Execution
Copy

     

    REVOLVING CREDIT, GUARANTY,
AND SECURITY AGREEMENT

     

    PNC
BANK, NATIONAL ASSOCIATION

     

    (AS
LENDER AND AS AGENT)

     

    WITH

     

    ROCKY
BRANDS, INC.

    LEHIGH
OUTFITTERS, LLC

    LIFESTYLE
FOOTWEAR, INC.

    ROCKY
BRANDS WHOLESALE LLC,

    ROCKY
BRANDS INTERNATIONAL, LLC

    ROCKY
CANADA, INC.

     

    (BORROWERS)

     

    Dated
as of October 20, 2010

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    TABLE OF
CONTENTS

     

    
      
        
          
            
              	
                      I

                    	
                      DEFINITIONS

                    	
                      1

                    
	 
      	
                      1.1.

                    	
                      Accounting
      Terms

                    	
                      1

                    
	 
      	
                      1.2.

                    	
                      General
      Terms

                    	
                      1

                    
	 
      	
                      1.3.

                    	
                      Uniform
      Commercial Code Terms

                    	
                      34

                    
	 
      	
                      1.4.

                    	
                      Certain
      Matters of Construction

                    	
                      35

                    
	 
      	 
      	 
      	 
      
	
                      II

                    	
                      ADVANCES,
      PAYMENTS

                    	
                      35

                    
	 
      	
                      2.1.

                    	
                      Revolving
      Advances

                    	
                      35

                    
	 
      	
                      2.2.

                    	
                      Procedure
      for Revolving Advances Borrowing

                    	
                      36

                    
	 
      	
                      2.3.

                    	
                      Disbursement
      of Advance Proceeds

                    	
                      39

                    
	 
      	
                      2.4.

                    	
                      Amortizing
      Tranche of Formula Amount

                    	
                      39

                    
	 
      	
                      2.5.

                    	
                      Maximum
      Advances

                    	
                      39

                    
	 
      	
                      2.6.

                    	
                      Repayment
      of Advances

                    	
                      39

                    
	 
      	
                      2.7.

                    	
                      Repayment
      of Excess Advances

                    	
                      40

                    
	 
      	
                      2.8.

                    	
                      Statement
      of Account

                    	
                      40

                    
	 
      	
                      2.9.

                    	
                      Letters
      of Credit

                    	
                      40

                    
	 
      	
                      2.10.

                    	
                      Issuance
      of Letters of Credit

                    	
                      40

                    
	 
      	
                      2.11.

                    	
                      Requirements
      For Issuance of Letters of Credit

                    	
                      41

                    
	 
      	
                      2.12.

                    	
                      Disbursements,
      Reimbursement

                    	
                      42

                    
	 
      	
                      2.13.

                    	
                      Repayment
      of Participation Advances

                    	
                      43

                    
	 
      	
                      2.14.

                    	
                      Documentation

                    	
                      43

                    
	 
      	
                      2.15.

                    	
                      Determination
      to Honor Drawing Request

                    	
                      43

                    
	 
      	
                      2.16.

                    	
                      Nature
      of Participation and Reimbursement Obligations

                    	
                      44

                    
	 
      	
                      2.17.

                    	
                      Indemnity

                    	
                      45

                    
	 
      	
                      2.18.

                    	
                      Liability
      for Acts and Omissions

                    	
                      45

                    
	 
      	
                      2.19.

                    	
                      Cash
      Collateral

                    	
                      47

                    
	 
      	
                      2.20.

                    	
                      Additional
      Payments

                    	
                      47

                    
	 
      	
                      2.21.

                    	
                      Manner
      of Borrowing and Payment

                    	
                      47

                    
	 
      	
                      2.22.

                    	
                      Mandatory
      Prepayments

                    	
                      49

                    
	 
      	
                      2.23.

                    	
                      Use
      of Proceeds

                    	
                      49

                    
	 
      	
                      2.24.

                    	
                      Defaulting
      Lender

                    	
                      49

                    
	 
      	
                      2.25.

                    	
                      Increase
      of the Maximum Revolving Advance Amount

                    	
                      50

                    
	 
      	
                      2.26.

                    	
                      Reduction
      of the Maximum Revolving Advance Amount

                    	
                      51

                    
	 
      	 
      	 
      	 
      
	
                      III

                    	
                      INTEREST
      AND FEES

                    	
                      52

                    
	 
      	
                      3.1.

                    	
                      Interest

                    	
                      52

                    
	 
      	
                      3.2.

                    	
                      Letter
      of Credit Fees

                    	
                      52

                    
	 
      	
                      3.3.

                    	
                      Facility
      Fee

                    	
                      53

                    
	 
      	
                      3.4.

                    	
                      Fee
      Letter

                    	
                      53

                    
	 
      	
                      3.5.

                    	
                      Computation
      of Interest and Fees

                    	
                      53

                    
	 
      	
                      3.6.

                    	
                      Maximum
      Charges

                    	
                      54

                    
	 
      	
                      3.7.

                    	
                      Increased
      Costs

                    	
                      54

                    
	 
      	
                      3.8.

                    	
                      Basis
      For Determining Interest Rate Inadequate or Unfair

                    	
                      55

                    
	 
      	
                      3.9.

                    	
                      Capital
      Adequacy

                    	
                      56

                    
	 
      	
                      3.10.

                    	
                      Gross
      Up for Taxes

                    	
                      56

                    


            

          

        

      

    

     

    
      
         


      

      
        i

        
          

        

      

      
         


      

    

    


    
      
        
          
            	 
      	
                    3.11.

                  	
                    Withholding
      Tax Exemption

                  	
                    56

                  
	 
      	
                    3.12.

                  	
                    FATCA

                  	
                    57

                  
	 
      	 
      	 
      	 
      
	
                    IV

                  	
                    COLLATERAL:  GENERAL
      TERMS

                  	
                    57

                  
	 
      	
                    4.1.

                  	
                    Security
      Interest in the Collateral

                  	
                    57

                  
	 
      	
                    4.2.

                  	
                    Perfection
      of Security Interest

                  	
                    58

                  
	 
      	
                    4.3.

                  	
                    Disposition
      of Property

                  	
                    58

                  
	 
      	
                    4.4.

                  	
                    Preservation
      of Collateral

                  	
                    59

                  
	 
      	
                    4.5.

                  	
                    Ownership
      of Collateral

                  	
                    59

                  
	 
      	
                    4.6.

                  	
                    Defense
      of Agent’s and Lenders’ Interests

                  	
                    60

                  
	 
      	
                    4.7.

                  	
                    Books
      and Records

                  	
                    60

                  
	 
      	
                    4.8.

                  	
                    Reserved

                  	
                    60

                  
	 
      	
                    4.9.

                  	
                    Compliance
      with Laws

                  	
                    61

                  
	 
      	
                    4.10.

                  	
                    Inspection
      of Premises

                  	
                    61

                  
	 
      	
                    4.11.

                  	
                    Insurance

                  	
                    61

                  
	 
      	
                    4.12.

                  	
                    Failure
      to Pay Insurance

                  	
                    62

                  
	 
      	
                    4.13.

                  	
                    Payment
      of Taxes

                  	
                    62

                  
	 
      	
                    4.14.

                  	
                    Payment
      of Leasehold Obligations

                  	
                    63

                  
	 
      	
                    4.15.

                  	
                    Receivables

                  	
                    63

                  
	 
      	
                    4.16.

                  	
                    Inventory

                  	
                    67

                  
	 
      	
                    4.17.

                  	
                    Maintenance
      of Equipment

                  	
                    67

                  
	 
      	
                    4.18.

                  	
                    Exculpation
      of Liability

                  	
                    68

                  
	 
      	
                    4.19.

                  	
                    Environmental
      Matters

                  	
                    68

                  
	 
      	
                    4.20.

                  	
                    Financing
      Statements

                  	
                    70

                  
	 
      	 
      	 
      	 
      
	
                    V

                  	
                    REPRESENTATIONS
      AND WARRANTIES

                  	
                    70

                  
	 
      	
                    5.1.

                  	
                    Authority

                  	
                    70

                  
	 
      	
                    5.2.

                  	
                    Formation,
      Qualification, Equity Interests, Subsidiaries

                  	
                    70

                  
	 
      	
                    5.3.

                  	
                    Survival
      of Representations and Warranties

                  	
                    71

                  
	 
      	
                    5.4.

                  	
                    Tax
      Returns

                  	
                    71

                  
	 
      	
                    5.5.

                  	
                    Financial
      Statements

                  	
                    71

                  
	 
      	
                    5.6.

                  	
                    Entity
      Names

                  	
                    72

                  
	 
      	
                    5.7.

                  	
                    O.S.H.A.
      and Environmental Compliance

                  	
                    72

                  
	 
      	
                    5.8.

                  	
                    Solvency;
      No Litigation, Violation, Indebtedness or Default

                  	
                    72

                  
	 
      	
                    5.9.

                  	
                    Patents,
      Trademarks, Copyrights and Licenses

                  	
                    73

                  
	 
      	
                    5.10.

                  	
                    Licenses
      and Permits

                  	
                    73

                  
	 
      	
                    5.11.

                  	
                    Default
      of Indebtedness

                  	
                    74

                  
	 
      	
                    5.12.

                  	
                    No
      Default

                  	
                    74

                  
	 
      	
                    5.13.

                  	
                    No
      Burdensome Restrictions

                  	
                    74

                  
	 
      	
                    5.14.

                  	
                    No
      Labor Disputes

                  	
                    74

                  
	 
      	
                    5.15.

                  	
                    Margin
      Regulations

                  	
                    74

                  
	 
      	
                    5.16.

                  	
                    Investment
      Company Act

                  	
                    74

                  
	 
      	
                    5.17.

                  	
                    Disclosure

                  	
                    74

                  
	 
      	
                    5.18.

                  	
                    Reserved

                  	
                    74

                  
	 
      	
                    5.19.

                  	
                    Conflicting
      Agreements

                  	
                    75

                  
	 
      	
                    5.20.

                  	
                    Application
      of Certain Laws and Regulations

                  	
                    75

                  
	 
      	
                    5.21.

                  	
                    Business
      and Property of Borrowers

                  	
                    75

                  
	 
      	
                    5.22.

                  	
                    Section
      20 Subsidiaries

                  	
                    75

                  


          

        

      

    

     

    
      
         


      

      
        ii

        
          

        

      

      
         


      

    

    


    
      
        
          
            
              	 
      	
                      5.23.

