfactory to Agent in its Permitted Discretion, and Agent has been named as sole loss payee with
respect to such insurance pursuant to a loss payable endorsement acceptable to Agent in its
Permitted Discretion, (f) such Inventory is the subject of an Acceptable Bill of Lading, and (g)
Borrowers have provided a certificate to Agent that certifies that, to the best knowledge of
Borrowers, such Inventory meets all of Borrowers’ representations and warranties contained in the
Loan Documents concerning Eligible Inventory, that it knows of no reason why such Inventory would
not be accepted by Borrowers when it arrives in at the applicable location in the United States set
forth on Schedule E-1, and that the shipment as evidenced by the documents conforms to the
related order documents.



“Eligible Inventory” means Eligible Landed Inventory or Eligible In-Transit Inventory.



“Eligible Landed Inventory” means Inventory consisting of first quality finished goods
held for sale in the ordinary course of Borrowers’ business that complies with each of the
representations and warranties respecting Eligible Inventory made in the Loan Documents, and that
is not excluded as ineligible by virtue of the one or more of the excluding criteria set forth
below; provided, however, that such criteria may be revised from time to time by
Agent in Agent’s Permitted Discretion to address the results of any audit or appraisal performed by
Agent from time to time after the Closing Date. In determining the amount to be so included,
Inventory shall be valued at the lower of cost or market in accordance with GAAP on a basis
consistent with the terms of Section 6.10, but without duplication of any reserves
described in clause (c) of the definition of Inventory Reserve. An item of Inventory shall
not be included in Eligible Inventory if:



(a) a Borrower does not have good, valid, and marketable title thereto,



(b) a Borrower does not have actual and exclusive possession thereof (either directly or
through a bailee or agent of a Borrower),



(c) it is not located at one of the locations in the continental United States set forth on
Schedule E-1 (or in-transit from one such location to another such location),



(d) it is in-transit to or from a location of a Borrower (other than in-transit from one
location set forth on Schedule E-1 to another location set forth on Schedule E-1),



(e) it is located on real property leased by a Borrower or in a contract warehouse, in each
case, unless it is subject to a Collateral Access Agreement executed by the lessor or warehouseman,
as the case may be, and unless it is segregated or otherwise separately identifiable from goods of
others, if any, stored on the premises,



(f) it is the subject of a bill of lading or other document of title,



(g) it is not subject to a valid and perfected first priority Agent’s Lien,



(h) it consists of goods returned or rejected by any Borrower’s customers,



(i) it consists of goods that are obsolete or slow moving (other than Prior Season Inventory),
restrictive or custom items, work-in-process, raw materials, or goods that constitute spare parts,
packaging and shipping materials, supplies used or consumed in any Borrower’s business, bill and
hold goods, defective goods, “seconds,” or Inventory acquired on consignment,


 


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(j) it is subject to third party trademark, licensing or other proprietary rights, unless,
with respect to each applicable Required Licensor with respect thereto (if any), a Licensor
Agreement is then in effect (unless Agent has waived the requirement for a Licensor Agreement with
respect to such Required Licensor), or



(k) it was acquired in connection with a Permitted Acquisition, until the completion of an
appraisal and field examination of such Inventory, in each case, reasonably satisfactory to Agent
(which appraisal and field examination may be conducted prior to the closing of such Permitted
Acquisition).



“Eligible NVOCC” means, as of any date of determination, a Person (other than an
Affiliate) that is engaged by Borrowers as a freight forwarder or otherwise to assist in the
importation of In-Transit Inventory to the United States and that is a party to an effective
Imported Goods Agreement.



“Eligible Transferee” means (a) a commercial bank organized under the laws of the
United States, or any state thereof, and having total assets in excess of $1,000,000,000, (b) a
commercial bank organized under the laws of any other country which is a member of the Organization
for Economic Cooperation and Development or a political subdivision of any such country and which
has total assets in excess of $1,000,000,000, provided that such bank is acting through a branch or
agency located in the United States, (c) a finance company, insurance company, or other financial
institution that is engaged in making, purchasing, or otherwise investing in commercial loans in
the ordinary course of its business and having (together with its Affiliates) total assets in
excess of $1,000,000,000, (d) any Affiliate (other than individuals) of a pre-existing Lender, (e)
so long as no Event of Default has occurred and is continuing, any other Person approved by Agent
and Borrowers (such approval by Borrowers not to be unreasonably withheld, conditioned or delayed),
and (f) during the continuation of an Event of Default, any other Person approved by Agent;
provided, that, except in the case of clause (f) above, in no event shall an
Eligible Transferee include (i) any hedge fund or infrastructure fund or (ii) any Person that
participates in its ordinary course of business in the provision of women’s and men’s wovens and
knits or in the designing and marketing of branded apparel in the United States, without, in any
such case, the prior written consent of Borrowers.



“Environmental Action” means any written complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative proceeding,
judgment, letter, or other written communication from any Governmental Authority, or any third
party involving violations of Environmental Laws or releases of Hazardous Materials (a) from any
assets, properties, or businesses of any Borrower, any Subsidiary of a Borrower, or any of their
predecessors in interest, (b) from adjoining properties or businesses, or (c) from or onto any
facilities which received Hazardous Materials generated by any Borrower, any Subsidiary of a
Borrower, or any of their predecessors in interest.



“Environmental Law” means any applicable federal, state, provincial, foreign or local
statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and
enforceable written policy, or rule of common law now or hereafter in effect and in each case as
amended, or any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, in each case, to the extent binding on Parent or
its Subsidiaries, relating to the environment, the effect of the environment on employee health, or
Hazardous Materials, in each case as amended from time to time.



“Environmental Liabilities” means all liabilities, monetary obligations, losses,
damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel,
experts, or consultants, and costs of investigation and feasibility studies), fines, penalties,
sanctions, and interest
incurred as a result of any claim or demand, or Remedial Action required, by any Governmental
Authority or any third party, and which relate to any Environmental Action.


 


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“Environmental Lien” means any Lien in favor of any Governmental Authority for
Environmental Liabilities.



“Equipment” means equipment (as that term is defined in the Code).



“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute thereto.



“ERISA Affiliate” means (a) any Person subject to ERISA whose employees are treated as
employed by the same employer as the employees of Parent or its Subsidiaries under IRC Section
414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by the
same employer as the employees of Parent or its Subsidiaries under IRC Section 414(c), (c) solely
for purposes of Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA
that is a member of an affiliated service group of which Parent or any of its Subsidiaries is a
member under IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412
of the IRC, any Person subject to ERISA that is a party to an arrangement with Parent or any of its
Subsidiaries and whose employees are aggregated with the employees of Parent or its Subsidiaries
under IRC Section 414(o).



“Event of Default” has the meaning specified therefor in Section 8 of the
Agreement.



“Excess Availability” means, as of any date of determination, (a) the lesser of (i)
the Maximum Revolver Amount or (ii) the Borrowing Base as of such date, minus (b) the sum
of (i) the aggregate Revolver Usage as of such date plus (ii) the aggregate amount of all
payables, other than payables which are being disputed in good faith by a Loan Party, which are
more than 60 days past their due date.



“Excess Liquidity” means, as of any date of determination, (a) the lesser of (i) the
Maximum Revolver Amount or (ii) the Borrowing Base plus Qualified Cash as of such date,
minus (b) the sum of (i) the aggregate Revolver Usage as of such date plus (ii) the
aggregate amount of all payables, other than payables which are being disputed in good faith by a
Loan Party, which are more than 60 days past their due date.



“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time to
time.



“Excluded Copyrights” means the registered copyrights owned by MCI as of the Closing
Date.



“Existing Credit Facility” means Parent’s existing revolving credit facility provided
by HSBC Bank USA, N.A., as agent, and certain lenders.