                    	
                      Anti-Terrorism
      Laws

                    	
                      75

                    
	 
      	
                      5.24.

                    	
                      Trading
      with the Enemy

                    	
                      76

                    
	 
      	
                      5.25.

                    	
                      Reserved

                    	
                      76

                    
	 
      	
                      5.26.

                    	
                      Withholdings
      and Remittances

                    	
                      76

                    
	 
      	 
      	 
      	 
      
	
                      VI

                    	
                      AFFIRMATIVE
      COVENANTS

                    	
                      76

                    
	 
      	
                      6.1.

                    	
                      Payment
      of Fees

                    	
                      76

                    
	 
      	
                      6.2.

                    	
                      Conduct
      of Business and Maintenance of Existence and Assets

                    	
                      77

                    
	 
      	
                      6.3.

                    	
                      Reserved

                    	
                      77

                    
	 
      	
                      6.4.

                    	
                      Government
      Receivables

                    	
                      77

                    
	 
      	
                      6.5.

                    	
                      Fixed
      Charge Coverage Ratio

                    	
                      77

                    
	 
      	
                      6.6.

                    	
                      Execution
      of Supplemental Instruments

                    	
                      77

                    
	 
      	
                      6.7.

                    	
                      Payment
      of Indebtedness

                    	
                      77

                    
	 
      	
                      6.8.

                    	
                      Standards
      of Financial Statements

                    	
                      78

                    
	 
      	
                      6.9.

                    	
                      Reserved

                    	
                      78

                    
	 
      	 
      	 
      	 
      
	
                      VII

                    	
                      NEGATIVE
      COVENANTS

                    	
                      78

                    
	 
      	
                      7.1.

                    	
                      Merger,
      Consolidation, Acquisition and Sale of Assets

                    	
                      78

                    
	 
      	
                      7.2.

                    	
                      Creation
      of Liens

                    	
                      78

                    
	 
      	
                      7.3.

                    	
                      Guarantees

                    	
                      78

                    
	 
      	
                      7.4.

                    	
                      Investments

                    	
                      78

                    
	 
      	
                      7.5.

                    	
                      Loans

                    	
                      79

                    
	 
      	
                      7.6.

                    	
                      Reserved

                    	
                      79

                    
	 
      	
                      7.7.

                    	
                      Dividends

                    	
                      79

                    
	 
      	
                      7.8.

                    	
                      Indebtedness

                    	
                      79

                    
	 
      	
                      7.9.

                    	
                      Nature
      of Business

                    	
                      80

                    
	 
      	
                      7.10.

                    	
                      Transactions
      with Affiliates

                    	
                      80

                    
	 
      	
                      7.11.

                    	
                      Reserved

                    	
                      80

                    
	 
      	
                      7.12.

                    	
                      Subsidiaries

                    	
                      80

                    
	 
      	
                      7.13.

                    	
                      Fiscal
      Year and Accounting Changes

                    	
                      80

                    
	 
      	
                      7.14.

                    	
                      Pledge
      of Credit

                    	
                      80

                    
	 
      	
                      7.15.

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

                    	
                      80

                    
	 
      	
                      7.16.

                    	
                      Compliance
      with ERISA

                    	
                      81

                    
	 
      	
                      7.17.

                    	
                      Prepayment
      of Indebtedness

                    	
                      81

                    
	 
      	
                      7.18.

                    	
                      Anti-Terrorism
      Laws

                    	
                      81

                    
	 
      	
                      7.19.

                    	
                      Membership/Partnership
      Interests

                    	
                      81

                    
	 
      	
                      7.20.

                    	
                      Trading
      with the Enemy Act

                    	
                      81

                    
	 
      	 
      	 
      	 
      
	
                      VIII

                    	
                      CONDITIONS
      PRECEDENT

                    	
                      81

                    
	 
      	
                      8.1.

                    	
                      Conditions
      to Initial Advances

                    	
                      81

                    
	 
      	
                      8.2.

                    	
                      Conditions
      to Each Advance

                    	
                      84

                    
	 
      	 
      	 
      	 
      
	
                      IX

                    	
                      INFORMATION
      AS TO BORROWERS

                    	
                      85

                    
	 
      	
                      9.1.

                    	
                      Disclosure
      of Material Matters

                    	
                      85

                    
	 
      	
                      9.2.

                    	
                      Schedules

                    	
                      85

                    
	 
      	
                      9.3.

                    	
                      Environmental
      Reports

                    	
                      86

                    
	 
      	
                      9.4.

                    	
                      Litigation

                    	
                      86

                    
	 
      	
                      9.5.

                    	
                      Material
      Occurrences

                    	
                      86

                    


            

          

        

      

    

     

    
      
         


      

      
        iii

        
          

        

      

      
         


      

    

    


    
      
        
          
            	 
      	
                    9.6.

                  	
                    Government
      Receivables

                  	
                    86

                  
	 
      	
                    9.7.

                  	
                    Annual
      Financial Statements

                  	
                    86

                  
	 
      	
                    9.8.

                  	
                    Reserved

                  	
                    87

                  
	 
      	
                    9.9.

                  	
                    Monthly
      Financial Statements

                  	
                    87

                  
	 
      	
                    9.10.

                  	
                    Other
      Reports

                  	
                    87

                  
	 
      	
                    9.11.

                  	
                    Additional
      Information

                  	
                    87

                  
	 
      	
                    9.12.

                  	
                    Projected
      Operating Budget

                  	
                    87

                  
	 
      	
                    9.13.

                  	
                    Variances
      From Operating Budget

                  	
                    88

                  
	 
      	
                    9.14.

                  	
                    Notice
      of Suits, Adverse Events

                  	
                    88

                  
	 
      	
                    9.15.

                  	
                    ERISA
      Notices and Requests

                  	
                    88

                  
	 
      	
                    9.16.

                  	
                    Additional
      Documents

                  	
                    89

                  
	 
      	
                    9.17.

                  	
                    Cash
      Reporting; Liquidity Calculation

                  	
                    89

                  
	 
      	 
      	 
      	 
      
	
                    X

                  	
                    EVENTS
      OF DEFAULT

                  	
                    89

                  
	 
      	
                    10.1.

                  	
                    Nonpayment

                  	
                    89

                  
	 
      	
                    10.2.

                  	
                    Breach
      of Representation

                  	
                    89

                  
	 
      	
                    10.3.

                  	
                    Financial
      Information

                  	
                    89

                  
	 
      	
                    10.4.

                  	
                    Judicial
      Actions

                  	
                    90

                  
	 
      	
                    10.5.

                  	
                    Noncompliance

                  	
                    90

                  
	 
      	
                    10.6.

                  	
                    Judgments

                  	
                    90

                  
	 
      	
                    10.7.

                  	
                    Bankruptcy

                  	
                    90

                  
	 
      	
                    10.8.

                  	
                    Inability
      to Pay

                  	
                    90

                  
	 
      	
                    10.9.

                  	
                    Reserved

                  	
                    90

                  
	 
      	
                    10.10.

                  	
                    Lien
      Priority

                  	
                    90

                  
	 
      	
                    10.11.

                  	
                    Cross
      Default

                  	
                    91

                  
	 
      	
                    10.12.

                  	
                    Breach
      of Guaranty

                  	
                    91

                  
	 
      	
                    10.13.

                  	
                    Change
      of Control

                  	
                    91

                  
	 
      	
                    10.14.

                  	
                    Invalidity

                  	
                    91

                  
	 
      	
                    10.15.

                  	
                    Licenses

                  	
                    91

                  
	 
      	
                    10.16.

                  	
                    Seizures

                  	
                    91

                  
	 
      	
                    10.17.

                  	
                    Operations

                  	
                    92

                  
	 
      	 
      	 
      	 
      
	
                    XI

                  	
                    LENDERS’
      RIGHTS AND REMEDIES AFTER DEFAULT

                  	
                    92

                  
	 
      	
                    11.1.

                  	
                    Rights
      and Remedies

                  	
                    92

                  
	 
      	
                    11.2.

                  	
                    Agent’s
      Discretion

                  	
                    93

                  
	 
      	
                    11.3.

                  	
                    Setoff

                  	
                    94

                  
	 
      	
                    11.4.

                  	
                    Appointment
      of Receiver

                  	
                    94

                  
	 
      	
                    11.5.

                  	
                    Rights
      and Remedies not Exclusive

                  	
                    95

                  
	 
      	
                    11.6.

                  	
                    Allocation
      of Payments After Event of Default

                  	
                    95

                  
	 
      	 
      	 
      	 
      
	
                    XII

                  	
                    WAIVERS
      AND JUDICIAL PROCEEDINGS

                  	
                    96

                  
	 
      	
                    12.1.

                  	
                    Waiver
      of Notice

                  	
                    96

                  
	 
      	
                    12.2.

                  	
                    Delay

                  	
                    96

                  
	 
      	
                    12.3.

                  	
                    Jury
      Waiver

                  	
                    97

                  
	 
      	 
      	 
      	 
      
	
                    XIII

                  	
                    EFFECTIVE
      DATE AND TERMINATION

                  	
                    97

                  
	 
      	
                    13.1.

                  	
                    Term

                  	
                    97

                  
	 
      	
                    13.2.

                  	
                    Termination

                  	
                    97

                  


          

        

      

    

     

    
      
         


      

      
        iv

        
          

        

      

      
         


      

    

    


    
      
        
          
            	
                    XIV

                  	
                    REGARDING
      AGENT

                  	
                    98

                  
	 
      	
                    14.1.

                  	
                    Appointment

                  	
                    98

                  
	 
      	
                    14.2.

                  	
                    Nature
      of Duties

                  	
                    98

                  
	 
      	
                    14.3.

                  	
                    Lack
      of Reliance on Agent and Resignation

                  	
                    99

                  
	 
      	
                    14.4.

                  	
                    Certain
      Rights of Agent

                  	
                    99

                  
	 
      	
                    14.5.

                  	
                    Reliance

                  	
                    100

                  
	 
      	
                    14.6.

                  	
                    Notice
      of Default

                  	
                    100

                  
	 
      	
                    14.7.

                  	
                    Indemnification

                  	
                    100

                  
	 
      	
                    14.8.

                  	
                    Agent
      in its Individual Capacity

                  	
                    100

                  
	 
      	
                    14.9.

                  	
                    Delivery
      of Documents

                  	
                    100

                  
	 
      	
                    14.10.

                  	
                    Borrowers’
      Undertaking to Agent

                  	
                    100

                  
	 
      	
                    14.11.

                  	
                    No
      Reliance on Agent’s Customer Identification Program

                  	
                    101

                  
	 
      	
                    14.12.

                  	
                    Other
      Agreements

                  	
                    101

                  
	 
      	
                    14.13.

                  	
                    Delegation

                  	
                    101

                  
	 
      	 
      	 
      	 
      
	
                    XV

                  	
                    BORROWING
      AGENCY

                  	
                    101

                  
	 
      	
                    15.1.

                  	
                    Borrowing
      Agency Provisions

                  	
                    101

                  
	 
      	
                    15.2.

                  	
                    Waiver
      of Subrogation

                  	
                    102

                  
	 
      	
                    15.3.

                  	
                    Cross
      Guaranty

                  	
                    102

                  
	 
      	
                    15.4.

                  	
                    Subordination

                  	
                    103

                  
	 
      	
                    15.5.

                  	
                    No
      Disposition

                  	
                    103

                  
	 
      	 
      	 
      	 
      
	
                    XVI

                  	
                    MISCELLANEOUS

                  	
                    103

                  
	 
      	
                    16.1.

                  	
                    Governing
      Law

                  	
                    103

                  
	 
      	
                    16.2.

                  	
                    Entire
      Understanding

                  	
                    104

                  
	 
      	
                    16.3.

                  	
                    Successors
      and Assigns; Participations; New Lenders

                  	
                    106

                  
	 
      	
                    16.4.

                  	
                    Application
      of Payments

                  	
                    108

                  
	 
      	
                    16.5.

                  	
                    Indemnity

                  	
                    109

                  
	 
      	
                    16.6.

                  	
                    Notice

                  	
                    109

                  
	 
      	
                    16.7.

                  	
                    Survival

                  	
                    111

                  
	 
      	
                    16.8.

                  	
                    Severability

                  	
                    111

                  
	 
      	
                    16.9.

                  	
                    Expenses

                  	
                    112

                  
	 
      	
                    16.10.

                  	
                    Injunctive
      Relief

                  	
                    112

                  
	 
      	
                    16.11.

                  	
                    Consequential
      Damages

                  	
                    112

                  
	 
      	
                    16.12.

                  	
                    Captions

                  	
                    112

                  
	 
      	
                    16.13.

                  	
                    Counterparts;
      Facsimile Signatures

                  	
                    112

                  
	 
      	
                    16.14.

                  	
                    Construction

                  	
                    112

                  
	 
      	
                    16.15.

                  	
                    Confidentiality;
      Sharing Information

                  	
                    113

                  
	 
      	
                    16.16.

                  	
                    Publicity

                  	
                    113

                  
	 
      	
                    16.17.

                  	
                    Certifications
      From Banks and Participants; US PATRIOT Act

                  	
                    113

                  
	 
      	
                    16.18.

                  	
                    Language

                  	
                    113

                  
	 
      	
                    16.19.

                  	
                    Judgment
      Currency

                  	
                    114

                  


          

        

      

    

     

    
      
         


      

      
        v

        
          

        

      

      
         


      

    


    LIST OF EXHIBITS AND
SCHEDULES

     

    
      
        
          	
                  Exhibits

                	 
      
	 
      	 
      
	
                  Exhibit
      1.2

                	
                  Borrowing
      Base Certificate

                
	
                  Exhibit
      2.1(a)

                	
                  Revolving
      Credit Note

                
	
                  Exhibit
      4.15(j)

                	
                  US
      Assignment

                
	
                  Exhibit
      8.1(i)

                	
                  Financial
      Condition Certificate

                
	
                  Exhibit
      16.3

                	
                  Commitment
      Transfer Supplement

                
	 
      	 
      
	
                  Schedules

                	 
      
	 
      	 
      
	
                  Schedule
      1.2(a)

                	
                  Permitted
      Encumbrances

                
	
                  Schedule
      4.5

                	
                  Property,
      Equipment, Books & Records, and Inventory Locations

                
	
                  Schedule
      4.11

                	
                  Insurance

                
	
                  Schedule
      4.15(c)

                	
                  Chief
      Executive Offices

                
	
                  Schedule
      4.15(h)

                	
                  Deposit
      and Investment Accounts

                
	
                  Schedule
      4.15(j)

                	
                  Government
      Contracts

                
	
                  Schedule
      5.1

                	
                  Consents

                
	
                  Schedule
      5.2(a)

                	
                  States
      of Qualification and Good Standing

                
	
                  Schedule
      5.2(b)

                	
                  Equity
      Interests; Subsidiaries

                
	
                  Schedule
      5.4

                	
                  Federal
      Tax Identification Number

                
	
                  Schedule
      5.5(a)

                	
                  Financial
      Projections

                
	
                  Schedule
      5.6

                	
                  Prior
      Names

                
	
                  Schedule
      5.7

                	
                  OSHA
      and Environmental Compliance

                
	
                  Schedule
      5.8(d)

                	
                  ERISA
      Plans

                
	
                  Schedule
      5.9

                	
                  Intellectual
      Property, Source Code Escrow Agreements

                
	
                  Schedule
      5.10

                	
                  Licenses
      and Permits

                
	
                  Schedule
      5.12

                	
                  Material
      Contracts

                
	
                  Schedule
      5.14

                	
                  Labor
      Disputes

                
	
                  Schedule
      7.3

                	
                  Guarantees

                
	
                  Schedule
      7.8

                	
                  Existing
      Indebtedness

                


        

      

    

     

    
      
         


      

      
        vi

        
          

        

      

      
         


      

    


    REVOLVING CREDIT, GUARANTY,
AND SECURITY AGREEMENT

     

    Revolving
Credit, Guaranty, and Security Agreement dated as of October 20, 2010 among
Rocky Brands, Inc., an
Ohio corporation (“Parent”), Lehigh Outfitters, LLC, a
Delaware limited liability company (“Lehigh”), Lifestyle Footwear, Inc., a
Delaware corporation (“Lifestyle”), Rocky Brands Wholesale LLC, a
Delaware limited liability company (“Rocky Wholesale”),
Rocky Brands International,
LLC, an Ohio limited liability company (“Rocky
International”), and Rocky Canada, Inc., a
corporation formed under the laws of the Province of Ontario (“Rocky Canada”)
(Parent, Lehigh, Lifestyle, Rocky Wholesale, Rocky International, and Rocky
Canada, collectively, the “Borrowers” and
individually a “Borrower”), the
financial institutions which are now or which hereafter become a party hereto
(collectively, the “Lenders” and
individually a “Lender”) and PNC Bank, National Association
(“PNC”), as
agent for Lenders (PNC, in such capacity, the “Agent”).

    


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

     

    
      	
              I 

            	
              DEFINITIONS.

            


    

     

    1.1.           Accounting
Terms.  As used in this Agreement, the Other Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided, however,
whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrowers for the fiscal year ended December 31,
2009.

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

      
        1

        
          

        

      

      
         


      

    


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

     

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

     

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

     

    “Amortizing Tranche”
shall mean the portion of the Formula Amount calculated in accordance with to
Section 2.1(a)(y)(v)(A).

     

    “Anti-Terrorism Laws”
shall mean any Applicable Laws relating to terrorism or money laundering,
including Executive Order No. 13224, the USA PATRIOT Act, the Applicable Laws
comprising or implementing the Bank Secrecy Act, and the Applicable Laws
administered by the United States Treasury Department’s Office of Foreign Asset
Control (as any of the foregoing Applicable Laws may from time to time be
amended, renewed, extended, or replaced), the Proceeds of Crime (Money
Laundering), Terrorist Financing Act (Canada), the Foreign Extraterritorial
Measures Act (Canada), and the respective regulations promulgated
thereunder.

     

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

     

    “Applicable Margin”
for Revolving Advances shall mean, commencing as of the Closing Date, 1.75% per
annum for Eurodollar Rate Loans and 0% per annum for Domestic Rate
Loans.  Thereafter, effective as of the fifth (5th)
Business Day after receipt by Agent of a Liquidity Calculation for the fiscal
quarter ending December 31, 2010, and thereafter upon receipt of a Liquidity
Calculation for each subsequent fiscal quarter (each day of such delivery, an
“Adjustment
Date”), the Applicable Margin for each type of Advance shall be adjusted,
if necessary, to the applicable percent per annum set forth in the pricing table
set forth below corresponding to the Quarterly Liquidity of Borrowers during the
fiscal quarter ending immediately prior to the applicable Adjustment
Date:

     

    
      
         


      

      
        2

        
          

        

      

      
         


      

    

    


    
      
        
          
            
              
                
                  	
                          Quarterly Liquidity

                        	 	
                          Applicable Margins for

                          Eurodollar Rate Loans

                        	 	 	
                          Applicable Margins for

                          Domestic Rate Loans

                        	 
	
                          >
      $17,500,000

                        	 	 	1.50	%	 	 	-
      0.25	%
	
                          <
      $17,500,000 but >
      $10,000,000

                        	 	 	1.75	%	 	 	0	%
	
                          <
      $10,000,000

                        	 	 	2.00	%	 	 	0.25	%


                

              

            

          

        

      

    

    


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

     

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

     

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

     

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

     

    
      
         


      

      
        3

        
          

        

      

      
         


      

    


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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Blocked Person” shall
have the meaning set forth in Section 5.23(b).

     

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

     

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

     

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

     

    “Borrowing Agent”
shall mean Parent.

     

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

     

    
      
         


      

      
        4

        
          

        

      

      
         


      

    


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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

      
        5

        
          

        

      

      
         


      

    


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

     

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

     

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

     

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

     

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

     

    
      
         


      

      
        6

        
          

        

      

      
         


      

    


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

     

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

     

    “Collateral” shall
mean and include:

     

    (a)          all
Receivables other than Excluded Receivables;

     

    (b)          all
Equipment;

     

    (c)          all
General Intangibles;

     

    (d)          all
Inventory;

     

    (e)          all
Investment Property;

     

    (f)           all
Eligible Real Property;

     

    (g)          all
Subsidiary Stock;

     

    (h)          the
Leasehold Interests;

     

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

     

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

     

    
      
         


      

      
        7

        
          

        

      

      
         


      

    


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

     

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

     

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

     

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

     

    (iii)         any
Real Property which is not Eligible Real Property, and

     

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

     

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

     

    
      
         


      

      
        8

        
          

        

      

      
         


      

    


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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

    “Documents” shall have
the meaning set forth in Section 8.1(c).