“Factor” means The CIT Group/Commercial Services, Inc. or any other Person reasonably
satisfactory to Agent, each in its capacity as a factor, or provider of credit protection, with
respect to Accounts owing to Borrowers.



“Factored Accounts” means trade accounts receivable of Borrowers created in the
ordinary course of business which have been purchased by the Factor pursuant to a Factoring
Agreement.


 


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“Factoring Agreement” means any factoring agreement between a borrower and the Factor.



“Fee Letter” means that certain fee letter, dated as of even date with the Agreement,
between Borrowers and Agent, in form and substance reasonably satisfactory to Agent.



“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum
equal to, for each day during such period, the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the quotations for
such day on such transactions received by Agent from three Federal funds brokers of recognized
standing selected by it.



“Fiscal Year” means the fiscal year of Parent and its Subsidiaries, which currently
ends on December 31, 2010.



“Fixed Charge Coverage Ratio” means, for any period, the ratio of (a) EBITDA for such
period minus unfinanced Capital Expenditures made (to the extent not already incurred in a prior
period) or incurred during such period, to (b) Fixed Charges for such period, in each case as
determined on a consolidated basis for Parent and its Subsidiaries in accordance with GAAP.



“Fixed Charges” means, for any period, the sum, without duplication, of (a) interest
expense accrued (other than interest paid-in-kind, amortization of financing fees, and other
non-cash interest expense) during such period, (b) principal payments in respect of Indebtedness
that are required to be paid during such period, and (c) all federal, state, and local income taxes
paid or due and payable during such period, and (d) all Restricted Junior Payments paid during such
period, in each case as determined on a consolidated basis for Parent and its Subsidiaries in
accordance with GAAP.



“Foreign Lender” means any Lender or Participant that is not a United States person
within the meaning of IRC section 7701(a)(30).



“Foreign Subsidiary” means, in the case of any Loan Party, any Subsidiary thereof that
is not organized under the laws of the United States or a state or commonwealth thereof.



“Foreign Vendor” means a Person that sells Inventory to Borrowers and which Person is
located in a country other than the United States.



“Funding Date” means the date on which a Borrowing occurs.



“Funding Losses” has the meaning specified therefor in Section 2.12(b)(ii) of
the Agreement.



“GAAP” means generally accepted accounting principles as in effect from time to time
in the United States, consistently applied; provided, however, that: (a) all
calculations relative to liabilities shall be made without giving effect to Financial Accounting
Standards Board Accounting Standard Codification Topic 825 or, to the extent applicable, Statement
of Financial Accounting Standards No. 159; and (b) except for purposes of calculating the Fixed
Charge Coverage Ratio (including the calculation of Fixed Charges), the terms “Capital Lease” and
“Indebtedness” shall not include any leases that would otherwise be required to be classified as
Capital Leases solely as a result of any Accounting Change occurring after the Closing Date.


 


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“Governing Documents” means, with respect to any Person, the certificate or articles
of incorporation, by-laws, or other organizational documents of such Person.



“Governmental Authority” means any federal, state, local, or other governmental or
administrative body, instrumentality, board, department, or agency or any court, tribunal,
administrative hearing body, arbitration panel, commission, or other similar dispute-resolving
panel or body.



“Guarantors” means (a) Parent, (b) each Subsidiary of Parent (other than any
Subsidiary that is not required to become a Guarantor pursuant to Section 5.11), and (c)
each other Person that becomes a guarantor after the Closing Date pursuant to Section 5.11
of the Agreement, and “Guarantor” means any one of them.



“Guaranty” means that certain general continuing guaranty, dated as of even date with
the Agreement, executed and delivered by each extant Guarantor in favor of Agent, for the benefit
of the Lender Group and the Bank Product Providers, in form and substance reasonably satisfactory
to Agent.



“Hampshire Designers” has the meaning specified therefor in the preamble to the
Agreement.



“Hazardous Materials” means (a) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable laws or regulations as “hazardous substances,” “hazardous
materials,” “hazardous wastes,” “toxic substances,” or any other formulation intended to define,
list, or classify substances by reason of deleterious properties such as ignitability, corrosivity,
reactivity, carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil, petroleum, or
petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids,
produced waters, and other wastes associated with the exploration, development, or production of
crude oil, natural gas, or geothermal resources, (c) any flammable substances or explosives or any
radioactive materials, and (d) asbestos in any form or electrical equipment that contains any oil
or dielectric fluid containing levels of polychlorinated biphenyls in excess of 50 parts per
million.



“Hedge Agreement” means a “swap agreement” as that term is defined in Section
101(53B)(A) of the Bankruptcy Code.



“Hedge Obligations” means any and all obligations or liabilities, whether absolute or
contingent, due or to become due, now existing or hereafter arising, of Parent or its Subsidiaries
arising under, owing pursuant to, or existing in respect of Hedge Agreements entered into with one
or more of the Bank Product Providers.



“Hedge Provider” means Wells Fargo or any of its Affiliates.



“High Season” means the six fiscal month period of each Fiscal Year starting on the
first day of the fiscal month beginning in October of such Fiscal Year.



“Holdout Lender” has the meaning specified therefor in Section 14.2(a) of the
Agreement.



“HSBC Cash Collateral Account” means the deposit account held at HSBC Bank USA, N.A.
into which amounts are deposited as cash collateral for the Loan Parties’ obligations described in
clause (m) of the definition of Permitted Indebtedness.


 


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“Imported Goods Agreement” means an agreement among any customs broker or non-vessel
operating common carrier, one or more Borrowers, and Agent, in the form attached hereto as
Exhibit I-1 or otherwise in form and substance reasonably satisfactory to Agent.



“Inactive Subsidiary” means, as of any date of determination, any Subsidiary of Parent
(other than a Borrower) with respect to which each of the following conditions is satisfied: (a)
such Subsidiary had gross revenues in the prior Fiscal Year of not more than $250,000; (b) such
Subsidiary has year-to-date gross revenues in the current Fiscal Year of not more than $250,000;
(c) neither the aggregate fair market value, nor the aggregate book value, of such Subsidiary’s
assets (excluding intercompany balances, and, solely in respect of MCA, (i) security deposits held
by MCA in connection with sub-leases by MCA of Real Property sub-let by MCA as of the Closing Date,
and (ii) receivables arising out of customs duty refunds relating to MCA’s operations prior to the
Closing Date) exceeds $250,000; (d) such Subsidiary is not the owner of any Inventory or other
assets included in the Borrowing Base, nor the owner or licensee of any trademark used by any
Borrower in connection with the sale, distribution or manufacture of any Inventory; and (e) such
Subsidiary is not a party to any Material Contract. In the event any such condition is no longer
satisfied as to any Subsidiary that was previously classified as an Inactive Subsidiary, such
Subsidiary immediately shall cease to be an Inactive Subsidiary for all purposes under the
Agreement and the other Loan Documents without need for any further action or notice under the
Agreement or any other Loan Document; provided, however, that in the event facts or
circumstances existed with respect to a Subsidiary that was previously classified as an Inactive
Subsidiary that would have constituted a breach of any covenant in the Loan Documents (or caused a
Default or Event of Default) if such Subsidiary was not then classified as an Inactive Subsidiary,
such facts or circumstances shall only constitute a breach of the applicable covenant (or cause a
Default or Event of Default) to the extent that such facts or circumstances remain in effect on the
date such Subsidiary ceases to be classified as an Inactive Subsidiary.



“Indebtedness” as to any Person means (a) all obligations of such Person for borrowed
money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar
instruments, and all reimbursement or other obligations in respect of letters of credit, bankers
acceptances, time drafts and similar extensions of credit, (c) all obligations of such Person as a
lessee under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any
asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all
obligations of such Person to pay the deferred purchase price of assets (other than trade payables
incurred in the ordinary course of business and repayable in accordance with customary trade
practices), (f) all obligations of such Person owing under Hedge Agreements (which amount shall be
calculated based on the amount that would be payable by such Person if the Hedge Agreement were
terminated on the date of determination), (g) any Prohibited Preferred Stock of such Person, and
(h) any obligation of such Person guaranteeing or intended to guarantee (whether directly or
indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any
other Person that constitutes Indebtedness under any of clauses (a) through (g)
above. For purposes of this definition, (i) the amount of any Indebtedness represented by a
guaranty or other similar instrument shall be the lesser of the principal amount of the obligations
guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be
liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of
any Indebtedness described in clause (d) above shall be the lower of the amount of the
obligation and the fair market value of the assets of such Person securing such obligation.



“Indemnified Liabilities” has the meaning specified therefor in Section 10.3
of the Agreement.



“Indemnified Person” has the meaning specified therefor in Section 10.3 of the
Agreement.


 


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“Insolvency Proceeding” means any proceeding commenced by or against any Person under
any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency
law, assignments for the benefit of creditors, formal or informal moratoria, compositions,
extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.



“Intercompany Subordination Agreement” means an intercompany subordination agreement,
executed and delivered by Parent, one or more of its Subsidiaries, and Agent, the form and
substance of which is reasonably satisfactory to Agent.



“Interest Period” means, with respect to each LIBOR Rate Loan, a period commencing on
the date of the making of such LIBOR Rate Loan (or the continuation of a LIBOR Rate Loan or the
conversion of a Base Rate Loan to a LIBOR Rate Loan) and ending 1, 2, or 3 months thereafter;
provided, however, that (a) interest shall accrue at the applicable rate based upon
the LIBOR Rate from and including the first day of each Interest Period to, but excluding, the day
on which any Interest Period expires, (b) any Interest Period that would end on a day that is not a
Business Day shall be extended to the next succeeding Business Day unless such Business Day falls
in another calendar month, in which case such Interest Period shall end on the next preceding
Business Day, (c) with respect to an Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period), the Interest Period shall end on the last Business Day
of the calendar month that is 1, 2, or 3 months after the date on which the Interest Period began,
as applicable, and (d) Borrowers may not elect an Interest Period which will end after the Maturity
Date.



“In-Transit Inventory” means Inventory of Borrowers that is in the possession of a
common carrier and is in transit from a Foreign Vendor from a location outside the continental
United States to a location of Borrowers (or a location designated by Borrowers) that is in the
continental United States.



“Inventory” means inventory (as that term is defined in the Code).



“Inventory Reserves” means reserves (determined from time to time by Agent in its
Permitted Discretion) for (a) the estimated costs relating to unpaid freight charges, warehousing
or storage charges, customs brokers charges, taxes, duties, and other similar unpaid costs
associated with the acquisition and importation of In-Transit Inventory by Borrowers, plus
(b) the estimated reclamation claims of unpaid sellers of In-Transit Inventory sold to Borrowers,
plus (c) the estimated royalties and license fees that will be required to be paid in
connection with the sale or disposition of Inventory of any Borrower which bears a trademark (other
than any trademark owned by a Loan Party).



“Investment” means, with respect to any Person, any investment by such Person in any
other Person (including Affiliates) in the form of loans, guarantees, advances, capital
contributions (excluding (a) commission, travel, and similar advances to officers and employees of
such Person made in the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business), or acquisitions of Indebtedness, Stock, or all or substantially all
of the assets of such other Person (or of any division or business line of such other Person), and
any other items that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.



“IRC” means the Internal Revenue Code of 1986, as in effect from time to time.



“Issuing Lender” means WFCF or any other Lender that, at the request of Borrowers and
with the consent of Agent, agrees, in such Lender’s sole discretion, to become an Issuing Lender
for the purpose of issuing Letters of Credit or Reimbursement Undertakings pursuant to Section
2.11 of the Agreement and the Issuing Lender shall be a Lender.


 


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“Item-Eyes” has the meaning specified therefor in the preamble to the Agreement.



“JPM Chase” means JPMorgan Chase Bank, N.A.



“JPM Chase Collection Account” means one or more existing collection accounts
maintained by Parent or Borrowers with JPM Chase during the Transition Period for the receipt of
Collections.



“Junior Preferred Stock” means the Series A Junior Participating Preferred Stock, par
value $0.10 per share, of Parent.



“Lender” has the meaning set forth in the preamble to the Agreement, shall include the
Issuing Lender and the Swing Lender, and shall also include any other Person made a party to the
Agreement pursuant to the provisions of Section 13.1 of the Agreement and “Lenders”
means each of the Lenders or any one or more of them.



“Lender Group” means each of the Lenders (including the Issuing Lender and the Swing
Lender) and Agent, or any one or more of them.



“Lender Group Expenses” means, without duplication, all (a) costs or expenses
(including taxes, and insurance premiums) required to be paid by Parent or its Subsidiaries under
any of the Loan Documents that are paid, advanced, or incurred by the Lender Group, (b)
out-of-pocket fees or charges paid or incurred by Agent in connection with the Lender Group’s
transactions with Parent or its Subsidiaries under any of the Loan Documents, including, fees or
charges for photocopying, notarization, couriers and messengers, telecommunication, public record
searches (including tax lien, litigation, and UCC searches and including searches with the patent
and trademark office, the copyright office, or the department of motor vehicles), filing,
recording, publication, appraisal (including periodic collateral appraisals or business valuations
to the extent of the fees and charges (and up to the amount of any limitation) contained in the
Agreement or the Fee Letter), real estate surveys, real estate title policies and endorsements, and
environmental audits, (c) out-of-pocket costs and expenses incurred by Agent in the disbursement of
funds to Borrowers or other members of the Lender Group (by wire transfer or otherwise), (d)
out-of-pocket charges paid or incurred by Agent resulting from the dishonor of checks payable by or
to any Loan Party, (e) reasonable out-of-pocket costs and expenses paid or incurred by the Lender
Group to correct any default or enforce any provision of the Loan Documents, or during the
continuance of an Event of Default, in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated, (f) reasonable out-of-pocket audit
fees and expenses (including travel, meals, and lodging) of Agent related to any inspections or
audits to the extent of the fees and charges (and up to the amount of any limitation) contained in
the Agreement or the Fee Letter, (g) reasonable out-of-pocket costs and expenses of third party
claims or any other suit paid or incurred by the Lender Group in enforcing or defending the Loan
Documents or in connection with the transactions contemplated by the Loan Documents or the Lender
Group’s relationship with Parent or any of its Subsidiaries, (h) Agent’s reasonable costs and
expenses (including reasonable attorneys’ fees) incurred in advising, structuring, drafting,
reviewing, administering (including travel, meals, and lodging), or amending the Loan Documents,
and (i) Agent’s and each Lender’s reasonable costs and expenses (including reasonable attorneys,
accountants, consultants, and other advisors fees and expenses) incurred in terminating, enforcing
(including attorneys, accountants, consultants, and other advisors fees and expenses incurred in
connection with a “workout,” a “restructuring,” or an Insolvency Proceeding concerning Parent or
any of its Subsidiaries or in exercising rights or remedies under the Loan Documents), or defending
the Loan Documents, irrespective of whether suit is brought, or in taking any Remedial Action
concerning the Collateral; provided, that, (1) without limitation of the inclusion of costs



 


-17-












 





and expenses of Agent’s advisors (including attorneys, accountants, consultants, and
other advisors) as Lender Group Expenses, the costs and expenses of advisors to the other Lenders
that are included as Lender Group Expenses under this clause (i) shall be limited to the
costs and expenses (including reasonable attorneys’ fees) of one law firm as counsel to such
Lenders, one accountant to such Lenders, one consultant to such Lenders, and one other advisor of
any category to such Lenders, and (2) to the extent reasonably available to Agent and Lenders,
Agent and Lenders shall provide to Borrowers reasonable documentation with respect to costs and
expenses of third-party service providers that are included as Lender Group Expenses, which
documentation may take the form of a summary invoice and need not be provided to Borrowers as a
condition precedent to Agent’s right to pay any Lender Group Expenses or charge the Loan Account
therefor.