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

    
      
         


      

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

     

    “Eligible Real
Property” means any Borrower’s Real Property satisfying the following
requirements, as determined by Agent: (a) fee title is vested in such Borrower,
free and clear of all Liens other than Permitted Encumbrances, (b) Borrower has
executed and delivered to Agent a Mortgage in form and substance acceptable to
Agent in its Permitted Discretion, and such Mortgage has been recorded to create
a valid and enforceable first priority Lien in favor of Agent for the benefit of
itself and the Lenders on such Real Property, (c) Agent shall have received an
ALTA mortgagee’s title policy (2006 form) with respect to the Mortgage on such
Real Property with no exceptions other than Permitted Encumbrances and otherwise
in form and substance acceptable to Agent in its Permitted Discretion, (d) Agent
shall have received an ALTA survey of such Real Property prepared and certified
to Agent, applicable title insurance company, and the applicable title insurance
agency by a surveyor acceptable to Agent including such Table A items as Agent
shall reasonably request, (e) Agent shall have received an opinion of counsel in
the state in which such Real Property is located in form and substance and from
counsel satisfactory to Agent in its Permitted Discretion, (f) Agent shall have
received an environmental assessment with respect to such Real Property
specified by Agent from firm(s) satisfactory to Agent, which assessment shall
indicate that such Real Property is not subject to any recognized environmental
condition and shall otherwise be acceptable to Agent in its Permitted
Discretion, (g) Agent shall have received an independent flood plain certificate
indicating that such Real Property and improvements are not located in a flood
hazard area, or if in such an area, evidence of flood insurance acceptable to
Agent, (h) Agent shall have received an appraisal of the as-is fair market value
of such Real Property in form and substance and from an appraiser satisfactory
to Agent in its Permitted Discretion, and (i) Agent shall have received such
other information, documentation, and certifications with respect to such Real
Property as may be reasonably required by Agent.

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

      
        13

        
          

        

      

      
         


      

    


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

     

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

     

    (l)           the
Receivable is an Eligible Government Receivable and would cause the total amount
of Eligible Government Receivables in the Formula Amount (after application of
the Receivables Advance Rate) to exceed $2,500,000 at any time, but only to the
extent of such excess;

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    (u)          such
Receivable is an Excluded Receivable.

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

      
        15

        
          

        

      

      
         


      

    


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

     

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

     

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

     

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

     

    “Excluded Receivables”
shall mean any Receivable owing by a Customer that is a Blocked Person or that
arises out of a transaction or activity that would violate the Trading with the
Enemy Act.

     

    “Executive Order No.
13224” shall mean the Executive Order No. 13224 on Terrorist Financing,
effective September 24, 2001, as the same has been, or shall hereafter be,
renewed, extended, amended or replaced.

     

    “FATCA” means Sections
1471 through 1474 of the Code and any current or future regulations or official
interpretations thereof.

     

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

     

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

     

    
      
         


      

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

     

    “Fee Letter” shall
mean the fee letter dated as of the Closing Date among PNC and the
Borrowers.

     

    “FEMA” shall have the
meaning set forth in Section 5.23(d).

     

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

     

    “Fixed Charge Coverage
Ratio” shall mean and include for any fiscal period, for Parent and its
Subsidiaries on a consolidated basis, the ratio of (a) EBITDA, plus non-cash
charges against net income other than write-downs of Eligible Accounts, Eligible
Inventory and Eligible Real Property, minus Unfinanced Capital Expenditures
made, minus expenses for income or franchise taxes included as an expense in the
determination of net income (other than any provision for deferred taxes), minus
payment of deferred taxes relating to income and franchise taxes accrued in any
prior period, to (b) Senior Debt Payments made, plus the amount of each
reduction to the Amortizing Tranche required under Section 2.4, plus dividends
paid by Parent, plus aggregate payments made on account of pension-related
obligations to the extent not deducted as an expense in the determination of
EBITDA during such fiscal period, all for the same fiscal period.

     

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

     

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

     

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

     

    “GECC Loan” shall have
the meaning set forth in Section 2.23.

     

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

     

    
      
         


      

      
        17

        
          

        

      

      
         


      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

      
        19

        
          

        

      

      
         


      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Letter of Credit
Sublimit” shall mean $7,500,000.

     

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

     

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

     

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

     

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

     

    
      
         


      

      
        20

        
          

        

      

      
         


      

    

     

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

     

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

     

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

     

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

     

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

     

     “Maximum Revolving Advance
Amount” shall mean $70,000,000.

     

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

     

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

     

    “Mortgage” shall mean
collectively the mortgages on the Eligible Real Property securing the
Obligations together with all extensions, renewals, amendments, supplements,
modifications, substitutions and replacements thereto and thereof.

     

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

     

    
      
         


      

      
        21

        
          

        

      

      
         


      

    

     

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

     

     “Note” shall mean any
Revolving Credit Note.

     

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

     

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

     

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

     

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

     

    “Parent” is defined in
the preamble.

     

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


     

      
        
           


        

        
          22

          
            

          

        

        
           


        

      

    

     

     “Participant” shall
mean each Person who shall be granted the right by any Lender to participate in
any of the Advances and who shall have entered into a participation agreement in
form and substance satisfactory to such Lender.

     

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

     

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

     

    “Payee” shall have the
meaning set forth in Section 3.10.

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      	
               
      

            	
              (i)

            	
              written
      notice of such proposed
acquisition;

            


    

     

    
      	
               
      

            	
              (ii)

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

            


    

     

    
      	
               
      

            	
              (iii)

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

            


    

     

    
      
         


      

      
        23

        
          

        

      

      
         


      

    

     

    
      	
               
      

            	
              (iv)

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

            


    

     

    
      	
               
      

            	
              (v)

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

            


    

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

      
        24

        
          

        

      

      
         


      

    

     

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

     

    (i)    the Purchase
Price for such acquisition shall not individually or in the aggregate with all
other acquisitions during any calendar year exceed $20,000,000, provided, that in
connection with any Permitted Acquisitions, such amounts shall be increased on a
dollar for dollar basis by the amount of Purchase Price paid from the actual
proceeds of the issuance of Equity Interests by any Borrower; and

     

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

     

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

     

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

     

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

     

    “Permitted
Encumbrances” shall mean:

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

      
        25

        
          

        

      

      
         


      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

      
        26

        
          

        

      

      
         


      

    

     

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

     

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

     

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

     

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

     

    
      	
               
      

            	
              “Permitted
      Investments” shall mean any of the
  following:

            


    

     

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

     

    (b)    United States
dollar-denominated time deposits, certificates of deposit and bankers
acceptances of any bank whose short-term debt rating from Standard & Poor’s
Ratings Group, a division of The McGraw-Hill Companies, Inc. (“S&P”), is at
least A-1 or the equivalent or whose short-term debt rating from Moody’s
Investors Service, Inc. (“Moody’s”) is at least P-1 or the equivalent with
maturities of not more than six months from the date of acquisition or any
Canadian equivalent thereof;

     

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

     

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

     

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

     

    
      
         


      

      
        27

        
          

        

      

      
         


      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    (m)    Investments
constituting Permitted Acquisitions;

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

    “Projections” shall
have the meaning set forth in Section 5.5(a).

     

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


    
      
         


      

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

     

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

     

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

     

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

     

    “Quarterly Liquidity”
shall mean, for any fiscal quarter (other than the fiscal quarter ending
December 31, 2010), an amount equal to (a) the daily average (as of the end of
each Business Day) during such fiscal quarter of the sum of: (i) the lesser of
(A) the Formula Amount minus the outstanding amount of the Revolving Advances,
or (B) the Maximum Revolving Advance Amount minus the Maximum Undrawn Amount of
all Letters of Credit minus the outstanding amount of the Revolving Advances,
plus (ii) Qualified Cash, minus (b) all amounts owing to Borrowers’ trade
creditors which are 60 days or more past due as of the end of such fiscal
quarter.  The fiscal quarter ending December 31, 2010 shall be
determined as above for the period from November 15, 2010 through December 31,
2010.

     

    “Questionnaire” shall
mean the Disclosure Schedule and the responses thereto provided by Borrowers and
delivered to Agent.

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Revolving Advances”
shall mean Advances made other than Letters of Credit.

     

    “Revolving Credit
Note” shall mean, collectively, the promissory notes referred to in
Section 2.1(a).

     

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

     

    “Satisfaction Event”
shall mean the first (1st) date
after a Triggering Event on which both of the following conditions are
satisfied: (a) Undrawn Availability has equaled more than $15,000,000 for a
period of ninety (90) or more consecutive calendar days after such Triggering
Event, and (b) no Default or Event of Default is continuing.

     

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

     

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

     

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

     

    
      
         


      

      
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    “Senior Debt Payments”
shall mean and include all cash actually expended by any Borrower to make (a)
interest payments on any Advances hereunder, plus (b) net payments on account of
all Hedging Agreements, plus (c) payments for all fees, commissions and charges
paid to Agent, Issuer, or any Lender set forth herein and with respect to any
Advances, plus (d) payments on Capitalized Lease Obligations, plus (e) payments
with respect to any other Indebtedness for borrowed money (other than the
Revolving Advances and Letters of Credit) but excluding the satisfaction of any
Indebtedness to the extent simultaneously refinanced with the proceeds of any
Indebtedness permitted to be incurred hereunder other than the proceeds
Revolving Advances, provided that the
prepayment of the GECC Loan from the proceeds of the Amortizing Tranche shall
not constitute a Senior Debt Payment, and provided that any
Indebtedness refinanced by the initial Advances made hereunder shall not
constitute a Senior Debt Payment.

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

    “Trading with the Enemy
Act” shall mean the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any
enabling legislation or executive order relating thereto.

     

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

     

    “Triggering Event”
shall mean either: (a) the occurrence of an Event of Default, or (b) the first
(1st) date
(or the most recent Satisfaction Event if a Triggering Event has previously
occurred) on which the sum of Undrawn Availability, plus Qualified Cash, has
equaled less than $10,000,000 for a period of ten (10) or more consecutive days
after the 45th day
following the Closing Date.

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

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

     

    “Withholding Agent”
means Borrowers and Agent.