“Lender Group Representatives” has the meaning specified therefor in Section
17.9 of the Agreement.



“Lender-Related Person” means, with respect to any Lender, such Lender, together with
such Lender’s Affiliates, officers, directors, employees, attorneys, and agents.



“Letter of Credit” means a standby or trade letter of credit issued by Issuing Lender
or Underlying Issuer, as the context requires, for the account of Parent or a Borrower.



“Letter of Credit Collateralization” means either (a) providing cash collateral
(pursuant to documentation reasonably satisfactory to Agent, including provisions that specify that
the Letter of Credit fee and all usage charges set forth in the Agreement will continue to accrue
while the Letters of Credit are outstanding) to be held by Agent for the benefit of those Lenders
with a Commitment in an amount equal to 105% of the then existing Letter of Credit Usage, (b)
causing the Letters of Credit to be returned to the Issuing Lender, or (c) providing Agent with a
standby letter of credit, in form and substance reasonably satisfactory to Agent, from a commercial
bank acceptable to Agent (in its sole discretion) in an amount equal to 105% of the then existing
Letter of Credit Usage (it being understood that the Letter of Credit fee and all usage charges set
forth in the Agreement will continue to accrue while the Letters of Credit are outstanding and that
any such fees that accrue must be an amount that can be drawn under any such standby letter of
credit).



“Letter of Credit Disbursement” means a payment made by Issuing Lender or Underlying
Issuer pursuant to a Letter of Credit.



“Letter of Credit Usage” means, as of any date of determination, the aggregate undrawn
amount of all outstanding Letters of Credit.



“LIBOR Deadline” has the meaning specified therefor in Section 2.12(b)(i) of
the Agreement.



“LIBOR Notice” means a written notice in the form of Exhibit L-1.



“LIBOR Option” has the meaning specified therefor in Section 2.12(a) of the
Agreement.



“LIBOR Rate” means the rate per annum rate appearing on Bloomberg L.P.’s (the
“Service”) Page BBAM1/(Official BBA USD Dollar Libor Fixings) (or on any successor or
substitute page of such Service, or any successor to or substitute for such Service) 2 Business
Days prior to the commencement of the requested Interest Period, for a term and in an amount
comparable to the Interest Period and the amount of the LIBOR Rate Loan requested (whether as an
initial LIBOR Rate Loan or as a continuation of a LIBOR Rate Loan or as a conversion of a Base Rate
Loan to a LIBOR Rate Loan) by
Borrowers in accordance with the Agreement, which determination shall be conclusive in the
absence of manifest error.


 


-18-









 





“LIBOR Rate Loan” means each portion of an Advance that bears interest at a rate
determined by reference to the LIBOR Rate.



“LIBOR Rate Margin” means 2.50%.



“Licensor Agreement” means a letter or agreement from any licensor of any trademark
under which a Borrower sells Inventory (other than any trademark owned by a Loan Party), in form
and substance reasonably satisfactory to Agent, with respect to the rights of Agent to use such
trademark to sell or otherwise dispose of such Inventory.



“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge,
deposit arrangement, encumbrance, easement, lien (statutory or other), security interest, or other
security arrangement and any other preference, priority, or preferential arrangement of any kind or
nature whatsoever, including any conditional sale contract or other title retention agreement, the
interest of a lessor under a Capital Lease and any synthetic or other financing lease having
substantially the same economic effect as any of the foregoing.



“Loan Account” has the meaning specified therefor in Section 2.9 of the
Agreement.



“Loan Documents” means the Agreement, any Borrowing Base Certificate, the Controlled
Account Agreements, the Control Agreements, the Copyright Security Agreement, the Fee Letter, the
Guaranty, any Intercompany Subordination Agreement, the Letters of Credit, any Mortgages, the
Patent Security Agreement, the Security Agreement, the Trademark Security Agreement, any note or
notes executed by Borrowers in connection with the Agreement and payable to any member of the
Lender Group, any letter of credit application entered into by Borrowers in connection with the
Agreement, and any other agreement entered into, now or in the future, by Parent or any of its
Subsidiaries and any member of the Lender Group in connection with the Agreement.



“Loan Party” means any Borrower or any Guarantor.



“Low Season” means the six fiscal month period of each Fiscal Year starting on the
first day of the fiscal month beginning in April of such Fiscal Year.



“Margin Stock” as defined in Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.



“Material Adverse Change” means (a) a material adverse change in the business,
operations, results of operations, assets, liabilities or financial condition of Parent and its
Subsidiaries, taken as a whole, (b) a material impairment of the ability of the Loan Parties, taken
as a whole, to perform their obligations under the Loan Documents to which they are parties or of
the Lender Group’s ability to enforce the Obligations or realize upon the Collateral, or (c) a
material impairment of the enforceability or priority of Agent’s Liens with respect to the
Collateral as a result of an action or failure to act on the part of Parent or its Subsidiaries.



“Material Contract” means, with respect to any Person, (i) each contract or agreement
to which such Person or any of its Subsidiaries is a party involving aggregate consideration
payable to or by such Person or such Subsidiary of $3,000,000 or more in any Fiscal Year (other
than purchase orders in the ordinary course of the business of such Person or such Subsidiary and
other than contracts that by
their terms may be terminated by such Person or Subsidiary in the ordinary course of its
business upon less than 60 days notice without penalty or premium), and (ii) all other contracts or
agreements, the loss of which could reasonably be expected to result in a Material Adverse Change.


 


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“Maturity Date” has the meaning specified therefor in Section 3.3 of the
Agreement.



“Maximum Revolver Amount” means $50,000,000, decreased by the amount of reductions in
the Commitments made in accordance with Section 2.4(c) of the Agreement.



“MCA” means Marisa Christina Apparel, Inc., a Delaware corporation.



“MCI” means Marisa Christina, Inc., a Delaware corporation.



“Moody’s” has the meaning specified therefor in the definition of Cash Equivalents.



“Mortgages” means, individually and collectively, one or more mortgages, deeds of
trust, or deeds to secure debt, executed and delivered by Parent or its Subsidiaries in favor of
Agent, in form and substance reasonably satisfactory to Agent, that encumber any Real Property
Collateral.



“Net Income” means, for any period, the net income of Parent and its Subsidiaries, as
determined on a consolidated basis in accordance with GAAP, plus, to the extent such costs
were deducted from net income during such period, (a) any non-cash write-off incurred during such
period as a result of the special directors and officers insurance policy purchased by Parent in
December 2007, but not to exceed $3,400,000, (b) any non-cash expense for equity incentive
compensation issued by Parent, but not to exceed $600,000 in any Fiscal Year, and (c) any non-cash
loss incurred from the disposal of fixed assets, but not to exceed $500,000.



“Net Liquidation Percentage” means the percentage of the book value of Borrowers’
Inventory that is estimated to be recoverable in an orderly liquidation of such Inventory net of
all associated costs and expenses of such liquidation, such percentage to be as determined from
time to time by an appraisal company selected by Agent.



“Obligations” means, without duplication, (a) all loans (including the Advances
(inclusive of Protective Advances and Swing Loans)), debts, principal, interest (including any
interest that accrues after the commencement of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding),
reimbursement or indemnification obligations with respect to Reimbursement Undertakings or with
respect to Letters of Credit (irrespective of whether contingent), premiums, liabilities (including
all amounts charged to the Loan Account pursuant to the Agreement), obligations (including
indemnification obligations), fees (including the fees provided for in the Fee Letter), Lender
Group Expenses (including any fees or expenses that accrue after the commencement of an Insolvency
Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such
Insolvency Proceeding), guaranties, covenants, and duties of any kind and description owing by any
Loan Party pursuant to or evidenced by the Agreement or any of the other Loan Documents and
irrespective of whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and including all interest not
paid when due and all other expenses or other amounts that Borrowers are required to pay or
reimburse by the Loan Documents or by law or otherwise in connection with the Loan Documents, (b)
all debts, liabilities, or obligations (including reimbursement obligations, irrespective of
whether contingent) owing by Borrowers or any other Loan Party to an Underlying Issuer now or
hereafter arising from or in respect of Underlying Letters of Credit, and (c) all Bank Product
Obligations. Any reference in the Agreement or in
the Loan Documents to the Obligations shall include all or any portion thereof and any
extensions, modifications, renewals, or alterations thereof, both prior and subsequent to any
Insolvency Proceeding.


 


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“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the
Treasury.



“Originating Lender” has the meaning specified therefor in Section 13.1(e) of
the Agreement.



“Overadvance” has the meaning specified therefor in Section 2.5 of the
Agreement.



“Parent” has the meaning specified therefor in the preamble to the Agreement.



“Participant” has the meaning specified therefor in Section 13.1(e) of the
Agreement.



“Patent Security Agreement” has the meaning specified therefor in the Security
Agreement.



“Patriot Act” has the meaning specified therefor in Section 4.18 of the
Agreement.



“Payoff Date” means the first date on which all of the Obligations are paid in full
and the Commitments of the Lenders are terminated.



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


 


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“Permitted Discretion” means a determination made in the exercise of reasonable (from
the perspective of an asset-based lender providing the type of credit facility contemplated by the
Agreement) business judgment.



“Permitted Dispositions” means:



(a) sales, abandonment, or other dispositions of Equipment that is substantially worn,
damaged, or obsolete in the ordinary course of business,



(b) sales of Inventory to buyers in the ordinary course of business,



(c) the use or transfer of money or Cash Equivalents in a manner that is not prohibited by the
terms of the Agreement or the other Loan Documents,



(d) the licensing, on a non-exclusive basis, of patents, trademarks, copyrights, and other
intellectual property rights in the ordinary course of business,



(e) sales or other dispositions of Equipment in the ordinary course of business for fair
market value, to the extent that (i) such Equipment is exchanged for credit against the purchase
price of similar replacement Equipment or (ii) the proceeds are reasonably promptly applied to pay
the purchase price of such replacement Equipment,



(f) the granting of Permitted Liens,



(g) the sale of Cash Equivalents, for cash or other Cash Equivalents, in the ordinary course
of business for fair market value,



(h) the sale or transfer of assets by any Loan Party to another Loan Party or by a non-Loan
Party to a Loan Party or another non-Loan Party, so long as any Liens granted in favor of Agent in
the assets so sold or transferred remain in full force and effect and perfected to at least the
extent as in effect immediately prior to such sale or transfer,



(i) dispositions permitted by Section 6.3 of the Agreement,



(j) the sale or discount, in each case without recourse, of Accounts arising in the ordinary
course of business, but only in connection with the compromise or collection thereof,



(k) any involuntary loss, damage or destruction of property,



(l) any involuntary condemnation, seizure or taking, by exercise of the power of eminent
domain or otherwise, or confiscation or requisition of use of property,



(m) the leasing or subleasing of assets of Parent or its Subsidiaries in the ordinary course
of business,



(n) the sale or issuance of Stock (other than Prohibited Preferred Stock) of Parent,



(o) the lapse of registered patents, trademarks and other intellectual property of Parent and
its Subsidiaries to the extent not economically desirable in the conduct of their business and so
long as such lapse is not materially adverse to the interests of the Lenders,


 


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(p) the making of a Restricted Junior Payment that is expressly permitted to be made pursuant
to the Agreement,



(q) the making of a Permitted Investment,



(r) the sale of the works of art listed on Schedule P-3,



(s) the release of a claim against a third party pursuant to settlement thereof,



(t) the sale of Factored Accounts to the Factor pursuant to a Permitted Factoring Sale, and



(u) dispositions of assets (other than Accounts, intellectual property, licenses, Stock of
Subsidiaries of Parent, or Material Contracts) not otherwise permitted in clauses (a)
through (t) above so long as made at fair market value and the aggregate fair market value
of all assets disposed of in all such dispositions since the Closing Date (including the proposed
disposition) would not exceed $1,000,000.



“Permitted Factoring Sale” means the sale and/or assignment of Factored Accounts in
the ordinary course of business pursuant to a Factoring Agreement that is reasonably acceptable to
Agent, so long as an Assignment of Factoring Proceeds is in effect with respect thereto.



“Permitted Indebtedness” means:



(a) Indebtedness evidenced by the Agreement or the other Loan Documents, as well as
Indebtedness owed to Underlying Issuers with respect to Underlying Letters of Credit,



(b) Indebtedness set forth on Schedule 4.19 and any Refinancing Indebtedness in
respect of such Indebtedness,



(c) Permitted Purchase Money Indebtedness and any Refinancing Indebtedness in respect of such
Indebtedness,



(d) endorsement of instruments or other payment items for deposit,



(e) Indebtedness consisting of (i) unsecured guarantees incurred in the ordinary course of
business with respect to surety and appeal bonds, performance bonds, bid bonds, appeal bonds,
completion guarantee and similar obligations; (ii) unsecured guarantees arising with respect to
customary indemnification obligations to purchasers in connection with Permitted Dispositions; and
(iii) unsecured guarantees with respect to Indebtedness of Parent or one of its Subsidiaries, to
the extent that the Person that is obligated under such guaranty could have incurred such
underlying Indebtedness,



(f) Indebtedness incurred in the ordinary course of business under performance, surety,
statutory, and appeal bonds,



(g) Indebtedness owed to any Person providing property, casualty, liability, or other
insurance to Parent or any of its Subsidiaries, so long as the amount of such Indebtedness is not
in excess of the amount of the unpaid cost of, and shall be incurred only to defer the cost of,
such insurance for the year in which such Indebtedness is incurred and such Indebtedness is
outstanding only during such year,


 


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(h) the incurrence by Parent or its Subsidiaries of Indebtedness under Hedge Agreements that
are incurred for the bona fide purpose of hedging the interest rate, commodity, or foreign currency
risks associated with Parent’s and its Subsidiaries’ operations and not for speculative purposes,



(i) Indebtedness incurred in respect of credit cards, credit card processing services, debit
cards, stored value cards, purchase cards (including so-called “procurement cards” or “P-cards”),
or Cash Management Services, in each case, incurred in the ordinary course of business,



(j) unsecured Indebtedness of Parent or any other Loan Party owing to former employees,
officers, or directors (or any spouses, ex-spouses, or estates of any of the foregoing) incurred in
connection with the repurchase by such Loan Party of its Stock that has been issued to such
Persons, so long as (i) no Default or Event of Default has occurred and is continuing or would
result from the incurrence of such Indebtedness, (ii) the aggregate amount of all such Indebtedness
outstanding at any one time does not exceed $1,000,000, and (iii) such Indebtedness is subordinated
to the Obligations on terms and conditions reasonably acceptable to Agent,



(k) Indebtedness composing Permitted Investments,



(l) Acquired Indebtedness assumed in connection with any Permitted Acquisition,



(m) reimbursement and other obligations with respect to the letters of credit described in the
payoff letter delivered by HSBC Bank USA, N.A. on the Closing Date, provided no such letters of
credit shall be renewed or otherwise extended without Agent’s consent, and



(n) unsecured Indebtedness not otherwise described in the preceding clauses of the definition
of Permitted Indebtedness not exceeding $3,000,000 in aggregate at any one time outstanding.