     

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

     

    
      
         


      

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

     

    II           
ADVANCES, PAYMENTS.

     

    2.1.         Revolving
Advances.

     

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

     

    
      
         


      

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

     

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

     

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

     

    (iv)    the amount by
which the sum of Section 2.1(a)(y)(ii) plus Section 2.1(a)(y)(iii) exceeds
$40,000,000, plus

     

    (v)     (A) up to
the lesser of (I) $7,500,000, or (II) 70% of the as-is fair market value of
Eligible Real Property, minus (B) the scheduled reductions to the Amortizing
Tranche required by Section 2.4, minus

     

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

     

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

     

    The
amount derived from the sum of Sections 2.1(a)(y) at any time and from time to
time shall be referred to as the “Formula Amount”.  The Revolving
Advances shall be evidenced by one or more secured promissory notes
(collectively, the “Revolving Credit
Note”) substantially in the form attached hereto as Exhibit
2.1(a).

     

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

     

    2.2.         Procedure for Revolving
Advances Borrowing.

     

    (a)           Domestic Rate Loan
Requests. Borrowing Agent on behalf of any Borrower may notify Agent
prior to 12:00 Noon on a Business Day of a Borrower’s request to incur, on that
day, a Revolving Advance comprised of a Domestic Rate Loan
hereunder.

     

    
      
         


      

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

     

    (c)           Eurodollar Rate Loan
Requests. In the event any Borrower desires to obtain a Eurodollar Rate
Loan, Borrowing Agent shall give Agent written notice by no later than 12:00
Noon on the day which is three (3) Business Days prior to the date such
Eurodollar Rate Loan is to be borrowed, specifying (i) the date of the proposed
borrowing (which shall be a Business Day), (ii) the type of borrowing and the
amount on the date of such Advance to be borrowed, which amount shall be in an
aggregate principal amount that is not less than $1,000,000 and integral
multiples of $500,000 in excess thereof, and (iii) the duration of the first
Interest Period therefor.  Interest Periods for Eurodollar Rate Loans
shall be for one, two, three or six months; provided, if an
Interest Period would end on a day that is not a Business Day, it shall end on
the next succeeding Business Day unless such day falls in the next succeeding
calendar month in which case the Interest Period shall end on the next preceding
Business Day.  No Eurodollar Rate Loan shall be made available to any
Borrower during the continuance of a Default or an Event of
Default.  After giving effect to each requested Eurodollar Rate Loan,
including those which are converted from a Domestic Rate Loan under Section
2.2(d), there shall not be outstanding more than six (6) Eurodollar Rate Loans,
in the aggregate.  Each Interest Period of a Eurodollar Rate Loan
shall commence on the date such Eurodollar Rate Loan is made and shall end on
such date as Borrowing Agent may elect as set forth in subsection (c)(iii) above
provided that
the exact length of each Interest Period shall be determined in accordance with
the practice of the interbank market for offshore Dollar deposits and no
Interest Period shall end after the last day of the Term.  Borrowing
Agent shall elect the initial Interest Period applicable to a Eurodollar Rate
Loan by its notice of borrowing given to Agent pursuant to Section 2.2(c) or by
its notice of conversion given to Agent pursuant to Section 2.2(d), as the case
may be.  Borrowing Agent shall elect the duration of each succeeding
Interest Period by giving irrevocable written notice to Agent of such duration
not later than 12:00 Noon on the day which is three (3) Business Days prior to
the last day of the then current Interest Period applicable to such Eurodollar
Rate Loan.  If Agent does not receive timely notice of the Interest
Period elected by Borrowing Agent, Borrowing Agent shall be deemed to have
elected to convert to a Domestic Rate Loan subject to Section 2.2(d)
hereinbelow.

     

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

     

    
      
         


      

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

     

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

     

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

     

    
      
         


      

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

     

    2.4.         Amortizing Tranche of
Formula Amount.   The Amortizing Tranche shall be reduced
on the fifteenth (15th) day of
each month, beginning November 15, 2010, by an amount equal to 1/60th of the
maximum amount thereof during the Term.

     

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

     

    2.6.         Repayment of
Advances.

     

    (a)           The
Advances shall be due and payable in full on the last day of the Term subject to
earlier prepayment as herein provided.

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

    2.10.       Issuance of Letters of
Credit.

     

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

     

    
      
         


      

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

     

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

     

    2.11.      Requirements For Issuance of
Letters of Credit.

     

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

     

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

     

    
      
         


      

      
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    2.12.      Disbursements,
Reimbursement.

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

    2.13.      Repayment of Participation
Advances.

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

    (ix)         any
Material Adverse Effect;

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

    
      
         


      

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

     

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

     

    2.21.       Manner of Borrowing and
Payment.

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

    
      
         


      

      
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    2.22.       Mandatory
Prepayments.  Subject to Section 4.3, when any Borrower sells
or otherwise disposes of any Collateral other than Inventory in the Ordinary
Course of Business, Borrowers shall repay the Advances in an amount equal to the
net proceeds of such sale (i.e., gross proceeds less the reasonable costs of
such sales or other dispositions), such repayments to be made promptly but in no
event more than one (1) Business Day following receipt of such net proceeds, and
until the date of payment, such proceeds shall be held in trust for
Agent.  The foregoing shall not be deemed to be implied consent to any
such sale otherwise prohibited by the terms and conditions hereof. Such
repayments shall be applied to the Revolving Advances subject to Borrowers’
ability to reborrow Revolving Advances in accordance with the terms hereof,
provided
however, if the Collateral disposed of is Eligible Real Property, there shall be
a corresponding reduction in the Amortizing Tranche.

     

    2.23.       Use of
Proceeds.

     

    (a)           Borrowers
shall apply the proceeds of Advances to (a) refinance the Borrowers’ existing
working capital credit facility agented by GMAC, (b) refinance the Borrowers’
11.5% term loan payable to Laminar Direct Capital, L.L.C. SPV Capital Funding,
L.L.C., Whitebox Hedged High Yield Partners, L.P., and successor to GPC LIX,
L.L.C. (c) pay the early termination fee in conjunction with such term loan, (d)
refinance the Borrowers’ term  loans payable to GE Capital Corp. or
its Affiliates and pay any early termination fee in conjunction with such term
loan (the “GECC
Loan”), (e) partially fund permitted capital expenditures, (f) fund
Permitted Acquisitions and dividends permitted hereunder, (g) pay the fees and
expenses associated with this transaction at closing, (h) provide for working
capital needs and reimburse drawings under Letters of Credit, and (i) for other
lawful purposes of Parent and its Subsidiaries permitted under the
Agreement.

     

    (b)           Without
limiting the generality of Section 2.23(a) above, neither the Borrowers, the
Guarantors, nor any of their respective Subsidiaries, nor any other Person which
may in the future become party to this Agreement or the Other Documents as a
Borrower or Guarantor, intends to use nor shall they use any portion of the
proceeds of the Advances, directly or indirectly, for any purpose in violation
of the Trading with the Enemy Act.

     

    2.24.       Defaulting
Lender.

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

    2.25.       Increase of the Maximum
Revolving Advance Amount.   Borrowers shall have the
option, upon at least thirty (30) days' prior written notice to Agent, to
increase the Maximum Revolving Advance Amount by up to $10,000,000, subject to
the following conditions precedent:

     

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

     

    (b)           the
representations and warranties set forth in Article V shall be
true and correct on and as of the date on which such increase is to become
effective, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they shall be true and
correct as of such earlier date;

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

    2.26.       Reduction of the Maximum
Revolving Advance Amount.   Borrowers shall have the
option, upon at least thirty (30) days' prior written notice to Agent, to reduce
the Maximum Revolving Advance Amount by up to $10,000,000, subject to the
following conditions precedent:

     

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

     

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

     

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

     

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

     

    
      
         


      

      
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    III          INTEREST
AND FEES.

     

    3.1.         Interest.

     

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

     

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

     

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

     

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

     

    
      
         


      

      
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    3.3.         Facility
Fee.  If, for any calendar quarter during the Term, the average
daily unpaid balance of the Revolving Advances and the Maximum Undrawn Amount of
all Letters of Credit for each day of such calendar quarter does not equal the
Maximum Revolving Advance Amount, then Borrowers shall pay to Agent for the
ratable benefit of Lenders a fee at a rate equal to one quarter of one percent
(0.25%) per annum on the amount by which the Maximum Revolving Advance Amount
exceeds such average daily unpaid balance.  Such fee shall be payable
to Agent in arrears on the first day of each calendar quarter with respect to
the previous calendar quarter.

     

    3.4.         Fee Letter. Borrowers
shall pay the amounts required to be paid in the Fee Letter in the manner and at
the times required by the Fee Letter.

     

    3.5.         Computation of Interest and
Fees.

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

    (c)           impose
on Agent or any Lender or the London interbank Eurodollar market any other
condition with respect to this Agreement or any Other Document;

     

    
      
         


      

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

     

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

     

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

     

    (b)           Dollar
deposits in the relevant amount and for the relevant maturity are not available
in the London interbank Eurodollar market, with respect to an outstanding
Eurodollar Rate Loan, a proposed Eurodollar Rate Loan, or a proposed conversion
of a Domestic Rate Loan into a Eurodollar Rate Loan,

     

    then
Agent shall give Borrowing Agent prompt written or telephonic of such
determination.  If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing
Agent shall notify Agent no later than 12:00 Noon two (2) Business Days prior to
the date of such proposed borrowing, that its request for such borrowing shall
be cancelled or made as an unaffected type of Eurodollar Rate Loan, (ii) any
Domestic Rate Loan or Eurodollar Rate Loan which was to have been converted to
an affected type of Eurodollar Rate Loan shall be continued as or converted into
a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent, no later than
12:00 Noon two (2) Business Days prior to the proposed conversion, shall be
maintained as an unaffected type of Eurodollar Rate Loan, and (iii) any
outstanding affected Eurodollar Rate Loans shall be converted into a Domestic
Rate Loan, or, if Borrowing Agent shall notify Agent, no later than 12:00 Noon
two (2) Business Days prior to the last Business Day of the then current
Interest Period applicable to such affected Eurodollar Rate Loan, shall be
converted into an unaffected type of Eurodollar Rate Loan, on the last Business
Day of the then current Interest Period for such affected Eurodollar Rate
Loans.  Until such notice has been withdrawn, Lenders shall have no
obligation to make an affected type of Eurodollar Rate Loan or maintain
outstanding affected Eurodollar Rate Loans and no Borrower shall have the right
to convert a Domestic Rate Loan or an unaffected type of Eurodollar Rate Loan
into an affected type of Eurodollar Rate Loan.