“Permitted Intercompany Advances” means loans made by (a) a Loan Party to another Loan
Party, (b) a non-Loan Party to another non-Loan Party, and (c) a non-Loan Party to a Loan Party, so
long as the parties thereto are party to an Intercompany Subordination Agreement.



“Permitted Investments” means:



(a) Investments in cash and Cash Equivalents,



(b) Investments in negotiable instruments deposited or to be deposited for collection in the
ordinary course of business,



(c) advances made in connection with purchases of goods or services in the ordinary course of
business (including loans made to vendors in the ordinary course of business for the sole purpose
of purchasing raw materials to be used by vendors for the development and manufacture of samples
and goods exclusively for the Loan Parties),



(d) Investments received in settlement of amounts due to any Loan Party or any of its
Subsidiaries effected in the ordinary course of business or owing to any Loan Party or any of its
Subsidiaries as a result of Insolvency Proceedings involving an Account Debtor or upon the
foreclosure or enforcement of any Lien in favor of a Loan Party or its Subsidiaries,



(e) Investments owned by any Loan Party or any of its Subsidiaries on the Closing Date and set
forth on Schedule P-1,


 


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(f) guarantees permitted under the definition of Permitted Indebtedness,



(g) Permitted Intercompany Advances,



(h) Stock or other securities acquired in connection with the satisfaction or enforcement of
Indebtedness or claims due or owing to a Loan Party or its Subsidiaries (in bankruptcy of customers
or suppliers or otherwise outside the ordinary course of business) or as security for any such
Indebtedness or claims,



(i) deposits of cash, or in the form of a letter of credit, made in the ordinary course of
business to secure performance of operating leases,



(j) non-cash loans to employees, officers, and directors of Parent or any of its Subsidiaries
for the purpose of purchasing Stock in Parent so long as the proceeds of such loans are used in
their entirety to purchase such stock in Parent,



(k) Permitted Acquisitions,



(l) Investments in the form of capital contributions and the acquisition of Stock made by any
Loan Party in any other Loan Party,



(m) Investments resulting from entering into (i) Bank Product Agreements, or (ii) agreements
relative to Indebtedness that is permitted under clause (i) of the definition of Permitted
Indebtedness, and



(n) so long as no Event of Default has occurred and is continuing or would result therefrom,
any other Investments in an aggregate amount not to exceed $500,000 during the term of the
Agreement.



“Permitted Liens” means



(a) Liens granted to, or for the benefit of, Agent to secure the Obligations,



(b) Liens for unpaid taxes, assessments, or other governmental charges or levies that either
(i) are not yet delinquent, or (ii) do not have priority over Agent’s Liens and the underlying
taxes, assessments, or charges or levies are the subject of Permitted Protests,



(c) judgment Liens arising solely as a result of the existence of judgments, orders, or awards
that do not constitute an Event of Default under Section 8.3 of the Agreement,



(d) Liens set forth on Schedule P-2; provided, however, that to qualify as a
Permitted Lien, any such Lien described on Schedule P-2 shall only secure the Indebtedness
that it secures on the Closing Date and any Refinancing Indebtedness in respect thereof,



(e) the interests of lessors under operating leases and non-exclusive licensors under license
agreements,



(f) purchase money Liens or the interests of lessors under Capital Leases to the extent that
such Liens or interests secure Permitted Purchase Money Indebtedness and so long as (i) such Lien
attaches only to the asset purchased or acquired and the proceeds thereof, and (ii) such Lien only
secures the Indebtedness that was incurred to acquire the asset purchased or acquired or any
Refinancing Indebtedness in respect thereof,


 


-25-









 





(g) Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of business and not
in connection with the borrowing of money, and which Liens either (i) are for sums not yet
delinquent, or (ii) are the subject of Permitted Protests,



(h) Liens on amounts deposited to secure Parent’s and its Subsidiaries’ obligations in
connection with worker’s compensation or other unemployment insurance,



(i) Liens on amounts deposited to secure Parent’s and its Subsidiaries’ obligations in
connection with the making or entering into of bids, tenders, or leases in the ordinary course of
business and not in connection with the borrowing of money,



(j) Liens on amounts deposited to secure Parent’s and its Subsidiaries’ reimbursement
obligations with respect to surety or appeal bonds obtained in the ordinary course of business,



(k) with respect to any Real Property, easements, rights of way, and zoning restrictions that
do not materially interfere with or impair the use or operation thereof,



(l) non-exclusive licenses of patents, trademarks, copyrights, and other intellectual property
rights in the ordinary course of business,



(m) Liens that are replacements of Permitted Liens to the extent that the original
Indebtedness is the subject of permitted Refinancing Indebtedness and so long as the replacement
Liens only encumber those assets that secured the original Indebtedness (plus improvements
thereon),



(n) rights of setoff or bankers’ liens upon deposits of cash in favor of banks or other
depository institutions, solely to the extent incurred in connection with the maintenance of such
deposit accounts in the ordinary course of business,



(o) Liens granted in the ordinary course of business on the unearned portion of insurance
premiums securing the financing of insurance premiums to the extent the financing is permitted
under the definition of Permitted Indebtedness,



(p) Liens in Factored Accounts (and returned goods and intangible assets relating thereto)
pursuant to a Permitted Factoring Sale,



(q) Liens on Real Property or Equipment assumed in connection with a Permitted Acquisition,
but solely to the extent such Liens secure Acquired Indebtedness,



(r) Liens in favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods, and



(s) Liens in favor of HSBC Bank USA, N.A. on the HSBC Cash Collateral Account and amounts
deposited therein.



“Permitted Preferred Stock” means and refers to any Preferred Stock issued by Parent
(and not by one or more of its Subsidiaries) that is not Prohibited Preferred Stock.


 


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“Permitted Protest” means the right of Parent or any of its Subsidiaries to protest
any Lien (other than any Lien that secures the Obligations), taxes (other than payroll taxes or
taxes that are the subject of a United States federal tax lien), or rental payment, provided that
(a) a reserve with respect to such obligation is established on Parent’s or its Subsidiaries’ books
and records in such amount as is required under GAAP, (b) any such protest is instituted promptly
and prosecuted diligently by Parent or its Subsidiary, as applicable, in good faith, and (c) while
any such protest is pending, there will be no impairment of the enforceability, validity, or
priority of any of Agent’s Liens.



“Permitted Purchase Money Indebtedness” means, as of any date of determination,
Purchase Money Indebtedness incurred after the Closing Date in an aggregate principal amount
outstanding at any one time not in excess of $1,000,000.



“Person” means natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land
trusts, business trusts, or other organizations, irrespective of whether they are legal entities,
and governments and agencies and political subdivisions thereof.



“Preferred Stock” means, as applied to the Stock of any Person, the Stock of any class
or classes (however designated) that is preferred with respect to the payment of dividends, or as
to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Stock of any other class of such Person.



“Primary Obligor” means, as of any date of determination, (a) Parent, (b) each
Borrower, and (c) each other Guarantor that, as of the date of determination, is not an Inactive
Subsidiary.



“Prior Season Inventory” means finished goods Inventory of any Borrower which was
manufactured for sale in a shipping season prior to the current shipping season of such Borrower
and which Inventory has been approved by Agent as Prior Season Inventory (for purposes of this
definition, the term “shipping season” means the period of time in which Inventory of any Borrower
is shipped for sale, such period to be determined in a manner consistent with such Borrower’s past
business practices).