     

    
      
         


      

      
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    3.9.         Capital
Adequacy.

     

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

     

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

     

    3.10.       Gross Up for
Taxes.  If any Borrower shall be required by Applicable Law to
withhold or deduct any taxes from or in respect of any sum payable under this
Agreement or any of the Other Documents to Agent, or any Lender, assignee of any
Lender, or Participant (each, individually, a “Payee” and
collectively, the “Payees”), (a) the sum
payable to such Payee or Payees, as the case may be, shall be increased as may
be necessary so that, after making all required withholding or deductions, the
applicable Payee or Payees receives an amount equal to the sum it would have
received had no such withholding or deductions been made (the “Gross-Up
Payment”), (b) such Borrower shall make such withholding or deductions, and (c)
such Borrower shall pay the full amount withheld or deducted to the relevant
taxation authority or other authority in accordance with Applicable
Law.  Notwithstanding the foregoing, no Borrower shall be obligated to
make any portion of the Gross-Up Payment that is attributable to any withholding
or deductions that would not have been paid or claimed had the applicable Payee
or Payees properly claimed a complete exemption with respect thereto pursuant to
Section 3.11.

     

    3.11.       Withholding Tax
Exemption.

     

    (a)           Each
Payee that is not incorporated under the Applicable Laws of the United States of
America or a state thereof (and, upon the written request of Agent, each other
Payee) agrees that it will deliver to Borrowing Agent and Agent two (2) duly
completed appropriate valid Withholding Certificates (as defined under
§1.1441-1(c)(16) of the Income Tax Regulations (“Regulations”))
certifying its status (i.e., U.S. or foreign person) and, if appropriate, making
a claim of reduced, or exemption from, U.S. withholding tax on the basis of an
income tax treaty or an exemption provided by the Code.  The term
“Withholding Certificate” means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form
W-8IMY and the related statements and certifications as required under
§1.1441-1(e)(2) and/or (3) of the Regulations; a statement described in
§1.871-14(c)(2)(v) of the Regulations; or any other certificates under the Code
or Regulations that certify or establish the status of a payee or beneficial
owner as a U.S. or foreign person.

     

    
      
         


      

      
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    (b)           Each
Payee required to deliver to Borrowing Agent and Agent a valid Withholding
Certificate pursuant to Section 3.11(a) shall deliver such valid Withholding
Certificate as follows:  (A) each Payee which is a party hereto on the
Closing Date shall deliver such valid Withholding Certificate at least five (5)
Business Days prior to the first date on which any interest or fees are payable
by any Borrower hereunder for the account of such Payee; (B) each Payee shall
deliver such valid Withholding Certificate at least five (5) Business Days
before the effective date of such assignment or participation (unless Agent in
its sole discretion shall permit such Payee to deliver such Withholding
Certificate less than five (5) Business Days before such date in which case it
shall be due on the date specified by Agent).  Each Payee which so
delivers a valid Withholding Certificate further undertakes to deliver to
Borrowing Agent and Agent two (2) additional copies of such Withholding
Certificate (or a successor form) on or before the date that such Withholding
Certificate expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent Withholding Certificate so delivered by
it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by Borrowing Agent or Agent.

     

    (c)           Notwithstanding
the submission of a Withholding Certificate claiming a reduced rate of or
exemption from U.S. withholding tax required under Section 3.11(b), Agent shall
be entitled to withhold United States federal income taxes at the full 30%
withholding rate if in its reasonable judgment it is required to do so under the
due diligence requirements imposed upon a withholding agent under §1.1441-7(b)
of the Regulations.  Further, Agent is indemnified under §1.1461-1(e)
of the Regulations against any claims and demands of any Payee for the amount of
any tax it deducts and withholds in accordance with regulations under §1441 of
the Code.

     

    3.12.       FATCA.  If
a payment made to a Payee under this Agreement would be subject to U.S. Federal
withholding tax imposed by FATCA if such Payee were to fail to comply with the
applicable reporting requirements of FATCA (including those containing in
Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall
deliver to the Withholding Agent, at the time or times prescribed by law and at
such time or times reasonably requested by the Withholding Agent, such
documentation prescribed by Applicable Law (including as prescribed by Section
1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably
requested by the Withholding Agent as may be necessary for the Withholding Agent
to comply with its obligations under FATCA, to determine that such Lender has
complied with such Lender’s obligations under FATCA or to determine the amount
to deduct and withhold from such payment.

     

    IV           COLLATERAL:  GENERAL
TERMS

     

    4.1.         Security Interest in the
Collateral.

     

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


    
      
         


      

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

     

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

     

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

     

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


    
      
         


      

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

     

    4.5.         Ownership of
Collateral.

     

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

     

    
      
         


      

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

     

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

     

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

     

    4.8.         Reserved.

     

    
      
         


      

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

     

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

     

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


    
      
         


      

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

     

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

     

    
      
         


      

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

     

    4.15.       Receivables.

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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


    
      
         


      

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

     

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

     

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

     

    (j)           United States Government
Receivables.

     

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

     

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


    
      
         


      

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

     

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

     

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

     

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

     

    
      
         


      

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

     

    4.19.       Environmental
Matters.

     

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

     

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

     

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

     

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

     

    (e)          [reserved].

     

    
      
         


      

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

     

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

     

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

     

    
      
         


      

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

     

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

     

    V           
REPRESENTATIONS AND WARRANTIES.

     

    Each
Borrower represents and warrants as follows:

     

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

     

    5.2.         Formation, Qualification,
Equity Interests, Subsidiaries.

     

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


    
      
         


      

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

     

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

     

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

     

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

     

    5.5.         Financial
Statements.

     

    (a)      The
cash flow, income statement and balance sheet projections of Parent and its
Subsidiaries on a consolidated basis, copies of which are annexed hereto as
Schedule 5.5(a) (the “Projections”) are
based on underlying assumptions which provide a reasonable basis for the
projections contained therein and reflect Borrowers’ judgment based on present
circumstances of the most likely set of conditions and course of action for the
projected period.

     

    (b)      The
consolidated balance sheets of Parent and its Subsidiaries as of December 31,
2009, and the related consolidated statement of income, changes in stockholder’s
equity, and changes in cash flow for the period ended on such date, all
accompanied by reports thereon containing opinions without qualification by
independent certified public or chartered accountants, copies of which have been
delivered to Agent, have been prepared in accordance with GAAP, consistently
applied (except for changes in application in which such accountants concur) and
present fairly the financial position of Parent and its Subsidiaries on a
consolidated basis at such date and the results of their operations for such
period.  Since December 31, 2009, there has been no change in the
condition, financial or otherwise, of Parent or its Subsidiaries as shown on the
consolidated balance sheet as of such date and no change in the aggregate value
of machinery, equipment and Real Property owned by Parent or its Subsidiaries,
in each instance, which individually or in the aggregate has had a Material
Adverse Effect.

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    5.18.       Reserved.

     

    
      
         


      

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

     

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

     

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

     

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

     

    5.23.       Anti-Terrorism
Laws.

     

    (a)          General.  Neither
any Borrower nor any Affiliate of any Borrower is in violation of any
Anti-Terrorism Law or engages in or conspires to engage in any
transaction  that evades or avoids, or has the purpose of evading or
avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law.

     

    (b)          Executive Order No.
13224.  Neither any Borrower nor any Affiliate of any Borrower
or their respective agents acting or benefiting in any capacity in connection
with the Advances or other transactions hereunder, is any of the following (each
a “Blocked
Person”):

     

    (i)           a
Person that is listed in the annex to, or is otherwise subject to the provisions
of, the Executive Order No. 13224;

     

    (ii)          a
Person owned or  controlled  by, or acting for or on
behalf  of,  any  Person  that is listed
in the annex to, or is otherwise subject to the provisions of, the Executive
Order No. 13224;

     

    (iii)         a
Person or entity with which any Lender is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law;

     

    (iv)      
  a Person or entity that commits, threatens or conspires to commit or
supports “terrorism” as defined in the Executive Order No. 13224;

     

    
      
         


      

      
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    (v)         a
Person or entity that is named as a “specially designated national” on the most
current list published by the U.S. Treasury Department Office of Foreign Asset
Control at its official website or any replacement website or other replacement
official publication of such list, or

     

    (vi)        a
Person or entity who is affiliated or associated with a Person or entity listed
above.

     

    (c)           Transactions.  Neither
any Borrower nor to the knowledge of any Borrower, any of its agents acting in
any capacity in connection with the Advances or other transactions hereunder (i)
conducts any business or engages in making or receiving any contribution of
funds, goods or services to or for the benefit of any Blocked Person, or (ii)
deals in, or otherwise engages in any transaction relating to, any property or
interests in property blocked pursuant to the Executive Order No.
13224.

     

    (d)          Foreign Extraterritorial
Measures Act (Canada).  It shall not be considered a breach of
the representations and warranties contained in Section 5.23 or Section 5.24 if
Rocky Canada is unable to make any of the foregoing representations and
warranties regarding its activities and affairs due to compliance by it with the
Foreign Extraterritorial Measures Act (Canada) (“FEMA”) or any other
Applicable Law in effect in Canada.

     

    5.24.       Trading with the
Enemy.  No Borrower has engaged, nor does it intend to engage,
in any business or activity prohibited by the Trading with the Enemy
Act.

     

    5.25.       Reserved.

     

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

     

    VI           AFFIRMATIVE
COVENANTS.