“Prohibited Preferred Stock” means any Preferred Stock that by its terms is
mandatorily redeemable or subject to any other payment obligation (including any obligation to pay
dividends, other than dividends of shares of Preferred Stock of the same class and series payable
in kind or dividends of shares of common stock) on or before a date that is less than 1 year after
the Maturity Date, or, on or before the date that is less than 1 year after the Maturity Date, is
redeemable at the option of the holder thereof for cash or assets or securities (other than
distributions in kind of shares of Preferred Stock of the same class and series or of shares of
common stock); provided, however, that “Prohibited Preferred Stock” shall not
include the Rights or Junior Preferred Stock.



“Projections” means Parent’s forecasted (a) balance sheets, (b) profit and loss
statements, and (c) cash flow statements, all prepared on a consolidated basis consistent with
Parent’s historical financial statements, together with appropriate supporting details and a
statement of underlying assumptions.



“Pro Rata Share” means, as of any date of determination:



(a) with respect to a Lender’s obligation to make Advances and right to receive payments of
principal, interest, fees, costs, and expenses with respect thereto, (i) prior to the Commitments
being terminated or reduced to zero, the percentage obtained by dividing (y) such Lender’s
Commitment, by (z) the aggregate Commitments of all Lenders, and (ii) from and after the time that
the
Commitments have been terminated or reduced to zero, the percentage obtained by dividing (y)
the outstanding principal amount of such Lender’s Advances by (z) the outstanding principal amount
of all Advances,


 


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(b) with respect to a Lender’s obligation to participate in Letters of Credit and
Reimbursement Undertakings, to reimburse the Issuing Lender, and right to receive payments of fees
with respect thereto, (i) prior to the Commitments being terminated or reduced to zero, the
percentage obtained by dividing (y) such Lender’s Commitment, by (z) the aggregate Commitments of
all Lenders, and (ii) from and after the time that the Commitments have been terminated or reduced
to zero, the percentage obtained by dividing (y) the outstanding principal amount of such Lender’s
Advances by (z) the outstanding principal amount of all Advances; provided,
however, that if all of the Advances have been repaid in full and Letters of Credit remain
outstanding, Pro Rata Share under this clause shall be determined based upon subclause (i)
of this clause as if the Commitments had not been terminated or reduced to zero and based upon the
Commitments as they existed immediately prior to their termination or reduction to zero, and



(c) with respect to all other matters as to a particular Lender (including the indemnification
obligations arising under Section 15.7 of the Agreement), (i) prior to the Commitments
being terminated or reduced to zero, the percentage obtained by dividing (y) such Lender’s
Commitment, by (z) the aggregate amount of Commitments of all Lenders, and (ii) from and after the
time that the Commitments have been terminated or reduced to zero, the percentage obtained by
dividing (y) the outstanding principal amount of such Lender’s Advances, by (z) the outstanding
principal amount of all Advances; provided, however, that if all of the Advances
have been repaid in full and Letters of Credit remain outstanding, Pro Rata Share under this clause
shall be determined based upon subclause (i) of this clause as if the Commitments had not
been terminated or reduced to zero and based upon the Commitments as they existed immediately prior
to their termination or reduction to zero.



“Protective Advances” has the meaning specified therefor in Section 2.3(d)(i)
of the Agreement.



“Purchase Money Indebtedness” means Indebtedness (other than the Obligations, but
including Capitalized Lease Obligations), incurred at the time of, or within 90 days after, the
acquisition of any fixed assets for the purpose of financing all or any part of the acquisition
cost thereof.



“Qualified Cash” means, as of any date of determination, the amount of all
unrestricted cash and Cash Equivalents of Parent and Borrowers (other than Restricted Cash) that is
in a Deposit Account or Securities Account that is the subject of a Control Agreement and is
maintained in the United States with Wells Fargo or an Affiliate thereof; provided, that,
solely during the Transition Period, “Qualified Cash” shall also include the available
amount of cash of Parent and Borrowers that is in a Deposit Account maintained in the United States
with JPM Chase (other than the JPM Chase Collection Account), which such Deposit Account is the
subject of a Control Agreement.



“Qualified Import Letter of Credit” means a Letter of Credit that (a) is issued to
facilitate the purchase by Borrowers of Inventory that would be Eligible Inventory but for the fact
that such Inventory is the subject of a Qualified Import Letter of Credit (it being understood that
no Inventory shall be included in the Borrowing Base as Eligible Inventory if such Inventory is the
subject of a Qualified Import Letter of Credit), (b) is in form and substance acceptable to Agent,
and (c) is issued to support an Underlying Letter of Credit that only is drawable by the
beneficiary thereof by the presentation of, among other documents, an Acceptable Bill of Lading.


 


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“Real Property” means any estates or interests in real property now owned or hereafter
acquired by Parent or its Subsidiaries and the improvements thereto.



“Real Property Collateral” means the Real Property (if any) identified on Schedule
R-1 and any Real Property hereafter acquired by Parent or its Subsidiaries that is required to
be subjected to a Mortgage in accordance with Section 5.11 or 5.12 of the
Agreement.



“Record” means information that is inscribed on a tangible medium or that is stored in
an electronic or other medium and is retrievable in perceivable form.



“Refinancing Indebtedness” means refinancings, renewals, or extensions of Indebtedness
so long as:



(a) such refinancings, renewals, or extensions do not result in an increase in the principal
amount of the Indebtedness so refinanced, renewed, or extended, other than by the amount of
premiums paid thereon and the fees and expenses incurred in connection therewith and by the amount
of unfunded commitments with respect thereto,



(b) such refinancings, renewals, or extensions do not result in a shortening of the average
weighted maturity (measured as of the refinancing, renewal, or extension) of the Indebtedness so
refinanced, renewed, or extended, nor are they on terms or conditions that, taken as a whole, are
or could reasonably be expected to be materially adverse to the interests of the Lenders,



(c) if the Indebtedness that is refinanced, renewed, or extended was subordinated in right of
payment to the Obligations, then the terms and conditions of the refinancing, renewal, or extension
must include subordination terms and conditions that are at least as favorable to the Lender Group
as those that were applicable to the refinanced, renewed, or extended Indebtedness, and



(d) the Indebtedness that is refinanced, renewed, or extended is not recourse to any Person
that is liable on account of the Obligations other than those Persons which were obligated with
respect to the Indebtedness that was refinanced, renewed, or extended.



“Reimbursement Undertaking” has the meaning specified therefor in Section
2.11(a) of the Agreement.



“Remedial Action” means all actions taken to (a) clean up, remove, remediate, contain,
treat, monitor, assess, evaluate, or in any way address Hazardous Materials in the indoor or
outdoor environment, (b) prevent or minimize a release or threatened release of Hazardous Materials
so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor
or outdoor environment, (c) restore or reclaim natural resources or the environment, (d) perform
any pre-remedial studies, investigations, or post-remedial operation and maintenance activities, or
(e) conduct any other actions with respect to Hazardous Materials required by Environmental Laws.



“Replacement Lender” has the meaning specified therefor in Section 2.13(b) of
the Agreement.



“Report” has the meaning specified therefor in Section 15.16 of the Agreement.



“Required Lenders” means, at any time, Lenders whose aggregate Pro Rata Shares
(calculated under clause (c) of the definition of Pro Rata Shares) exceed 50%;
provided, however, that at any time there are 2 or more Lenders, “Required
Lenders” must include at least 2 Lenders.