     

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

     

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

     

    
      
         


      

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

     

    6.3.           Reserved.

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

    6.9.         Reserved.

     

    VII         NEGATIVE
COVENANTS.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

    7.6.           Reserved.

     

    7.7.           Dividends.  Declare,
pay or make any dividend or distribution on any shares of the Equity Interests
of Parent (other than dividends or distributions payable in its stock, or
split-ups or reclassifications of its stock) or apply any of its funds, property
or assets to the purchase, redemption or other retirement of any Equity
Interests, or of any options to purchase or acquire any such Equity Interests of
Parent, except that Parent shall be permitted to pay dividends to its
shareholders or apply any of its funds to such purchase, redemption, retirement
or acquisition each fiscal quarter in an amount not in excess of 50% of the net
income of the Parent and its Subsidiaries on a consolidated basis for the
immediately prior fiscal quarter provided that (a)
after giving effect to the payment of any of the foregoing there shall not exist
any Event of Default or Default, (b) a notice of termination with regard to this
Agreement shall not be outstanding, (c) Undrawn Availability is at least
$7,000,000 immediately after giving effect to each such payment, (d) the
proforma Fixed Charge Coverage Ratio of Parent and its Subsidiaries on a
consolidated basis is at least 1.25 to 1.00 for the twelve (12) month period
ending on the last day of the fiscal month prior to the month of the proposed
payment, after giving effect to such payment, as evidenced by a pro-forma
Compliance Certificate delivered by the Borrowing Agent, and (e) each such
payment may be made only after Agent shall have received a Compliance
Certificate for such immediately prior fiscal quarter.  All
calculations and projections to be made pursuant to this Section shall be
subject to the Agent’s approval and provided to the Agent prior to the making of
the applicable payment.

     

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

     

    
      
         


      

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

     

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

     

    7.11.      Reserved.

     

    7.12.      Subsidiaries.  
Form any Subsidiary unless (a) (i) in the case of a Domestic Subsidiary, it
expressly joins in this Agreement as a borrower or Guarantor and becomes jointly
and severally liable for the Obligations, or (ii) in the case of a Foreign
Subsidiary, 65% of the Equity Interests of such Foreign Subsidiary are pledged
as Collateral, and (b) Agent shall have received all documents, including legal
opinions, it may reasonably require to establish compliance with each of the
foregoing conditions.

     

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

     

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

     

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

     

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

     

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

     


    
      
         


      

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

     

    7.17.      Prepayment of
Indebtedness.  Except for the repayment in full of the GECC
Loan, at any time, directly or indirectly, prepay any Indebtedness in an amount
exceeding $500,000 (other than to Lenders), or repurchase, redeem, retire or
otherwise acquire any Indebtedness of any Borrower.

     

    7.18.      Anti-Terrorism
Laws.  No Borrower shall, until satisfaction in full of the
Obligations and termination of this Agreement, nor shall it permit any Affiliate
or agent to:

     

    (a)           Conduct
any business or engage in any transaction or dealing with any Blocked Person,
including the making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person.

     

    (b)           Deal
in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to the Executive Order No.
13224.

     

    (c)           Engage
in or conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in the Executive Order No. 13224, the USA PATRIOT Act or any other
Anti-Terrorism Law.  Borrower shall deliver to Lenders any
certification or other evidence requested from time to time by any Lender in its
sole discretion, confirming Borrower’s compliance with this
Section.

     

    Provided,
however, that Rocky Canada shall be required to comply with Section 7.18 or
Section 7.20 to the extent that such compliance would violate or otherwise
contravene FEMA or any other Applicable Law in effect in Canada.

     

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

     

    7.20.      Trading with the Enemy
Act.  No Borrower shall, until satisfaction in full of the
Obligations and termination of this Agreement, nor shall it permit any Affiliate
or agent to engage in any business or activity in violation of the Trading with
the Enemy Act.

     

    VIII       CONDITIONS
PRECEDENT.

     

    8.1.           Conditions to Initial
Advances.  The agreement of Lenders to make the initial
Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Agent, immediately prior to or concurrently with the
making of such Advances, of the following conditions precedent:

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

    (i)     
      Financial Condition
Certificates.  Agent shall have received an executed Financial
Condition Certificate in the form of Exhibit 8.1(i).

     

    (j)            Collateral
Examination.  Agent shall have completed Collateral
examinations and received appraisals, the results of which shall be satisfactory
in form and substance to Lenders, of the Receivables, Inventory, Eligible Real
Property, and Equipment of each Borrower and all books and records in connection
therewith;

     

    (k)           Fees.  Agent
shall have received all fees payable to Agent and Lenders on or prior to the
Closing Date hereunder, including pursuant to Article III;

     

    (l)            Insurance.  Agent
shall have received in form and substance satisfactory to Agent, certified
copies of Borrowers’ casualty insurance policies, together with loss payable
endorsements on Agent’s standard form of loss payee endorsement naming Agent as
loss payee, and certified copies of Borrowers’ liability insurance policies,
together with endorsements naming Agent as a co-insured or as an additional
insured in the case of Canadian insurance policies;

     

    (m)          Payment
Instructions.  Agent shall have received written instructions
from Borrowing Agent directing the application of proceeds of the initial
Advances made pursuant to this Agreement;

     

    (n)           Blocked
Accounts.  Agent shall have received duly executed agreements
establishing the Blocked Accounts or Collection Accounts with financial
institutions acceptable to Agent for the collection or servicing of the
Receivables and proceeds of the Collateral;

     

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

     

    (p)           No Adverse Material
Change.  (i) since December 31, 2009 there shall not have
occurred any event, condition or state of facts which could reasonably be
expected to have a Material Adverse Effect and (ii) no representations made or
information supplied to Agent or Lenders shall have been proven to be inaccurate
or misleading in any material respect;

     

    (q)           Collateral Access
Agreements.  Agent shall have received Collateral Access
Agreements satisfactory to Agent with respect to the Access Agreement
Locations;

     

    
      
         


      

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

     

    (s)           Contract
Review.  Agent shall have reviewed all Material Contracts of
Borrowers including leases, union contracts, labor contracts, vendor supply
contracts, license agreements and distributorship agreements and such contracts
and agreements shall be satisfactory in all respects to Agent;

     

    (t)            Borrowing
Base.  Agent shall have received evidence from Borrowers that
the aggregate amount of Eligible Receivables and Eligible Inventory is
sufficient in value and amount to support Advances in the amount requested by
Borrowers on the Closing Date;

     

    (u)           Undrawn
Availability.  After giving effect to the initial Advances
hereunder, including for all fees and expenses related to the subject
transactions, Borrowers shall have Undrawn Availability of at least $10,000,000;
and

     

    (v)           Compliance with
Laws.  Agent shall be reasonably satisfied that each Borrower
is in compliance with all pertinent federal, state, provincial, local or
territorial regulations, including those with respect to the Federal
Occupational Safety and Health Act, the Environmental Protection Act, ERISA and
the Trading with the Enemy Act.

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

    IX         INFORMATION
AS TO BORROWERS.

     

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

     

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

     

    9.2.           Schedules.  Deliver
to Agent on or before the fifteenth (15th) day of
each month as and for the prior month (a) Receivables ageings inclusive of
reconciliations to the general ledger, (b) accounts payable schedules inclusive
of reconciliations to the general ledger, (c) a report of sales, credits, and
collections, (d) Inventory reports, and (e) a Borrowing Base Certificate in form
and substance satisfactory to Agent (which shall be calculated as of the last
day of the prior month and which shall not be binding upon Agent or restrictive
of Agent’s rights under this Agreement); provided that, the
Borrowers may, but shall not be obligated to (except as set forth in the
following sentence), deliver the foregoing more frequently than once per
month.  Commencing upon Undrawn Availability plus Qualified Cash being
less than $15,000,000 for a period in excess of five (5) consecutive days after
the 45th day
following the Closing Date, unless waived by Agent in its sole discretion or
until Undrawn Availability plus Qualified Cash exceeds $17,000,000 for a period
in excess of ten (10) consecutive days thereafter), deliver to Agent on or
before the second (2nd)
Business Day of each week as and for the prior week, a report of sales, credits,
and collections (which shall be calculated as of the last day of the prior week
and which shall not be binding upon Agent or restrictive of Agent’s rights under
this Agreement).  In addition, each Borrower will deliver to Agent at
such intervals as Agent may require in its Permitted Discretion:  (i)
confirmatory assignment schedules, (ii) copies of Customer’s invoices, (iii)
evidence of shipment or delivery, (iv) reports on Priority Payables, and (v)
such further schedules, documents and/or information regarding the Collateral as
Agent may reasonably require including trial balances and test
verifications.  Agent shall have the right to confirm and verify all
Receivables by any manner and through any medium it considers advisable and do
whatever it may deem reasonably necessary to protect its interests
hereunder.  The items to be provided under this Section are to be in
form reasonably satisfactory to Agent and executed by Borrowing Agent and
delivered to Agent from time to time solely for Agent’s convenience in
maintaining records of the Collateral, and any Borrower’s failure to deliver any
of such items to Agent shall not affect, terminate, modify or otherwise limit
Agent’s Lien with respect to the Collateral.

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

    
      
         


      

      
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    9.8.           Reserved.

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

    
      
         


      

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

     

    9.17.       Cash Reporting; Liquidity
Calculation.

     

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

     

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

     

    X           EVENTS
OF DEFAULT.

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

    10.9.        [Reserved].

     

    10.10.      Lien
Priority.  Any Lien created hereunder or provided for hereby or
under any Other Document for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest, subject to Permitted
Encumbrances and except as otherwise permitted under this Agreement, in each
instance other than as a direct result of the failure of Agent or any Lender to
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    10.11.      Cross
Default.  A failure of any Borrower, Guarantor, or any of their
respective Subsidiaries to pay when due any principal or interest on any
Indebtedness (other than the Obligations) in the individual principal amount in
excess of $750,000 or having an aggregate principal amount in excess of
$1,500,000 under any agreement for borrowed money or default by any Borrower,
Guarantor, or any of their respective Subsidiaries in any agreement evidencing
any such Indebtedness, if such breach causes the holder of such Indebtedness to
accelerate the maturity thereof or declare such Indebtedness due prior to its
stated maturity;

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

    XI     
    LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.

     

    11.1.      Rights and
Remedies.

     

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

     

    
      
         


      

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

     

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

     

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

     

    
      
         


      

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

     

    11.4.      Appointment of
Receiver.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

    
      
         


      

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

     

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

     

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

     

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

     

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

     

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

     

    In
carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses “FOURTH”, “FIFTH” and “SIXTH” above and Agent may convert any amounts
to Dollars or Canadian Dollars as necessary to make such application; and (iii)
to the extent that any amounts available for distribution pursuant to clause
“FIFTH” above are attributable to the issued but undrawn amount of outstanding
Letters of Credit, such amounts shall be held by the Agent in a cash collateral
account and applied (A) first, to reimburse the Issuer from time to time for any
drawings under such Letters of Credit and (B) then, following the expiration of
all Letters of Credit, to all other obligations of the types described in
clauses “FIFTH” and “SIXTH” above in the manner provided in this Section
11.6.

     

    XII        WAIVERS
AND JUDICIAL PROCEEDINGS.

     

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

     

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

     

    
      
         


      

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

     

    XIII        EFFECTIVE
DATE AND TERMINATION.

     

    13.1.       Term.  This
Agreement, which shall inure to the benefit of and shall be binding upon the
respective successors and permitted assigns of each Borrower, Agent and each
Lender, shall become effective on the date hereof and shall continue in full
force and effect until October 20, 2015 (the “Term”) unless sooner
terminated as herein provided.  Borrowers may terminate this Agreement
at any time upon ten (10) days’ prior written notice and payment in full of the
Obligations.  Such notice shall be
irrevocable.  .

     

    13.2.       Termination.

     

    (a)           The
termination of the Agreement shall not affect any Borrower’s, Agent’s or any
Lender’s rights, or any of the Obligations having their inception prior to the
effective date of such termination, and the provisions hereof shall continue to
be fully operative until all transactions entered into, rights or interests
created or Obligations have been fully and indefeasibly paid, disposed of,
concluded or liquidated.  Until such event, the security interests,
Liens and rights granted to Agent and Lenders hereunder and the financing
statements filed hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement or the fact that Borrowers’
Account may from time to time be temporarily in a zero or credit position, until
all of the Obligations of each Borrower have been indefeasibly paid and
performed in full after the termination of this Agreement or each Borrower has
furnished Agent and Lenders with an indemnification reasonably satisfactory to
Agent and Lenders with respect thereto.  Accordingly, in such event,
each Borrower waives any rights which it may have under the Uniform Commercial
Code, the PPSA, or other Applicable Law, to demand the filing of termination
statements (or the equivalent) with respect to the Collateral, and Agent shall
not be required to send such termination statements (or the equivalent) to each
Borrower, or to file them with any filing office, unless and until this
Agreement shall have been terminated in accordance with its terms and all
Obligations have been indefeasibly paid in full in immediately available
funds.  All representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof until all
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    (b)           Upon
termination of this Agreement and full and indefeasible payment of the
Obligations to Agent and Lender (other than any Obligations which expressly
survive the termination of this Agreement) in accordance with Section 13.1(a),
(i) all rights and remedies of each Borrower, Agent and each Lender hereunder
shall cease, other than those which survive termination, and (ii) Agent and each
Lender agrees to execute and deliver, as applicable, to Borrowing Agent or a
designated agent (i) all property pledged and delivered to Agent or any Lender
(including without limitation stock or other certificates, notes receivable,
certificates of title, direct pay notices to account debtors, change of address
forms and other instruments, together with accompanying stock powers and
allonges in the forms delivered to Agent or any Lender; (2) the original
promissory notes executed in connection with the Obligations marked “CANCELLED”;
(3) all guaranty agreements, indemnification agreements and other accommodation
agreement executed by any guarantor, marked “CANCELLED”; (4) mortgage or deed of
trust releases against any Real Property of any Borrower or Guarantor, releases
of any liens or encumbrances filed against any Intellectual Property or property
subject to any title laws and other like releases, and (5) UCC-3 termination
statements with respect to the Uniform Commercial Code and PPSA filings made by
Agent in respect of each Borrower or Guarantor, as applicable.

     

    XIV       REGARDING
AGENT.

     

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

     

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

    
      
         


      

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

     

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

     

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

     

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

    

      
        
           


        

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

     

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

     

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

     

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

     

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

     

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

    
      
         


      

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

     

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

     

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

     

    XV     
   BORROWING AGENCY.

     

    15.1.      Borrowing Agency
Provisions.

     

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

     

    
      
         


      

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

     

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

     

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

     

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

    
      
         


      

      
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    15.4.       Subordination.

     

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

     

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

     

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

     

    XVI    
   MISCELLANEOUS

     

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

    
      
         


      

      
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    16.2.      Entire
Understanding.

     

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

     

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

     

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

     

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

     

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

     

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

     

    (v)          change
the rights and duties of Agent.
 

    
      
         


      

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

     

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

     

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

     

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

     

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

     

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

    
      
         


      

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

     

    16.3.       Successors and Assigns;
Participations; New Lenders.

     

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

     

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

    
      
         


      

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

     

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

    
      
         


      

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

     

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

     

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

     

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

     

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

     

      
        
           


        

        
          108

          
            

          

        

        
           


        

      

    

     

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

     

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

     

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

    
      
         


      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    (A)           If
to Agent or PNC at:

     

    PNC Bank,
National Association

    201 East
Fifth Street, 2nd
Floor

    Mail
Stop: B1-BM01-02-1

    Cincinnati,
Ohio  45202-4135

    Attention:       Jeffrey
Swartz

    Telephone:     (513)
651-8472

    Facsimile:       (513)
651-7078

    


    
       with
a copy to:

    

     

    
      	
               
      

            	
              PNC
      Bank, National Association

            


    

    
      	
               
      

            	
              PNC
      Agency Services

            


    

    
      	
               
      

            	
              PNC
      Firstside Center

            


    

    
      	
               
      

            	
              500
      First Avenue, 4th Floor

            


    

    
      	
               
      

            	
              Pittsburgh,
      Pennsylvania 15219

            


    

    
      	
               
      

            	
              Attention:       Lisa
      Pierce

            


    

    
      	
               
      

            	
              Telephone:     (412)
      762-6442

            


    

    
      	
               
      

            	
              Facsimile:       (412)
      762-8672

            


    


    
      
         


      

      
        110

        
          

        

      

      
         


      

    


    
       with an
additional copy to:

    

    


    
      	
               
      

            	
              Frost
      Brown Todd LLC

            


    

    
      	
               
      

            	
              201
      East Fifth Street, Suite 2200

            


    

    
      	
               
      

            	
              Cincinnati,
      Ohio   45202

            


    

    
      	
               
      

            	
              Attention:       Michael
      J. O’Grady

            


    

    Telephone:    
  (513) 651-6482

    Facsimile:       (513)
651-6981

     

    
      	
               
      

            	
              (B)

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

            


    

     

    (C)         If
to Borrowing Agent or any Borrower:

     

    Rocky
Brands, Inc.

    39 East
Canal Street

    Nelsonville,
Ohio 45764

    Attention:      
James E. McDonald

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

    Facsimile:       (740)
753-5555

    


    with a
copy to:

    


    Porter,
Wright, Morris & Arthur LLP

    41 South
High Street

    Columbus,
Ohio 43215

    Attention:      
Timothy E. Grady

    Telephone:     (614)
227-2105

    Facsimile:     
(614) 227-2100

    


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

     

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

     


    
      
         


      

      
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    16.9.       Expenses.  All
reasonable costs and expenses including reasonable attorneys’ fees (including
the allocated costs of in house counsel) and disbursements incurred by Agent on
its behalf or on behalf of Lenders, or by any Lender on its own behalf: (a) in
all efforts made to enforce payment of any Obligation or effect collection of
any Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement or any consents or
waivers hereunder and all related agreements, documents and instruments, or (c)
in instituting, maintaining, preserving, enforcing and foreclosing on Agent’s
security interest in or Lien on any of the Collateral, or maintaining,
preserving or enforcing any of Agent’s or any Lender’s rights hereunder and
under all related agreements, documents and instruments, whether through
judicial proceedings or otherwise, or (d) in defending or prosecuting any
actions or proceedings arising out of or relating to Agent’s or any Lender’s
transactions with any Borrower, Guarantor, or any of their respective
Subsidiaries, or (e) in connection with any advice given to Agent or any Lender
with respect to its rights and obligations under this Agreement and all related
agreements, documents and instruments, may be charged to Borrowers’ Account and
shall be part of the Obligations.  Notwithstanding the foregoing, no
Borrower shall be responsible for any legal fee of Agent’s U.S. counsel incurred
to initially establish this Agreement and the Other Documents which exceeds
$50,000 in the aggregate.  Such limitation shall not apply to
out-of-pocket expenses of U.S. counsel or legal fees or expenses of counsel
located outside of the U.S. In addition, Agent may cause appraisals of the Real
Property, Inventory and Equipment of Borrowers to be conducted from time to time
at Borrowers’ sole cost.  Agent’s right to conduct an Inventory
appraisal shall be limited to one (1) such appraisal during any fiscal
year.  Inventory appraisals conducted in connection with the
establishment of this Agreement, in connection with a Permitted Acquisition, or
during the continuance of an Event of Default shall be charged to Borrowers and
not be subject to the foregoing limitation.

     

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

     

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

     

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

     

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

     

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

    
      
         


      

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

     

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

     

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

     

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

    
      
         


      

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

     

    [Signature
Pages Follow]
 

    
      
         


      

      
        114

        
          

        

      

      
         


      

    


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

     

    
      	 
      	
              Borrowers:

            
	 
      	 
      
	 
      	
              Rocky
      Brands, Inc.,

              Lifestyle
      Footwear, Inc.,

              Rocky
      Brands Wholesale LLC,

              Lehigh
      Outfitters, LLC,

              Rocky
      Brands International, LLC,

              Rocky
      Canada, Inc.

            
	 
      	 
      	 
      
	 
      	
              By: 
      

            	
              /s/ James E. McDonald

            
	 
      	 
      	
              James
      E. McDonald

            
	 
      	 
      	
              Executive
      Vice President and Chief

              Financial
      Officer of each Borrower

            


    

    


    
      
         


      

      
        115

        
          

        

      

      
         


      

    


    Signature
Page to Revolving Credit, Guaranty, and Security Agreement

     

    
      	 
      	
              PNC
      Bank, National Association

            
	 
      	
              as
      Agent and Lender

            
	 
      	 
      	 
      
	 
      	
              By: 
      

            	
              /s/ Gerald R. Kirpes

            
	 
      	 
      	
              Gerald
      R. Kirpes

            
	 
      	 
      	
              Senior
      Vice President

            
	 
      	 
      	 
      
	 
      	
              Address:

               

              PNC
      Bank, National Association

              201
      East Fifth Street, 2nd
      Floor

              Mail
      Stop: B1-BM01-02-1

              Cincinnati,
      Ohio  45202-4135

              Attention:        Jeffrey
      Swartz

              Telephone:      (513)
      651-8472

              Facsimile:       (513)
      651-7078

            
	 
      	 
      
	 
      	
              Commitment
      Percentage:  100%

            


    
 

    
      
         


      

      
        116