 


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“Required Licensor” means, with respect to Inventory of a Borrower that is sold under
a licensed trademark, each licensor that has licensed such trademark to such Borrower to the extent
that the gross revenues received (or expected to be received) by Borrowers with respect to the sale
of Inventory subject to such licensed trademark (and any related licensed trademarks) equals or
exceeds $5,000,000 for any twelve month period (taking into account sales as well as unfilled
orders). As of the Closing Date, “Required Licensors” are Geoffrey Beene, Inc. (as to the
“Geoffrey Beene” licensed trademark), Levi Strauss & Co. (as to the “Dockers” and “Dockers Premium”
licensed trademarks), Alexander Julian, Inc. (as to the “Alexander Julian” licensed trademark, and
JA Apparel Corp. (as to the “JOE Joseph Abboud” licensed trademark).



“Required Liquidity” means that Excess Liquidity exceeds $25,000,000.



“Responsible Officer” means each of the chief executive officer, president,
controller, chief financial officer, treasurer, corporate secretary or general counsel of any Loan
Party, as applicable, or any other officer having substantially the same authority and
responsibility.



“Restricted Cash” means, as of any date of determination, the available amount of
unrestricted cash of Borrowers that is in a Deposit Account maintained in the United States with
Wells Fargo, and which such Deposit Account is the subject of a Control Agreement that provides
Agent sole dominion and control over such Deposit Account and the cash contained therein (including
the sole right to authorize the release of cash therefrom); provided, that, (a) Borrowers
may request that Agent authorize the release of cash from any such Deposit Account, and Agent shall
promptly thereafter endeavor to cause the release of such cash from such Deposit Account to the
Designated Account, so long as (i) Borrowers provide Agent written notice of such request at least
2 Business Days prior to the proposed release date, which notice shall set forth the Dollar amount
of cash proposed to be released and wire transfer instructions for the Designated Account, (ii) no
Default or Event of Default has occurred and is continuing or would result therefrom, and (iii)
Excess Availability would not be less than $3,000,000 after giving effect to the release of such
cash from such Deposit Account; (b) solely during the Transition Period, “Restricted Cash” shall
also include the available amount of cash of Borrowers that is in a Deposit Account maintained in
the United States with JPM Chase and used by Borrowers for the receipt of Collections, and which
such Deposit Account is the subject of a Control Agreement that provides that all available funds
contained therein are to be transferred to a Deposit Account (that is subject to a Control
Agreement) maintained with Wells Fargo or otherwise per Agent’s instructions; and (c) in no event
shall “Restricted Cash” include any Qualified Cash.



“Restricted Junior Payment” means to (a) declare or pay any dividend or make any other
payment or distribution on account of Stock issued by Parent (including any payment in connection
with any merger or consolidation involving Parent) or to the direct or indirect holders of Stock
issued by Parent in their capacity as such (other than dividends or distributions payable in Stock
(other than Prohibited Preferred Stock) issued by Parent, or (b) purchase, redeem, or otherwise
acquire or retire for value (including in connection with any merger or consolidation involving
Parent) any Stock issued by Parent.



“Revolver Usage” means, as of any date of determination, the sum of (a) the amount of
outstanding Advances, plus (b) the amount of the Letter of Credit Usage.



“Rights” means the rights to purchase Junior Preferred Stock as contemplated by the
Rights Plan.



“Rights Plan” means that certain Rights Agreement, dated as of August 13, 2008, by and
between Parent and Mellon Investor Services LLC, as Rights Agent, as amended from time to time.


 


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“Sanctioned Entity” means (a) a country or a government of a country, (b) an agency of
the government of a country, (c) an organization directly or indirectly controlled by a country or
its government, (d) a Person resident in or determined to be resident in a country, in each case,
that is subject to a country sanctions program administered and enforced by OFAC.



“Sanctioned Person” means a person named on the list of Specially Designated Nationals
maintained by OFAC.



“S&P” has the meaning specified therefor in the definition of Cash Equivalents.



“Scott James” has the meaning specified therefor in the preamble to the Agreement.



“SEC” means the United States Securities and Exchange Commission and any successor
thereto.



“Securities Account” means a securities account (as that term is defined in the Code).



“Securities Act” means the Securities Act of 1933, as amended from time to time, and
any successor statute.



“Security Agreement” means a security agreement, dated as of even date with the
Agreement, in form and substance reasonably satisfactory to Agent, executed and delivered by
Borrowers and Guarantors to Agent.



“Settlement” has the meaning specified therefor in Section 2.3(e)(i) of the
Agreement.



“Settlement Date” has the meaning specified therefor in Section 2.3(e)(i) of
the Agreement.



“Solvent” means, with respect to any Person on a particular date, that, at fair
valuations, the sum of such Person’s assets is greater than all of such Person’s debts.



“Stock” means all shares, options, warrants, interests, participations, or other
equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting,
including common stock, preferred stock, or any other “equity security” (as such term is defined in
Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).



“Subsidiary” of a Person means a corporation, partnership, limited liability company,
or other entity in which that Person directly or indirectly owns or controls the shares of Stock
having ordinary voting power to elect a majority of the board of directors (or appoint other
comparable managers) of such corporation, partnership, limited liability company, or other entity.



“Swing Lender” means WFCF or any other Lender that, at the request of Borrowers and
with the consent of Agent agrees, in such Lender’s sole discretion, to become the Swing Lender
under Section 2.3(b) of the Agreement.



“Swing Loan” has the meaning specified therefor in Section 2.3(b) of the
Agreement.


 


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“Taxes” means any taxes, levies, imposts, duties, fees, assessments or other charges
of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or
taxing authority thereof or therein with respect to such payments and all interest, penalties or
similar liabilities
with respect thereto; provided, however, that Taxes shall exclude (i) any tax
imposed on the net income or net profits of any Lender or any Participant (including any branch
profits taxes), in each case imposed by the jurisdiction (or by any political subdivision or taxing
authority thereof) in which such Lender or such Participant is organized or the jurisdiction (or by
any political subdivision or taxing authority thereof) in which such Lender’s or such Participant’s
principal office is located in each case as a result of a present or former connection between such
Lender or such Participant and the jurisdiction or taxing authority imposing the tax (other than
any such connection arising solely from such Lender or such Participant having executed, delivered
or performed its obligations or received payment under, or enforced its rights or remedies under
the Agreement or any other Loan Document); (ii) taxes resulting from a Lender’s or a Participant’s
failure to comply with the requirements of Section 16(c) or (d) of the Agreement,
and (iii) any United States federal withholding taxes that would be imposed on amounts payable to a
Foreign Lender based upon the applicable withholding rate in effect at the time such Foreign Lender
becomes a party to the Agreement (or designates a new lending office), except that Taxes
shall include (A) in the case of any assignee that is a Foreign Lender, any amount that such
Foreign Lender’s assignor was previously entitled to receive pursuant to Section 16(a) of
the Agreement, and (B) additional United States federal withholding taxes that may be imposed after
the time such Foreign Lender becomes a party to the Agreement (or designates a new lending office),
as a result of a change in law, rule, regulation, order or other decision with respect to any of
the foregoing by any Governmental Authority.



“Tax Lender” has the meaning specified therefor in Section 14.2(a) of the
Agreement.



“Trademark Security Agreement” has the meaning specified therefor in the Security
Agreement.



“Transition Period” has the meaning specified therefor on Schedule 3.6.



“Trigger Level” means, (a) in the case of any determination made based on a Borrowing
Base Certificate prepared as of a date during the High Season, $25,000,000, and (b) in the case of
any determination made based on a Borrowing Base Certificate prepared as of a date during the Low
Season, $10,000,000.



“Underlying Issuer” means Wells Fargo or one of its Affiliates.



“Underlying Letter of Credit” means a Letter of Credit that has been issued by an
Underlying Issuer.



“United States” means the United States of America.



“Voidable Transfer” has the meaning specified therefor in Section 17.8 of the
Agreement.



“Wells Fargo” means Wells Fargo Bank, National Association, a national banking
association.



“WFCF” means Wells Fargo Capital Finance, LLC, a Delaware limited liability company.


 


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